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TMI Blog2023 (9) TMI 253X X X X Extracts X X X X X X X X Extracts X X X X ..... said explanation then allowing the said claim by the AO as otherwise a correct and allowable claim cannot be held as prejudicial to the interest of the revenue. When the assessee has given correct calculation of the increase in the claim of depreciation as a consequence of declaration of supply affording charges and electrification charges as revenue receipt instead of capital receipt then allowing the said claim of the assessee by the AO without even conducting inquiry would not render the order of the AO as prejudicial to the interest of the revenue. Therefore, when the claim of the assessee is a correct and valid allowable claim then the not conducting an inquiry on the part of the AO is not epso facto permit the commissioner to invoke the provisions of section 263 of the Act. Accordingly we hold that twine conditions i.e. the order passed by the AO is erroneous so far as prejudicial to the interest of revenue are not satisfied and consequently the Pr. CIT is not permitted to invoke the provisions of section 263 of the Act. Hence the impugned order of the Pr. CIT is quashed. Decided in favour of assessee. - Shri Vijay Pal Rao, Judicial Member And Shri B.M. Biyani, Acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Order u/s. 263 of the Act which is wrong and contrary to the facts of the case is liable to be set aside. 5. On the facts and in the circumstances of the case and in law, the Ld. PCIT has erred in holding that the Ld. AO has not examined fact/issue and no enquiry/investigation has been made regarding allowability of provision of Section 72 of the Act without appreciating that the claim of depreciation is required to be examined under the provisions of section 32 of the Act and not under section 72 of the Act. Thus, the proceedings under section 263 of the Act initiated on incorrect premise are liable to be quashed. 6. On the facts and in the circumstances of the case and in law, the Ld. PCIT has erred in passing the Order u/s. 263 of the Act without considering the detailed submission made by the appellant company during the course of revision proceedings and not doing so is wrong and contrary to the provisions of the Act and principle of natural justice. Thus, the Order u/s. 263 of the Act is liable to be quashed. 2. The assessee company is engaged in the distribution of the electricity and filed its return of income on 28.11.2015 declaring total loss of Rs. 1184,20, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t this issue of treating the receipt on account of supply affording charges and electrification charges from the customers at the time of new electricity connection as capital receipt by the assessee is recurring issue for last many years and the department is treating the said receipt as revenue. He has referred to the earlier assessment order and submitted that the AO has been adding this amount by treating the same as revenue receipt and consequently assessee being loss making company has decided to declare this amount as revenue receipt in the return of income. Though, in the books of account the assessee is treating the same as capital receipt and reducing the written down value of the fixed asset. Ld. AR has submitted that earlier when the assessee was capitalizing this receipt and reducing the written down value of the fixed assets resulting less claim of depreciation due to reduction in the written down value of the fixed assets. However, now the assessee decided to declare this amount as revenue receipt in the return of income and consequently written down value of the fixed asset is increased and the depreciation on the enhanced written done value is also increased accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not satisfy the conditions provided u/s 263 being the order of the AO is erroneous so far as prejudicial to the interest of revenue. Thus the ld. AR has contended that when the twin condition as provided u/s 263 of the Act are not satisfied then the Pr. CIT cannot invoked the provisions of section 263 of the Act. Thus, he has pleaded that the impugned order of Pr. CIT u/s 263 is not sustainable in law and liable to be quashed. 