Tribunal upholds notice under section 154, dismisses appeal on failure to consider Supreme Court decision.

The Tribunal upheld the notice issued under section 154 of the Act, ruling that the failure to consider a binding decision by the Hon'ble Supreme Court constituted a mistake apparent on record. Additionally, the disallowance of additional depreciation was upheld based on the alignment of the case facts with established precedent, leading to the dismissal of the appeal on 29/08/2019.

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Issues:
1. Whether the notice issued under section 154 of the Act was valid in a case involving a debatable issue.
2. Whether the disallowance of additional depreciation on account of manufacturing activities was justified.

Analysis:

Issue 1:
The appeal was against the order of the ld. CIT(A) upholding the notice issued under section 154 of the Act for the Assessment Year 2012-13. The AO disallowed additional depreciation on plant and machinery, citing a decision of the Hon'ble Supreme Court in a similar case. The assessee contended that the issue was debatable and not a mistake apparent from records. The Tribunal noted that the Hon'ble Supreme Court's decision on the issue was binding on all authorities. The Tribunal held that the AO's failure to consider the binding law while allowing the depreciation in the original assessment order constituted a mistake apparent on record. The Tribunal referred to the case law to support its decision, emphasizing that non-consideration of a binding decision renders the order liable for rectification under section 154 of the Act.

Issue 2:
The second issue revolved around the disallowance of additional depreciation on the grounds that the assessee's manufacturing activities did not qualify as manufacturing. The ld. CIT(A) upheld the AO's decision, relying on the Hon'ble Supreme Court's judgment that cutting and polishing of raw diamonds did not amount to manufacturing. The Tribunal found that the process involved in the manufacturing of tiles from marble blocks, as cited in a different case, was distinct from cutting and polishing raw diamonds. The Tribunal emphasized that the decision in the case of CIT vs. Gems India Mfg. Co. was not overruled by subsequent judgments. The Tribunal concluded that the ld. CIT(A) had correctly disallowed the additional depreciation, as the facts of the case aligned with the precedent set by the Hon'ble Supreme Court.

In conclusion, the Tribunal dismissed the appeal, affirming the decisions of the ld. CIT(A) and the AO. The order was pronounced on 29/08/2019.

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