M/s.Bhima Jewellery, Trivandrum V. The DCIT, Trivandrum

ITA 328/COCH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81425 (ITAT-COCHIN)
• Duration Of Justice: 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2014
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 01-12-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 07-07-2014
• Court: TRIBUNAL
• Department Lawyers: K K JOHN
• Assessee Lawyers: R KRISHNAN
• Keywords: Depreciation; Reasonable cause; Condonation of delay
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND CHANDRA POOJ ARI, AM I.T.A. NO. 328/COCH/2014 ASSESSMENT YEAR : 2009-10 M/S. BHIMA JEWELLERY, ELANKATH COMPLEX, NEAR OVERBRIDGE, M.G. ROAD, TRIVANDRUM. [PAN: AACFB 2230M] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX,CIRCLE-1(2), TRIVANDRUM. (ASSESSEE-APPELLANT) (REVENUE-RESPONDENT) ASSESSEE BY SHRI R. KRISHNAN, CA REVENUE BY SHRI K.K. JOHN, SR. DR DATE OF HEARING 01/12/2014 DATE OF PRONOUNCEMENT 12/12/2014 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 20-02-2014 PASSED BY THE CIT, TRIVANDRUM U/S. 263 OF THE I.T. ACT FOR THE ASSESSMENT YEAR 2009-10. 2. THERE WAS A DELAY OF 75 DAYS IN FILING THE ABOVE APPEAL BY THE ASSESSEE BEFORE THE TRIBUNAL. THE ASSESSEE HAS FI LED A PETITION SEEKING CONDONATION OF DELAY AND HAS ALSO FILED AN AFFIDAVI T EXPLAINING THE REASONS FOR DELAY IN FILING THE APPEAL. THE LD. AR SUBMITTED THAT THE I.T.A. NO.328/COCH/2014 2 PETITIONERS AUTHORIZED REPRESENTATIVE WAS INVOLVED IN STATUTORY AUDIT OF BANKS AND LIC IN THE MONTHS OF APRIL AND MAY, 2014, WITH THE RESULT THAT THE MATTER HAD COMPLETELY ESCAPED THE ATTENTION OF THE AUTHORIZED REPRESENTATIVE AND BY THE TIME THE AUTHORIZED REPRE SENTATIVE RETURNED AFTER THE AUDIT, HE BECAME INDISPOSED ON ACCOUNT OF SEVERE ILLNESS AND HAD TO KEEP AWAY FROM THE OFFICE FOR A FEW DAYS. H ENCE, THE LD. AR SUBMITTED THAT IN THE PROCESS, THERE WAS A DELAY OF 75 DAYS IN FILING THE APPEAL BEFORE THE TRIBUNAL WHICH IS DUE TO REASONS EXPLAINED ABOVE AND BEYOND THE CONTROL OF THE PETITIONER. 3. THE LD. DR HAS NOT RAISED ANY SERIOUS OBJECT ION FOR CONDONATION OF DELAY IN FILING THE APPEAL BY THE ASSESSEE. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E RECORD. WE FIND THAT THERE EXISTS REASONABLE CAUSE FOR NOT FILING THE APPEAL I N TIME AND THE REASONS ADVANCED BY THE ASSESSEE FOR THE DELAY ARE BONA FID E. BEING SO, WE CONDONE THE DELAY IN FILING THE APPEAL BY THE ASSESSEE AND ADMI T THE APPEAL FOR ADJUDICATION. 5. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND S: 1) THE CIT(A) ERRED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE INCOME TAX ACT IN RESPECT OF HIGHER CLAIM OF D EPRECIATION IN WINDMILL. , I.T.A. NO.328/COCH/2014 3 2) THE CIT(A) ERRED IN HIS FINDING THAT ELECTRICAL WORKS INCLUDING SUPPLY AND INSTALLATION OF ELECTRICAL ITEMS AND D EVELOPMENT AND OTHER CHARGES TO KSEB ARE NOT PART OF RENEWABLE EN ERGY DEVICE AND THEREFORE, NOT ENTITLED TO HIGHER RATE OF DEPR ECIATION AS CLAIMED BY THE ASSESSEE. 3) THE CIT(A) OUGHT TO HAVE TAKEN NOTE OF THE FACT THAT THERE ARE DECISIONS TO THE EFFECT THAT WINDMILL INSTALLATION AND ACCESSORIES ARE PERIPHERALS OF A WINDMILL OR AN INTEGRAL PART OF WINDMILL, SO MUCH SO, THE ASSESSEE IS ENTITLED TO THE SAME RATE OF DEPRECIATION AS THAT OF WINDMILL. 4) AT ANY RATE, WHEN THERE ARE DIVERGENT VIEWS, TH ERE IS NO HARM IN THE ASSESSING OFFICER ADOPTING ONE POSSIBLE VIE W AND IN SUCH AN EVENT, THE ORDER WOULD NOT BE PREJUDICIAL TO THE I NTERESTS OF REVENUE. THEREFORE, ACTION U/S. 263 IS BAD IN LAW . 6. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E, A FIRM ENGAGED IN THE BUSINESS OF RUNNING A JEWELLERY SHOP FILED I TS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 01-10-2013, DECLARIN G A TOTAL INCOME OF RS.6,62,11,090/-. THE ASSESSMENT WAS COMPLETED U/S. 143(3) ON 25-11- 2011 ARRIVING AT A TOTAL INCOME OF RS.6,71,55,180/- . 7. ON A VERIFICATION OF THE RECORDS BY CIT, THE FOL LOWING ERRORS WERE NOTICED IN THE ASSESSMENT ORDER: (I) THE DEPRECIATION ON WINDMILL ALLOWED FOR THE P REVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2009-10 WAS RS.3,0 8,80,000/- WHEREAS THE ALLOWABLE DEPRECIATION WAS ONLY RS.3,0 0,80,000/- (II) THE ASSESSEE FIRM COMMISSIONED WINDMILLS DURI NG THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2009-10, WHIC H WAS PUT TO USE FROM MARCH, 2009. AS PER LAW, ONLY PLANT & MAC HINERY USED IN THE PRODUCTION OF RENEWABLE ELECTRICAL ENERGY IS E LIGIBLE FOR DEPRECIATION @80% AS PROVIDED IN INCOME TAX RULES. AS SUCH, I.T.A. NO.328/COCH/2014 4 DEPRECIATION @ 40%, I.E., HALF THE RATE OF ADMISSI BLE DEPRECIATION ON THE VALUE OF WINDMILLS WAS CLAIMED AND THAT WAS ALLOWED ON ASSESSMENT. 8. AS PER RULES, PLANT AND MACHINERY USED IN CONNEC TION WITH THE TRADING OF ELECTRICAL ENERGY PRODUCED WAS ELIGIBLE FOR DEPRECIATION @15% ONLY. ACCORDING TO THE AGREEMENT BETWEEN THE KERAL A STATE ELECTRICITY BOARD (KSEB) AND THE ASSESSEE, IT IS THE RESPONSIBIL ITY OF THE ASSESSEE TO STEP UP THE RENEWABLE ELECTRICAL ENERGY PRODUCED AN D CONSTRUCTION OF TRANSMISSION LINE AT A DISTANCE OF 7 KM. FROM THE P ROJECT SWITCH YARD AND THEREFORE, THE RATE OF DEPRECIATION APPLICABLE FOR THIS SHOULD BE 15% AND LIMITED TO 7.5% IN THIS PARTICULAR CASE IN VIEW OF COMMENCEMENT OF PROJECT IN MARCH 2009. THE DEPRECIATION STATEMENT FOR THE FINANCIAL YEAR 2008-09 SHOWED THE ASSET