Madhucon Projects Limited, Hyderabad V. DCIT., Central Circle-3, Hyderabad, Hyderabad

ITA 1939/HYD/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6296 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 08-11-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 29-12-2014
• Court: TRIBUNAL
• Department Lawyers: G V HEMALATHA
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Depreciation; Condonation of delay
• Section: 143(3); 153A; 54; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1939/HYD/2014 ASSESSMENT YEAR: 2007-08 MADHUCON PROJECTS LTD HYDERABAD [PAN: AABCM4757A] VS DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3, HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI P. MURALI MOHAN RAO, AR FOR REVENUE : SMT. G.V. HEMALATHA, DR DATE OF HEARING : 16-08-2016 DATE OF PRONOUNCEMENT : 02-09-2016 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-VII, HYDERABAD DATED 30-09-2014. THE ISSUE IN THIS APPEAL IS DISALLOWANC E OF EXCESS CLAIM OF DEPRECIATION ON VEHICLES AT 25% AS AGAINST AL LOWABLE RATE OF 15%. BY ISSUANCE OF NOTICES U/S. 154 OF THE INC OME TAX ACT [ACT], THE ASSESSING OFFICER (AO) VIDE ORDER DT. 04-03 -2011 HAS DISALLOWED AN AMOUNT OF RS. 19,37,84,716/-. THE BOD Y OF THE ORDER U/S. 154 IS AS UNDER: I.T.A. NO. 1939/HYD/2014 MADHUCON PROJECTS LTD., :- 2 -: IN THE CASE OF ABOVE ASSESSEE COMPANY, ASSESSMENT U/S. 143(3) OF THE I.T. ACT HAS BEEN COMPLETED ON 31/12/2009, AND A DEMAND OF RS. 17,84,36,660/- WAS RAISED THEREON. THE ASSESSEE CO MPANY CLAIMED EXCESS DEPRECIATION ON ASSET OF VEHICLES @ 25% AS A GAINST 15%. AS THE MISTAKE IS APPARENT FROM THE RECORD A NOTICE U/S. 1 54 ISSUED, MENTIONING THE PARTICULARS OF MISTAKE PROPOSED TO BE RECTIFIED . AS THERE IS NO RESPONSE FROM THE ASSESSEE COMPANY TO THE NOTICE ISSUED THE ASSESSMENT ORDER PASSED U/S. 143(3) OF THE I.T. ACT IS RECTIFIED U/S . 154 AS UNDER: RS. TOTAL INCOME AS PER THE CONSEQUENTIAL ORDER DT: 14/02/2011 46,23,27,445 ADD: DEPRECIATION EXCESS ALLOWED ON VEHICLES 19,37, 84,716 65,61,12,161 2. IT WAS CONTENDED BEFORE THE CIT(A) THAT AO HAS EXAMIN ED AND ALLOWED THE DEPRECIATION AND FURTHER, ASSESSEE WAS EL IGIBLE FOR DEDUCTION U/S. 80IA OF THE ACT AND FURTHER THE ENTIRE AMO UNT OF DEPRECIATION CLAIMED WAS DISALLOWED AS AGAINST SO CAL LED EXCESS DEPRECIATION ON VEHICLES. LD. CIT(A) REJECTED THE A PPEAL BY GIVING THE FOLLOWING FINDINGS: 5.0 FINDINGS: 5.1 AT THE OUTSET IT IS TO BE STATED THAT THERE IS A SUBSTANTIAL DELAY OF 920 DAYS IN FILING OF THE APPEAL. THE APPE LLANT FILED AN AFFIDAVIT SEEKING CONDONATION OF DELAY STATING THAT THE PAPERS HAVE BEEN MISPLACED AND THE SAME COULD BE TRACED OUT ONL Y SUBSEQUENTLY. THE DEMAND RAISED IS ABOUT 8.96 CRORE S AND IT IS STRANGE THAT DESPITE SUCH HUGE DEMAND, THE ORDER WA S MISPLACED AND THE APPELLANT COULD NOT EVEN FILE AN APPEAL. TH E REASONS STATED THEREFORE ARE NOT STRONG AND ARE NOT SATISFACTORY. 