2015 (6) TMI 1120 - AT - Income Tax

Tribunal upholds assessment order, rejects CIT's revision on additional depreciation for windmill.

Jitendra J. Mehta Versus Commissioner of Income Tax, Cen. 4, Mumbai

The Tribunal held that the assessment order under sections 143(3) and 153A was not erroneous or prejudicial to the Revenue's interest. The CIT's revision ... Revision u/s 263 - Assessing Officer did not consider the issue of eligibility of additional depreciation on windmill and the same has resulted in loss of revenue - assessment order passed by AO under the provisions of section 143(3) r.w.s. 153A - Held that:- AO did not have jurisdiction to the make addition on the impugned issue as the same is not based on seized material. Such contention has been rejected only on the ground that there are conflicting views rendered by various High Courts and the contention of the assessee has not been rejected on the ground that the impugned addition is based on seized material. Also there is no material on record to suggest that issue regarding additional depreciation on Wind Mill was based on seized material. Therefore, certainly, this issue is other than the additions based on seized material. If it is so then according to the aforementioned decision of Hon’ble Bombay High Court in the case of CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015 (5) TMI 656 - BOMBAY HIGH COURT) the AO would not have jurisdiction to bring such issue in the assessment completed u/s. 153A r.w.s 143(3) and non-consideration thereof in the assessment order would not make the assessment order passed under section 143(3) r.w.s. 153A as erroneous and prejudicial to the interest of Revenue. - Decided in favour of assessee. Issues Involved:1. Erroneous and prejudicial assessment order under section 263 of the Income Tax Act, 1961.2. Merger of assessment orders under sections 143(3) and 153A.3. Jurisdiction of the Assessing Officer to disallow additional depreciation on windmill.4. Consideration of eligibility for additional depreciation on windmill by the Assessing Officer.5. Correctness of the claim for additional depreciation on windmill as per the provisions of the Act.Issue-wise Detailed Analysis:1. Erroneous and Prejudicial Assessment Order under Section 263:The Principal Commissioner of Income Tax (CIT) invoked section 263 of the Income Tax Act, 1961, to revise the assessment order dated 30/03/2013, passed under section 143(3) read with section 153A. The CIT held that the assessment order was erroneous and prejudicial to the interest of the Revenue because the additional depreciation on the windmill was wrongly allowed, resulting in a loss of revenue. The assessee contended that the assessment order under section 153A should be based on seized material found during the search, and since the additional depreciation issue was not based on such material, the Assessing Officer (AO) did not have jurisdiction to make any disallowance on this ground.2. Merger of Assessment Orders under Sections 143(3) and 153A:The assessee argued that the original assessment order passed under section 143(3) did not merge with the order passed under section 153A. The CIT, however, treated the assessment orders as merged, which the assessee contended was incorrect. The chronology of events indicated that the original assessment order dated 31/12/2008 did not disallow the additional depreciation on the windmill, and the subsequent assessment under section 153A also did not address this issue.3. Jurisdiction of the Assessing Officer to Disallow Additional Depreciation on Windmill:The assessee argued that the AO did not have jurisdiction to disallow the additional depreciation on the windmill in the assessment under section 153A, as it was not based on seized material. The CIT rejected this contention, citing contradictory judgments from various High Courts and a decision by the Karnataka High Court in Canara Housing Development Co., which supported the Revenue's stance. However, the assessee relied on a recent decision by the Bombay High Court in CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd., which confirmed that the AO could not disturb finalized assessments unless new material was found during the search.4. Consideration of Eligibility for Additional Depreciation on Windmill by the Assessing Officer:The CIT held that the AO did not consider the issue of eligibility for additional depreciation on the windmill, leading to a loss of revenue. The assessee contended that the AO rightly allowed the additional depreciation, and the CIT's revision under section 263 was not justified. The Tribunal noted that the CIT's rejection of the assessee's contention was based on conflicting High Court judgments and not on any material suggesting that the additional depreciation was based on seized material.5. Correctness of the Claim for Additional Depreciation on Windmill as per the Provisions of the Act:The assessee maintained that the additional depreciation on the windmill was correctly claimed and allowed by the AO as per the provisions of the Act. The Tribunal referred to the decision of the Bombay High Court in CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd., which held that the AO could not bring issues not based on seized material into the assessment under section 153A. Therefore, the non-consideration of the additional depreciation issue in the assessment order did not make it erroneous or prejudicial to the interest of the Revenue.Conclusion:The Tribunal concluded that the power under section 263 of the Act invoked by the CIT was contrary to the provisions of the statute. The assessment order passed under section 143(3) read with section 153A was neither erroneous nor prejudicial to the interest of the Revenue. Consequently, the Tribunal quashed the order passed by the CIT under section 263 and allowed the appeal filed by the assessee. The appeal was pronounced in the open court on 24/06/2015.