Tribunal Permits Depreciation Claim Rectification, Clarifies Error Correction Under Tax Law.

The Tribunal set aside the order of the CIT(A) and directed the Assessing Officer to allow the depreciation claim as per the rules. It held that the omission to claim depreciation was a mistake apparent from the record, rectifiable under section 154. The assessee's appeal was allowed, permitting the rectification and entitlement to depreciation under section 32. The Tribunal reconciled conflicting Supreme Court judgments, applying the principles of Anchor Pressings (P.) Ltd., establishing that rectification is permissible when all factual materials are on record, despite the initial omission.

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Issues Involved:
1. Whether the assessee could claim depreciation u/s 32 by moving an application for rectification u/s 154 of the Income-tax Act, 1961.

Summary:

Issue 1: Application for Rectification u/s 154 During Re-assessment Proceedings
The Tribunal examined whether the application u/s 154 could be rejected during the pendency of re-assessment proceedings. The CIT(A) had held that the original assessment became non-existent upon the issue of notice u/s 148, thus preventing rectification u/s 154. The Tribunal found this reasoning erroneous, citing the Supreme Court's decision in CIT v. Sun Engg. Works (P.) Ltd., which clarified that only the under-assessment is set aside, not the entire assessment. Therefore, the original assessment order remained valid, and the application for rectification could be considered on its merits.

Issue 2: Entitlement to Claim Depreciation u/s 32 via Rectification u/s 154
The Tribunal considered whether the assessee could claim depreciation by making an application for rectification on the ground of forgetting to claim it initially. The Supreme Court in Anchor Pressings (P.) Ltd. v. CIT held that rectification u/s 154 is permissible if all factual materials necessary for the relief are on record, even if the assessee omitted to claim it. The Tribunal found that the assessee's omission to claim depreciation constituted a mistake apparent from the record, which could be rectified u/s 154.

Issue 3: Conflict Between Supreme Court Judgments
The Tribunal addressed the apparent conflict between the Supreme Court's decisions in Anchor Pressings (P.) Ltd. and CIT v. Mahendra Mills. The former allowed rectification if all factual materials were on record, while the latter held that depreciation could not be forced upon the assessee if not claimed. The Tribunal reconciled these by noting that the latter case did not concern rectification u/s 154 but rather the mandatory duty of the officer to allow depreciation. Thus, the Tribunal concluded that the present case was governed by the principles laid down in Anchor Pressings (P.) Ltd.

Conclusion
The Tribunal set aside the order of the CIT(A) and directed the Assessing Officer to allow the depreciation as per rules, holding that the omission to claim depreciation was a mistake apparent from the record that could be rectified u/s 154. The appeal of the assessee was allowed.

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