ADDITION OF WINDMILL ELECTR ICITY ENERGY PLANT VALUED AT RS.7,52,00,000/- AND CLAIM OF DEPRECIATIO N OF RS.3,00,80,000/- THE AMOUNTS IN RESPECT OF ELECTRICAL WORKS INCLUDIN G SUPPLY AND INSTALLATION OF ELECTRICAL ITEMS AND DEVELOPMENT AN D OTHER CHARGES TO KSEB WERE SHOWN AS RS.37,31,828/- AND RS.12,45,000/- EQUALLY AND RESPECTIVELY DISTRIBUTED AMONG LOCATION NOS. 456 AN D 457 WHERE THE WINDMILLS WERE INSTALLED AND THE TOTAL AMOUNTS TO R S.99,53,656/- FOR WHICH DEPRECIATION WAS CLAIMED BY THE ASSESSEE. THE ASSESSING OFFICER DISALLOWED THE RATE OF DEPRECIATION CLAIMED BY THE ASSESSEE FOR ELECTRICAL WORKS INCLUDING SUPPLY AND INSTALLATION OF ELECTRIC AL ITEMS NOT BEING PART OF WINDMILL INSTALLATION AND FALLING WITHIN THE AMB IT OF PLANT & MACHINERY I.T.A. NO.328/COCH/2014 5 USED IN CONNECTION WITH THE TRADING OF ELECTRICAL E NERGY PRODUCED. ACCORDING TO THE ASSESSING OFFICER, DEVELOPMENT AND OTHER CHARGES TO KSEB IS ONLY A REQUIREMENT OF THE KSEB AS PER THE AGR EEMENT AND NOT AN INTEGRAL PART OF THE WINDMILL INSTALLED AND AS T HE CONSTRUCTION OF TRANSMISSION LINE IS NOT A PART OF THE WINDMILL, TH E DEPRECATION CLAIMED WAS AGAINST RULES. 9. THE CIT STATED THAT THE DEPRECIATION TABLE WAS V ERY SPECIFIC AND CLEAR THAT DEPRECIATION @ 80% AND EXPENSES ON ELECT RICAL WORKS AND DEVELOPMENT CHARGES ARE INELIGIBLE FOR DEPRECIATION AS RENEWABLE ENERGY DEVICES AND THESE ELECTRICAL INSTALLATIONS DO NOT F ALL UNDER ITEMS LISTED IN EITHER (1) OR (M) OF ITEM 8, SUB ITEM (XIII). ACCO RDING TO THE CIT, THE ASSESSEE RELIED ON THE DECISION OF THE DELHI HIGH C OURT IN THE CASE OF CIT VS. BSES YAMUNA POWERS LTD. IN I.T.A. NO. 1267/2012 WHEREIN IT WAS HELD THAT COMPUTER ACCESSORIES AND PERIPHERALS COUL D NOT BE TREATED AS SEPARATE FROM THE COMPUTER AND HIGHER RATE OF DEPRE CIATION HAD TO BE ALLOWED FOR COMPUTER PERIPHERALS. HOWEVER, THE CIT WAS OF THE OPINION THAT THE SAID DECISION CANNOT BE APPLIED TO THE ASS ESSEE AS IN THAT CASE, THE COMPUTER PERIPHERALS AND ACCESSORIES SUCH AS PR INTER, SCANNER, SERVER, ETC. CANNOT FUNCTION INDEPENDENTLY WITHOUT THE AID OF COMPUTER OR COMPUTER SOFTWARE AND AS SUCH THEY FORM AN INTEG RAL PART OF THE SYSTEM. IN THE CASE OF THE ASSESSEE, THE TRANSMISS ION LINE FROM THE I.T.A. NO.328/COCH/2014 6 WINDMILL TO THE KSEB SUB-STATION WAS NOT AN ACCESSOR Y OR PERIPHERAL OF A WINDMILL. THE CIT OBSERVED THAT IN THE DECISION OF THE MUMBAI ITAT IN THE CASE OF AMINITY DEVELOPERS AND BUILDERS WHICH W AS RELIED UPON BY THE ASSESSEE, IT WAS HELD THAT THE CIVIL WORK IS AN INTEGRAL PART OF PLANT AND MACHINERY AND CANNOT SURVIVE INDEPENDENTLY AND HENCE A HIGHER RATE OF DEPRECIATION WAS ALLOWABLE. 