2017 (9) TMI 1655 - AT - Income Tax

Revision u/s 263 - validity of order passed u/s 153A - Held that - As the A.O remaining within the four parameters of law had passed the assessment order u/s. 153A r.w.s 143(3) dated 27.03.2015 therefore the said assessment cannot be faulted with and held to be erroneous . We thus are of the considered view that now when the assessment order passed by the A.O is not found to be erroneous therefore the Principal CIT had wrongly assumed jurisdiction and revised the order in exercise of the powers vested with him u/s 263 of the Act . We thus set aside the order passed by the Principal CIT under Sec. 263 of the Act and restore the order passed by the A.O under Sec. 153A r.w.s 143(3) Depreciation claim allowability - revision of an order passed by an A.O in respect of an issue cannot be carried out without putting the assessee to notice and affording an opportunity of being heard to him as stands contemplated u/s 263(1) of the Act in respect of the said issue therefore the order passed by the Principal CIT u/s 263 to the extent directing the A.O to further examine the claim of the assessee in respect of initial depreciation on the addition of fixed assets of Rs. 17, 60, 00, 000/- made during the year without affording any opportunity to the assessee to put forth an explanation as regards the same cannot be sustained.

Summary

Issues Involved:
1. Validity of invoking Section 263 of the Income Tax Act, 1961.
2. Whether the assessment order passed under Section 143(3) read with Section 153A was erroneous and prejudicial to the interest of the revenue.
3. Eligibility for additional depreciation under Section 32(1)(iia) for businesses engaged in the generation of electricity.
4. Examination of depreciation claims on fixed assets.
5. Impact of absence of incriminating material found during search on unabated assessments.

Issue-wise Detailed Analysis:

1. Validity of Invoking Section 263:
The Principal Commissioner of Income Tax (CIT) invoked Section 263 of the Income Tax Act, 1961, asserting that the assessment orders passed by the Assessing Officer (AO) under Section 143(3) read with Section 153A were erroneous and prejudicial to the interest of the revenue. The Tribunal evaluated whether the CIT had the jurisdiction to invoke Section 263 and concluded that the CIT wrongly assumed jurisdiction as the assessment orders were not found to be erroneous.

2. Erroneous and Prejudicial to Revenue:
The CIT held that the AO's failure to disallow certain expenses and verify the depreciation claims rendered the assessment orders erroneous and prejudicial to the interest of the revenue. The Tribunal, however, found that the AO had taken a plausible view supported by judicial precedents, and thus, the orders could not be characterized as erroneous.

3. Eligibility for Additional Depreciation:
The Tribunal examined whether businesses engaged in the generation of electricity were eligible for additional depreciation under Section 32(1)(iia) before the amendment effective from 01.04.2013. It was concluded that the generation of electricity amounted to the production of an article or thing, thus entitling the assessees to additional depreciation even before the amendment.

4. Examination of Depreciation Claims:
The CIT directed the AO to examine the claims of depreciation on fixed assets, including the verification of the period for which the assets were put to use. The Tribunal found that the CIT had exceeded his jurisdiction by directing such verification without putting the assessee to notice regarding this issue. Thus, the Tribunal set aside the CIT's order on this ground.

5. Impact of Absence of Incriminating Material:
The Tribunal considered whether additions or disallowances could be made in respect of unabated assessments in the absence of any incriminating material found during the search. It was held that no additions could be made for unabated assessments if no incriminating material was found, aligning with the settled position of law.

Conclusion:
The Tribunal set aside the orders passed by the Principal CIT under Section 263 and restored the assessment orders passed by the AO under Section 153A read with Section 143(3). The appeals were allowed or partly allowed based on the specific issues and observations. The Tribunal emphasized that the AO's plausible view, supported by judicial precedents, could not be deemed erroneous, and the CIT's directions exceeded jurisdiction when the assessee was not put to notice.