PUNJAB STATE ELECTRICITY BOARD vs. PRESIDNET INCOME TAX APPELLATE TRIBUNAL

This appeal has been preferred by the assessee under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against order dated 9.7.2003 passed by the Income Tax Appellate Tribunal, Chandigarh Bench “B”, Chandigarh (hereinafter referred to as “the Tribunal”) in ITA No. 1266/Chandi/96, relating to the assessment year 1993-94, claiming the following substantial questions of law:- “I) Whether the courts below are right in proposing rectification u/s 154 of the Income Tax Act? II) Whether the orders passed by the courts below while deciding the case of the appellant are in contravention of the provisions of Section 143(1)(a)

The facts necessary for disposal as pleaded in the appeal are that the assessee-Board filed its return of income declaring loss of Rs.2,34,38,62,874/- for the assessment year 1993-94 on 30.12.1993 which was processed at a loss of Rs.2,34,31,71,679/- after adjustment of an amount of Rs.6,91,195/-. The assessee received consumer contributions from the consumers amounting to Rs.42,44,73,495/- and it itself disallowed depreciation amounting to Rs.10,61,18,374/- on consumer contributions of Rs.42,44,73,495/-, i.e. @ 25%. The Assessing Officer while observing that the assessee had not disallowed the depreciation on Written Down Value (WDV) of the consumer contributions as on the Ist day of the previous year, issued a show cause notice under Section 154 of the Act proposing to disallow -3- depreciation of the same. The assessee duly replied the said notice pleading that in case proposed rectification is done, the assessee be given 100% depreciation for the items costing less than Rs.5000/-. The Assessing Officer vide order dated 17.1.1996 computed the WDV of contributions as on 31.3.1992 by reducing depreciation @ 25% of gross value contributions and disallowed depreciation aggregating to Rs.35,67,84,294/-. Feeling aggrieved, the assessee took the matter in appeal and the Commissioner of Income Tax (Appeals) [in short “the CIT(A)”] vide its order dated 12.9.1996 partly allowed the appeal and reduced the disallowance of depreciation from Rs.23,58,43,342/- to Rs.5,89,60,835/-. On further appeal by the assessee, the Tribunal vide order dated 9.7.2003 upheld the view of the CIT(A) and dismissed the appeal. Hence, the present appeal by the assessee.

We have heard learned counsel for the parties.

The point for determination in this appeal is whether the Assessing Officer was right in invoking Section 154 of the Act and rectifying the mistake which was apparent on the record regarding claim of depreciation made by the assessee.

Learned counsel for the assessee submitted that the assessee had rightly claimed the depreciation which was allowed by the Assessing Officer and the mistake which was sought to be corrected by invoking Section 154 of the Act was not a mistake apparent on the record and in view of the pronouncements of the Apex Court in T.S. Balaram, ITO v. Volkart Bros. (1971) 82 ITR 50 (SC); Smt. Nita Taneja v. Assistant Controller of Estate Duty, (1994) 211 ITR 462 (SC); CIT v. Keshri Metal Pvt. Ltd. (1992) 237 ITR 165 (SC) and -4- Khatau Junder Ltd. v. K.S. Pathania (1992) 196 ITR 55, the same could not have been resorted to.

Learned counsel for the revenue on the other hand supported the order passed by the Tribunal.

We have given our thoughtful consideration to the respective submissions of learned counsel for the parties and do not find any substance in the plea raised by the learned counsel for the assessee.

The Tribunal while concluding that there existed a mistake which was apparent from the record noticed that amount which had been collected by the assessee from its customers towards cost of capital assets had to be reduced from the actual cost while calculating depreciation. It was further observed that the said issue had attained finality in the assessment year 1982-83 and the assessee had been claiming depreciation after reducing consumer's contribution from cost of capital assets. It was also recorded that the assessee had itself not claimed depreciation @ 25% on Rs.42,44,73,495/- which was consumer's contribution towards capital cost. The Assessing Officer through rectification had sought to disallow depreciation on WDV of Consumer Contribution as on 1.4.1992 which was on the basis of past practice of the assessee. Adverting to the assessee's claim of 100% depreciation in respect of assets costing less than Rs.5,000/-, it was found that the assessee had been allowed depreciation in respect thereof in earlier assessment years as claimed in the returns and if there was some substance in the plea of the assessee, it could file separate rectification application for those assessment years including -5- the present assessment year. It was further noted that no such specific ground had been raised by the assessee before the Tribunal. It would be relevant to reproduce the findings recorded by the Tribunal in paras 7 and 8 of its order, which read thus:- “7. Now the question that requires to be considered is whether there was a mistake apparent from record in the return of income documents and copies of accounts accompanying the return and whether the AO was justified in resorting to provisions of section 154 of the Income Tax Act? The facts discussed above clearly show that the amounts contributed by the consumers were on capital account. The ld. Counsel for the assessee was fair enough to concede that there was no obligation on the part of the assessee to refund such contributions collected from the customers. Therefore, as per provisions of sub-section (6) of section 43 of the Income Tax Act, the amounts collected from the customers towards the cost of capital assets were required to be reduced from the actual cost for the purpose of claiming depreciation. The facts discussed above further show that the issue of capital assets had attained finality in the assessment year 1982-83 and thereafter the assessee had been claiming depreciation by reducing the consumers' contributions from the cost of capital assets. In fact even for the assessment year under reference, the assessee had itself disallowed depreciation @ 25% on the contributions by the consumers amounting to Rs.42,44,73,495/-.

The submission of the ld. Counsel for the assessee that as per Board's circular No. 549 dated 31.10.89 the AO could only vary the rates of depreciation and could not recompute the depreciation is without any substance. The examples given in para 5.4 of the aforesaid circular are only -7- illustrative and not exhaustive. What is required to be seen is, whether the mistake is apparent from record on the basis of documents and copies of accounts filed along with the return? The facts discussed above clearly suggest that assessee had made a wrong claim of depreciation without reducing consumers' contributions from the WDV. This being a mistake apparent from record, the AO rightly rectified the same u/s 154 of Income Tax Act. We also do not find any merit in the submissions of the ld. Counsel that the AO ought to have allowed depreciation @ 100% in respect of assets with cost less than Rs.5,000/-. The assessee had been allowed depreciation in respect of such assets in the earlier assessment years as claimed in the returns. If the assessee was serious about such claim, it could have filed separate applications u/s 154 for those assessment years or even for the assessment year under reference. No such application was filed. In fact no specific ground to this effect has been raised before us. Therefore, such submission is also rejected. Having regard to these facts and circumstances of the case and the legal position discussed above, we are of the considered opinion that Ld. CIT(A) was justified in confirming the order of the AO. Thus, we confirm the order of the CIT(A) and dismiss all the grounds of assessee's appeal.”

The aforesaid findings have not been shown to be perverse in any manner by the learned counsel for the assessee. Further, it may -8- be noticed that so far as the judgments relied upon by the learned counsel for the assessee are concerned, the legal principles enunciated therein are well recognized but in view of the findings noticed above in which no perversity has been pointed out, the same do not advance the case of the assessee any further.

Accordingly, the substantial questions of law are answered against the assessee and in favour of the revenue. The appeal is dismissed. (AJAY KUMAR MITTAL) JUDGE January 28, 2011 (ADARSH KUMAR GOEL) gbs JUDGE