5.2 APART FROM THE ABOVE, THE WHOLE APPEAL APPEARS TO BE IN FRUCTUOUS AS EXPLAINED BELOW : (A) THE ORIGINAL ASSESSMENT FOR AY 2007-08 WAS ACTU ALLY COMPLETED ON 31.12.2009 AND INCOME ASSESSED WAS RS. 56.83 CRORES. SUBSEQUENTLY, THIS WAS REVISED TO 46,23,27, 445/- AS PER CONSEQUENTIAL ORDER DATED 14/02/2011 (PROBABLY GIVI NG EFFECT TO AN APPELLATE ORDER PASSED BY THE CIT(A) ON 4/2/2011). SUBSEQUENTLY I.T.A. NO. 1939/HYD/2014 MADHUCON PROJECTS LTD., :- 3 -: THIS INCOME WAS MODIFIED AGAIN AND AN ORDER U/S 154 WAS PASSED ON 04.03.2011, WHICH IS NOW THE SUBJECT MATTER OF A PPEAL. IN THE MEANWHILE, ON FURTHER APPEAL AGAINST THE ORDER OF T HE CIT(A) DATED 4/2/2011, BY THE APPELLANT AS WELL AS THE DEPARTMEN T, THE HON'BLE ITAT, HYDERABAD VIDE ITS ORDER DATED 28.12.2012 DIS POSED OF BOTH THE APPEALS AND THE INCOME WAS FINALLY ARRIVED AT R S.19.31 CRORES. (B) WHILE THE APPEAL PROCEEDINGS ON THE ORIGINAL AS SESSMENT ORDER PASSED U/S 143(3) WERE GOING ON, THERE WERE S EARCH OPERATIONS ALSO IN THE CASE OF THE APPELLANT ON 04. 02.2011 AND NOTICE U/S 153A WAS ISSUED ON 13.01.2012 CULMINATIN G IN PASSING OF ASSESSMENT ORDER U/S 143(3) RWS. 153A ON 31.03.2 013. (C) IN THE ORDER PASSED U/S 153A RWS 143(3), THE AO STARTED WITH INCOME ASSESSED AFTER GIVING EFFECT TO THE ITA T ORDER AT RS.19.31 CRORES. IN LIGHT OF THE ABOVE, THERE IS NO INDEPENDENT 154 ORDER SUBSISTING SINCE IT SUBSEQUENTLY GOT MERGED W ITH THE ORDER GIVING EFFECT TO THE HON'BLE ITAT ORDER. (D) THE PRESENT APPEAL IS THEREFORE DISMISSED AND T HE AO IS ADVISED TO VERIFY WHETHER WHILE GIVING EFFECT TO TH E ITAT ORDER, THE RATE OF DEPRECIATION WAS ADOPTED AT 15% OR 25%. ALL OWABILITY OF DEPRECIATION IS AS PER RATES LISTED IN THE RULES AN D THE ACT. IF THE APPELLANT IS ENTITLED TO ONLY 15%, THEN ONLY 15% SH OULD HAVE BEEN ALLOWED AND NOT 25%. IF THE DEPRECIATION WAS CORREC TLY ADOPTED WHILE MAKING THE ORDER, THEN NO FURTHER ACTION IS N ECESSARY. HOWEVER, IF DEPRECIATION WAS ALLOWED AT 25%, THEN IT WOULD CERTAINLY CONSTITUTE A MISTAKE APPARENT FROM RECORD . IF SO, THE AO MAY TAKE REMEDIAL ACTION U/S 154 ON THE ORDER PASSE D U/S 153A R.W.S. 143(3) AFTER GIVING DUE OPPORTUNITY TO THE A SSESSEE. 3. LD. COUNSEL WHILE CONTESTING THAT CIT(A) SHOULD HAVE ALLOWED THE CONDONATION, SUBMITTED THAT ON MERITS AMOUNT OF RS. 19,37,84,716/- DISALLOWED WAS THE ENTIRE DEPRECIATION ON PLANT & MACHINERY AND VEHICLES. BY FILING THE DETAILED DEPR ECIATION SCHEDULES, FILED AT THE TIME OF ASSESSMENT, IT WAS SUB MITTED THAT WDV ON VEHICLES ALONE WAS RS. 18.10 CRORES TO WHICH RS. 24.47 CRORES OF VEHICLES WERE ADDED MAKING IT THE TOTAL COST A T RS. 42.52 CRORES. AFTER DELETION OF CERTAIN VEHICLES, THE TOTAL AS ON 31-03- 2007 WAS ARRIVED AT RS. 43,07,91,900/- AND THE DEPRE CIATION I.T.A. NO. 1939/HYD/2014 MADHUCON PROJECTS LTD., :- 4 -: CLAIMED FOR THE YEAR WAS RS. 5,48,44,719/-. ASSESSE E ALSO FILED REVISED CORRECTED STATEMENTS OF DEPRECIATION FROM AY. 2 004-05, WHEREIN THE WDV OF VEHICLES AS ON 01-04-2006 