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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR.
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
ORDER Per: Anikesh Banerjee, JM: The instant appeal of the assessee was filed against the order of the ld. Principal Commissioner of Income-1, Amritsar, (in brevity ‘the PCIT’) order passed u/s 263 of the Income-tax Act, 1961 (in brevity the Act) for assessment year 2017-18. The impugned order was emanated from the order of ld. ACIT Circle, Pathankot, (in brevity ‘the AO’) order passed u/s 143 (3) of the Act.
The appeal was filed with delay of 354 days. The assessee filed a condonation petition and explained that the reasonable cause for filing the appeal in delay due to wrong advice of the consultant. The ld. AR relied on the order of the Hon’ble Supreme Court in case of N. Balakrishnan vs. M. Krishnamurty (SC) 1998 (7) SCC 123 Dated 03.09.1998. The ld. AR further relied on the order of the same bench of the ITAT, Amritsar in case of Smt.
Rajinder Kaur vs. ITO in ITA 171/Asr/2022 date of pronouncement 22.03.2023for condonation of delay. In this order, the Hon’ble A.M. condoned the delay for 448 days. The ld. DR had not made any strong objection against the condonation of delay. Accordingly, the delay for 354 days is condoned.
The assessee has taken the following grounds:
“1 That the ld.Pr.CIT-1, Amritsar has erred in initiating proceedings u/s 263 of the Act without application of mind.
2 That Pr.CIT-1, Amritsar has erred in holding that the AO has failed to make necessary enquiries or verification before making assessment.
3 That the ld.Pr.CIT-1, Amritsar has erred in holding that the assessment order passed by the AO u/s 143(3) is erroneous in so far as prejudicial to the interest of revenue and setting aside the order of the AO with direction to make denovo assessment.
4 That the order passed by Pr.CIT-1, Amritsar u/s 263 is bad in law and on facts
5 That the appellant craves leave to add or amend the ground of appeal before the appeal is heard and disposed off.”
Brief facts as culled out from the records are that the assessee was running a business as stone crusher and tipper of the stones. The assessee claimed depreciation on the tipper (goods vehicle) which are used for delivery of stone to the party, accordingly, the depreciation was claimed @ 30%. Related the truck and tipper which are used for collecting the stone to the crusher was claimed @ 15% depreciation. The assessment was framed u/s 143(3) and the disallowance was made @ 5% on the expenses. The ld. AO accepted the rate of depreciation of the assessee. The ld. PCIT by invoking the section 263 issued the notice and asked assessee for claiming depreciation @ 30% which is amount to Rs.3,51,34,432/- on written down value of the tipper. Whereas, the ld. PCIT supposed to allow the claim @ 15% and the depreciation would be Rs.1,75,67,215/-. As per the ld. PCIT. The assessee claimed excess depreciation on the tripper. The assessment order was treated as erroneous and prejudicial to the interest of the revenue by invoking section 263. Aggrieved assessee filed an appeal before us.
5. The ld. AR of the assessee has filed written submissions which are kept in the record. The ld. AR first invited our attention in APB pages 23 to 36, the chart for claiming depreciation under Income Tax Act which are enclosed related to assessment year 2014-15 to 2019-20. The ld. AR argued that the truck and tipper which are used for collecting the stone from the mines to crusher was duly claimed 15% depreciation. The ld. AR drawn our attention in Appendix-A Part –A Serial 3(ii) of the Income Tax Rule, 1962 for allowability of claim of depreciation @30%. The ld. AR mentioned that after receiving the show cause notice u/s 263 the assessee filed the submission before the ld. PCIT which was duly ignored.
5.1 The ld. AR invited our attention in the order of the ld. PCIT in pages 2 to 3 paragraphs 3 to 5 which are duly reproduced as below:
“03. On 21-03-2022 the reply of the assessee received through ITBA which is reproduced as under:
“That the assessment u/s 143(3) of the IT Act was completed by the AO at an assessed income of Rs. 1,87,01,950/-after making disallowance of 5% of expenses debited in the profit & loss account amounting to Rs.3,71,380/- and adhoc addition of Rs. 5 lac made on account of purchase and addition of Rs. 1 lac on account of repair to machinery (Direct Expenses).
It is submitted that we also carry on business of transportation, income of which is shown in our trading/profit & loss account filed in the return. Truck/Tipper used for transportation only has deprecation rate of 30% as per income tax act. So we charged depreciation @30% on Truck/Tipper used for transportation of public. We also charged depreciation @25% on Truck/Tipper used for own business of contractor ship. Which is also shown in the return.
