The ACIT, Circle-3, Baroda V. Shri Kalpesh S.Patel, Baroda

ITA 1017/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89719 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-07-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 10-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C MISHRA
• Keywords: Depreciation
• Section: 143(3); 154

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATUVEDI, ACCOUNTANT MEMBER ./ ITA NO.1017 AND 1018/AHD/2012 / ASSESSMENT YEAR: 2006-2007 AND 2007-2008 ACIT, CIR.3 BARODA. VS SHRI KALPESH S. PATEL 87, MAHESHWARNAGAR SOCIETY SUBHANPURA, BARODA. PAN : AGBPP 6655 M ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI D.C. MISHRA, SR.DR / DATE OF HEARING : 13/07/2015 / DATE OF PRONOUNCEMENT: 13/07/2015 $%/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE PRESENT TWO APPEALS ARE DIRECTED AT THE INSTAN CE OF REVENUE AGAINST THE COMMON ORDER OF THE LEARNED CIT(A) DATE D 10.2.2012 PASSED FOR THE ASSTT.YEARS 2006-07 AND 2007-08. 2. THE SOLITARY GRIEVANCE OF THE REVENUE IN BOTH TH E YEARS IS THAT THE LD.CIT(A) HAS ERRED IN HOLDING THAT THERE IS NO APP ARENT MISTAKE ON RECORD WHICH OUGHT TO BE RECTIFIED BY THE AO, AND T HEREFORE, THE DEPRECIATION WITHDRAWN BY THE AO IS AGAINST THE LAW . 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS RUNNING PROPRIETARY CONCERNS IN THE NAME AND STYLE OF M/S.S.B. PATEL, W HICH IS ENGAGED IN THE BUSINESS OF CIVIL WORKS AND EXCAVATION WORK OF CANALS, BUILDING, ITA NO.1017 AND 1018/AHD/2012 2 ROADS ETC. HE HAS FILED RETURN OF INCOME ON 31.12. 2006 AND 31.10.2007 DECLARING A TOTAL INCOME OF RS.2,08,73,760/- AND RS .2,84,67,340/- IN ASSTT.YEARS 2006-07 AND 2007-08 RESPECTIVELY. THE LEARNED AO HAS PASSED ASSESSMENT ORDERS IN BOTH THE YEARS UNDER SE CTION 143(3) ON 23.5.2008 AND 31.12.2009. 4. THE LEARNED AO HAS HARBOURED A PLEA THAT THE ASS ESSEE CLAIMED DEPRECIATION AT THE RATE OF 40% OF THE MOTOR CAR. THE DEPRECIATION FROM THE ASSTT.YEAR 2006-07 IS ADMISSIBLE AT THE RATE OF 30% ON THE MOTOR CAR, WHICH WAS USED BY THE ASSESSEE FOR THE PURPOSE OF RUNNING THEM ON HIRE. ACCORDING TO HIM, SINCE THE ASSESSEE HAS USED VEHICLES FOR HIS BUSINESS PURPOSE, AND DOES NOT HIRE THEM, THEREFORE , THE DEPRECIATION IS ADMISSIBLE AT THE RATE OF 15% AND NOT AT THE RATE O F 30%. HE, THEREFORE, ISSUED NOTICE UNDER SECTION 154 OF THE I NCOME TAX ACT IN BOTH THE ASSESSMENT YEARS. IN RESPONSE TO THE NOTI CE, IT WAS CONTENDED BY THE ASSESSEE THAT VEHICLES WERE USED FOR ASSESSE ES OWN BUSINESS AS WELL AS THESE