FROSTEES INDIA PVT. LTD.,NORTH TWENTY FOUR PARGANAS vs. D.C.I.T., CIRCLE - 11(1), KOLKATA

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ITA 2204/KOL/2026Status: DisposedITAT Kolkata02 September 2026AY 2018-20197 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the assessee's appeal was delayed but condoned it. The Tribunal decided to set aside the orders of the lower authorities and remand the matter to the Assessing Officer for fresh assessment.

What were the facts?

The assessee claimed depreciation on fixed assets for AY 2018-19. The Assessing Officer noted a significant difference between the closing WDV of the previous year and the opening WDV of the current year, disallowing excess depreciation. The CIT(A) confirmed this disallowance, holding that the assessee failed to provide sufficient evidence for the discrepancy.

What were the issues?

Whether the disallowance of depreciation due to a discrepancy in the Written Down Value (WDV) was justified, and whether the assessee provided sufficient evidence to explain the difference.

Which sections of the Income-tax Act were involved?

Section 32,Section 43(6),Section 143(3),Section 250,Section 270A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, KOLKATA ‘A’ BENCH AT KOLKATA

Before: SHRI GEORGE MATHAN & SHRI RAKESH MISHRA

PER RAKESH MISHRA, ACCOUNTANT MEMBER:

This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') for AY 2018-19 dated 24.10.2025. 1.1 The Registry has informed that the appeal is barred by limitation by 167 days. The assessee has filed an affidavit along with a petition for condonation of delay, explaining the reasons that the initial disallowance merely reduced the returned loss without creating any tax demand, leading to a bona fide commercial decision not to appeal, but a subsequent penalty order u/s 270A of the Act on the same disallowance caused real prejudice necessitating this appeal. After perusing the same, we are satisfied that the assessee had a reasonable and sufficient cause and was prevented from filing the instant appeal within the statutory time limit. We, therefore, condone the delay and admit the appeal for adjudication.

2.

The assessee is in appeal before the Tribunal raising the following grounds of appeal:

"

1.

That on the facts and in the circumstances of the case, the order dated 24.10.2025 passed under section 250 of the Income-tax Act, 1961 by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi ["CIT(A)"] confirming the assessment order dated 25.02.2021 passed under section 143(3) read with sections 143(3A) and 143(3B) of the Act, is arbitrary, erroneous, contrary to the facts on record and bad in law.

2.

That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the disallowance of depreciation of Rs. 75,07,859/- without appreciating that the opening Written Down Value of Rs. 19,19,19,452/- adopted in the return for A. Y. 2018-19 was exactly the closing WDV as per the audited books of account and the tax audit report in Form No. 3CD for F.Y. 2016-17, and that the depreciation for the year was therefore computed on the true and correct WDV of the blocks of assets in accordance with section 32 read with section 43(6) of the Act.

3.

That the learned CIT(A) failed to appreciate that the difference of Rs. 7,04,31,192/- between the opening WDV as per the return for A.Y. 2018-19 and the closing WDV as per the return for A.Y. 2017-18 arose solely out of an inadvertent clerical error in the depreciation schedule of the return for A.Y. 2017-18, wherein the F.Y. 2015-16 schedule was erroneously repeated and the additions to fixed assets of Rs. 9,83,63,839/- actually made during F.Y. 2016-17 duly evidenced by the audited financial statements and the tax audit report were omitted, and that an inadvertent error in the return of an earlier year cannot override the actual cost and actual WDV of the assets as borne out by the books of account.

4.

That the learned CIT(A) erred in holding that the Appellant failed to furnish any reconciliation or credible evidence, ignoring that the tax audit reports in Form Nos. 3CA/3CD and the audited financial statements for F.Y. 2016-17 and F.Y. 2017-18, together with the asset-wise depreciation working, were available on the record of the Department and themselves constituted complete reconciliation of the opening and closing WDV; and further erred in drawing an adverse inference from the non-filing of a revised return for A.Y. 2017-18 when the time limit for filing such revised return under section 139(5) had already expired before the error was detected in the course of the scrutiny proceedings.

5.

That the disallowance has been made and confirmed on a purely arithmetical mismatch between two returns, without disputing the genuineness of the additions to fixed assets, the ownership of the assets, or their user for the purposes of the Appellant's business - the twin conditions of section 32- and is therefore unsustainable in law.

6.

Without prejudice to the above, that the authorities below failed to appreciate that in terms of section 43(6)(c) of the Act the WDV is to be computed with reference to the depreciation "actually allowed", and since depreciation of only Rs. 1,78,95,211/- (as against Rs. 2,16,28,203/- allowable) was claimed and allowed for A.Y. 2017-18, the correct opening WDV for A.Y. 2018-19 works out to Rs. 19,56,52,444/-, which is higher than the WDV of Rs. 19,19,19,452/- actually adopted by the Appellant, so that the depreciation claimed for the year under appeal was, if anything, understated and no disallowance whatsoever was warranted.

7.

That the learned CIT(A) erred in disposing of the appeal without dealing with the material on record and without affording a meaningful opportunity, in disregard of the mandate of sub-sections (4) and (6) of section 250 of the Act requiring the appellate authority to make such further inquiry as may be necessary and to pass a reasoned order on the points in determination, and in effect dismissed the appeal in a summary manner.

8.

That on the facts and in the circumstances of the case, the authorities below ought to have determined the correct income of the Appellant in accordance with law, it being the settled position that the Revenue is obliged to assess the correct income and to allow the legitimate depreciation due to the assessee, and that tax can be collected only in accordance with law in terms of Article 265 of the Constitution of India.

9.

