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Facts
The assessee filed its return for AY 2012-13. The assessment was completed, but later reopened under Section 148. The AO disallowed additional depreciation on moulds, restricting it to 15% from 30% claimed, as the assessee was in the business of steel scrap recycling and not rubber/plastic goods manufacturing. The assessee failed to provide evidence for their claim.
Held
The Tribunal noted that the assessee did not produce evidence to substantiate its claim for 30% depreciation on moulds during reassessment or appeal proceedings. However, since the assessee's counsel requested an opportunity to present documents, the matter was restored to the CIT(A) for fresh adjudication.
Key Issues
Whether the assessee could claim 30% depreciation on moulds used in steel scrap recycling business, and if the reassessment proceedings were validly initiated.
Sections Cited
143(3), 148, 147, 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “F” MUMBAI
Before: SHRI OM PRAKASH KANT & MS. KAVITHA RAJAGOPAL
ORDER PER OM PRAKASH KANT, AM These appeals by the assessee are directed against two separate orders, both dated 11.02.2025, passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment years 2012- 13 and 2013-14 respectively. As common issues-in-dispute are involved in these appeals and therefore, same were heard together
Vir Alloys and Steel Company Pvt. Ltd Vir Alloys and Steel Company Pvt. Ltd 2 & 2557/MUM/2025 & and disposed off by way of this consolidated for the sake of and disposed off by way of this consolidated for the sake of and disposed off by way of this consolidated for the sake of convenience.
Briefly stated, the facts pertaining to Assessment Year 2012 Briefly stated, the facts pertaining to Assessment Year 2012 Briefly stated, the facts pertaining to Assessment Year 2012– 13 are that the assessee filed its return of income on 30.09.2012, 13 are that the assessee filed its return of income on 30.09.2012, 13 are that the assessee filed its return of income on 30.09.2012, declaring total income of ₹57,04,372/-. The assessment was declaring total income of . The assessment was completed under Section 143(3) of the Income completed under Section 143(3) of the Income- -tax Act, 1961 (hereinafter referred to as "the Act") on 16.03.2015, determining (hereinafter referred to as "the Act") on 16.03.2015, determining (hereinafter referred to as "the Act") on 16.03.2015, determining total income at ₹57,16,548/ 57,16,548/-. Subsequently, the case was reopened . Subsequently, the case was reopened by issuance of notice under Sectio by issuance of notice under Section 148 of the Act dated n 148 of the Act dated 30.05.2018. During reassessment proceedings, the Assessing 30.05.2018. During reassessment proceedings, the Assessing 30.05.2018. During reassessment proceedings, the Assessing Officer raised a specific query as to why depreciation on moulds Officer raised a specific query as to why depreciation on moulds Officer raised a specific query as to why depreciation on moulds should not be restricted to 15% of the written down value, in should not be restricted to 15% of the written down value, in should not be restricted to 15% of the written down value, in accordance with the applicable Income accordance with the applicable Income-tax Rules tax Rules. However, no explanation was submitted by the assessee, despite having been explanation was submitted by the assessee, despite having been explanation was submitted by the assessee, despite having been provided multiple opportunities. Consequently, the reassessment provided multiple opportunities. Consequently, the reassessment provided multiple opportunities. Consequently, the reassessment order dated 11.10.2018 passed under Section 147 disallowed order dated 11.10.2018 passed under Section 147 disallowed order dated 11.10.2018 passed under Section 147 disallowed additional depreciation of ₹37,41,179/-, reducing the ra additional depreciation of , reducing the rate from the 30% claimed by the assessee to 15%, on the ground that the 30% claimed by the assessee to 15%, on the ground that the 30% claimed by the assessee to 15%, on the ground that the assessee was engaged in recycling of steel scrap and manufacturing assessee was engaged in recycling of steel scrap and manufacturing assessee was engaged in recycling of steel scrap and manufacturing of ingots and castings of ingots and castings — not in the business of rubber or plastic not in the business of rubber or plastic goods manufacturing, where the higher rate would apply.. The goods manufacturing, where the higher rate would app goods manufacturing, where the higher rate would app relevant finding of the Assessing Officer is reproduced as under: relevant finding of the Assessing Officer is reproduced as under: relevant finding of the Assessing Officer is reproduced as under:
“In response to the notice issued u/s. 142(1) on 25.08.2018 In response to the notice issued u/s. 142(1) on 25.08.2018 In response to the notice issued u/s. 142(1) on 25.08.2018 assessee e preferred preferred adjournment adjourn ment vide vide letter letter dated dated 06.09.2018. Adjournment was granted up to 17.09.20,18. 06.09.2018. Adjournment was granted up to 17.09.20,18. 06.09.2018. Adjournment was granted up to 17.09.20,18.
Vir Alloys and Steel Company Pvt. Ltd Vir Alloys and Steel Company Pvt. Ltd 3 & 2557/MUM/2025 &
Assessee again Assessee again sought adjournment vide letter dated sought adjournment vide letter dated 18.09.2018 filed in tapal of this office. In response to the 18.09.2018 filed in tapal of this office. In response to the 18.09.2018 filed in tapal of this office. In response to the same another notice u/s. 142(1) was issued on 19.09.2018 same another notice u/s. 142(1) was issued on 19.09.2018 same another notice u/s. 142(1) was issued on 19.09.2018 fixing hearing on 26.09.2018 & assessee was once again fixing hearing on 26.09.2018 & assessee was once again fixing hearing on 26.09.2018 & assessee was once again requested to provide details. The assessee how requested to provide details. The assessee however did not ever did not produce any details/explanation produce any details/explanation till 28.09.2018 even after 28.09.2018 even after a lapse of one month after issuance of notice u/s. 142(1) on a lapse of one month after issuance of notice u/s. 142(1) on a lapse of one month after issuance of notice u/s. 142(1) on 25.08.2018. Therefore a final opportunity was given to assessee vide Therefore a final opportunity was given to assessee vide Therefore a final opportunity was given to assessee vide notice issued u/s. (1) on 29.09.2018 to explain why notice issued u/s. (1) on 29.09.2018 to explain why notice issued u/s. (1) on 29.09.2018 to explain why depreciation may not be restricted to 15% as provided in the depreciation may not be restricted to 15% as provided in the depreciation may not be restricted to 15% as provided in the Act. However no explanation was offered by assessee in Act. However no explanation was offered by assessee in Act. However no explanation was offered by assessee in this regard. Therefore in view of the clear provisions of IT Rules Therefore in view of the clear provisions of IT Rules Therefore in view of the clear provisions of IT Rules deprecation on moulds used be assessee in its business of deprecation on moulds used be assessee in its business of deprecation on moulds used be assessee in its business of recycling of st recycling of steel scrape and manufacturing of ingots is eel scrape and manufacturing of ingots is allowed @ 15% instead of depreciation claimed @ 30% by allowed @ 15% instead of depreciation claimed @ 30% by allowed @ 15% instead of depreciation claimed @ 30% by the assessee and additional depreciation of Rs. 37,41,179 the assessee and additional depreciation of Rs. 37,41,179 the assessee and additional depreciation of Rs. 37,41,179 claimed by assessee as worked out below is disallowed. claimed by assessee as worked out below is disallowed. claimed by assessee as worked out below is disallowed. Particular Amount Amount Depreciation claimed @30% Depreciation claimed @30% 74,82,357 74,82,357 Less: Depreciation allowable @15% Depreciation allowable @15% 37,41,179 37,41,179 Disallowance Rs. Disallowance Rs. 37,41,179 37,41,179 3. On appeal, the assessee challenged both the validity of the On appeal, the assessee challenged both the validity of the On appeal, the assessee challenged both the validity of the reassessment and the disallowance on merits. The Ld. CIT(A), reassessment and the disallowance on merits. The Ld. CIT(A), reassessment and the disallowance on merits. The Ld. CIT(A), however, upheld the reassessment as well as the addition. In however, upheld the reassessment as well as the addition. In however, upheld the reassessment as well as the addition. In respect of the depreciation claim, it was held that the assessee respect of the depreciation claim, it was held that the assessee respect of the depreciation claim, it was held that the assessee failed to submit any documentary evidence to demonstrate that the submit any documentary evidence to demonstrate that the submit any documentary evidence to demonstrate that the moulds used had a life span of less than one year, or that they moulds used had a life span of less than one year, or that they moulds used had a life span of less than one year, or that they qualified as consumables warranting revenue treatment or higher qualified as consumables warranting revenue treatment or higher qualified as consumables warranting revenue treatment or higher depreciation. The Ld. CIT(A) accordingly confirmed the findings of depreciation. The Ld. CIT(A) accordingly confirmed the findings of depreciation. The Ld. CIT(A) accordingly confirmed the findings of the Assessing Officer Assessing Officer observing as under:
“4.4 Now coming to the next ground, the appellant 4.4 Now coming to the next ground, the appellant 4.4 Now coming to the next ground, the appellant challenged the disallowance towards claim of depreciation challenged the disallowance towards claim of depreciation challenged the disallowance towards claim of depreciation
Vir Alloys and Steel Company Pvt. Ltd Vir Alloys and Steel Company Pvt. Ltd 4 & 2557/MUM/2025 & amount of Rs.37,41,179/ amount of Rs.37,41,179/-. The AO has observed that the . The AO has observed that the assessee has claimed depreciation on moulds at 30% assessee has claimed depreciation on moulds at 30% assessee has claimed depreciation on moulds at 30% though higher depreciation @30% is allowable only on the gh higher depreciation @30% is allowable only on the gh higher depreciation @30% is allowable only on the moulds used in the rubber and plastic goods factories. The moulds used in the rubber and plastic goods factories. The moulds used in the rubber and plastic goods factories. The appellant was involved in the business of recycling of steel appellant was involved in the business of recycling of steel appellant was involved in the business of recycling of steel scrape & manufacturing ingots and castings and in such scrape & manufacturing ingots and castings and in such scrape & manufacturing ingots and castings and in such case, depreciation was allow case, depreciation was allowable @ 15%. The assessee has able @ 15%. The assessee has offered no explanation in this regard during the assessment offered no explanation in this regard during the assessment offered no explanation in this regard during the assessment proceedings. proceedings. proceedings. During During During the the the appellate appellate appellate proceedings, proceedings, proceedings, the the the appellant submitted appellant submitted that the usable life of moulds in the usable life of moulds in the steel industry is less than one year and moulds are in steel industry is less than one year and moulds are in steel industry is less than one year and moulds are in nature of items of stores and consumables in this industry, ure of items of stores and consumables in this industry, ure of items of stores and consumables in this industry, thereby assessee should claim the purchase of moulds as thereby assessee should claim the purchase of moulds as thereby assessee should claim the purchase of moulds as revenue expenses instead of fixed assets and instead it has revenue expenses instead of fixed assets and instead it has revenue expenses instead of fixed assets and instead it has claimed depreciation only @30%. But the appellant has claimed depreciation only @30%. But the appellant has claimed depreciation only @30%. But the appellant has failed to file any documentar failed to file any documentary evidence which can prove y evidence which can prove that the moulds are usable only for one year in the business that the moulds are usable only for one year in the business that the moulds are usable only for one year in the business of recycling of steel scrape & manufacturing ingots and of recycling of steel scrape & manufacturing ingots and of recycling of steel scrape & manufacturing ingots and castings. Therefore, due to lack of evidence, 1 side with the castings. Therefore, due to lack of evidence, 1 side with the castings. Therefore, due to lack of evidence, 1 side with the findings of the AO with respect to disallowance of findings of the AO with respect to disallowance of findings of the AO with respect to disallowance of depreciation claimed. The evidence furnished by the depreciation claimed. The evidence furnished by the depreciation claimed. The evidence furnished by the appellant before me in the form of reply do not carry the appellant before me in the form of reply do not carry the appellant before me in the form of reply do not carry the factual weight found during the assessment proceedings factual weight found during the assessment proceedings factual weight found during the assessment proceedings and are not found to be substantial enough to controvert the and are not found to be substantial enough to controvert the and are not found to be substantial enough to controvert the assessing officer's findings. assessing officer's findings. Consequently, Grounds of Consequently, Grounds of appeal relating to this issue stands appeal relating to this issue stands dismissed.” 3.1 On the issue of the validity of the reassessment, the Ld. CIT(A) On the issue of the validity of the reassessment, the Ld. CIT(A) On the issue of the validity of the reassessment, the Ld. CIT(A) observed that the reopening was carried out after recording observed that the reopening was carried out after recording observed that the reopening was carried out after recording reasons, with due approval and within the period prescribed under reasons, with due approval and within the period pre reasons, with due approval and within the period pre the law. It was further held that the principles of natural justice the law. It was further held that the principles of natural justice the law. It was further held that the principles of natural justice had been followed, and therefore, the objections raised by the had been followed, and therefore, the objections raised by the had been followed, and therefore, the objections raised by the assessee on jurisdiction and limitation were devoid of merit. assessee on jurisdiction and limitation were devoid of merit. assessee on jurisdiction and limitation were devoid of merit. Relevant part of his decision is reproduced as un Relevant part of his decision is reproduced as under: :
“4.3 It has been noticed from the grounds filed by the 4.3 It has been noticed from the grounds filed by the 4.3 It has been noticed from the grounds filed by the appellant that he has objected to the validity of reopening appellant that he has objected to the validity of reopening appellant that he has objected to the validity of reopening proceedings. The facts of the case in the light of the above proceedings. The facts of the case in the light of the above proceedings. The facts of the case in the light of the above allegation were carefully considered. As per the contents of allegation were carefully considered. As per the contents of allegation were carefully considered. As per the contents of assessment ord assessment order, it is evident that the reasons for er, it is evident that the reasons for reopening were correctly recorded, necessary approval reopening were correctly recorded, necessary approval reopening were correctly recorded, necessary approval
Vir Alloys and Steel Company Pvt. Ltd Vir Alloys and Steel Company Pvt. Ltd 5 & 2557/MUM/2025 & obtained, served the notice within the stipulated time and obtained, served the notice within the stipulated time and obtained, served the notice within the stipulated time and had had had also also also provided provided provided the the the reasons reasons reasons for for for reopening reopening reopening the the the assessment. Further, Assessing Officer has provided assessment. Further, Assessing Officer has provided assessment. Further, Assessing Officer has provided adequate opportunity to the appellant before completing the uate opportunity to the appellant before completing the uate opportunity to the appellant before completing the assessment order and the Principles of Natural Justice have assessment order and the Principles of Natural Justice have assessment order and the Principles of Natural Justice have been duly complied. Therefore, the corresponding grounds been duly complied. Therefore, the corresponding grounds been duly complied. Therefore, the corresponding grounds of appeal are found to be unsubstantiated, made in a of appeal are found to be unsubstantiated, made in a of appeal are found to be unsubstantiated, made in a mechanical fashion and hence a mechanical fashion and hence all the grounds related to ll the grounds related to legality of reopening stands dismissed. legality of reopening stands dismissed.”
4. We have heard the rival submissions of the parties and We have heard the rival submissions of the parties and We have heard the rival submissions of the parties and perused the material on record. As regards the merits of the perused the material on record. As regards the merits of the perused the material on record. As regards the merits of the disallowance, it is noted that the assessee did not produce any disallowance, it is noted that the assessee did not produce any disallowance, it is noted that the assessee did not produce any evidence either during the reassessment proceedings or before the ce either during the reassessment proceedings or before the ce either during the reassessment proceedings or before the Ld. CIT(A) to substantiate its claim that depreciation at the rate of Ld. CIT(A) to substantiate its claim that depreciation at the rate of Ld. CIT(A) to substantiate its claim that depreciation at the rate of 30% was allowable in respect of moulds used in its line of business. 30% was allowable in respect of moulds used in its line of business. 30% was allowable in respect of moulds used in its line of business. However, before us, learned counsel for the assessee has submitted However, before us, learned counsel for the assessee has However, before us, learned counsel for the assessee has that necessary documents can now be furnished to support the that necessary documents can now be furnished to support the that necessary documents can now be furnished to support the claim and requested that one more opportunity be granted to claim and requested that one more opportunity be granted to claim and requested that one more opportunity be granted to present the relevant material. present the relevant material.
4.1 Considering the totality of the circumstances, and in the Considering the totality of the circumstances, and in the Considering the totality of the circumstances, and in the interest of justice, we deem it interest of justice, we deem it appropriate to restore the matter to appropriate to restore the matter to the file of the Ld. CIT(A) for a fresh adjudication of the issue relating the file of the Ld. CIT(A) for a fresh adjudication of the issue relating the file of the Ld. CIT(A) for a fresh adjudication of the issue relating to to to depreciation, depreciation, depreciation, after after after affording affording affording the the assessee the assessee assessee a a a reasonable reasonable reasonable opportunity to submit supporting documentary evidence. opportunity to submit supporting documentary evidence. opportunity to submit supporting documentary evidence.
4.2 Insofar as the validity of Insofar as the validity of the reassessment is concerned, we the reassessment is concerned, we note that the assessee had raised a specific ground challenging the note that the assessee had raised a specific ground challenging the note that the assessee had raised a specific ground challenging the reopening on the basis that the notice under Section 148 was reopening on the basis that the notice under Section 148 was reopening on the basis that the notice under Section 148 was Vir Alloys and Steel Company Pvt. Ltd Vir Alloys and Steel Company Pvt. Ltd 6 & 2557/MUM/2025 & issued beyond four years from the end of the relevant assessment issued beyond four years from the end of the relevant assessment issued beyond four years from the end of the relevant assessment year, and that there was no year, and that there was no failure on the part of the assessee to failure on the part of the assessee to disclose fully and truly all material facts during the original disclose fully and truly all material facts during the original disclose fully and truly all material facts during the original assessment. However, we find that the Ld. CIT(A) has not examined assessment. However, we find that the Ld. CIT(A) has not examined assessment. However, we find that the Ld. CIT(A) has not examined this contention in terms of the first proviso to Section 147 of the this contention in terms of the first proviso to Section 147 of the this contention in terms of the first proviso to Section 147 of the Act. Since the matter is being remanded on merits, we consider it ter is being remanded on merits, we consider it ter is being remanded on merits, we consider it appropriate to restore this ground also to the Ld. CIT(A) for appropriate to restore this ground also to the Ld. CIT(A) for appropriate to restore this ground also to the Ld. CIT(A) for adjudication afresh, in accordance with law and after considering adjudication afresh, in accordance with law and after considering adjudication afresh, in accordance with law and after considering the assessee’s submissions on the aspect of limitation and full the assessee’s submissions on the aspect of limitation and full the assessee’s submissions on the aspect of limitation and full disclosure.
The grounds raised
in the appeal for Assessment Year 2013 he grounds raised in the appeal for Assessment Year 2013 he grounds raised in the appeal for Assessment Year 2013– 14 are identical to those raised in the appeal for Assessment Year 14 are identical to those raised in the appeal for Assessment Year 14 are identical to those raised in the appeal for Assessment Year 2012–13. Accordingly, following our findings hereinabove, the 13. Accordingly, following our findings hereinabove, the 13. Accordingly, following our findings hereinabove, the grounds in the appeal for AY 2013 grounds in the appeal for AY 2013–14 are also restored to the file of 14 are also restored to the file of the Ld. CIT(A) to be decided afresh, the Ld. CIT(A) to be decided afresh, mutatis mutandis mutatis mutandis.
In the result, both appeals of the assessee are allowed for In the result, both appeals of the assessee are allowed for In the result, both appeals of the assessee are allowed for statistical purposes, with directions as aforesaid. statistical purposes, with directions as aforesaid.