WERE HIRED. THE ASSESSEE HAS SHOWN H IRING RECEIPTS IN THE GROSS RECEIPTS. IT WAS ADMITTED BY THE ASSESSEE TH AT DEPRECIATION UPTO ASSTT.YEAR 2005-06 WAS ADMISSIBLE AT THE RATE OF 40 %, BUT FROM THE ASSTT.YEAR 2006-07 IS ADMISSIBLE AT THE RATE OF 30% . THUS, TO THE EXTENT DEPRECIATION WAS CLAIMED ABOVE 30% IS AN APP ARENT ERROR, WHICH MAY BE RECTIFIED. BUT THE DEPRECIATION CANNOT BE R ESTRICTED TO 15%. THE LEARNED AO HAS REJECTED THE CONTENTIONS OF THE ASSESSEE, AND RECTIFIED THE ORDER BY HOLDING THAT AN APPARENT MIS TAKE WAS COMMITTED BY HIM WHILE PASSING SCRUTINY ASSESSMENT. HE WITHD REW THE DEPRECIATION OF RS.48,43,335/- IN THE ASSTT.YEAR 20 06-07 AND RS.50,89,470/- IN THE ASSTT.YEAR 2007-08. DISSATI SFIED WITH THE ACTION OF THE AO, THE ASSESSEE CARRIED THE MATTER IN APPEA L. THE LD.FIRST APPELLATE AUTHORITY HAS DECIDED BOTH THE APPEALS BY COMMON ORDER AND HELD THAT THE ISSUE WHETHER THE DEPRECIATION IS ADM ISSIBLE AT THE RATE OF 15% OR 30% IS A DEBATABLE ISSUE, WHICH CANNOT BE AD JUDICATED IN ITA NO.1017 AND 1018/AHD/2012 3 PROCEEDINGS UNDERTAKEN UNDER SECTION 154 OF THE ACT . THE LEARNED FIRST APPELLATE AUTHORITY SET ASIDE THE ORDER PASSED BY T HE LEARNED AO. THE RELEVANT FINDING RECORDED BY THE LD.CIT(A) IN THIS CONNECTION READS AS UNDER: 3.4.4 THUS, TO DECIDE WHETHER THE ASSESSEE IS IN B USINESS OF RUNNING THE MOTOR LORRIES ON HIRE, THE ASSESSING OF FICER WILL HAVE TO DIG DEEP INTO THE ACTS OF THE CASE AND THE DIVER SE DECISIONS ON THE ISSUE. THE ISSUE IS OPEN TO DEBATE. JUST BECA USE THE ASSESSEE IS CLASS AA CONTRACTOR AND THE AUDITORS HAVE STATED THE ASSESSEE'S BUSINESS TO BE THAT OF EARTH WORK AT C ANALS, ROADS AND CIVIL CONSTRUCTION SITES AND BUILDING WORKS AS PER TENDER ALLOTTED BY THE GOVERNMENT AGENCIES', DOES NOT AUTO MATICALLY MEAN THAT HE IS NOT IN THE BUSINESS OF RUNNING THE VEHICLES ON HIRE, WHEN SEEN FOR THE LIMITED PURPOSE OF ALLOWANC E OF DEPRECATION. IT IS THEREFORE NOT APPARENT FROM RECO RD THAT THE ASSESSEE IS ENTITLED TO ONLY 15% OF DEPRECIATION AN D NOT HIGHER RATE OF 30% CLAIMED BY HIM. THAT BEING SO, THE QUES TION FALLS OUTSIDE THE AMBIT OF SECTION 154 OF THE INCOME-TAX ACT. THE ADDITIONAL GROUND OF APPEAL RAISED, IS THEREFORE AC CEPTED AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE DISALLO WANCE MADE FOR BOTH THE YEARS. HOWEVER, AS ACCEPTED BY THE AUTHORI ZED REPRESENTATIVE, THE ASSESSEE HAS ERRONEOUSLY CLAIME D THE DEPRECIATION @ 40% WHICH WAS THE RATE APPLICABLE UP TO A.Y. 2005-06. FOR A.Y. 2006-07 AND 2007-08, THE RATE A PPLICABLE