4. On the other hand, ld. DR has submitted that the AO has not conducted any inquiry on this issue of claim of depreciation in the revised return of income filed by the assessee and accepted the same without a due and proper inquiry. He has submitted that this issue is a claim of complete lack of inquiry on the part of the AO while passing assessment order which renders the order of the AO as erroneous so far as prejudicial to the interest of revenue. He has relied upon the impugned order of Pr. CIT passed u/s 263 of the Act. 5. We have considered the rival submissions as well as relevant material on record. The assessee filed original return of income on 28.11.2015 declaring total loss of Rs. 11,84,20,96,274/- Later on the assessee has revised its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ward business depreciation of Rs. 2,14,23,49,756/-. In response to the said show cause notice the assessee filed the reply which has been reproduced by the Pr. CIT in para 2 of the impugned order as under: With reference to above subject, vide above referred notice, your good office has drawn attention towards point no. 18 and Annexure - 2 of the Form 3CD pertaining to the A.Y. 2015-16 wherein depreciation allowable as per the I. T. Act, 1961 for the AY was Rs. 214,23,49,756/-, whereas while filing revised return of income, Company declares total loss of Rs. 974,36,54,487/- and the assessment was completed determining total loss of Rs. 974,36,54,487/- including carried forward business depreciation of Rs. 218,62,57,725/-. Further, it is mention that the AO has not examined this fact/issue and no enquiry/investigation has been made regarding allowability of provision of section 72 of the IT Act. Accordingly, your good office directed to show cause why reason of section 263 be not invoked in this case. In this regard attention is drawn towards Assessment Order passed by the Assessing Officer for the Assessment Year 2011-12, 2012-13 2013-14. Wherein Assessing Officer made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same to the value of Fixed Assets (Plant Machinery) which was reduced while filing original return of Income treating the same capital receipt. Company had also offered certain Income amounting to Rs. 3,99,517/- which remain to be offered as Income while filing original return of income. The Impact of the revision of Return of A. Y. 2014-15 can be understand as under: Particular Original Return Revised return Difference Remark Total Income (-) 1651,19,06,765/- 16195053413 31,68,53,352 The loss has reduced following offered to income 1. Supply affording electrification charges 31,64,53 2. Other in 3,99,517 Depreciation claimed 201,18,76,983/- 203,56,11,021/- 2,37,34,038/- The amount depreciation increased because of addition supply affording and electrification charges to value of assets (Plant machinery) calculation (Treating the as put to us less than days Rs. 31,64,5x15%x1/2=2,37,34,038/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation as mentioned Revised Return of Income and Tax Audit Report of A. Y. 2015-16. Copy of Acknowledgment of Original Return of Income along with computation, Acknowledgment of Revised Return of Income along with Computation and Assessment Order for A.Y. 2015-16, enclosed with the letter as Annexure-7, Annexure-8 and Annexure-9 respectively. In view of above, it is submitted that the came forward depreciation for A. Y. 2015-16 amounting to Rs. 218,62,57,725/- is in accordance with the provision of section 72 of the Income Tax Act, 1961 and the difference in amount mentioned as per Tax Audit report and Revised Rectum of Income is only due the effect of change in particular of A. Y. 2014-15 which is brought forward to A.Y. 2015-16 as per the above detailed submission. Further, it is also submitted that, since during the A.Y. there is changes only due to change in Opening Balances therefore, there is no case of reopening of Assessment u/s 263 of the Income Tax Act, 1961 for A. Y. 2015-16. Also, attention is drawn towards the Notice issued by A.O. vide letter no. 688 dated 24/11/2017, where in vide point no. 1 A.O. had asked to furnish details of addition to fixed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uiry owing to the fact that the assessee itself has offered supply affording charges and electrification charges as revenue receipt which was earlier capitalized and consequently the written down value of the fixed assets is increased by the said amount resulting increase of claim of depreciation. We find that for the assessment year 2015-16 the opening written down value of fixed assets as on 01.04.2014 was increased from Rs. 1291,69,06,048/- to Rs. 1320,96,25,845/- due to declaration of the charges supply of affordable charges and electrification charges as revenue receipt in the revised return of income for A.Y.2014-15 and the net increase in the written down value is Rs. 29,27,19,797/-. The Depreciation at the rate of 15% on the net increase of written down value of Rs. 29,27,19,797/- comes to Rs. 4,39,07,969/-. The assessee has explained before the Pr. CIT that the revised return of income for A.Y. 2014-15 was filed after the original return of income for A.Y.2015-16 and to give effect to the change match in the return of income for A.Y. 2014-15 the return of income for A.Y.2015-16 was also revised. Therefore when the assessee has given correct calculation of the increase in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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