10. THE CIT OBSERVED THAT THE WINDMILL IS CAPABLE O F GENERATING POWER INDEPENDENT OF THE TRANSMISSION LINES AND THE TRANSMISSION LINE IS ALSO NOT AN EXCLUSIVE ACCESSORY WHICH CAN ONLY FUNC TION WITH THE WINDMILL. ACCORDING TO THE CIT, IT DOES NOT SERVE ANY SPECIAL PURPOSE WHICH CAN BE IDENTIFIED WITH THE FUNCTIONING OF THE WINDMILL OR GENERATION OF RENEWABLE ENERGY. THE CIT WAS OF THE OPINION THAT IT IS ONLY A DEVICE TO PROVIDE CONNECTIVITY TO THE GRID A ND SUCH A TRANSMISSION LINE WILL WORK EQUALLY WELL WITH A HYDEL POWER SYST EM OR WITH A THERMAL POWER SYSTEM AND THE TRANSMISSION LINE IS FUNCTIONI NG INDEPENDENT OF THE WIND ENERGY GENERATOR. ACCORDINGLY, HE FOUND N O FORCE IN THE ASSESSEES RELIANCE ON THE DECISIONS OF THE DELHI H IGH COURT AND ITAT, MUMBAI, CITED SUPRA. 11. AFTER GOING THROUGH THE ASSESSMENT ORDER AND TH E ORDER SHEET, THE CIT OBSERVED THAT THE ASSESSING OFFICER MERELY CALLED FOR THE INVOICES I.T.A. NO.328/COCH/2014 7 OF WINDMILL AND CONFIRMATION FROM THE KSEB. ACCORDI NG TO THE CIT, THE ASSESSING OFFICER DISALLOWED HIGHER DEPRECIATION CL AIMED ON THE VALUE OF LAND AND REGISTRATION CHARGES AND THERE IS NO EVIDE NCE EITHER IN THE ORDER OR THE FILE AS TO WHETHER THE ASSESSING OFFIC ER HAD APPLIED HIS MIND JUDICIOUSLY ON THE ISSUE OF CLAIM OF HIGHER DEPRECI ATION ON TRANSMISSION LINE AND OTHER SUCH MATERIAL. THE CIT FOUND THAT T HE ORDER FALLS WITHIN THE RATIO OF THE DECISION OF THE SUPREME COURT IN T HE CASE OF TOYOTA MOTOR CORPORATION (306 ITR 49) WHEREIN IT WAS HELD THAT IT IS ALSO NECESSARY FOR THE PARTIES TO KNOW THE REASONS THAT HAVE WEIGHED WITH THE ADJUDICATING AUTHORITY IN COMING TO A CONCLUSIO N AND IN THE PRESENT CASE, THE ORDER WAS CRYPTIC AND DEVOID OF REASONING WITH RESPECT TO THE HIGHER DEPRECIATION RELATING TO TRANSMISSION LINE. 12. ACCORDING TO THE CIT, THE EXAMINATION OF THE AS SESSMENT ORDER DOES NOT EVIDENCE ANY INDICATION THAT THE ASSESSING OFFICER HAD APPLIED HIS MIND TO THE ISSUE AND MADE A JUDICIOUS ORDER AF TER EVALUATING THE EVIDENCES SUBMITTED BEFORE HIM. ACCORDING TO THE C IT, IN THE ABSENCE OF ANY DISCUSSION IN THE ORDER, NOTE ON THE FILE, I T CANNOT BE HELD THAT THE ASSESSING OFFICER HAD EXAMINED THE ISSUE, APPLIED H IS MIND AND HAD ALLOWED THE SAID DEPRECIATION. THE CIT HELD THAT T HE ASSESSING OFFICER SHOULD HAVE EITHER IN THE ORDER OR IN THE FILE INDI CATED THE REASONS FOR ALLOWING THE CLAIM OF HIGHER DEPRECIATION AND HIS F AILURE TO DO SO WOULD I.T.A. NO.328/COCH/2014 8 ATTRACT THE JURISDICTION OF SEC. 263 BY VIRTUE OF R ATIO EXPRESSED IN THE ABOVE MENTIONED DECISION. 