TO THE SAID BLOCK OF THE ASSETS I.E. HENCE THE ASSESSI NG OFFICER IS DIRECTED TO DISALLOW DEPRECIATION OF 10% (40% - 30% ) AND ALLOW RELIEF TO THE EXTENT OF 15% (30% - 15%). IN OTHER W ORDS THE DEPRECIATION ALLOWABLE WOULD BE 30% FOR BOTH THE YE ARS. 3.4.5. SINCE THE ADDITIONAL GROUND OF APPEAL IS ACC EPTED AND THE ASSESSING OFFICER IS DELETE THE DISALLOWANCE MADE U /S.154, THE MAIN GROUND OF APPEAL REMAINS ONLY OF ACADEMIC INTE REST AND DOES NOT NEED ADJUDICATION, FOR BOTH THE YEARS. 5. WITH THE ASSISTANCE OF THE LEARNED REPRESENTATIV E, WE HAVE GONE THROUGH THE RECORD CAREFULLY. THE POWER OF RECTIFIC ATION UNDER SECTION 154 OF THE INCOME TAX ACT CAN BE EXERCISED ONLY WHE N THE MISTAKE, WHICH IS SOUGHT TO BE RECTIFIED, IS AN OBVIOUS PATE NT MISTAKE, WHICH IS APPARENT FROM THE RECORD AND NOT A MISTAKE, WHICH I S REQUIRED TO BE ESTABLISHED BY ARGUMENTS AND LONG DRAWN PROCESS OF REASONING ON ITA NO.1017 AND 1018/AHD/2012 4 POINTS, ON WHICH THERE MAY CONCEIVABLY BE TWO OPINI ONS. THE DEPRECIATION AT THE RATE OF 30% CAN BE DENIED TO TH E ASSESSEE IF A FINDING OF FACT IS BEING RECORDED BY THE AO EXHIBIT ING THAT VEHICLES OWNED BY THE ASSESSEE ALLEGED TO HAVE BEEN USED FOR COMMERCIAL PURPOSE ON HIRE BUT, WERE NOT USED FOR HIRE. THIS FINDING OF THE FACT CAN ONLY BE RECORDED WHEN A LONG DRAWN PROCESS OF REASO NING IS UNDERTAKEN. IT IS A DISPUTED AND DEBATABLE QUESTIO N, WHICH WILL NOT COME WITHIN THE AMBIT OF APPARENT MISTAKE. THE ASS ESSEE HAS ALLEGED THAT HE HAS SHOWN HIRE RECEIPTS IN THE GROSS RECEIP TS. IF THAT BE SO, THEN THE AO IS NOT JUSTIFIED IN OBSERVING THAT THE ASSESSEE IS ENTITLED FOR THE DEPRECIATION AT THE RATE OF 15% ONLY. AS FAR A S THE ERROR COMMITTED BY THE ASSESSEE BY CLAIMING DEPRECIATION AT THE RAT E OF 40%, WHEREAS THE RATE ADMISSIBLE FROM THE ASSTT.YEAR 2006-07 IS OF 30% IS CONCERNED, IT IS AN APPARENT MISTAKE. THE LEARNED CIT(A) HAS ALREADY TAKEN CARE OF THIS, AND ISSUED DIRECTIONS TO THE AO (EXTRACTED SU PRA). THE LEARNED DR WAS UNABLE TO POINT OUT ANY APPARENT MISTAKE, BEYON D THE ONE ACCEPTED BY THE LD.CIT(A), WHICH REQUIRES TO BE RECTIFIED. THE LD.CIT(A) HAS APPRECIATED THE FACTS AND CIRCUMSTANCES IN RIGHT PE RSPECTIVE. WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LD .CIT(A). ACCORDINGLY, BOTH THE APPEALS ARE DISMISSED. 6. IN THE RESULT BOTH THE APPEALS OF THE REVENUE AR E DISMISSED. ORDER PRONOUNCED IN THE COURT ON 13 TH JULY, 2015 AT AHMEDABAD. SD/- SD/- (ANIL CHATURVEDI) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 13/07/2015