Keeping in view the above fact, it is clear that the assessment order dated 28-12-2019 passed u/s 143(3) of the Act passed by erstwhile Assistant Commissioner of Income Tax Act, Circle-6, Pathankot in our case for A.Y. 2017-18 is not erroneous and not prejudicial to the interest of revenue.
So your good self is requested that assessment made u/s 143(3) of Income Tax Act may not be cancelled or revised u/s 263 of the Income Tax Act.
This is for your information and necessary action please in this regard'.
Reply of the assessee has been perused and duly considered and found not tenable on the ground that assessee has simply stated that the receipt/income shown in the profit and loss account filed with return of income. No any documentary evidence/bifurcation in respect of the income on account of claim of deprecation @30% 8s 15% on account of Truck/Tipper used for transportation of public and used for own business of contractorship respectively have been provided. AO has made
grave mistake for not making the enquiry on the matter during assessment proceedings. This makes itself order defective and erroneous.”
5.2 The ld. AR also placed that the assessee claimed the correct rate of depreciation @ 30% related to tipper which are used for sale of stones to the buyer. The ld. AR invited our attention in APB page 47 in the order of ACIT, Central Circle-2 Bhubaneswar vs. Bharat Carriers Ltd. date of pronouncement 17.05.2022 the relevant paragraph is inserted as below:
“5. We have heard the rival submissions and perused the record of the case. We find that the ld CIT(A) allowed the higher depreciation @ 30% to the assessee by observing as under:
“I have carefully examined the appellant's submission and facts on record. The assessment record for the given year was called for and verified. Ongoing through the audited accounts and the profit and loss accounts for the year under consideration, it is seen that the assessee has effectively the only source of income from transportation charges of Rs.67,60,59,591/-. The only other heads of income is "other income" of Rs.2,38,263/-. Therefore, it is clear that the only business of the assessee is from transportation. The assessee is eligible for higher depreciation if the vehicles were running on hire which includes use in assessee's business of transportation of goods on hire. The inference is that the vehicle that runs on hire would depreciate faster. Such view has become final and is no longer res-integra after the decision of Hon'ble Gupta Global Exim Pvt. Ltd. (2008) 305 ITR 132 SC. The Hon’ble Supreme Court held as under: Under sub-item 2(ii) of Item III of Appendix I of the Income Tax Rules, 1962, higher rate of depreciation is admissible on motor trucks used in a business of running them on hire. Therefore, the user of the same in the business of transportation of the assessee is the test.
6.5 Further, in Circular No.652 dated 14.06.1993, it has been stated as under: “ In Board Circular No.609, dated 29.07.1991 (SI. No. 244) it was clarified that where a tour operator or travel agent uses motor buses or motor taxis owned him in providing transportation services to tourists, higher rate of depreciation would be allowed on such vehicles. It is further clarified that higher depreciation will also be admissible on motor lorries used in the assessee's business of transportation of goods on hire. The higher rate of depreciation, however, will not apply if the motor buses, motor lorries, etc.. are used in some other now hiring business of the assessee."
6.6 In view of the above, the assessee had correctly claimed higher depreciation for utilising the vehicles in his own business of transportation. Therefore, the ground of appeal is allowed.”
6. Ld DR could not controvert the findings of fact that as per circular No.652 dated 14.6.1993, the motor lorries used in assessee’s business of transportation of goods on hire is eligible for higher depreciation @ 30%. In view of above, we see no reason to interfere with the order of the ld CIT(A), which is hereby confirmed and the ground of appeal of revenue is rejected.”
(Emphasis supplied)
The ld. DR vehemently argued and fully relied on the order of the ld. PCIT u/s 263.
We heard the rival submission and considered the documents available in the record. The assessee is running the business since long. The assessee claimed the depreciation in two blocks; i) @ 15% and another @ 30%. On that basis the assessment was completed in earlier years and the depreciation was duly accepted by the ld. AO. Copy of the assessment order is enclosed in APB pages 37 to 41 in A.Y. 2015-16. The balance and the chart of depreciation was duly submitted before the ld. AO during assessment proceeding. The assessee also in revisional proceeding explained before the ld. PCIT about the variation of rate of depreciation in two blocks. The rate of depreciation was duly supported by the Income Tax Rule 1962 and also it is duly covered in the case of Bharat Carriers Ltd. (supra). So, there is no ambiguity for accepting the depreciation @ 30% for tipper which used in the assessee’s business for hiring for transporting the goods. We find that the assessment order is not at all erroneous and prejudicial to the interest of revenue. Accordingly, the order passed by the ld. PCIT u/s 263 is duly set aside and quashed. Accordingly, the appeal of the assessee is allowed.
In the result, appeal of the assessee is allowed.