2010 (10) TMI 247 - AT - Income Tax

Tribunal invalidates order due to time limit breach, cancels and allows appeal.

The Tribunal allowed the assessee's appeal, holding that the order under section 154 was not passed within the statutory period of limitation and was thus ... Depreciation - Rectification of mistakes - service of the order of assessment u/s. 154 of the Act and the service of notice of demand u/s.156 of the Act - The order u/s.154 merely refers to the fact that there was excess depreciation allowed in the order u/s. 143(3) of the Act by Rs. 5,53,080/- and the Assessee by letter dated 7/7/99 accepted the proposed rectification. If the order u/s.154 was passed on the basis of admission of the Assessee, there is no explanation as to why the order was passed only on 24/01/2000 i.e., after a period of more than 6 months, even without referring to any of the other correspondence on the issue between the Assessee and the AO. - All the above circumstances clearly go to show that the order u/s.154 was not passed on 24/01/2000. The above circumstance also shows that there no evidence to show that the tax calculation in Form No. ITNS 150 was in fact made within the period of limitation. - Held that: - the order u/s.154 is not legal as the same has been passed beyond the period of limitation. - Decided in favor of assessee. Issues Involved:1. Validity of the order under section 154 passed by the Assessing Officer (AO) within the period of limitation.2. Confirmation of disallowance of depreciation on leased assets.3. Charging of interest under sections 234A, 234B, and 234C in the order under section 154.4. Legality of rectification under section 154 while an appeal against the AO's order under section 143(3) was pending.Issue-Wise Detailed Analysis:1. Validity of the Order under Section 154 Passed by the AO within the Period of Limitation:The primary contention was whether the order under section 154 was passed within the statutory period of limitation. The order sought to amend an assessment passed on 30/03/1998, and thus, under section 154(7), it had to be passed by 31/03/2002. The assessee argued that the order dated 24/01/2000 was not served until 04/05/2005, and there was no notice of demand under section 156 on record. The Tribunal examined the original records and noted several discrepancies, including the absence of a dated tax calculation sheet (ITNS 150) and no recovery steps taken despite a substantial demand. The Tribunal concluded that the order under section 154 was not passed within the limitation period and was therefore invalid. Consequently, the order under section 154 was canceled.2. Confirmation of Disallowance of Depreciation on Leased Assets:The assessee challenged the disallowance of depreciation on leased assets, arguing that such rectification was outside the purview of section 154 and should have been addressed under sections 147 and 148. However, since the Tribunal found the order under section 154 itself invalid due to being time-barred, it did not delve into the merits of this issue.3. Charging of Interest under Sections 234A, 234B, and 234C:The assessee contended that the AO was not entitled to charge interest under sections 234A, 234B, and 234C in the rectification order, as it was not a regular assessment under section 2(40). The Tribunal did not address this contention separately, as the primary ground of the order being time-barred was upheld, rendering this issue moot.4. Legality of Rectification under Section 154 While an Appeal was Pending:The assessee argued that the AO was not legally entitled to carry out rectification under section 154 when an appeal against the AO's order under section 143(3) was pending. The Tribunal did not specifically adjudicate this issue, as the invalidation of the order under section 154 due to the limitation period rendered further examination unnecessary.Conclusion:The Tribunal allowed the assessee's appeal, holding that the order under section 154 was not passed within the statutory period of limitation and was thus invalid. Consequently, the Tribunal canceled the order under section 154 and did not address the other grounds of appeal in detail. The appeal was allowed, and the order was pronounced in the open court on 08/10/2010.