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Power of revisions u/s 263 are validly exercised if original assessment order allows relief to assessee without proper enquiry into the claims: ITAT

2019-TIOL-1522-ITAT-MAD

IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH ‘B’ CHENNAI

ITA No.1747/Chny/2018
Assessment Year: 2013-14

M/s LOTUS CLEAN POWER VENTURE PVT LTD
484, KAMARAJ ROAD, UPPILIPALAYAM
COIMBATORE – 641015 
PAN NO:AACCL0985E

Vs

DEPUTY COMMISSIONER OF INCOME TAX
CORPORATE CIRCLE 1, COIMBATORE – 641018

Duvvuru RL Reddy, JM & S Jayaraman, AM

Date of Hearing: June 24, 2019
Date of Decision: June 26, 2019

Appellant Rep by: Shri T Raghunathan, CA
Respondent Rep by: 
Shri Guru Bashyam, JCIT

Income Tax – Section 115JB , 143(1) & 263

Keywords – reasons for reopening – depreciation on windmill – revisionary jurisdiction

The assessee company had filed its return declaring loss of Rs.46,11,81,720/- and book profit of Rs.6,65,88,454/- u/s 115JB. Thereafter, the case was selected for scrutiny and the assessment was completed at a loss at Rs.76,15,92,530/- after excluding depreciation of Rs. 88,68,28,727/-. But the assessment order was found to be erroneous as a consequence of which PCIT directed the AO to re-do the assessment afresh after verifying the issues. The assessee approached the Tribunal where he submitted that the PCIT erred in directing the AO to re-do the assessment on the mere ground that the depreciation on wind mills allowed at 80% was without verification of facts and without proper enquiry and therefore prayed for quashing order u/s 263 of the Act.

On appeal, the ITAT held that,

Whether assessment order passed by the AO without verification of fact and also by allowing reliefs without proper inquiry of the claim, calls for revisionary jurisdiction u/s 263 – YES: ITAT

++ the PCIT has observed that Sec 32 repeatedly stresses the need of the asset to have been acquired by the assessee and also being put to use by the assessee. It was further observed that the word ‘installation’ would only mean and does not hold any other meaning other than the meaning that it was put to use by the assessee after the asset being acquired by it. It was further observed that the ownership and putting to use are two conjoined conditions that has to be simultaneously satisfied for claim of depreciation. It was further observed that the assessee claimed 80% depreciation as the wind mills were originally used by another entity before 31.03.2012 is out of a contorted reading of the enabling notification and the provisions of the Act and deserves to be dismissed as an argument devoid of long or merit. It was further observed that the assessment order passed by AO u/s 143(3) is made without verification of the fact also by allowing reliefs without proper inquiry of the claim of the said relief;

++ the Tribunal finds that the assessment order is very cryptic. It may be evident that the windmills were transferred in the name of the assessee. In this case, the AO has not examined/determined the WDV of old windmills against which huge amount of depreciation was allowed against the claim of the assessee. What was the actual cost of the windmill was not brought on record and otherwise also, after claiming depreciation for 6-7 years old windmills, where there is possibility of obsolete technology, would fetch such a higher cost. Hence the court is of the considered opinion that the assessment order passed u/s 143(3) is erroneous and prejudicial to the interest of Revenue. Under these facts and circumstances, the PCIT has rightly invoked the provisions of section 263 and directed the AO to re-do the assessment afresh after verification of the issues.

Assessee’s Appeal dismissed

ORDER

Per: Duvvuru RL Reddy:

This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax 1, Coimbatore dated 19.03.2018 relevant to the assessment year 2013-14 passed under section 263 of the Income Tax Act, 1961 [“Act” in short].

2. Brief facts of the case are that the assessee filed its return of income for the assessment year 2013-14 on 29.09.2013 declaring loss of Rs.46,11,81,720/- under normal provisions and book profit of Rs.6,65,88,454/- under section 115JB of the Act. The return was processed under section 143(1) of the Act. Subsequently, the case was selected for scrutiny. Against service of statutory notices, the assessee filed the details called for. After verification of details filed by the assessee and considering the submissions, the Assessing Officer completed the assessment under section 143(3) of the Act and determined the loss at Rs.76,15,92,530/- by allowing depreciation of Rs.88,68,28,727/-.

3. Since the assessment order was found erroneous and prejudicial to the interest of Revenue, the ld. PCIT proposed for revision under section 263 of the Act and a notice of show-cause dated 09.03.2018 was served on the assessee to file objections, if any. After considering the objections of the assessee, ld. PCIT directed the Assessing Officer to re-do the assessment afresh after verification of the issues since the assessment order passed under section 143(3) of the Act is erroneous and prejudicial to the interest of the Revenue.

4. Aggrieved, the assessee is in appeal before the Tribunal. The ld. Counsel for the assessee has submitted that the ld. PCIT has erred in directing the Assessing Officer to re-do the assessment on the ground that the depreciation on wind mills allowed at 80% was without verification of facts and without proper enquiry and prayed for quashing order passed under section 263 of the Act

5. Per contra, the ld. DR strongly supported the order of the ld. PCIT.

6. We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. The assessee claimed depreciation on windmills @ 80%. The Assessing Officer allowed the same without passing speaking order. By reproducing the provisions of section 32 of the Act relating to the claim of depreciation, the ld. PCIT has observed that the section repeatedly stresses the need of the asset to have been acquired by the assessee and also being put to use by the assessee. It was further observed that the word ‘installation’ would only mean and does not hold any other meaning other than the meaning that it was put to use by the assessee after the asset being acquired by it. It was further observed that the ownership and putting to use are two conjoined conditions that has to be simultaneously satisfied for claim of depreciation. It was further observed that the assessee claimed 80% depreciation as the wind mills were originally used by another entity before 31.03.2012 is out of a contorted reading of the enabling notification and the provisions of the Act and deserves to be dismissed as an argument devoid of long or merit. It was further observed that the assessment order passed by the Assessing Officer under section 143(3) of the Act is made without verification of the fact also by allowing reliefs without proper inquiry of the claim of the said relief.

6.1 On perusal of the assessment order, we find that the assessment order is very cryptic. It may be evident that the windmills were transferred in the name of the assessee on 25.05.2012. In this case, the Assessing Officer has not examined/determined the WDV of old windmills against which huge amount of depreciation was allowed against the claim of the assessee. What was the actual cost of the windmill was not brought on record and otherwise also, after claiming depreciation for 6-7 years old windmills, where there is possibility of obsolete technology, would fetch such a higher cost. Hence we are of the considered opinion that the assessment order passed under section 143(3) of the Act is erroneous and prejudicial to the interest of Revenue. Under these facts and circumstances, the ld. PCIT has rightly invoked the provisions of section 263 of the Act and directed the Assessing Officer to re-do the assessment afresh after verification of the issues and we find no reason to interfere with the order passed by the ld. PCIT. Thus, the ground raised by the assessee stands dismissed.

7. In the result, the appeal filed by the assessee is dismissed.

(Order pronounced on the 26.06.2019)

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