WAS ARR IVED AT RS. 20,01,43,197/- AND THE TOTAL FOR THE YEAR AFTER ADDITION S AND DELETIONS WAS ARRIVED AT RS. 43,07,91,901/- AND 15% O N THAT WAS ARRIVED AT RS. 5,48,44,719/-. IT WAS SUBMITTED THAT AT B EST, THE AO COULD HAVE DISALLOWED THE DIFFERENCE OF DEPRECIATION CLAIMED ORIGINALLY RS. 8,66,28,503 - 3,94,79,389 = RS. 4,71 ,49,114/- BUT NOT THE AMOUNT WHICH WAS DISALLOWED BY THE AO IN THE OR DER U/S. 154. IT WAS SUBMITTED THAT THE AMOUNT DISALLOWED WAS PERTA INING TO PLANT & MACHINERY AND OTHER ASSETS AS WELL AND NOT EX CLUSIVELY THE VEHICLES. IT WAS SUBMITTED THAT THE OTHER DISALLOWANCE S MADE BY THE AO SHOULD BE DELETED, AS IT IS NOT PART OF THE PR OCEEDINGS INITIATED FOR 154. 4. LD. DR HOWEVER, SUBMITTED THAT CIT(A) HAS NOT CONDON ED THE DELAY AND FURTHER, ASSESSEE WAS NOT CORRECT IN CLAIMIN G THAT THERE IS A MISTAKE IN AOS ORDER. 5. AFTER CONSIDERING THE RIVAL CONTENTIONS AND PERUSING THE DETAILS PLACED ON RECORD AND SERIES OF ORDERS PASSED SO FAR, WE ARE OF THE OPINION THAT AO HAS EXCEEDED THE POWERS GRANTED U/S. 154. AS SEEN FROM THE NOTICE AS WELL AS THE IMPUGNED ORDER , THE OBJECTION IS ONLY WITH REFERENCE TO EXCESS CLAIM OF DE PRECIATION ON VEHICLES. AS SEEN FROM THE WDV AND ADDITIONS AND DE LETIONS AND THE CLAIM OF DEPRECIATION, THE ADDITION SHOULD NOT BE MO RE THAN CLAIM. HOWEVER, HE HAS DISALLOWED AN AMOUNT OF RS. 19,37,84,716/- WHICH INCLUDES THE DEPRECIATION ON O THER ASSETS AS WELL FOR WHICH THERE IS NO NOTICE. THEREFORE, A O CANNOT EXCEED I.T.A. NO. 1939/HYD/2014 MADHUCON PROJECTS LTD., :- 5 -: AND DISALLOW THE ENTIRE AMOUNT WITHOUT GIVING AN OPPORTU NITY TO ASSESSEE. IN VIEW OF THIS, WE DIRECT THE AO TO RESTRIC T THE EXCESS DEPRECIATION ONLY TO THE EXTENT OF VEHICLES WHICH WE RE CONSIDERED IN THE NOTICE. AS WE NOTICE THAT THERE ARE MANY NUMBER O F ORDERS ISSUED PRIOR TO THIS ORDER U/S. 154 AND ALSO SUBSEQUE NT TO THAT, AO IS DIRECTED TO VERIFY ALL THE ASPECTS AND PASS NECESSA RY MODIFICATION ORDER KEEPING IN MIND, THAT THIS IMPUGNED NOTICE U/S. 1 54 IS ONLY FOR RESTRICTING THE DEPRECIATION ON VEHICLES ALONE. EV EN THOUGH LD, CIT(A) DID NOT CONDONE SPECIFICALLY NOR REJECT THE APP EAL, HE ADJUDICATED THE MATTER ON MERITS. THEREFORE, WE PRESUME THAT HE CONDONED THE DELAY. WITH THESE OBSERVATIONS, THE ORDER OF CIT(A) IS MODIFIED AND AO IS DIRECTED TO PASS NECESSARY MODIFI CATION ORDERS AS DIRECTED ABOVE. 6. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND SEPTEMBER, 2016 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEM BER HYDERABAD, DATED 2 ND SEPTEMBER, 2016 TNMM I.T.A. NO. 1939/HYD/2014 MADHUCON PROJECTS LTD., :- 6 -: COPY TO : 1. MADHUCON PROJECTS LTD., HYDERABAD. C/O. P. MURA LI & CO., CHARTERED ACCOUNTANTS, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD. 2. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCL E-3, HYDERABAD. 3. CIT (APPEALS)-VII, HYDERABAD. 4. THE CIT (CENTRAL), HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.