1997 (10) TMI 102 - AT - Income Tax

Tribunal cancels CIT's order, reinstates AO's assessment for 1987-88

The tribunal allowed the assessee's appeal, canceling the CIT's order under s. 263 for the assessment year 1987-88. The tribunal found that the AO had ... - Issues:Appeal against order of CIT under s. 263 for asst. yr. 1987-88 - Investment allowance claimed on tractor - Excessive depreciation on air compressor and rockdrill.Analysis:The appeal was filed by the assessee against the CIT's order under s. 263 for the assessment year 1987-88, challenging the disallowance of investment allowance on the tractor and excessive depreciation on the air compressor and rockdrill. The CIT issued a show-cause notice proposing to modify the assessment based on these issues. The assessee responded with arguments supported by a Board's Circular and a Tribunal order. The CIT, however, was not convinced by the assessee's reply and proceeded to modify the AO's order under s. 263, stating that the tractor remained a road transport vehicle and not part of mining machinery.The assessee contended before the appellate tribunal that the assessment was done after due consideration of depreciation and investment allowance, making the CIT's order erroneous. The assessee also argued that the CIT's decision was based on an audit objection, citing the Indian & Eastern Newspaper Society case to support the claim of a change of opinion not warranting action under s. 263. The Departmental Representative supported the CIT's order, arguing that the tractor could not be considered part of the mining machinery for full depreciation.The tribunal carefully considered the arguments and found that the AO had raised queries regarding depreciation and investment allowance during assessment, which the assessee had satisfactorily addressed, leading to their allowance. Drawing from the Supreme Court's decision in the Indian & Eastern Newspaper Society case, the tribunal noted that the action under s. 263, based on an audit objection, was akin to a change of opinion already considered during assessment. Additionally, the tribunal referred to a decision involving Mewar Chemical Products Ltd., emphasizing that the CIT's order lacked concrete evidence of incorrect information provided by the assessee. The tribunal also analyzed relevant case laws like CIT vs. Popular Borewell Service and CIT vs. Super Drillers to support the assessee's claim for investment allowance and depreciation.Ultimately, the tribunal concluded that the CIT's order under s. 263 was unwarranted, as the assessment was done diligently, and the claims were rightly allowed by the AO. Considering the merits of the case and the legal precedents cited, the tribunal allowed the assessee's appeal, canceling the CIT's order and reinstating the AO's original assessment.In conclusion, the tribunal upheld the assessee's appeal, emphasizing that the CIT's order under s. 263 was unjustified, and the claims for investment allowance and depreciation were valid, as correctly allowed by the AO.