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2016 (5) TMI 931 - AT - Income TaxRevision u/s 263 - conclusion drawn by the CIT that the depreciation on enhanced cost was allowed by the Income Tax Officer without application of mind - Held that:- There is no dispute that the assets in question were used by the seller viz., M/s.Southern Ferro Ltd., prior to the transfer of the same to the assessee. The written down value of these assets was shown in the books of the seller at ₹ 24,05,230/- whereas the assessee has shown the value of the assets in its books of account at ₹ 4.5 crores. Therefore, the value in the books of the assessee is enhanced about 20 times of the WDV in the books of the seller. Once the assets in question were used by the seller before the date of acquisition by the assessee, then matter of valuation of such assets falls in the purview of Explanation 3 to section 43(1) of the Act The issue in question is not regarding correctness of the record or valuation ascribed by the assessee to the fixed assets but it is about allowability of the claim of valuation under Explanation 3 to section 43(1) of the Act. When there was no examination by the AO as per the provisions of Explanation 3 to section 43(1) because the AO has not even raised any query on this issue, then it is a clear case of nonconduct of any enquiry on the issue. The AO did not ask any question, any record or explanation to justify the value assigned by the assessee which is 20 times of the WDV in the books of seller. Therefore, it is absolutely impossible to infer that the AO has conducted any enquiry on this issue. Hence, it is a case of complete lack of enquiry which renders the order of the AO erroneous so far as prejudicial to the interest of the revenue. In view of the matter when there is a complete and absolute lack of enquiry and non-application of mind on the part of the AO, decisions relied upon by the learned AR of the assessee would not help the case of the assessee. As regards the alleged visit of the AO to the factory of the assessee, in the absence of any record as well as any other material to indicate such visit or undertaking exercise of verification of valuation, the same cannot be a material aspect to convert a case of lack of enquiry into application of mind of the AO. In view of the above facts and circumstances of the case, we do not find any reason to interfere with the order of the CIT. - Decided against assessee
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