NILGIRI OIL & ALLIED INDUSTRIES,KOLKATA vs. ACIT, CIR-28, KOLKATA, KOLKATA

This is an appeal preferred by the assessee against the order of Ld. Pr. CIT, Kolkata- 10, Kolkata passed u/s. 263 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) for AY 2011-12 dated 02.03.2016.

At the outset itself, it has been brought to our notice that the AO has given effect to the order impugned before us i.e. 263 order on 30.12.2016 and has only made addition on two counts i.e. depreciation of flats and on account of prior period adjustment, although the Ld. CIT in his order passed u/s. 263 of the Act has taken note of four faults. Therefore, when we adjudicate the legality of 263 order of Ld. CIT, we need to only consider these two issues pointed out by the Ld. CIT in his order passed u/s. 263 of the Act i.e. prior period adjustment and depreciation on fixed assets i.e flats. In respect to prior period adjustment, though the AO asked during the original assessment by 142(1) notice about the prior period adjustment, we note that the assessee had although replied merely by filing the list of items and nowhere before the AO it was stated that it was bad debts written off. We note that only before the Ld. CIT for the first time it was stated by the assessee that it was bad debt written off instead of prior period adjustment. We also note from perusal of the 2 Nilgiri Oil & Allied Industries, AY- 2011-12 list of items shown by the assessee to the AO pursuant to the notice u/s 142(1) that there were sales tax deposit, scooter deposit etc. We note that deposits made by the assessee are asset and cannot be a debt. So, the contention by assessee before the Ld. CIT that the claim was not prior period adjustment but bad debt written off on certain items as pointed out by Ld. CIT, DR makes the claim legally unsustainable. In any case, the AO after receiving the reply of the assessee which contained only a list of items which we have stated earlier did not make any enquiry and has simply accepted the claim. On this issue, therefore the AO has not applied his mind to the reply rendered by the assessee which makes the original order of assessment erroneous and prejudicial to the interest of the revenue and the Ld. CIT has jurisdiction to interfere in his revisional jurisdiction u/s. 263 of the Act. Coming to the depreciation of fixed assets, we note that the assessee had claimed depreciation to the tune of Rs.17,30,702/- on the block of asset, building and the assessee has flats in Vedic Village, Kolkata etc. The assessee has also shown rental income from the land and building at Hyderabad and since the assessee has shown rental income from house property then it has to be assessed u/s. 22 to 27 of the Act then only standard deduction can be given and depreciation u/s. 32 cannot be allowed. We note that the AO has not made any enquiry regarding the allowability of depreciation claimed by the assessee, which makes the AO’s original order erroneous and prejudicial to the interest of the revenue. Therefore, the revisional jurisdiction exercised by the Ld. CIT is valid in the eyes of law and, therefore, we do not find any reason to interfere in the order of the Ld. CIT passed u/s. 263 of the Act and, therefore, we are inclined to dismiss the appeal of the assessee. We order accordingly.

In the result, the appeal of assessee is dismissed.