DCIT, BANGALORE vs. SRI. SRINIVASA EDUCATIONAL AND CHARITABLE TRUST, BANGALORE

Per Shri Vijay Pal Rao, J.M. : This appeal by the revenue is directed against the order dt.3.12.2013 of

Commissioner of Income Tax (Appeals) for the Assessment Year 2007-08.

2 ITA No.899/Bang/2014 the case, the Ld.CIT(A) is justified in granting relief to the assessee by allowing the depreciation amount of Rs.1,29,81,735/- without appreciating that the issue involved is debatable in nature and therefore cannot be considered in the proceedings u/s.154 of the IT Act?

Section 12A of the Income Tax Act, 1961 (in short 'the Act'). The assessee filed

its return of income for the year under consideration on 29.10.2007 and

claimed exemption under Sections 11 & 12 of the Act. Accordingly, the

assessee declared a total income at NIL. The scrutiny assessment under

Section 143(3) was completed vide order dt.23.12.2009 whereby the Assessing

Officer determined the total income of Rs.80,26,689 and taxable income of

Rs.35,15,757. The assessee challenged the assessment order before the CIT

(Appeals) by filing the appeal on 27.1.2010. In the meantime the assessee filed

a petition under Section 154 of the Act on 4.1.2010 seeking rectification in the

assessment order in respect of the following issues :

3 ITA No.899/Bang/2014 “ - To delete the disallowance of earlier years’ expenditure adjusted towards the current year income amounting to Rs.1,70,31,963. - To allow deduction towards acquisition of fixed asset to the extent of Rs.2,63,43,356 instead of Rs.1,61,92,963 as application of funds and - To allow deduction for depreciation claimed on fixed asset to the extent of Rs.1,29,81,735.”

The Assessing Officer rejected the rectification application filed under Section

154 of the Act vide order dt.3.3.2010. Thus the order passed under Section 154

of the Act dt.3.3.2010 merged with the assessment order which was the subject

matter of the appeal before the CIT (Appeals). The CIT (Appeals) while passing

the impugned order has allowed the claim of the assessee in respect of the

earlier year expenditure adjusted towards the current year income as well as

deduction of depreciation claimed on fixed assets. However the CIT (Appeals)

rejected the claim of deduction for acquisition of fixed assets on the ground

that the claim cannot be allowed except by way of revised return. Aggrieved by

the order of the CIT (Appeals), the revenue is in appeal before the Tribunal.

Departmental Representative and considered the relevant material on record.

The only grievance of the revenue is that the claim made by the assessee in the

petition under Section 154 of the Act were beyond the scope of rectification.

4 ITA No.899/Bang/2014 Therefore the CIT (Appeals) was not justified in allowing the claim of the

assessee which could not be entertained by the Assessing Officer under Section

limited and only apparent mistakes on the face of the record can be rectified in

the proceedings under Section 154 of the Act. Thus the ld. D.R. has submitted

that the claim of expenditure of earlier year allowed against the current year

income as well as the claim of depreciation on the fixed assets cannot be said

to be in the nature of apparent error in the order of the Assessing Officer which

can be rectified under Section 154.

covered by the decision of the Hon'ble jurisdictional High Court as well as by

various decisions of this Tribunal and therefore when the order of the Assessing

Officer is contrary to the decision of the Hon'ble High Court then it amounts a

mistake apparent on record. He has further contended that even otherwise the

appellate authority has the jurisdiction and power to entertain such claim in the

appeal proceedings. He supported the impugned order of the CIT (Appeals).

record, we note that the impugned order has been passed by the CIT (Appeals)

5 ITA No.899/Bang/2014 in the appeal filed on 27.1.2010 against the assessment order dt.23.12.2009.

Therefore proceedings before the CIT (Appeals) were against the assessment

order and not against the rectification order passed under Section 154 of the

Act however, the CIT (Appeals) has considered the claim of the assessee which

was raised in the rectification petition filed under Section 154. Without going

into the issue of the scope of section 154 of the Act, we are of the view that

when the CIT (Appeals) has the jurisdiction to entertain the said claim raised by

the assessee in the petition under Section 154 in the appellate proceedings

against the assessment order then the issue can be looked into only from the

angle of the allowability of the claim on merits. We find that both these claims

were covered by the various decisions of Hon'ble High Courts including the

Hon'ble jurisdictional High Court and therefore there was no error or illegality

in the order of the CIT (Appeals) in entertaining such claims of the assessee

which are covered by binding precedence. The CIT (Appeals) has allowed the

claims of the assessee in paras 4.2 to 4.5 as under :

“ 4.2 I have considered rival contentions carefully. On the issue of disallowance of depreciation on the ground that it is a double deduction since investment in asset was allowed as application of income, relying on the case of Escorts Ltd. in 199 ITR 43 (SC) by the A.O. It is argued before me that this is a covered issue and the facts of case cited are different. The issue is covered by the decision of

6 ITA No.899/Bang/2014 Hon'ble Karnataka High Court in the case of CIT Vs. Society of the Sisters of St. Anne 146 ITR 28. The appellant cited various other cases including Sri Adichunchanagiri Shikshana Trust Vs. Addl. CIT in ITA No.775/Bng/2009 (ITAT ‘A’ Bench, Bangalore) 4.3 Similarly, on the disallowance of brought forward earlier year expenses, it is argued that this is also covered in the decision of Hon'ble jurisdictional High Court of Karnataka in 146 ITR 28 cited above. 4.4 I find that both issues are covered issues and accordingly direct the Assessing Officer to delete the same, respectfully following the decisions of Hon'ble High Court of Karnataka. 4.5 Regarding the amounts spent on acquisition of capital assets, it is argued by the appellant that the appellant has spent an amount of Rs.2,63,43,356 towards acquisition of capital assets. However, while filling the return, it has claimed only Rs.1,61,92,963 but, before completion of assessment it has filed revised statement of total income wherein, the amount considered was Rs.2,63,43,356 which is supported by audited statement of accounts and books of accounts.”

As it is clear from the findings of the CIT (Appeals) that both the claims of the

earlier year expenditure adjusted against the current year’s income as well as

depreciation on fixed assets are covered by the decision of the Hon'ble

jurisdictional High Court as well as the decision of this Tribunal. Accordingly, in

view of the facts and circumstances of the case when the CIT (Appeals) has

entertained and allowed the claims of the assessee in the appeal filed against

the assessment order then the issue of scope of section 154 becomes

7 ITA No.899/Bang/2014 irrelevant and academic in nature. Hence we do not find any reason to

interfere with the impugned order of the CIT (Appeals).

Sd/- Sd/- (ABRAHAM P GEORGE) (VIJAY PAL RAO) Accountant Member Judicial Member *Reddy gp

Copy to : 1. Appellant 2. Respondent 3. C.I.T. 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard File.

By Order

Asst. Registrar, ITAT, Bangalore