13. THE CIT FURTHER RELIED ON THE DECISION OF THE S UPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. VS. CIT (243 ITR 83) WHERE IN WAS HELD THAT AN INCORRECT ASSUMPTION OF FACTS OR AN I NCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE INSTANT CASE, ACCORDING TO THE CIT, THERE HAS BEEN INCORRECT APPLICATION OF FACTS LEADING TO INCORRECT APPLICATION OF LAW, I .E., HIGHER DEPRECIATION HAS BEEN ALLOWED ON AN ITEM WHICH IS NOT A RENEWABL E ENERGY DEVICE. IN VIEW OF THE ABOVE, THE CIT SET ASIDE THE ASSESSM ENT ORDER WITH REGARD TO HIGHER DEPRECIATION ALLOWED ON ELECTRICAL WORKS INCLUDING SUPPLY AND INSTALLATION OF ELECTRICAL ITEMS AND DEV ELOPMENT AND OTHER CHARGES TO THE KSEB AND EXCESS DEPRECIATION ALLOWED ON WINDMILL. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 14. BEFORE THE CIT, IT WAS SUBMITTED THAT THE FIRST ISSUE OF EXCESS DEPRECIATION CLAIMED WAS TERMED AS A TYPOGRAPHICAL ERROR AND THE ASSESSEE AGREED TO ACCEPT THE PROPOSAL FOR DISALLOW ANCE. AS REGARDS TO THE SECOND ISSUE OF INTANGIBLE DEPRECIATION CLAIMED , THE LD. AR SUBMITTED THAT THE ASSESSEE TOOK EXCEPTION TO THE P ROPOSAL ON THE GROUND THAT THESE EXPENSES WERE CAPITAL ADDITION TO WARDS ESTABLISHMENT I.T.A. NO.328/COCH/2014 9 OF WINDMILL AND FORMS AN INTEGRAL PART OF THE WINDM ILL INSTALLED. THE LD. AR SUBMITTED THAT UNDER PART A OF APPENDIX 1 RELATI NG TO TANGIBLE ASSETS UNDER HEADING III, MACHINERY AND PLANT, IN ITEM 8, SUB ITEM (XIII), IN SUB-ITEMS (L) AND (M) OF THE DEPRECIATIO N TABLE, A WINDMILL ACQUIRED UPTO 31-03-2012 IS ENTITLED TO DEPRECIATIO N @80% ON WRITTEN DOWN VALUE BASIS: (L) WINDMILLS AND ANY SPECIALLY DESIGNED DEVICES W HICH RUN ON WINDMILLS (M) ANY SPECIAL DEVICES INCLUDING ELECTRIC GENERAT ORS AND PUMPS RUNNING ON WIND ENERGY. 14.1 ACCORDING TO THE LD. AR, THERE IS NO DISTIN CTION BETWEEN THE SO CALLED PRODUCTION AND TRADING ITEMS IN THE DEPRECIA TION TABLE AND BEFORE US HE REITERATED THE ABOVE SUBMISSION. HE ALSO RE LIED ON THE FOLLOWING PRECEDENTS: 1) CIT VS. TEXMO PRECISION CASTINGS (2010) TAXATIO N 468 (MAD.). 2) S.T. REDDIAR & SONS VS. DY.CIT 129 ITD 475/135 TTJ 480/49 DTR 326 (COCHIN) (TRIB.) 3) MADHU INDUSTRIES LTD. VS. ITO (2010) 132 TTJ (A HD.) 233. 4) ACIT VS. M/S. KUTTI SPINNERS PVT. LTD. IN I.T.A . NOS. 755&756/MDS/2013 DATED 08-05-2014 ITAT, CHENN AI D BENCH. 5) ACIT VS. M/S. SHIVANI ENCLAVE (P) LTD. IN I.T.A. NO. 840/JP/2011 WITH C.O. NO. 26/JP/2012 DATED 25- 07-2014 ITAT, JAIPUR BENCH. I.T.A. NO.328/COCH/2014 10 6) ACIT VS. M/S. WESTERN PRECICAST PVT. LTD. IN I. T.A. NO. 2524/PN/2012 DATED 22/01/2014 ITAT PUNE BENC HES A. 7) ACIT(OSD) VS. PARRY ENGINEERING & ELECTRONICS P. LTD. IN I.T.A. NO. 3317/AHD/2011 WITH C.O. NO. 44/AHD/2012 DA TED 2 ND MARCH 2012 ITAT, AHMEDABAD. 8) DCIT VS. DATACRAFT INDIA LTD. (2010) 6 TAXMANN. COM 85 (MUM. ITAT (SB). . 15. THE LD. DR RELIED ON THE ORDER OF THE CIT. 16. WE HAVE HEARD THE PARTIES AND PERUSED THE RECOR D. SECTION 263 OF THE INCOME-TAX ACT SEEKS TO REMOVE THE PREJUDICE CAUSED TO THE REVENUE BY THE ERRONEOUS ORDER PASSED BY THE ASSESS ING OFFICER. IT EMPOWERS THE COMMISSIONER TO INITIATE SUO MOTO PROC EEDINGS EITHER WHERE THE ASSESSING OFFICER TAKES A WRONG DECISION WITHOUT CONSIDERING THE MATERIALS AVAILABLE ON RECORD OR HE TAKES A DEC ISION WITHOUT MAKING AN ENQUIRY INTO THE MATTERS, WHERE SUCH INQUIRY WAS PRIMA FACIE WARRANTED. THE COMMISSIONER WILL BE WELL WITHIN HIS POWERS TO REGARD AN ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUM STANCES OF THE CASE, THE ASSESSING OFFICER SHOULD HAVE MADE FURTHER INQU IRIES BEFORE ACCEPTING THE CLAIM MADE BY THE ASSESSEE IN HIS RET URN. THE REASON IS OBVIOUS. UNLIKE THE CIVIL COURT WHICH IS NEUTRAL IN GIVING A DECISION ON THE BASIS OF EVIDENCE PRODUCED BEFORE IT, THE ROLE OF AN ASSESSING OFFICER UNDER THE INCOME-TAX ACT IS NOT ONLY THAT OF AN ADJ UDICATOR BUT ALSO OF I.T.A. NO.328/COCH/2014 11 AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FA CE OF A RETURN, WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER ENQUIR Y. HE MUST DISCHARGE BOTH THE ROLES EFFECTIVELY. IN OTHER WORDS, HE MUST CARRY OUT INVESTIGATION WHERE THE FACTS OF THE CASE SO REQUIR E AND ALSO DECIDE THE MATTER JUDICIOUSLY ON THE BASIS OF MATERIALS COLLEC TED BY HIM AS ALSO THOSE PRODUCED BY THE ASSESSEE BEFORE HIM. THE SCHE ME OF ASSESSMENT HAS UNDERGONE RADICAL CHANGES IN RECENT YEARS. IT D ESERVES TO BE NOTED THAT THE PRESENT ASSESSMENT WAS MADE U/S. 143(3) OF THE INCOME-TAX ACT. IN OTHER WORDS, THE ASSESSING OFFICER WAS STAT UTORILY REQUIRED TO MAKE THE ASSESSMENT UNDER SECTION 143(3) AFTER SCRU TINY AND NOT IN A SUMMARY MANNER AS CONTEMPLATED BY SUB-SECTION (1) O F SECTION 143. BULK OF THE RETURNS FILED BY THE ASSESSEES ACROSS T HE COUNTRY IS ACCEPTED BY THE DEPARTMENT UNDER SECTION 143(1) WITHOUT ANY SCRUTINY. ONLY A FEW CASES ARE PICKED UP FOR SCRUTINY. THE ASSESSIN G OFFICER IS THEREFORE, REQUIRED TO ACT FAIRLY WHILE ACCEPTING OR REJECTING THE CLAIM OF THE ASSESSEE IN CASES OF SCRUTINY ASSESSMENTS. HE SHOUL D BE FAIR NOT ONLY TO THE ASSESSEE BUT ALSO TO THE PUBLIC EXCHEQUER. THE A SSESSING OFFICER HAS GOT TO PROTECT, ON ONE HAND, THE INTEREST OF THE AS SESSEE IN THE SENSE THAT HE IS NOT SUBJECTED TO ANY AMOUNT OF TAX IN EX CESS OF THAT IS LEGITIMATELY DUE FROM HIM, AND ON THE OTHER HAND, H E HAS A DUTY TO PROTECT THE INTERESTS OF THE REVENUE AND TO SEE THA T NO ONE DODGED THE REVENUE AND ESCAPED WITHOUT PAYING THE LEGITIMATE T AX. THE ASSESSING I.T.A. NO.328/COCH/2014 12 OFFICER IS NOT EXPECTED TO PUT BLINKERS ON HIS EYES AND MECHANICALLY ACCEPT WHAT THE ASSESSEE CLAIMS BEFORE HIM. IT IS H IS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED AND THE GENUINENESS O F THE CLAIMS MADE IN THE RETURN WHEN THE CIRCUMSTANCES OF THE CASE ARE S UCH AS TO PROVOKE INQUIRY. ARBITRARINESS IN EITHER ACCEPTING OR REJEC TING THE CLAIM HAS NO PLACE. THE ORDER PASSED BY THE ASSESSING OFFICER BE COMES ERRONEOUS BECAUSE AN ENQUIRY HAS NOT BEEN MADE OR GENUINENESS OF THE CLAIM HAS NOT BEEN EXAMINED WHERE THE INQUIRIES OUGHT TO HAVE BEEN MADE AND THE GENUINENESS OF THE CLAIM OUGHT TO HAVE BEEN EXA MINED AND NOT BECAUSE THERE IS ANYTHING WRONG WITH HIS ORDER IF A LL THE FACTS STATED OR CLAIM MADE THEREIN ARE ASSUMED TO BE CORRECT. THE C OMMISSIONER MAY CONSIDER AN ORDER OF THE ASSESSING OFFICER TO BE ER RONEOUS NOT ONLY WHEN IT CONTAINS SOME APPARENT ERROR OF REASONING O R OF LAW OR OF FACT ON THE FACE OF IT BUT ALSO WHEN IT IS A STEREO-TYPE D ORDER WHICH SIMPLY ACCEPTS WHAT THE ASSESSEE HAS STATED IN HIS RETURN AND FAILS TO MAKE ENQUIRIES OR EXAMINE THE GENUINENESS OF THE CLAIM W HICH ARE CALLED FOR IN THE CIRCUMSTANCES OF THE CASE. 17. IN THIS CASE, THE CIT WAS OF THE OPINION THAT E XCESS DEPRECIATION WAS ALLOWED TO THE ASSESSEE IN RESPECT OF WINDMILL TO THE EXTENT OF RS.8,00,000/- WHICH WAS ACCEPTED BY THE ASSESSEE DU RING THE SEC. 263 PROCEEDINGS AS TYPOGRAPHICAL ERROR. BEING SO, ON T HIS COUNT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT. . I.T.A. NO.328/COCH/2014 13 18. THE SECOND ARGUMENT OF THE ASSESSEES COUNSEL I S THAT ELECTRICAL WORKS IS PART OF RENEWABLE ENERGY DEVICES AND SO, T HE ASSESSEE IS ENTITLED TO HIGHER RATE OF DEPRECIATION AS CLAIMED BY THE ASSESSEE. 19. ON THIS ISSUE, WE NOTICED THAT IN THE ASSESSMEN T ORDER, THERE IS NO DISCUSSION OF WHATSOEVER REGARDING THIS ISSUE. THE ASSESSING OFFICER HAS ABSOLUTELY CLOSED HIS EYES AND ACCEPTED THE CLA IM OF THE ASSESSEE AS IT IS. IT IS INCUMBENT UPON THE ASSESSING OFFICER TO CAUSE NECESSARY ENQUIRY REGARDING THE NATURE OF ASSETS AND ENTITLEM ENT OF DEPRECIATION. BEING SO, THE CIT WAS JUSTIFIED IN INVOKING THE PRO VISIONS OF SEC. 263 ON ACCOUNT OF LACK OF ENQUIRY FROM THE SIDE OF THE ASS ESSING OFFICER. 20. FURTHER, FOR GRANTING HIGHER RATE OF DEPRECIATI ON TO THE ASSESSEE, IT IS NECESSARY TO EXAMINE THE FUNCTIONAL TEST OF E LECTRICAL EQUIPMENT. IT HAS TO BE SEEN WHETHER IT IS AN INTEGRAL PART OF TH E WINDMILL OR NOT. SUCH FINDING OF FACT IS ABSENT IN THIS REGARD. IN THE P RESENT CASE, THERE IS NOTHING ON RECORD TO ESTABLISH THAT ON THIS TOUCHST ONE OF FUNCTIONAL TEST, THE ELECTRICAL EQUIPMENT ARE SO DESIGNED THAT THEY CAN ONLY BE