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Income Tax Appellate Tribunal, BANGALORE BENCH “ A ”
Before: SHRI ABRAHAM P GEORGE & SHRI VIJAY PAL RAO
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.
The revenue has raised the following grounds : “
1. Whether on the facts and the circumstances of the case, the Ld.CIT(A) is justified in allowing the depreciation amount of Rs.1,29,81,735/- without appreciating that the ·Issue has not emanated from the order passed u/s.154 of the IT Act?
2. Without prejudice to the above, whether on the facts and the circumstances of 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?
3. Whether on the facts and the circumstances of the case, the Ld.CIT(A) is justified in holding that the assesse is eligible to carry forward the earlier year expenditure of Rs.l,70,31,693/- and adjust it towards current year income without appreciating that there is no such provision under the act in respect of trusts? 4. Whether on the facts and the circumstances of the case, the Ld.CIT(A) is justified in holding that the assesse is eligible to carry forward the earlier year expenditure of Rs.l,70,31,693/- and adjust it towards current year income 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?”
The assessee is a charitable trust and was granted Registration under 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 :
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.
We have heard the learned Authorised Representative as well as learned 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.
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
The ld. D.R. has forcefully contended that the scope of section 154 is 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.
On the other hand, the ld. A.R. has submitted that these two claims were 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).
Having considered the rival submissions as well as relevant material on record, we note that the impugned order has been passed by the CIT (Appeals)
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 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 (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 irrelevant and academic in nature. Hence we do not find any reason to interfere with the impugned order of the CIT (Appeals).
In the result, the appeal of revenue is dismissed. Order pronounced in the open court on 19th day of Aug., 2016.