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Facts
The appeals pertain to assessment years 2013-14, 2014-15, and 2016-17. For AY 2013-14 and 2014-15, issues involve depreciation on cameras and camera accessories claimed at 60% instead of 15%. For AY 2016-17, the reassessment proceedings were initiated based on an investigation wing report regarding cash deposits.
Held
The Tribunal held that camera and its accessories are eligible for depreciation at 15% and not 60%, upholding the disallowance of excess depreciation. Regarding the AY 2016-17 appeal, the Tribunal found that the reassessment proceedings were vitiated due to incorrect information and non-application of mind by the competent authority.
Key Issues
Whether depreciation on cameras and accessories should be allowed at 60% or 15%. Whether reassessment proceedings initiated based on audit report and approval with incorrect information are valid.
Sections Cited
147, 144, 154, 143(3), 32
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At the outset, the ld. Counsel pointed that with regard to appeal for AY 2013-14 and 2014-15, there is delay of 28 days for filing of the appeal, for which the assessee has filed a delay condonation application along with affidavit, wherein, it is mentioned that the order was received at the email address of previous consultant.
2.1. Considering the reasons cited and the facts that the delay is not of any substantial period, the delay is condoned and the appeals are admitted for hearing.
Next, with regard to the appeals for AY 2013-14 and 2014-15, on hearing both the sides we find that similar issues are involved and the facts and orders relevant for AY 2013-14 are being considered for disposal of the said two appeals.
Brief facts of the case are that the appellant is a private limited company and filed its return of income for the A.Y. 2013-14 declaring Nil income. The case was selected for scrutiny and assessment was completed vide order u/s 143(3) of the Act at returned income. Further based on information provided by to 4952/Del/2024 Investigation Wing Rohtak, the case of the assessee was reopened u/s 147 of the Act and assessment was completed vide order u/s 144 of the Act at assessed loss of Rs.6,07,79,029/- after making an addition of Rs.7,70,000/- During the audit of the assessee conducted under Performance Audit on "Assessment in Entertainment Sector", the audit party raised an audit objection in the original assessment proceeding u/s 143(3) of the Act. The Audit party observed that the assessee company had claimed depreciation of Rs. 1,67,37,472/- (60% on camera & camera accessories) but as per the Act, allowable depreciation should be Rs.41,84,368/- i.e. 15% and hence excess depreciation of Rs. 1,25,53, 104/- (Rs. 1,67,37,472 - Rs.41,84,368) required to be disallowed. Accordingly, a notice u/s 154 of the Act was issued to the assessee on 31.01.2020 seeking explanation on the objection raised by the audit party and to show cause as to why the depreciation on camera & camera accessories shall not be charged at 15% instead of 60% as claimed by the assessee. The assessee allegedly failed to explain the reason for charging depreciation at 60% whereas as per provisions of the Act, the depreciation on camera & camera accessories shall be charged at 15% since the same were part of plant & machinery for the assessee. In view of audit objection & non-compliance of the assessee, the AO charged the depreciation at 15% instead of 60% as claimed by the assessee and excess depreciation of Rs.1,25,53,104/- was disallowed thereby adding it to the total income of the assessee for the year under consideration.
The ld. CIT(A) has sustained the addition by holding as under:-
to 4952/Del/2024 “5. DECISION: I have perused the rectification order passed by the AO u/s 154 of the Act wherein the excess depreciation claimed on camera & camera accessories was disallowed and added to the total income of the assessee for the AY 2013-14. Similar addition was made by the AO for the AY 2014-15 also wherein the assessee claimed that it claimed depreciation at the rate of 60% on camera as it was connected to the computer & form part of the computer system. However it is noted that camera is a stand- alone equipment to shoot the running news activities & transmits its image which is further used by the computer to process it. Thus computer is only the peripheral device attachable to the computer and not the part of the computer system as claimed by the assessee. Therefore camera & its accessories being plant & machinery of the assessee company were eligible for depreciation at the rate of 15% only as against 60% claimed by the assessee in its return of income. It has also been held by Madras High Court in the case of Dinamalar Vs ITO Ward-11(1) Tirunelveli (TCA No.624 of 2016) dated 02.09.2016 that machines containing nomenclature of computer & software are not eligible for 60% depreciation like computer & softwares. The relevant portion of the impugned case law is reproduced here as under:- "Section 32 of the Income-tax Act, 1961 - Depreciation - Allowance/rate of - Assessment year 2011-12 (Computerised machines) - Assessee was a firm engaged in business of publication of daily newspaper - For relevant year it claimed depreciation on 'cannon lide, scanner, computerized counting and stacking machines, transportation charges, CP machine, scanner, sisco router, modem etc. at rate of 60 per cent treating them as computers and computer peripherals - Lower authorities disallowed same and held that such equipments were eligible at 15 per cent - They held that any machinery using computer as one of components could not be classified as 'computers' for depreciation purposes because computer in machine could not be used for any other purpose - Further they held that assessee could not have invented its own nomenclature and added word computer which was not there in invoice and then proceeded to claim depreciation at 60 per cent with argument that they were computers - It was also observed that upon functionality test, machinery represented plant and machinery eligible for 15 per cent depreciation, as they helped in easier typesetting and faster printing of newspaper and to 4952/Del/2024 automated stacking of newspaper in correct numbers - Whether impugned order of lower authorities rejecting higher depreciation claim at rate of 60 per cent to assessee was justified - Held, yes [Paras 14 to 16][In favour of revenue].” In view of the decision of the Hon'ble Madras High Court & facts discussed above, it is held that the AO correctly charged depreciation on camera & its accessories at the rate of 15% instead of 60% as claimed by the assessee. Therefore the contention of the appellant is rejected and the addition of Rs. 1,25,53,104/- made by the AO on account of disallowance of... excess claim of depreciation is confirmed. Accordingly all the grounds of appeal are dismissed.
6. Though the ld. DR has defended the impugned orders, we find that the initiations of the proceedings u/s 154 of the Act are not on the basis of some apparent mistake which came to knowledge of the Assessing Officer and his own indulgence of the assessment record but based on the audit report of the Departmental Authorities, the powers u/s 154 of the Act were exercised. As with regard to scope of section 154 of the Act, the law is very settled that the rectification is to deal with apparent mistakes from the record rather then to revisit issues by carrying out any detailed proving enquiry. As. with regard to the present issue about the applicability of correct rate of depreciation, in similar facts and circumstances, the Pune Bench of the Tribunal in the case of ACIT, Circle-1, Kolhapur, vs Sadashivrao Mandlik Kagal Talua Sahakari Sakhar Karkhana Ltd., Kolhapur in order dated 28.02.2024 was considering the case where, the Assessing Officer has invoked the provisions of section 154 of the Act for rectification of the assessment order for the purposes carrying out the detailed exercise of re-computing the to 4952/Del/2024 assessee’s depreciation/additional depreciation, wherein, relying upon the decision of the Hon’ble Supreme Court in the case of TS Balram, ITO vs Volkart Bros. [1971] 82 ITR 50 (SC) it was held that such rectification was beyond the scope of section 154 of the Act.
7. Then the ld. Counsel has also demonstrated before us by relying the decision of the Hon’ble Delhi High Court in the case of CIT vs BSES Yamuna Powers LLD./BSES Rajdhani Powers Ltd. 2010 (8) TMI 58 (Delhi)/[2013] 358 ITR 47, DCIT-1(3)(1), Addl. CIT, Range-1 (3), Mumbai vs M/s Unilever Industries Private Limited, M/s Megasoft Solutions (India) Pvt. Ltd. vs DCIT, Circle-16(2) 2016 (1) TMI 1207 and ACIT-1(3)(1), Mumbai vs M/s Tilaknagar Industries Limited 2022 (11) TMI 307 with regards to the issue as to particular set of digital equipment forms integral part of computer system so as to entitle to depreciation at higher rate there are possible views available and the issue was debatable thus too it was not justified to invoke provisions of section 154 of the Act to apply a different rate of depreciation on the basis of mere audit objections. Thus, grounds raised in both the appeals deserve to be sustained. Accordingly, appeals for AY 2013-14 and 2014-15 are allowed. for AY 2016-17, it comes up that the assessee company is engaged in the business of production, broadcast, exhibit and running of TV Channel. It is also engaged in trading and processing of paddy and rice during the year under consideration. The assessee’s return was opened for reassessment u/s 147 of the Act by issuing notice dated to 4952/Del/2024 28.03.2019 on the basis of Investigation Wing report about deposit of substantial cash in various bank accounts. A copy of this reason for reopening are made available at pages 52-53 of the paper book and a proforma of approval are placed at pages 147-148 of the paper book. The contention of the ld. Counsel is that the reasons and the approval, both are outcome of non- application of mind and this is defended by ld. DR by submitting that whatever is cited is merely clerical error otherwise the assessee had not disclosed the source of deposit of cash in the bank accounts.
9. Now what comes up from the reasons recorded for reopening is that there is an allegation of deposit of Rs.11,34,000/- in cash out of total deposit of Rs.6,88,96,982/- in an account maintained by the assessee with HDFC Bank, Sirsa. The year involved is AY 2016-17, thus it is for FY 2015-16, the deposits should pertain to. However, the ld. AR while referring to the copies of bank statement provided at pages no.76-85 of the paper book established that the cash deposits as referred in the reasons recorded for reopening in fact pertain to FY 2016-17 relevant to AY 2017-18 and not to the year under consideration.
9.1 In this context, it also comes up from the proforma containing the reasons and the approval sought of the competent authority for reopening that at various stages wrong AY 2012-13 has mentioned instead of AY 2016-17. The competent authority while granting approval accepted the figures of AY 2017- 18 and did not at all go through the records to cross check the information and material available. to 4952/Del/2024 9.2 It is mentioned by the ld. Counsel and established from the approval that the reopening in the present case was within two years from the end of relevant assessment year, however, the competent authority incorrectly records that more than four years have elapsed from the end of the assessment year under consideration.
Thus, what is established that the reopening notice is on the basis of reasons and approval, which took into consideration incorrect and irrelevant information and that certainly vitiated the assumption of jurisdiction. Reliance in this regard can be placed on the decision of the Hon’ble Bombay High Court in the case of CIT vs Jet Airways (I) Ltd. -2010 (4) TMI 431-Dated 12-4-2010 and of Hon’ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. vs CIT [2011] 12 taxmann.com 74 (Delhi).
In the light of aforesaid discussion, we are inclined to sustain the ground no. 3 to 9. Consequently, the appeal for AY 2016-17 which is also sustained, the impugned assessment order is quashed.
In the result, all the appeals of the assessee are allowed.
Order pronounced in the open court on 19th November, 2025.