Tribunal orders CIT(A) to review AO's reasons for denying higher depreciation on leased trucks, despite procedural issues.

The Tribunal restored the case to the CIT(A) to evaluate the Assessing Officer's reasons for disallowing the higher depreciation claim on leased trucks and to verify supporting documents. The Tribunal clarified that the CIT(A) could consider the claim on its merits, despite procedural issues under Section 139(5), as the AO had already assessed the merits. The Revenue's appeal was allowed for statistical purposes, directing the CIT(A) to issue a detailed order after hearing the assessee.

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Issues Involved:
1. Allowance of depreciation at 40% on leased trucks versus 20% allowed by the Assessing Officer (AO).
2. Validity of the claim for higher depreciation made via a letter beyond the period stipulated in Section 139(5) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Allowance of Depreciation at 40% on Leased Trucks:
The primary issue was whether the assessee was entitled to a higher depreciation rate of 40% on leased trucks, as opposed to the 20% allowed by the AO. The assessee argued that the trucks were run on hire, justifying the higher depreciation rate according to Appendix I of the Income Tax Rules, 1962. The AO had disallowed the higher depreciation, citing judgments from the Rajasthan High Court and a Board Circular which specified that higher depreciation was not available to entities not running vehicles on hire.

The CIT(A), however, allowed the higher depreciation based on past orders and the decision in the assessee's own case for the assessment year 1996-97. The Tribunal noted that the issue of higher depreciation on leased trucks was settled by the Delhi High Court in the case of CIT vs. Bansal Credits Ltd., which allowed higher depreciation if the lessee used the vehicles for hiring purposes. Despite this, the Tribunal restored the issue to the CIT(A) to address the specific reasons given by the AO for disallowing the claim and to verify the documents on record.

2. Validity of the Claim for Higher Depreciation Made via a Letter:
The second issue revolved around the procedural validity of the revised claim for higher depreciation, which was made through a letter during the assessment proceedings, rather than through a revised return under Section 139(5). The AO rejected this claim as it was filed beyond the stipulated period, treating the letter as non est (non-existent). However, the AO also considered the claim on merits and disallowed it.

The CIT(A) did not address the procedural aspect but allowed the claim based on the merits and past history. The Tribunal, while restoring the issue to the CIT(A), highlighted the need to address the procedural validity of the claim under Section 139(5).

The dissenting opinion by one of the Tribunal members argued that the CIT(A) was not required to address the procedural issue since the AO had already considered the claim on merits. This member also cited the judgment of the Bombay High Court in CIT vs. Prabhu Steel Industries (P) Ltd., which allowed claims made during assessment proceedings even if not initially claimed in the return.

Ultimately, the third member (Vice President) agreed with the view that the CIT(A) was not precluded from considering the claim on merits, given that the AO had already done so. The Vice President also noted that the claim for higher depreciation was not a new claim but a correction of an existing one, and thus did not necessitate a revised return under Section 139(5).

Conclusion:
The Tribunal restored the issue to the CIT(A) to address the specific reasons brought out by the AO for disallowing the claim and to verify the documents on record. The Tribunal also clarified that the CIT(A) was not precluded from considering the claim on merits, and that the procedural aspect under Section 139(5) needed to be addressed. The appeal by the Revenue was allowed for statistical purposes, with directions for the CIT(A) to pass a speaking order after giving the assessee an opportunity to be heard.

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