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Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI N.V. VASUDEVAN & Ms. PADMAVATHY S
IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND Ms. PADMAVATHY S, ACCOUNTANT MEMBER
ITA No.719/Bang/2022 Assessment year : 2016-17
Indauto Filters, Vs. The Assistant Director No.43/7, 3rd Floor, 15th Cross, of Income Tax, CPC, Between 4th & 6th Main, Bengaluru. Malleswaram, Bengaluru – 560 004. PAN: AAAFI 6985Q APPELLANT RESPONDENT
Appellant by : Shri K G Acharya, CA Respondent by : Shri K.R. Narayana, Addl.CIT(DR)(ITAT), Bengaluru.
Date of hearing : 11.10.2022 Date of Pronouncement : 21.10.2022 O R D E R Per Padmavathy S., Accountant Member This appeal is against the order of the CIT(Appeals), National Faceless Assessment Centre, Delhi [NFAC] , Delhi dated 15.7.2022 for the assessment year 2016-17.
The only issue contended by the assessee through various grounds of appeal is the non-granting of deduction in respect of depreciation u/s.32 of the Income-tax Act, 1961 [the Act] in the intimation order passed u/s. 143(1) the Act.
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The assessee is a partnership firm. In the return of income filed for the AY under consideration, the assessee inadvertently not fed the details of depreciation in “Schedule DEP” and “Part BP – Computation of income from business or profession” for an amount of Rs.2,72,51,521. However, the assessee has fed the depreciation figure correctly in “Part A- P&L”. In the intimation received u/s. 143(1) dated 28.4.2017, depreciation was not allowed as a deduction though the same was added to the income from business or profession.
The assessee filed an appeal against the intimation u/s. 143(1) whereby the assessee submitted that it was an inadvertent omission on the part of assessee to feed the depreciation in the appropriate column of the income tax return. The assessee also submitted before the CIT(A) that the assessee has filed a rectification on 9.6.2018 correcting the above omission which has not been given effect. The assessee placed reliance on the decision of the coordinate Bench of the Tribunal in the case of Rakesh Singh v. ACIT, ITA No.1027/Bang/2011.
On appeal, the CIT(A) did not accept the contentions of the assessee and dismissed the appeal by holding that –
8.1 Considered the facts of the grounds, material available on record and submission of the appellant alongwith the intimation issued u/s 143(1) of the IT Act. It is noted that the appellant had failed to claim the deduction allowance in the original income tax return filed by it on 17.10.2016. The return of the appellant was processed u/s 143(1) and appellant was provided with the opportunity to rectify the said defect. Consequently, thereof, the appellant filed revised income tax return 09.10.2018. However, on perusal of the said facts, it emanates that the appellant had failed to suo motu file the claim for the depreciation allowance. It is not
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the case where the appellant had failed to make the claim and in pursuance of the same, suo motu file the revised income tax return to claim the same. The appellant came to know of the said discrepancy during the course of assessment proceedings and also the date of filing the revised income tax return had expired thereto. The appellant also placed reliance on the case law in the case of Rakesh Singh vs ACIT, and the circular no. 14(XI-35) of 1995 dated April 11, 1955. However, the said case law is on its own footings distinguishable on facts. Further, the Circular relied by the appellant is also not applicable in as much as the appellant failed to file the revised income tax return within the time period as stipulated u/s 139(5) of the Act. Therefore, in such circumstances, he declined to interfere with the findings of the AO.” 6. Before us, the ld. AR submitted that the omission to feed the depreciation figure while filing the return of income is an inadvertent clerical error on the part of the assessee. The ld. AR further submitted that the assessee did not file any revised return as claimed by the CIT(A), but only filed a rectification for the intimation u/s. 143(1). Our attention was drawn by the ld AR to the fact that the details of depreciation is furnished in clause 18 from the Tax Audit report which according to the ld AR substantiates that the omission to feed the same in the return of income is an unintended error. The ld. AR also submitted that as per Explanation 5 to section 32, even if depreciation is not claimed in the return of income, the assessee shall be allowed the depreciation claimed. The ld. AR also submitted that the Circular No.14 of 1955, provides that the Officers of the department must not take advantage of the ignorance of assessee as to his rights and that although the responsibility for claiming refund and relief vests on the assessee, the Officer should draw the attention of assessee to any
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refund/relief, to which they are entitled to, but they have omitted to claim for some reason or the other.
The ld. DR, on the other hand, relied on the order of the CIT(A). He further submitted that in the case of Rakesh Singh (supra), the order contended was under u/s. 143(3) whereas in assessee’s case it is an intimation u/s. 143(1). The ld DR further submitted that the return was processed u/s. 143(1) much before the assessee filing the rectification. The ld. DR further submitted that it is the tax payer who has not claimed depreciation and the CIT(A) has rightly rejected the appeal of the assessee.
We heard the rival submissions and perused the material on record. We notice that the depreciation amounting to Rs. 2,72,51,521 is debited to Profit and Loss A/c and the same is also duly filled in the ITR under “Part A — P&L". The relevant extract of the ITR-5 is as under:-
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We also notice that the assessee has not fed in the figures for claiming depreciation of Rs. 2,72,51,521 under column 12 of 'Part BP — Computation of income from business or profession" and had not fed in the depreciation amount in "Schedule DEP" of the Income tax return. The relevant extracts from ITR-5 are as under:-
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In the intimation u/s.143(1) it is noticed that based on depreciation entered under "Part A — P&L", Rs. 2,72,51,521 is added back to the income. However, the deduction of the same u/s 32 of the Act is not allowed.
We will now look at the provisions of explanation 5 to s. 32 which reads as follows:-
“Explanation 5.—For the removal of doubts, it is hereby declared that the provisions of this sub-section shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income;” 12. A plain reading of the above explanation would mean that even if the assessee omits to claim, the deduction towards depreciation should be allowed. We notice that the coordinate bench of the Tribunal in in the case Rakesh Singh (supra) has considered a similar issue and held as under:-
“10. We have heard the rival submissions and perused the materials on record. It is not in dispute that in the instant case, return under section 139(1) was filed belatedly. Hence, the assessee is not entitled to file a revised return under section 139(5) of the Act going by the ratio laid down by the Hon'ble Apex Court in the case of Kumar Jagdish Chandra Sinha (supra). However, the depreciation allowance under Explanation 5 of section 32 of the Act is mandatory allowable if the said asset is used for the purpose of business of the assessee. In other words, whether the assessee makes a claim of depreciation or not in his return of income, the Assessing Officer is duty bound to grant depreciation allowance by virtue of Explanation 5 to section 32(1) of the Act (Inserted by Finance Act, 2001 w.e.f. 1/4/2002). 10.1. Circular No.14 (XI-35) of 1955, dated April 11, 1955 provides that the officers of the department must not take advantage of the ignorance of an assessee as to his rights and that although the
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responsibility for claiming refunds and reliefs rests with the assessee on whom it is imposed by law, yet (a) the officers should draw the attention of the assessees to any refund or relief to which they are entitled to but which they have omitted to claim for some reason or other, and (b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs. The relevant portion of the Circular reads as follows:- "Officers of the department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way particularly in the matter of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where the proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would in the long run, benefit the department; for it would inspire confidence in him that he may be sure of getting a square deal from the department. Although, therefore, the responsibility for claiming refunds and reliefs rests with the assessee on whom it is imposed by the law, officers should; (a) draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other; (b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs". 10.2 In view of Explanation 5 to section 32(1), the Assessing Officer was duty bound to grant depreciation allowance, whether the same is claimed by the assessee or not, provided the conditions mentioned under section 32 are satisfied. The controversy could be examined from another angle. No doubt, the revised return cannot be taken cognizance of since the original return was filed belatedly. However, an additional claim could be made before the appellate authority and the appellate authority is duty bound to consider the same. There are number of judgments which clearly establish that the assessee is entitled to raise additional grounds, not merely in terms of legal submissions but in respect of new claim not made in the return filed.”
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The ratio laid down by the Hon’ble Tribunal in the above case is that the assessee should be allowed the deduction towards depreciation even if not claimed by the assessee as per explanation 5 to section 32 and that the AO should bring any omission on the part of the assessee to claim any relief, to the notice of the assessee. The Hon’ble Tribunal even went to the extent to hold that the assessee entitled to raise grounds towards deductions not claimed in the return of income. In assessee’s case, the return of income is filed before the due date u/s.139(1) and as per e-filing report submitted before us, the assessee has filed a rectification on 11.06.2018 which as per the report is not processed. So the CIT(A)’s claim that the assessee the assessee has filed a revised return belatedly and hence not eligible to claim depreciation is factually not correct. The fact that depreciation is correctly fed in the “Part A — P&L" and also in the relevant clause of Tax Audit supports the contention that the depreciation is unintentionally omitted to be fed into while filing the ITR and that it is a clerical error.
In the light of the above discussion and considering the decision of the coordinate bench of the Tribunal in the case of Rakesh Singh (Supra) we are of the considered view that the assessee should be allowed the claim of depreciation u/s.32 of the Act to the tune of amount Rs. 2,72,51,521.
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In the result, the appeal by the assessee is allowed.
Pronounced in the open court on this 21st day of October, 2022.
Sd/- Sd/-
( N V VASUDEVAN ) ( PADMAVATHY S ) VICE PRESIDENT ACCOUNTANT MEMBER
Bangalore, Dated, the 21st October, 2022. /Desai S Murthy / Copy to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order
Assistant Registrar ITAT, Bangalore.