2016 (1) TMI 1404 - AT - Income Tax

Tribunal quashes CIT's order under Section 263, upholds original assessment. Assessee's appeal allowed, AO's order restored.

M/s. Century Plyboards (I) Ltd Versus C.I.T Kol-IV, Kolkata

M/s. Century Plyboards (I) Ltd Versus C.I.T Kol-IV, Kolkata - TMI Issues Involved:1. Legality of the CIT's order under Section 263 for the Assessment Year 2009-10.2. Depreciation on vehicles at the rate of 30%.3. Alleged bogus purchases from M/s Duralloy Cutters Ltd.4. Setting aside the entire assessment for a de novo review.Issue-wise Detailed Analysis:1. Legality of the CIT's order under Section 263 for the Assessment Year 2009-10:The assessee challenged the CIT's order under Section 263, arguing that the original assessment order was neither erroneous nor prejudicial to the interests of the Revenue. The CIT had issued a show cause notice under Section 263, treating the original assessment order as erroneous and prejudicial to the interests of the Revenue due to two main reasons: the depreciation rate applied to vehicles and alleged bogus purchases from M/s Duralloy Cutters Ltd.2. Depreciation on vehicles at the rate of 30%:The CIT contended that the assessee was not entitled to claim depreciation at 30% on vehicles as they were not used for running on hire. The assessee argued that the vehicles were used in the business of running them on hire, evidenced by transportation hire charges included in their income. The Tribunal found that the vehicles were indeed used for transporting goods between Kolkata Port and the assessee's Container Freight Station (CFS), and transportation charges were separately invoiced. This substantiated the claim for depreciation at 30%. The Tribunal noted that the AO had allowed the depreciation at 30% in subsequent assessments as well, thus the original assessment order was not erroneous.3. Alleged bogus purchases from M/s Duralloy Cutters Ltd:The CIT alleged that the assessee made bogus purchases based on information from DGIT (Inv.), Mumbai. The assessee provided complete details of purchases, including invoices, payment proofs, and transportation vouchers. The Tribunal noted that the CIT did not furnish specific details or evidence from the DGIT's information to the assessee, nor did it provide an opportunity for rebuttal. The Tribunal emphasized that the assessee had demonstrated the genuineness of the purchases and corresponding sales, thereby discharging its onus. The Tribunal cited precedents where similar allegations were dismissed due to lack of specific evidence and non-compliance with principles of natural justice.4. Setting aside the entire assessment for a de novo review:The Tribunal held that the CIT should not have set aside the entire assessment for a de novo review based on two specific issues. This would give the AO another opportunity to review concluded issues, which is not permissible. The Tribunal allowed the specific ground raised by the assessee against setting aside the entire assessment.Conclusion:The Tribunal quashed the CIT's order under Section 263, holding that the original assessment order was not erroneous or prejudicial to the interests of the Revenue. The appeal of the assessee was allowed, and the order of the AO under Section 143(3) was restored.