DHAVAL KIRTIBHAI SHAH, SURAT V. ITO, WARD-2(3)(6), SURAT

CO 16/SRT/2020

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 2030 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 9 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 24-05-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 13-03-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 09-08-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGHLA
• Keywords: Reopening of assessment; Business income; Depreciation
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकरअपील./ITANo.147/SRT/2020 & Cross Objection No.16/SRT/2020 [Arising out of an ITA No.147/SRT/2020] (Ǔनधा[रणवष[ / Assessment Year: (2012-13) (Virtual Court Hearing) The Income Tax Officer, Ward-2(3)(6), Surat. Vs. Dhaval Kiritbhai Shah, A-1103, Regent Residency, Green City Road, Pal, Surat-395009. èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AVMPS8446H (Assessee) (Respondent / Co-Objector) Assessee by Shri Mehul Shah, CA Respondent by Ms Anupama Singhla, Sr. DR Date of Hearing 14/03/2022 Date of Pronouncement 25/05/2022 आदेश / O R D E R PER DR. A. L. SAINI, AM: Captioned Appeal filed by the Revenue and CO by Assessee, pertaining to Assessment Year (AY) 2012-13, are directed against the order passed by the Learned Commissioner of Income Tax (Appeals) -4, Surat [in short “the ld. CIT(A)”], which in turn arises out of an assessment order passed by the Assessing Officer under section 144 r.w.s 147 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), dated 31.08.2017. 2. Grounds of appeal raised by the Revenue are as follows: “(i) On the facts and circumstances of the case and in Law, the Ld. CIT(A) has erred in deleting the addition made by the AO on account of excess claim of depreciation on embroidery machinery of Rs.11,11,350/- whereas the AO has rightly calculated the allowable depreciation at Rs.1,96,243/- on closing WDV of block of asset of embroidery at the applicable rate. (ii) On the facts and circumstances of the case and in Law, the Ld. CIT(A), Surat ought to have upheld the order of the Assessing Officer. It is, therefore, prayed the order of the Ld. CIT(A)-4, Surat may be set-aside and that of the Assessing Officer’s order may be restored. Page | 2 ITA.147 & CO.16/SRT/2020 Assessment Year.2012-13 Dhaval Kiritbhai Patel (iii) On the facts and circumstances of the case and in law, the assessee craves its right to add, alter, amend, deleted, any of the ground or grounds of appeal.” 3. The facts necessary for disposal of the appeal are stated in brief. During the assessment proceedings, the assessing officer observed that assessee had claimed depreciation to the tune of Rs.13,07,593/-on embroidery machinery. The assessing officer noted the relevant facts that embroidery machine showed opening balance of Rs.82,40,499/-, purchase of machinery of Rs.4,76,789/- and sale and transfer of machinery of Rs.74,09,000/-, therefore resulting into loss of Rs. 695/-, after claim of depreciation of Rs.13,07,593/-. The assessing officer was of the view that depreciation allowance would be at the rate of 15% on the Rs.13,08,228/- (after deducting sale proceeds of Rs.74,09,000/-) which comes to Rs.1,96,243/- ( 15% of Rs.13,08,228). However, the assessee first claimed depreciation of Rs.13,07,593/- being 15% of Rs.87,17,288/- (Opening Rs.82,40,499/- + Purchase Rs.4,76,789/-) as the machine was used during the year and sale was made at the end of the year as evident from the ledger account. Therefore, assessing officer made disallowance of difference to the tune of Rs.11,11,350/- (Rs.13,07,593 minus Rs.1,96,243). 4. The assessing officer also noticed that assessee had claimed depreciation of Rs.1,19,196/- on electrification at the rate of 60% whereas according to assessing officer, it should be at the rate of 15% on the Rs.1,98,660/- which comes to Rs.29,799/- and hence assessing officer made further disallowance of depreciation at Rs.89,397/- (Rs.1,98,660- Rs.29,799). In view of the matter, the excess depreciation claimed amounting to Rs.12,00,747/- (11,11,350 + 89,397) was disallowed and added to the total income of the assessee. 