That the Appellant craves leave to add, alter, amend, modify, substitute or withdraw any ground(s) of appeal before or at the time of hearing of the appeal."

3.

Brief facts of the case are that the assessee had filed the return of income for AY 2018-19 on 09.10.2018 declaring the loss of ₹(-) 2,19,13,486/-. The Assessing Officer (hereinafter referred to as Ld. 'AO') observed a substantial difference between the closing written down value of fixed assets for the preceding year and the opening written down value for the current year. He therefore, rejected the assessee's explanation regarding an omission in the prior year's computation and disallowed the excess depreciation of ₹75,07,859/-. Consequently, the Ld. AO assessed the total income at a loss of ₹1,44,05,627/- u/s 143(3) r.w.s. 143(3A) and 143(3B) of the Act. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A), who observed that the assessee had failed to furnish any credible evidence or reconciliation statement to substantiate the alleged omission in the previous year's computation. Accordingly, the Ld. CIT(A) confirmed the action of the Ld. AO and dismissed the appeal of the assessee vide his findings as under:

“5. Findings and Decision:

5.

1 During the course of assessment proceedings, the Assessing Officer noticed that there was a substantial difference of Rs.7,04,31,192/- between the closing WDV of fixed assets for the Assessment Year 2017-18 and the opening WDV for Assessment Year 2018-19. This discrepancy resulted in excess depreciation claim amounting to Rs.75,07,859/- for the year under consideration. When queried, the appellant submitted that the said difference arose due to an "omission of addition to fixed assets in the computation of depreciation for the preceding year i.e., F.Y. 2016-17" at the time of filing of return of income. It was contended that this error led to the anomaly in the WDV figures. The explanation furnished by the appellant was examined by the Assessing Officer and found to be unsatisfactory. Accordingly, the difference in depreciation of Rs.75,07,859/- was disallowed and added to the total income.

5.

2 During the appellate proceedings, the appellant reiterated the same submissions as made before the Assessing Officer and failed to produce any cogent or verifiable evidence to reconcile the difference in the opening WDV of fixed assets. No revised return or audited rectification statement for the preceding year was filed to substantiate the alleged omission.

5.

3 The appellant also failed to furnish any reconciliation statement linking the closing WDV of the immediately preceding year with the opening WDV of the current year as per books of account and tax records.

5.

4 It is an admitted fact that the closing WDV of an asset for one year necessarily becomes the opening WDV for the succeeding year. Therefore, any variation in the opening balance must be supported by proper reconciliation and documentary evidence.

5.

5 In the present case, the appellant has merely attributed the difference to an "omission" in the previous year's computation, but has not furnished any credible evidence such as revised return, audit note, or asset register reconciliation to support the claim.

5.

6 The onus lies upon the appellant to substantiate the correctness of the claim of depreciation as per the provisions of section 32 of the Income-tax Act, 1961. Mere explanation without supporting documents cannot be accepted.

5.

7 The Assessing Officer has correctly observed that due to the unexplained difference of Rs.7,04,31,192/- in the WDV, the depreciation claimed to the extent of Rs. 75,07,859/- was excessive and liable to be disallowed.

5.

8 I find no infirmity in the reasoning and conclusion drawn by the Assessing Officer. The appellant has not brought any new facts or evidences during the appellate proceedings which could warrant any interference with the order of the AO.

5.

9 In view of the above discussion, I hold that the disallowance of excess depreciation amounting to Rs.75,07,859/- made by the Assessing Officer is justified and in accordance with law.

6.

Accordingly, the appeal filed by the appellant is dismissed.”

4.

Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal.

5.

Rival contentions were heard and the submissions made have been examined. The Ld. AR submitted that the appeal relates to AY 2018-19 but inadvertently in the ITR, the WDV for AY 2015-16 was taken. This issue was raised before the Ld. CIT(A) who did not adjudicate the same on the basis of the facts of the case and confirmed the addition. The Ld. AR requested that even otherwise the provision of section 32 mandates that the depreciation has to be calculated on the basis of the correct WDV brought forward and requested that the matter may be remanded before the Ld. AO as the WDV was incorrectly filed in the ITR but was correctly mentioned in the tax audit report and the required evidence can be furnished before the Ld. AO.

6.

The Ld. DR relied upon the order of the Ld. CIT(A) and requested that the same may be confirmed.

7.

We have considered the submissions made, gone through the facts of the case and perused the record and the order of the Ld. CIT(A). The Bench was of the view that in the interest of justice and fair play, the request of the assessee to set aside the order of the Ld. CIT(A) and remand the case before the Ld. AO may be allowed so that a proper opportunity of being heard may be provided. Hence, after examining the facts of the case, we deem it appropriate to set aside the orders of both the Ld. CIT(A) as well as the Ld. AO and remit the matter to the Ld. AO for making the assessment de novo. The Ld. AO is directed to compute the depreciation as per law on the basis of the correct WDV brought forward as on 01.04.2018 as per the evidence to be filed by the assessee. Needless to say, the assessee shall be given a reasonable opportunity of being heard to make any further submission it wants to make in support of its grounds of appeal and shall not seek unnecessary adjournments. Accordingly, the grounds taken by the assessee in the appeal are partly allowed for statistical purposes.

8.

In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on 2nd September, 2026. [George Mathan] [Rakesh Mishra] Judicial Member Accountant Member Dated: 02.09.2026 Bidhan (Sr. P.S.)

Copy of the order forwarded to:

1.

Frostees India Pvt. Ltd.

2.

DCIT, Circle-11(1), Kolkata.

3.

CIT(A)-NFAC, Delhi.

4.

CIT-

5.

CIT(DR), Kolkata Benches, Kolkata.

6.

Guard File.Deputy

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