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2022 (3) TMI 1241 - AT - Income TaxRevision u/s 263 by CIT - claim of additional depreciation u/s 32(1)(iia) and investment allowance u/s. 32(AC) of the Act of machineries which were not new but transferred from earlier plant of the assessee at Uttarakhand to present plant at Gokak Karnataka - HELD THAT:- Assessee had sufficiently demonstrated to the Ld.PCIT that both his claim of additional depreciation and investment allowance on new assets as also claim of expenses relating to legal professional and advertisement were in accordance with law. The assessee we have noted had demonstrated to the Ld.PCIT that no benefit of additional depreciation and investment allowance had been claimed on the old assets transferred from Uttarakhand to Karnataka, which as per the Ld.PCIT the assessee had been erroneously allowed since the AO had not examined the claim. The entire list of new assets purchased during the year and on which addl. Depreciation and investment allowance was claimed, as reflected in the tax audit report and in conformity with the financial statements of the assessee, was filed to the Ld.PCIT and the bills of old assets transferred also submitted to him, pointing out that the said bills were not included in the list of new assets on which addl. depreciation and investment allowance had been claimed by the assessee. Similarly the assessee had filed all details of TDS deducted on legal, professional and advertisement expenses, correlating it with their ledger accounts in the books of the assessee and further supplementing the claim with TDS returns filed. Thus the assessee had demonstrated that the claim of the assessee to these expenses was in accordance with law, none being disallowable on account of non deduction of tax at source as apprehended by the Ld.PCIT. We have also noted that the assessee had been subjected to tax audit u/s 44AB of the Act, and the tax auditors had not reported any such incorrect /disallowable claims of the assessee. Nothing adverse has been pointed out by the Ld.PCIT with regards to the either of the above claims. The Ld.PCIT, we find, has not even cared to consider the contention of the assessee and simply held that these issues not having been examined by the AO ,has resulted in the assessment order being erroneous so as to cause prejudice to the Revenue. We are not in agreement with the same. The assessee having demonstrated his claim being in accordance with law and nothing adverse being pointed out by the Ld.PCIT in the explanation of the assessee, there arises no question of the assessment order being erroneous at all. No inquiry may have been conducted by the AO in the present case, but if the assessee demonstrates to the Ld.PCIT that his claim was in accordance with law,as in the present case and no infirmity is pointed out by him in the explanation of the assessee, how can the assessment order be erroneous. The fact of mere non inquiry in itself,in such circumstances, will not be sufficient to hold the assessment order erroneous so as to cause prejudice to the Revenue. ITAT Mumbai Bench has considered Explanation 2 to section 263, in the case of Narayan Tatu Rane [2016 (5) TMI 1162 - ITAT MUMBAI]ITAT holding that it cannot be said to have overridden the law interpreted by courts that before holding any order to be erroneous, the PCIT should have conducted inquiries to show that the finding of the AO was erroneous. That the provision would apply only if an order has been passed without making inquiries which a prudent officer should have carried out - Appeal of assessee allowed.
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