2016 (1) TMI 778 - AT - Income Tax

Tribunal upholds CIT's order under Section 263, emphasizing need for diligent assessment by Assessing Officer.

The Tribunal upheld the CIT's revisionary order under Section 263, dismissing the Assessee's appeal. The CIT's directive for the AO to reexamine the claim ... Revisionary order passed by ld. CIT u/s. 263 - claim of additional depreciation - Held that:- There has been non application of mind on the issue of additional depreciation by the A.O and therefore ld. CIT has rightly invoked the revisionary power u/s. 263 of the Act. As far as the submissions of Assessee that it is eligible for claiming additional depreciation in view of the various decisions cited by ld. A.R. is concerned, we are of the view that ld. CIT has directed the A.O to examine the issue in light to the submissions made before him and ld. CIT has not directed the A.O to disallow the expenses. In such a situation, we are of the view, that the claim of Assessee will be examined on the basis of facts and law by the A.O and if Assessee is eligible for deduction, the same will be allowed to it and thus no prejudice will be caused to Assessee. We therefore find no infirmity in the order of ld.CIT and therefore it requires no interference. - Decided against assessee. Issues:Challenge to revisionary order passed by CIT u/s. 263 of the Income Tax Act.Detailed Analysis:1. Invocation of Section 263 by CIT:The CIT invoked Section 263 due to the Assessee's claim of additional depreciation u/s. 32(1)(iia) being allowed without proper examination by the Assessing Officer (AO). The AO had specifically asked for details and justification of the claim, but no response was provided by the Assessee. The CIT's revisionary power was justified as there was a lack of application of mind by the AO on the issue of additional depreciation.2. Legal Interpretation of Section 263:The power of suo motu revision under Section 263 is a supervisory jurisdiction and can only be exercised if the order is erroneous and prejudicial to the interests of Revenue. Legal precedents, such as the decision in Malabar Industrial Co. Ltd. vs. CIT, emphasize that an incorrect assumption of facts or law satisfies the requirement of the order being erroneous.3. Judicial Precedents and CIT's Decision:The Assessee argued its eligibility for additional depreciation based on judicial precedents and legal provisions. However, the CIT directed the AO to reexamine the issue, not to disallow the expenses. The CIT's order did not prejudicially impact the Assessee, as the claim would be evaluated based on facts and law by the AO.4. AO's Failure to Apply Mind:The AO's failure to consider the justification for the claim of additional depreciation, despite specific queries, led to the invocation of Section 263 by the CIT. The lack of response from the Assessee to the AO's queries highlighted the non-application of mind by the AO.5. Decision and Conclusion:Considering the circumstances and legal interpretations, the Tribunal upheld the CIT's order under Section 263. The Assessee's appeal was dismissed, as the CIT's directive for the AO to reexamine the claim did not cause prejudice to the Assessee. The Tribunal found no fault in the CIT's decision and deemed it appropriate.In conclusion, the Tribunal upheld the CIT's revisionary order under Section 263, emphasizing the necessity for proper examination and application of mind by the Assessing Officer in allowing claims such as additional depreciation.