2006 (2) TMI 60 - HC - Income Tax

High Court directs Assessing Officer to modify assessments due to change in written down value from appellate orders.

The High Court allowed the original petition, setting aside the impugned orders and directing the Assessing Officer to modify the assessments. The court ... Rectification of assessment for mistake apparent on the face of the record - written down value for depreciation - effect of appellate order on subsequent assessments - recomputation of depreciation based on earlier appellate findingsRectification of assessment for mistake apparent on the face of the record - written down value for depreciation - effect of appellate order on subsequent assessments - Whether assessments for later years completed on returns can be rectified under section 154 where appellate orders for earlier years alter the written down value used for granting depreciation. - HELD THAT: - The Court held that written down value for depreciation for an assessment year must take into account depreciation actually allowed in the preceding year, and where the written down value for earlier years is changed by orders of appellate authorities, the written down value used in subsequent years' returns is rendered mistaken as a consequence of those appellate orders. Consequently, the conclusion of the authorities below - that there was no mistake apparent on the face of the record because assessments were completed on the returns - was incorrect. The Court directed that depreciation for 1992-93 and subsequent years be recomputed and the assessments modified to give effect to the written down value as fixed by the orders of the Commissioner (Appeals) and the Tribunal for the earlier years. The determinative reasoning is that the mistake in the later returns arises from the binding alteration of the prior years' written down value by appellate decisions, and therefore rectification under the statutory provision is permissible to reflect the corrected written down value and consequent depreciation. [Paras 2, 3]Impugned orders set aside; Assessing Officer directed to modify assessments and grant depreciation based on the written down value consequent upon appellate orders for the earlier years.Final Conclusion: Petition allowed: assessments for 1992-93 to 1996-97 to be modified and depreciation recomputed in accordance with the written down value determined by earlier appellate orders. Issues:Challenging exhibit P14 order dismissing revision petition for rectifying income-tax assessments under section 154 of the Income-tax Act, 1961 for 1992-93 to 1996-97 based on changed written down value due to preceding years' orders.Analysis:The petitioner challenged exhibit P14 order where the Commissioner of Income-tax dismissed the revision petition filed by the petitioner. The petitioner sought rectification of income-tax assessments under section 154 of the Income-tax Act, 1961, for the years 1992-93 to 1996-97. Assessments for these years were initially completed under section 143(1A) of the Act, granting depreciation based on the written down value declared by the petitioner in the returns. However, assessments for the two preceding years, 1990-91 and 1991-92, were under contest before the Commissioner (Appeals) and the Income-tax Appellate Tribunal. The issue revolved around the written down value of items like plant, machinery, furniture, etc., for depreciation. Orders of these two authorities changed the written down value for 1990-91 and 1991-92, leading to a modification in the written down value for granting depreciation for 1992-93 and later years.The Assessing Officer declined the petitioner's request for rectification, stating no mistake was apparent on the face of the record to rectify assessments under section 154. The Commissioner upheld this decision, stating assessments completed based on the returns cannot be rectified as no mistake was evident. The High Court analyzed the case, considering the written down value under section 43(6) of the Income-tax Act, which is the actual cost of the assessee less depreciation allowed. It concluded that since there was a change in the written down value due to the orders of the appellate authority for the preceding years, depreciation for 1992-93 and subsequent years had to be recomputed based on these orders. The court found the authorities' view that there could be no mistake in the written down value post-return filing to be incorrect. It held that the mistake in the written down value was a consequence of the appellate order, necessitating a modification in assessments and granting depreciation based on the revised written down value.In the final judgment, the High Court allowed the original petition, setting aside the impugned orders. It directed the Assessing Officer to modify the assessments and grant depreciation based on the written down value following the orders of the Commissioner of Income-tax (Appeals) and the Tribunal for the earlier years.