5. On appeal, ld CIT(A) deleted the addition. Aggrieved, by the order of ld CIT(A), the Revenue is in appeal before us. Page | 3 ITA.147 & CO.16/SRT/2020 Assessment Year.2012-13 Dhaval Kiritbhai Patel 6. Learned Departmental Representative (ld. DR) for the Revenue argues before the Bench that decision of the ld. CIT(A) is not acceptable because Assessing Officer has correctly allowed the depreciation to the tune of Rs.1,96,243/-. Thus, ld DR relied on the working of depreciation done by the assessing officer, which is reproduced below: “Opening WDV Rs.82,40,499/- Add: Purchases during the year Rs.4,76,789/- Less: Sold out of P&M Rs.74,09,000 Closing WDV Rs.13,08,228/- Depreciation allowable @15% of Rs.13,08,228 i.e. Rs.1,96,243/- Therefore, ld DR submitted that assessing officer has been correctly allowed depreciation on closing WDV of block of asset of embroidery at applicable of rate @15% therefore, above working of assessing officer may be accepted and thus addition made by the assessing officer should be sustained. 7. On the other hand, Learned Counsel for the assessee defended the order passed by the ld CIT(A). 8. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. We note that Revenue has challenged the deletion of additions by ld CIT(A) of Rs.12,00,747/- (Rs.11,11,350 + Rs.89,397) on account of excess claim of depreciation. The Learned CIT(A) observed that block of embroidery machine is exhausted which is "evident from the fact that assessing officer (AO) has accepted the figure of loss of Rs. 695/- claimed by the assessee on embroidery machinery. During appellate proceedings, the assessee has contended that even if depreciation claimed by him (assessee) on opening balance and purchase is ignored, it would result into further loss on sale of machinery of Rs.11,11,350/- and the same should be treated as loss u/s 32(i)(iii) and not short term capital loss u/s 50 of the Act. The difference in the treatment is relevant because if the Page | 4 ITA.147 & CO.16/SRT/2020 Assessment Year.2012-13 Dhaval Kiritbhai Patel said loss is treated as depreciation loss u/s 32(l)(iii) of the Act, the same would be available for set off against business income but if loss is treated as Short term capital loss under Section 50 of the Act, the same shall be carried forward in subsequent years and available for set off against future Short term capital gain for 8 years. In support of the contention that the loss of Rs.11,11,350/- should be considered as loss under Section 32(i)(iii) of the Act, the ld Counsel has relied on the following decisions: (i) ITO vs M/s. DFC Engineers Pvt. Ltd. [ITA No.5228/Mum/2013][ITAT Mumbai] dated 14.01.2015 (ii) Mukund Global Finance Ltd. vs. DCIT [(2009) 117 ITD 20 (Mumbai)][ITAT Mumbai] dated 27.11.2007. These above decisions were also relied by the assessee during the appellate proceedings. In both the decisions, it is held that Section 50 of the Act only deals with those types of cases where “profit’ is accrued on transfer of depreciable assets. In view of the above judgments, the ld CIT(A) observed that contention of the assessee is justified and therefore ld CIT(A) held that amount of Rs.11,11,350/- should be considered as loss u/s 32(1)(iii) of the Act and the same should be set off against business income and this way addition of Rs.11,11,350/- was deleted by ld CIT(A). Considering these facts and circumstances, we note that there is no infirmity in the order of ld CIT(A). That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid addition. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue are dismissed. 9. Now we shall take Cross Objection No.16/SRT/2020 for AY.2012-13, raised by the assessee. The assessee in its cross objection has challenged the reopening of assessment by assessing officer under section 147/148 of the Act. Since we have dismissed the appeal of the Revenue, therefore Cross Objection filed by assessee rendered academic and does not require adjudication. 10. In the result, appeals in ITA No.147/SRT/2017 filed by the Revenue is dismissed and in CO No. 16/SRT/2020 filed by assessee is also dismissed. Page | 5 ITA.147 & CO.16/SRT/2020 Assessment Year.2012-13 Dhaval Kiritbhai Patel Registry is directed to place one copy of this order in all appeals folder / case file(s). Order is pronounced in the open court on 25/05/2022 by placing the result on the Notice Board as per Rule 34(5) of the Income Tax (Appellate Tribunal) Rule 1963. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER lwjr /Surat Ǒदनांक/ Date: 25/05/2022 SAMANTA Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat