M/s Sanghi Brothers, Indore V. The ACIT 5 (1), Indore

ITA 723/Ind/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4605 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 24-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEB JAIN
• Assessee Lawyers: S N AGRAWAL
• Keywords: Depreciation; Tangible material
• Section: 143(3); 32; 147; 148

Judgement Text

SANGHI BROTHERS INDORE PVT. LTD ITA NO.723/IND/2017 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HONBLE KUL BHARAT, JUDICIAL MEMBER AND HONBLE MANISH BORAD, ACCOUNTANT MEMBER ITA NO.723/IND/2017 ASSESSMENT YEAR 2008-09 REVENUE BY SHRI RAJEEB JAIN, SR.D.R ASSESSEE BY S/ SHRI S.N. AGRAWAL & PANKAJ MOGRA, CAS DATE OF HEARING 04.02 .2019 DATE OF PRONOUNCEMENT 1 3 .0 2 .2019 O R D E R PER MANISH BORAD, AM. THE ABOVE CAPTIONED APPEAL FILED AT THE INSTANCE OF ASSESSEE PERTAINING TO ASSESSMENT YEAR 2008-09 IS DIRECTED A GAINST THE ORDERS OF LD. COMMISSIONER OF INCOME TAX (APPEALS)- II (IN SHORT LD.CIT(A)], INDORE DATED 20.09.2017 WHICH ARE AR ISING OUT OF THE ORDER U/S 143(3) OF THE INCOME TAX ACT 1961(IN SHOR T THE ACT) DATED 26.10.2015 FRAMED BY ACIT-5(1), INDORE. M/S. SANGHI BROTHERS INDORE PVT. LTD, 6, MANORAMAGANJ, A.B. ROAD, INDORE VS. A CIT 5(1) , INDORE (APPELLANT) (RESPONDENT ) PAN NO.AAKCS3060P SANGHI BROTHERS INDORE PVT. LTD ITA NO.723/IND/2017 2 2. BRIEFLY STATED FACTS AS CULLED OUT FROM THE RECO RDS ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY. RETURN OF I NCOME FOR ASSESSMENT YEAR 2008-09 FILED ON 16.4.2015 DECLARIN G INCOME OF RS. 1,14,27,130/-. THE CASE WAS SELECTED FOR SCRUT INY AND ASSESSMENT ORDER U/S 143(3) WAS PASSED ON 4.5.2010 ASSESSING TOTAL INCOME AT RS.1,16,52,130/-. SUBSEQUENTLY CAS E WAS RE- OPENED BY ISSUING NOTICE U/S 148 OF THE ACT. DURIN G THE COURSE OF RE-ASSESSMENT PROCEEDINGS LD. A.O CALLED FOR THE DE TAILS FROM THE ASSESSEE FOR ITS CLAIM OF DEPRECIATION OF TRUCKS AN D DUMPERS. AFTER GOING THROUGH THE SUBMISSION OF THE ASSESSEE, LD.A. O WAS OF THE VIEW THAT DURING THE YEAR NIL INCOME HAS BEEN REPOR TED BY THE ASSESSEE FROM HIRE CHARGES FROM PLYING OF TRUCKS AN D DUMPERS AND THEREFORE DEPRECIATION CANNOT BE ALLOWED @30% OF TH E WDV AND ACCORDINGLY RESTRICTED THE DEPRECIATION CLAIM TO 15 % OF THE WDV OF TRUCK AND DUMPERS AND DISALLOWED DEPRECIATION AT RS .2,87,188/- AND REASSESSED INCOME AT RS.1,19,39,318/-. 3. APPEAL OF THE ASSESSEE BEFORE LD. CIT(A) BROUGHT NO RELIEF AS THE LD. CIT(A) DISMISSED THE ASSESSEES GROUND CHAL LENGING THE RE- OPENING OF ASSESSMENT U/S 147 OF THE ACT AND ALSO C ONFIRMED THE DISALLOWANCE. SANGHI BROTHERS INDORE PVT. LTD ITA NO.723/IND/2017 3 4. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNA L RAISING FOLLOWING GROUNDS OF APPEAL; 1.1] THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD CIT (A) GROSSLY ERRED IN MAINTAINING THE ACT OF A.O. IN RES PECT OF ISSUANCE OF NOTICE U/S 148 OF THE ACT AND FRAMING ASSESSMENT ON THE BA SIS OF SUCH NOTICE EVEN WHEN NO NEW FACT HAS CAME TO THE KNOWLEDGE OF THE A.O. ON THE BASIS OF WHICH IT CAN BE PRESUMED THAT ANY INCOME CHARGEA BLE TO TAX HAS ESCAPED ASSESSMENT. THE NOTICE SO ISSUED AND ASSESS MENT FRAMED THEREON IN ABSENCE OF ANY TANGIBLE MATERIAL IN POSS ESSION OF THE ASSESSING OFFICER THEREFORE REQUIRES TO BE QUASHED. 1.2] THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A) ERRED IN MAINTAINING THE ORDER PASSED BY THE LD. A. O. U/S 148 OF THE LT. ACT AFTER THE FOUR YEARS FROM THE END OF THE RELEVA NT ASSESSMENT YEAR EVEN WHEN THE ORIGINAL ASSESSMENT FOR THE YEAR WAS FRAME D U/S 143(3) OF THE ACT AND THE ENTIRE FACTS WERE DISCLOSED BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDING. THE A SSESSMENT SO FRAMED THEREON IN ABSENCE OF ANY TANGIBLE MATERIAL IN POSS ESSION OF THE ASSESSING OFFICER REQUIRES TO BE QUASHED. WITHOUT PREJUDICE TO THE ABOVE 02]. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CI'T (A) ERRED IN MAINTAINING ADDITION ON ACCOUNT OF DEPRECI ATION ON TRUCKS AND DUMPERS OF RS. 287188/- BY RESTRICTING THE CLAIM OF DEPRECIATION AT 15% ONLY IN PLACE OF 30% AS CLAIMED BY THE APPELLANT WI THOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE HIM. 03]. THE ASSESSEE RESERVE ITS RIGHT TO ADD, ALTER, MODIFY OR AMEND THE GROUNDS OF APPEAL AS TAKEN IN THE RESENT APPEAL AS AND WHEN REQUIRED. 5. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE REFER RING TO THE DECISION OF CO-ORDINATE BENCH IN ASSESSEES OWN CAS E FOR ASSESSMENT YEAR 2009-10 VIDE ITA NO. 617/IND/2013 O RDER DATED 10.11.2014 WHEREIN SIMILAR ISSUE RAISED BY THE ASSE SSEE WAS SANGHI BROTHERS INDORE PVT. LTD ITA NO.723/IND/2017 4 ALLOWED IN ITS FAVOUR BY THE TRIBUNAL. LD. COUNSE L FOR THE ASSESSEE ALSO SUBMITTED THAT IN THE PRECEDING YEAR THE TRUCK S AND DUMPERS WERE REGULARLY USED FOR RUNNING ON HIRE AND THEY W ERE APPEARING IN THE 30% BLOCK OF ASSETS. DURING THE YEAR UNDER APP EAL THESE TRUCKS AND DUMPERS WERE NOT HIRED AS THE AGREEMENT WITH ON GC CAME TO END BUT ALL THE TRUCKS AND DUMPERS WERE READY TO US E AND THEREFORE THE DEPRECIATION IS ALLOWABLE ON ASSETS WHICH ARE R EADY TO USE, IMMATERIAL OF THE FACT THAT THEY WERE USED IN THE Y EAR OR NOT. 6. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE VEHEM ENTLY ARGUED SUPPORTING THE ORDERS OF LOWER AUTHORITIES. 7. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. THE ASSESSEE APART FROM CHALLENG ING THE RE- OPENING OF THE ASSESSMENT BY ISSUANCE OF NOTICE U/S 148 OF THE ACT HAS ALSO CHALLENGED THE DISALLOWANCE OF DEPRECIATIO N ON TRUCKS AND DUMPERS. AS CONTENDED BY THE LD. COUNSEL FOR THE AS SESSEE, THE ISSUE IS SQUARELY COVERED IN ITS FAVOUR BY THE DECI SION OF THE TRIBUNAL IN ITS OWN CASE. WE THEREFORE WILL FIRST ADJUDICATE THE ISSUE RAISED IN THIS APPEAL ON MERITS. LD. A.O MADE DISA LLOWANCE OF DEPRECIATION OF TRUCKS AND DUMPERS TO 15% AS AGAINS T 30% APPLICABLE TO VEHICLES USED IN HIRE BUSINESS. THE C O-ORDINATE BENCH SANGHI BROTHERS INDORE PVT. LTD ITA NO.723/IND/2017 5 ADJUDICATING SIMILAR ISSUE IN THE APPEAL OF THE ASS ESSEE FOR ASSESSMENT YEAR 2009-10 ORDER DATED 10.11.2014, HAS HELD IN FAVOUR OF THE ASSESSEE HAD OBSERVED AS FOLLOWS; 4.2 WE ARE OF THE VIEW THAT AS PER THE MAIN PROVIS ION RELATED TO THE ALLOWANCE OF DEPRECIATION, I.E, SECTION 32 OF IT AC T IN RESPECT OF ANY MACHINERY IF OWNED, WHOLLY OR PARTIALLY BY THE ASSE SSEE AND USED FOR THE PURPOSE OF THE BUSINESS THEN DEDUCTION OF DEPRECIAT ION IS ALLOWED AS PRESCRIBED. AS PER ONE OF THE PROVISION OF SECTION 32, IT IS REQUIRED THAT THE MACHINERY IS TO BE PUT TO USE FOR THE PURPOSE OF BU SINESS. AS FAR AS THE VEHICLES IN QUESTION ARE CONCERNED, THEY WERE ALREA DY PUT TO USE FOR THE PURPOSE OF THE BUSINESS; HENCE DESERVE FOR THE CLAI M OF DEPRECIATION. BUT THE QUESTION BEFORE US IS THAT WHETHER THE ASSETS I N QUESTION ARE ELIGIBLE FOR NORMAL RATE OF DEPRECIATION AT 15% AS PRESCRIBE D U/S.32 OF IT ACT OR ELIGIBLE FOR HIGHER RATE OF DEPRECIATION. TO ANSWER THIS QUESTION WE HAVE EXAMINED SUB RULE(1) AND (LA) OF RULE 5 OF INCOME T AX RULES, WHICH PRESCRIBES A TABLE IN APPENDIX-I FOR CLAIM OF DEPRE CIATION. AS PER APPENDIX 1, PART -IIL THE RATE OF DEPRECIATION IN RESPECT OF MOTOR, BUSES, ETC. USED IN THE BUSINESS OF RUNNING THEM ON HIRE IS PRESCRIBED @ 30%. AFTER READING THE CONNECTED RULE 15 AND APPENDIX-I, WE HAVE NOTED THAT THE REQUIREMENT IS THAT THE VEHICLE IN QUESTION IS TO BE USED IN A BUSINESS OF RUNNING THEM ON HIRE. THE EXPRESSION USED IN ALL THE PLACES AS R EFERRED SUPRA DO NOT SUGGEST THAT THE CORRESPONDING HIRING INCOME SHOULD HAVE BEEN SHOWN IN ASSESSMENT YEAR IN WHICH THE HIGHER RATE OF DEPREC IATION IS CLAIMED. RATHER PECULIAR FACT OF THIS CASE IS THAT THE HIRIN G RECEIPTS HAVE ACTUALLY BEEN SHOWN IN THE SUBSEQUENT ASSESSMENT YEAR AND AD MITTEDLY NOT SHOWN IN THE YEAR UNDER CONSIDERATION DUE TO LACK O F INFORMATION SUPPLIED BY THE SAID CONCERN USING THOSE VEHICLES FOR HIRING PURPOSE. THEREFORE, CONSIDERING THE PROVISIONS OF THE LAW APPLICABLE ON THIS ISSUE AS ALSO THE SANGHI BROTHERS INDORE PVT. LTD ITA NO.723/IND/2017 6 TOTALITY OF THE FACTS OF THE CASE, WE HEREBY DIRECT THE AO TO GRANT HIGHER RATE OF DEPRECIATION OF 30% FOR THE YEAR UNDER CONS IDERATION. RESULTANTLY, THE GROUND RAISED BY THE ASSESSEE IS HEREBY ALLOWED . 8. CONSIDERING THE FACTS OF THE INSTANT CASE IN LIG HT OF THE ABOVE DECISION, WE OBSERVE THAT THE ASSESSEE OWNS THE TRU CKS AND DUMPERS AS COMMERCIAL VEHICLES AND IS USING THEM FO R HIRING BUSINESS SINCE LAST MANY YEARS. THE CLAIM OF DEPRE CIATION @30% HAS BEEN ALLOWED IN THE PRECEDING YEARS, THERE IS N O DISPUTE ABOUT THE ASSETS BEING PUT TO USE AND READY TO USE FOR HI RING BUSINESS. THIS ACTIVITY CONTINUED IN THE SUBSEQUENT YEARS ALS O. THESE ASSETS NAMELY TRUCKS AND DUMPERS ARE PART OF THE 30% BLOCK OF THE ASSETS AS ON 1.4.2007 AND WDV IS SHOWN AT RS.19,48,988/- I N THE AUDITED STATEMENT ATTACHED WITH FORM 3CA OF THE TAX AUDIT R EPORT. 9. HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F SPEED AUTOMOBILES PVT. LTD (2004) 32 ITC 537 HAS CONFIRME D THE PROPOSITION THAT THE DEPRECIATION IS ELIGIBLE ON ASSETS WHICH ARE READY FOR USE AND WHICH ARE ALREADY USED IMMATERIAL OF THE FACT THAT SUCH ASSETS WERE USED IN THE YEAR OR NOT. 10. WE, THEREFORE RESPECTFULLY FOLLOWING THE ABOV E JUDGMENTS ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IS ENTITLED F OR 30% SANGHI BROTHERS INDORE PVT. LTD ITA NO.723/IND/2017 7 DEPRECIATION ON THE WDV OF TRUCKS AND DUMPERS WHICH ARE PURCHASED AS COMMERCIAL VEHICLE AND CONSISTENTLY US ED IN THE RUNNING OF HIRING. THUS GROUND NO.2 OF THE ASSESSEE STANDS ALLOWED. 11. AS REGARDS GROUND NO.1 CHALLENGING THE VALIDITY OF REOPENING OF THE ASSESSMENT WE FIND THAT THE SAME IS RENDERE D TO BE ACADEMIC IN NATURE AS WE HAVE ALREADY DELETED THE DISALLOWAN CE OF DEPRECIATION AT RS.2,87,188/- AND THEREFORE GROUND NO.1 IS DISMISSED AS ACADEMIC IN NATURE. 12. GROUND NO.3 IS GENERAL IN NATURE WHICH NEEDS NO ADJUDICATION. 13. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . THE ORDER PRONOUNCED IN THE OPEN COURT ON 13.02.2019. SD/- SD/- ( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 13 FEBRUARY, 2019 /DEV SANGHI BROTHERS INDORE PVT. LTD ITA NO.723/IND/2017 8 COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE