STAR PAPER MILLS LIMITED,KOLKATA vs. PCIT - 2, KOLKATA, KOLKATA

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ITA 1155/KOL/2024Status: DisposedITAT Kolkata15 January 2025AY 2017-20186 pages
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What did the Tribunal hold?

The Tribunal held that the revisionary jurisdiction exercised by the PCIT was not sustainable on the first issue concerning the excess claim of depreciation. The Tribunal noted that the assessee had added plant and machinery in the preceding assessment year, which was put to use for less than 180 days. This addition was eligible for 80% normal depreciation and 20% additional depreciation under Section 32(1)(iia). Since only 50% was claimed in the preceding year, the remaining 50% (40% normal + 10% additional) was claimed in the current year. The Tribunal found no anomaly or mistake in this claim, concluding that the assessment order was neither erroneous nor prejudicial to the revenue on this count. Therefore, the revisionary jurisdiction on this issue was quashed. However, on the second issue regarding the claim of excess brought forward unabsorbed losses/depreciation, the Tribunal found that the PCIT had not examined the issue with reference to the various orders passed by the AO determining these amounts. Therefore, the Tribunal sustained the revisionary order on this issue and directed the AO to verify the amount of brought forward unabsorbed loss/depreciation and allow the correct amounts as per the AO's orders giving appeal effect to appellate orders.

What were the facts?

The assessee, Star Paper Mills Limited, filed an appeal against an order passed by the Pr. Commissioner of Income Tax (PCIT), Kolkata-2, dated 28.03.2024, for Assessment Year 2017-18. The PCIT had invoked revisionary jurisdiction under Section 263 of the Income Tax Act, 1961, to revise an assessment order dated 04.06.2021, passed by the National Faceless Appeal Centre, Delhi (the Assessing Officer - AO). The PCIT found the assessment order to be erroneous and prejudicial to the revenue on two grounds: (i) excess allowance of depreciation amounting to ₹30,96,696/- and (ii) excess claim of brought forward losses and depreciation to the tune of ₹28,34,10,360/-. The assessee contended that the depreciation claim was correctly made, and the brought forward losses/depreciation were claimed as per the AO's orders giving effect to appellate orders.

What were the issues?

1. Whether the Pr. Commissioner of Income Tax erred in exercising revisionary jurisdiction under Section 263 of the Income Tax Act, 1961, by holding that the assessee claimed excess depreciation of ₹30,96,696/- on plant and machinery, making the assessment order erroneous and prejudicial to the interest of the Revenue? 2. Whether the Pr. Commissioner of Income Tax erred in exercising revisionary jurisdiction under Section 263 of the Income Tax Act, 1961, by holding that the assessee claimed excess brought forward losses and depreciation of ₹28,34,10,360/-, making the assessment order erroneous and prejudicial to the interest of the Revenue? Assessee's Contentions: Regarding issue 1, the assessee argued that depreciation was correctly claimed at 50% in the preceding assessment year on plant and machinery put to use for less than 180 days, comprising 40% normal depreciation and 10% additional depreciation. In the current year, the WDV was brought forward, and depreciation was again claimed at 50% (40% normal + 10% additional). The assessee relied on the tax audit report for AY 2016-17 and AY 2017-18, which disclosed these details and showed the claim being allowed. Thus, the assessment order was neither erroneous nor prejudicial. Regarding issue 2, the assessee contended that the claim for brought forward unabsorbed losses/depreciation was correctly made as per the AO's orders giving appeal effect to appellate orders. If verification was required, the matter could be remanded to the AO. Revenue's Contentions: The Revenue relied on the order of the PCIT and submitted that the assessee would not be affected if these issues were examined by the AO in set-aside proceedings, as an opportunity of hearing would be provided.

Which sections of the Income-tax Act were involved?

Section 263,Section 143(3),Section 144C(3),Section 144B,Section 32(1)(iia)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, KOLKATA

Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM

For Appellant: Shri Akkal Dudhwewala, AR
For Respondent: Shri P.N. Barnwal, Dr
Hearing: 06.01.2025Pronounced: 15.01.2025

This is an appeal preferred by the assessee against the order of the Pr. Commissioner of Income Tax, Kolkata-2 (hereinafter referred to as the “Ld. PCIT)”] dated 28.03.2024 for the AY 2017-18.

2.

The only issue raised in various grounds of appeal is against the invalid exercise of revisionary jurisdiction u/s 263 of the Act, thereby revising the assessment order framed u/s 143(3) / 144C of the Act dated 04.06.2021 by ignoring the fact that the said order was neither erroneous nor prejudicial to the interest of the Revenue.

4.

The ld. AR vehemently submitted before us that so far as the first issue of excess claim of depreciation at the rate of 50% by the assessee on the plant and machinery is concerned, the same was correctly claimed by the assessee. The ld. AR submitted that this addition was made in the preceding assessment year which was to use for less than 180 days. The ld. AR submitted that since normal data of depreciation is 80% on this item of addition plus 20% u/s 32(1)(iia) of the Act, therefore, 50% was claimed in preceding assessment year. The ld. AR also submitted that the facts were duly recorded in the tax audit report for A.Y. 2016-17, a copy of which is available from page no.9 to 23 of the Paper Book. The ld. AR submitted that in Para 18 of the said report under the head particulars of allowable depreciation under the income tax 1961 ,all the details were duly disclosed and the claim at the rate of 50% was allowed by the Revenue. The ld. AR further submitted that in the current year the Written-down value (WDV) of the end of last year i.e. 1,54,83,494/- was brought forward on 01.04.2016 and again the depreciation was claimed equal to 50% and the said fact was also stated in the tax audit report at page no.28

5.

The ld. DR on the other hand, relied on the order of ld. PCIT and submitted that the assessee is not affected in any manner if these issues are examined by the ld. AO in the set aside proceedings as the assessee would be given sufficient opportunity of hearing before framing the assessment denovo.

6.

After hearing the rival contentions and perusing the materials available on record, we find that the revisionary jurisdiction was exercised on two issues namely (i) excess claim of depreciation on

7.

So far as the second issue is concerned which is qua the claim of excess brought forward loss/ depreciation from the earlier years against the current year income is concerned, the same were stated to be correctly claimed by the assessee in accordance with the orders passed by the ld. AO giving appeal effect to the appellate orders. However, we note that the issue was not examined by the ld. PCIT with reference to the various orders passed by the ld. AO determining the unabsorbed depreciation/ unabsorbed losses in the earlier assessment years and therefore we sustain the revisionary order passed by the ld. PCIT on this issue. Similarly, we direct the ld. AO to

8.

In the result, the appeal of the assessee is partly allowed.

Order pronounced in the open court on 15.01.2025.

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