USED AS INTEGRAL PART OF THE WINDMILL AND IT IS NOT MEANT F OR ANY OTHER USE. IT IS ALSO NOT ESTABLISHED THAT THE IMPUGNED ELECTRICAL W ORKS ARE DESIGNED IN SUCH A MANNER TO FACILITATE POWER GENERATION AND DI STRIBUTION FROM I.T.A. NO.328/COCH/2014 14 WINDMILL. MOREOVER, THE OTHER QUESTION WHICH IS TO BE CONSIDERED IS THE BLOCK OF ASSETS AS PRESCRIBED IN THE TABLE OF RATES FOR THE PURPOSE OF GRANTING DEPRECIATION IN APPENDIX I OF IT RULES. A S PER THIS APPENDIX PART A CONTAINS BUILDING IN A SEPARATE HEAD, FURN ITURE AND FITTINGS IN ANOTHER HEAD AND MACHINERY AND PLANT IN A DIFFERENT HEAD AND ELECTRICAL FITTINGS IN A DIFFERENT HEAD BY PRESCRIBING DIFFERE NT RATES OF DEPRECIATIONS. THE SCIENTIFIC REASON IS OFTEN DISCUSSED AS THE PER IOD OF DIMINUTION FOR TANGIBLE ASSETS. IF THE PERIOD OF DIMINUTION OR WEA R-TEAR IS VERY FAST, THEN HIGHER RATE OF DEPRECIATION IS GRANTED. NATURA LLY THE SPEED WITH WHICH WIND MILLS GET DISCARDED DUE TO WEAR AND TEAR , THE ELECTRICAL WORKS DO NOT GET WEAR AND TEAR SO FAST. ON THIS BASIS, AS WELL, WE CANNOT HOLD THAT ELECTRICAL WORKS ARE NOT AT PAR WITH THE 'WIND MILL' AS FAR AS THE PERIOD OF DIMINUTION IS CONCERNED. MOREOVER SOMETIM ES TO PROMOTE A PARTICULAR ACTIVITY THE STATUTE PROVIDES CERTAIN IN CENTIVES IN THE SHAPE OF HIGHER DEPRECIATION. WE HAVE TO KEEP IN MIND SUCH A N INTENTION OF THE LEGISLATURE AS WELL. THE APPENDIX AND THE DEPRECIAT ION SCHEDULE HAS CATEGORICALLY WORDED THAT 'WINDMILLS AND ANY SPECIA LLY DESIGNED DEVICES WHICH RUN ON WIND MILLS' ARE QUALIFIED FOR 100 PER CENT RATE OF DEPRECIATION. IF THE ELECTRICAL WORKS ARE SPECIALLY DESIGNED DEVICES TO SUIT THE NEED OF WINDMILLS, THEN ONLY THE ASSESSEE IS EN TITLED FOR HIGHER RATE OF DEPRECIATION. AS WE HAVE OBSERVED IN THE EARLI ER PARAS, THERE IS NO DISCUSSION ON THIS POINT IN THE ASSESSMENT ORDER AN D EVEN THE CIT HAS I.T.A. NO.328/COCH/2014 15 NOT CARRIED OUT ANY ENQUIRY ON THIS ISSUE, IN OUR O PINION, IT IS PROPER TO REMIT THIS ISSUE BACK TO THE FILE OF THE AO FOR FRE SH CONSIDERATION. ACCORDINGLY, THIS ISSUE IS REMITTED BACK TO THE FIL E OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION. 21. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 12-12-2014 SD/- SD/- (N.R.S.GANESAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACC OUNTANT MEMBER PLACE: KOCHI DATED: 12TH DECEMBER, 2014 GJ COPY TO: 1. M/S. BHIMA JEWELLERY, ELANKATH COMPLEX, NEAR OVER BRIDGE, M.G. ROAD, TRIVANDRUM. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1( 2), TRIVANDRUM. 3. THE COMMISSIONER OF INCOME-TAX,TRIVANDRUM. 4. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 5. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COC HIN