SUPERIOR PORTFOLIO P.LTD,DELHI vs. ITO, WARD-24(4), NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘SMC’, NEW DELHI BEFORE SH. ANIL CHATURVEDI, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) (Assessment Year : 2015-16) Superior Portfolio Pvt. Ltd., Vs. ITO 4663, Ansari Road, Ward – 24(4) Daryaganj, Delhi-110002 New Delhi-110 002 PAN : AABCS 0119 C (APPELLANT) (RESPONDENT) Assessee by Shri Rakesh Joshi, C.A. Revenue by Shri R. K. Gupta, Sr. D.R. Date of hearing: 05.10.2021 Date of Pronouncement: 12.10.2021 ORDER PER ANIL CHATURVEDI, AM:

This appeal filed by the assessee is directed against the order dated 25.09.2018 of the Commissioner of Income Tax (Appeals)-8, New Delhi relating to Assessment Year 2015-16.

1. That Ld CIT(A) erred in upholding the AO’s order on facts and circumstances of the case to make an addition of Rs.84,010/- by ways of making part disallowance of depreciation claimed on property.

2. The appellant craves leave to add, alter, amend or vary any of the above grounds during the pendency of the appeal.

4. Assessee thereafter has raised the additional grounds which reads as under: “1. The order passed by Learned AO and further order passed by Learned CIT(A) is bad in law as the conversion of limited scrutiny to complete scrutiny is not in compliance with the CBDT Instruction No.19 & 20 dated 20.12.2015 on the subject. Appellant submits that the above ground was not raised before the Learned Commissioner of Income Tax (Appeal), but since the above ground is purely legal in nature hence appellant is entitle to raise the same first time before the Hon’ble Tribunal as held by the Supreme Court in case of National Thermal Power Co. Ltd. vs. CIT (229 ITR 383).

The appellant prays to your honours’ to kindly allow to raise the above additional ground which is purely legal in the nature. The appellant further craves leaves to add, alter, amend or delete any of the grounds of appeal on or before the date of hearing.”

5. With respect to the additional ground, it is the submission of the assessee that the additional ground raised is purely legal in nature and though the same was not raised before the CIT(A) but assessee was entitled to raise the same for the first time before the Hon’ble Tribunal and for which reliance was placed on the decision of Hon’ble Apex Court in the case of National Thermal Power Co. Ltd vs. CIT (1998) 229 ITR 383 (SC). He therefore submitted that the additional ground of appeal be admitted and appropriate order be passed in the interest of rendering substantial justice. On the issue of admissibility of additional ground, the Learned DR strongly objected to the plea for admission of additional ground.

6. Having heard the rival submissions and considering the submissions made by the Learned AR and following the decision of Hon’ble Apex Court in the case of National Thermal Power Co. Ltd. (supra), I am of the view that the additional ground raised in the present appeal needs to be admitted. I therefore admit the additional ground.

7. With respect to the additional ground, Learned AR submitted that initially the case of the assessee was selected for “Limited Scrutiny” and thereafter vide letter dated 27.09.2017, the case was converted to ‘Complete Scrutiny’. Learned AR submitted that the conversion from ‘Limited Scrutiny’ to ‘Complete Scrutiny’ was bad in law as it was not as per the instruction issued by CBDT vide Circular No.19 & 20 dated 29.12.2015. He submitted that as per Clause-D of Instruction No.20/2015 dated 29.12.2015, the assessment proceedings could be converted from ‘Limited Scrutiny’ to ‘Complete Scrutiny’ if there is potential escapement of income exceeding Rs.5,00,000/- and for metro city the monetary limit for escapement of income is Rs.10,00,000/-. He submitted that assessee being from Delhi, the monetary limit of Rs.10,00,000/- would be applicable. He thereafter pointed to the assessment order and submitted that the AO has proceeded to disallow the depreciation of Rs.84,010/- for the reason that the depreciation was claimed on a residential property and there was no evidence of being put to use for the purpose of business. He submitted that the ‘Limited Scrutiny’ did not include the issue of depreciation. He therefore submitted that in the absence of not following the binding instructions of CBDT for converting a limited scrutiny case to fill scrutiny case, the order of AO be set aside. On the merits of the addition, he submitted that assessee had claimed depreciation @ 10% on a residential property owned by it and the claim of depreciation was of Rs.1,68,021/-. He submitted that the residential property was used for the purpose of business of the assessee and was used to hold meeting and business discussions. AO did not agree with the contention of the assessee for the reason that the property was a residential property, it had not put on rent, no proof was provided by the assessee to substantiate its claim of having been used for the purpose of business and no employee expenses/depreciation on furniture was claimed by the assessee. AO therefore restricted the claim of the depreciation @ 5% and disallowed the balance 5% and the addition of Rs. 84,010/- was made by AO. When the matter was carried before the CIT(A), CIT(A) upheld the order of AO.

8. Before us, Learned AR reiterated the submissions made before the lower authorities and further submitted that no claim of depreciation has been disallowed in the scrutiny proceedings either in the year preceding to A.Y. 2015-16 nor in the subsequent assessment year. He further submitted that no reason for restricting the disallowance to 5% has been given by the AO and that AO allowing the claim of depreciation would mean that the claim of the assessee of the premises being used for business purpose is not in doubt. He therefore submitted that the disallowance of depreciation be deleted.

9. Learned DR on the other hand on the merits of the disallowance relied on the order of lower authorities and on the additional ground raised submitted that the ground was not raised before the CIT(A). He thus supported the order of lower authorities.

10. I have heard the rival submissions and perused the materials available on record. The issue in the present ground is with respect to the disallowance of depreciation made by AO. I find that assessee had claimed depreciation @ 10% on residential property amounting to Rs. 1,68,021/- but AO had restricted the addition to only Rs.84,010/- for the reason stated in his order. Before me, it is the contention of the assessee that the disallowance has been made for the first time in the year under consideration and there has been no disallowance either in the preceding assessment year or succeeding assessment year. The aforesaid contention of the Learned AR has not been controverted by the Revenue. I find that for restricting the disallowance to 5% no reasons have been given by AO which according to me would mean that assessee using the premises for the purpose of business has not been doubted. Considering the totality of the aforesaid facts, I am of the view that AO was not justified in restricting the claim of depreciation to 5%. I therefore direct the AO to allow the claim of depreciation @ 10%. Since I have decided the issue on merit in favour of the assessee the additional ground raised by the assessee, is rendered academic and therefore requires no adjudication. Thus the ground of the assessee is allowed.

Order pronounced in the open court on 17.10.2021