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TMI Blog2011 (8) TMI 1348X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to ₹ 40,781/-. Subsequently, the CIT examined the records and noted that the AO had allowed depreciation on toll road which was owned by Government without any examination. He, therefore, issued show cause letter dated 28.8.2008 asking the assessee to explain as why assessment should not be treated as erroneous and prejudicial to the interest of the revenue. The CIT also issued another show cause notice vide letter dated 2.12.2009 in which some other errors were also pointed out causing prejudice to the interest of the revenue, which were as follows :- i) The interest credited in the P L account of ₹ 2,09,889/-included interest of ₹ 2,01,889/- from Punjab National Bank (PNB) but the TDS certificate issued by PNB showed interest income of ₹ 4,06,494/-. Thus there was under assessment of income to the tune of ₹ 2,04,605/- which had accrued on the fixed deposits. ii) The assessee had claimed deduction on account of interest of ₹ 2,24,187/- paid by the assessee on late deposit of TDS which had been allowed by the AO without any examination which was erroneous and prejudicial to the interest of revenue. iii) The schedule of fixed assets sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e interest could not be allowed as deduction. With regard to addition to vehicles, it was submitted that for Assessment Year 2005-06, the assessee had claimed depreciation only on the sum of ₹ 23,68,887/- and no depreciation had been claimed on the balance amount of ₹ 17,27,511/- as the vehicle had been purchased on 18.2.2004 i.e., in Assessment Year 2004-05. CIT however did not accept the contentions. It was observed by him that the interest on FD had to be declared in the year in which interest income had accrued as per mercantile system being followed by the assessee and the assessee had no choice to declare income in subsequent years. The interest on TDS was penal in nature and was not allowable. As regards the addition to vehicles, the AO had not enquired into the matter nor sought any clarifications. It was not clear as to how depreciation was not claimed on a sum of ₹ 17,27,511/- being cost of vehicle purchased in Assessment Year 2004-05. CIT accordingly held that the order passed by the AO was erroneous and prejudicial to the interest of the revenue. Aggrieved by the said decision, the assessee has filed present appeal before Tribunal. 3 Before us, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT (243 ITR 83). The ld. AR further pointed out that CIT in the show casue notice had mentioned that depreciation was not allowable as assessee was not owner of road but in the order, he had held assessment to be erroneous on the ground that the same was passed without any enquiry/ application of mind which was not permitted. Reliance for this proposition was placed on the decision of Delhi Bench in the case of Maxpak Investment Ltd (13 SOT 67). 3.2 In relation to interest on FDR not declared this year, it was submitted that the same had been shown in Assessment Year 200506 and there was no prejudice to the interest of the revenue. It was also submitted that interest on TDS was not penalty and was thus allowable as deduction. As regards the details of addition to vehicles, it was submitted that the details submitted by the assessee vide letter dated 13.11.2007 related to 15 month period but the depreciation had been claimed only on the addition made in the relevant year of ₹ 23,68,887/-. There was therefore, no error. It was thus argued that assessment order was passed by the AO was after proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment as erroneous and prejudicial to the interests of the revenue. Under the provisions of section 263 CIT is empowered to modify and assessment order passed by AO in case the order is found to be erroneous and prejudicial to the interest of the revenue. It is a settled legal position as held by Hon'ble Supreme Court in the case of Rampyari Devi Saraogi (67 ITR 84) that a stereotyped order passed by AO without making enquiries which are called for on the facts of the case is erroneous which causes prejudice to the interest of the revenue. The same view was followed by Hon'ble Supreme Court in case of Smt. Tara Devi Aggarwal (88 ITR 323). Following the aforesaid judgments, the Hon'ble Supreme Court, the Hon ble High Court of Delhi in case of Geevee Enterprises Ltd. (99 ITR 375) have held that an order may be erroneous not only because it contains some apparent error of reasoning or of law or of fact in the face of it but also because it is a stereotyped order which simply accepts what the assessee has stated in the return and fails to make enquiries which are called for in the facts and circumstances of the case. 4.1 In this case, the assessee who was in the busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which also included roads allowed the claim. The issue of ownership was therefore, not before the Tribunal. In case of Gujarat Road and Infrastructure Co. Ltd. (supra), the road had been built on build, own, operate and transfer basis which is distinguishable from the present case in which the road had been constructed on build, operate and transfer basis . In case of Tamil Nadu Road Development Company Ltd. (supra), the depreciation had been allowed on the ground that the building also included roads. Thus the ownership issue had not been examined in that case. In case of Maharashtra State Road Development Corpn. Ltd. (supra), the road constructed and owned by the assessee and utilized in the business was treated as plant and depreciation was allowed. Thus, in that case ownership was not in dispute. The cases cited are therefore, distinguishable. In any case, merit of allowability is not the issue. In the present case the issue as pointed out earlier is whether the claim had been allowable after necessary examination /enquiry which were required on the facts of the case. In our view, claim had been allowed by AO in a very mechanical manner without any examination of the issue, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) as there was no business activity. Thus, the order passed under section 263 was totally on a different issue in respect of which the assessee had not been given any notice or opportunity. The present case is different. The assessee had been given notice in respect of allowance of depreciation on road and action under section 263 was also on the same issue. The assessee had also availed the opportunity in respect of the ground that allowance of depreciation without any examination or application of mind was erroneous which had caused prejudice to the interest of the revenue. The argument raised therefore, is rejected. 4.5 The ld. Authorised Representative also argued that depreciation was allowable on the road in view of the provisions of Explanation-1 to section 32(1) as road had been built on the land taken on lease by the assessee. It has been pointed out that since the road had been built on the land in respect of which the assessee had lease hold right, the road would be entitled for depreciation under the provisions of Explanation 1 to section 32(1). However, we find that Explanation 1 to section 32(1) applies to any renovation / extension of capital nature carried out ..... 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