TMI Blog1993 (4) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord that in the draft assessment order the ITO had proposed to assess the income from buses at Rs. 1,14,000 before allowing depreciation by applying a net profit rate at 20% on estimated receipts of Rs. 5,70,000 as against the profit before depreciation shown by the assessee at Rs. 54,308 from total plying receipts of Rs. 4,68,499. The ITO had perhaps further proposed to tinker with the claim of depreciation allowance and to disallow the capitalisation of heavy repairs. The IAC Jodhpur had directed that even if provisions of section 145(2) were applicable in this case the additions proposed by the ITO in the draft order were by and large arbitrary and that ITO's findings were based not on facts but on conjectures and surmises. He had also pointed out that as per ITO's observations the buses were very old ranging from 1962 model, two buses of 1967 model and three buses of 1969, 1970 and 1979 models. As such he had taken into consideration the fact that the buses might require heavy maintenance expenditure and while making any estimate of income it was imperative to keep in view the past accepted history of the case unless some new material or evidence becomes available to justify ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on assessee's request the case was posted for hearing for 10th March, 1989. In this letter dated 3rd March, 1989 the assessee was further informed that no further opportunity would be provided and on the event of non-compliance directions to the ITO will be issued on merits of the case. It has been repeatedly contended by the assessee ie., in the Grounds of Appeal and written submissions before the CIT(A), in the statement of facts before us, in the written submissions before us so also in the arguments advanced by Shri Jain before us that Shri Jain and Shri Pramod Kumar coparcener went to Udaipur on 10th March, 1988 but they were informed by one Shri Kothari, Inspector in the Office of the DC Udaipur that Shri B.S. Verma, Dy. Commissioner was not available in the office as he was reported to be ill and the case was discussed with Shri Kothari. It has also been stated that Sh. Kothari told Shri U.C. Jain, counsel for the assessee that if any modification from the directions of the then IAC Jodhpur were to be made the case would be fixed again. However, the DCIT Udaipur issued directions to the ITO Sumerpur under section 144A dated 23-3-1989 in which he directed the ITO to assess n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Affidavit in this regard, which was filed before the CIT(A) has been filed before us as pages 60-61 of the paper book. 2. It is in the back-ground of these facts that the first objection of the assessee is that the assessment order is barred by limitation because it was not passed by 31-3-1989. The learned D.R. heavily relying on the decision of the ld. CIT(A) who has dealt with this point in his order, submitted that when the acknowledgement slips showed that the assessment order as well as the penalty notices had been served on Shri Pramod Kumar on 31-3-1989, it had to be presumed that the assessment order had been passed on the date mentioned in the order and was served on the assessee in time. 3. We have carefully considered the submissions from both the sides and have taken into account the material on record and the orders of authorities below. We find a lot of force in the submissions of Shri Jain that even after considering all the facts submitted before him the ld. CIT(A) very casually wrote that "As per the facts on record, the order in question appears to have been passed within the time available under law and there is no material evidence to indicate that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1989, was wrong. All these facts and circumstances and evidence taken together with ratio of decision in the case of Mehta Parikh Co. v. CIT [1956] 30 ITR 181 (SC) lead us to accept the contentions of the assessee that, in fact, no assessment order was passed till 31-3-1989 and hence it has to held that the assessment order supposed to have been passed on 31-3-1989 was, in fact, passed after 31-3-1989 and is, as such, barred by limitation. 4. The next objection of the assessee is as to whether the directions issued by DC Udaipur were valid particularly when on the appointed date the DC Udaipur himself was not available in his officer and that the directions issued were without providing opportunity of being heard. In this regard also we find that inspite of a repeated affirmations of the assessee and his counsel there has been no dental or counter affidavit filed by the DC Udaipur or by his Inspector Shri Kothari to the effect that what is contended by the assessee is not correct. We find that even the learned CIT(A) who had perhaps examined the record has written "It is also seen from the file of the concerned authority who issued instructions under section 144A that the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is not known whether he was proposing to deviate from the directions issued by his predecessor, whether he proposed to enhance the income even above the income proposed by the ITO originally and in the second draft order at Rs. 1,14,000 and whether he was devising a different method of computation of income and was further adding an amount of Rs. 22,500 which was perhaps not a subject-matter considered by his predecessor when he had issued directions to the ITO Sumerpur to further examine the case and again submit a draft order in accordance with those directions. At this stage we may mention that we are unable to agree with the submissions of Shri U.C. Jain to the effect that the DC Udaipur was not competent to issue directions to the ITO because IAC Jodhpur had already issued directions to the ITO Sumerpur and the IAC Jodhpur could not be divested of his jurisdiction, except by an order under section 123(1). This is because firstly there is nothing on record to show that the jurisdiction was not transferred under section 123(1). We find that the letter from IAC Jodhpur was also issued to ITO Sumerpur and the directions from DC Udaipur were also sent to ITO Sumerpur and hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be said to be a valid assessment. Moreover, although it is true that directions under section 144A are binding on the ITO, yet it appears that the opportunity to meet these objections was being given by the ITO when he had no power or time to change those directions or get those directions changed by the DC even if there was some convincing reply given by the assessee against those directions and, therefore, it has to be held that no proper opportunity was given to the assessee while passing such a high pitched assessment. From this point of view also the assessment framed by the ITO cannot be upheld. 7. So far as the quantum of income is concerned, we find force in the submissions of Shri Jain that there is nothing on record to show as to whether there was any compliance made by the ITO in respect of the directions issued by IAC Jodhpur. On the other hand, the directons issued by the DC Udaipur were such which were rightly not upheld by the ld. CIT (Appeals) who had reduced assessee's income from bus plying from a figure of Rs. 2,36,392 before depreciation to a figure of Rs. 80,000 only and against which order also the Department has not come in appeal before the Tribunal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarding depreciation allowance and capitalisation of expenses. We may observe that normally the Revenue has been objecting to an assessee claiming its capital expenses as revenue expenses, this, however, is a rare case where the Deptt. is objecting to assessee capitalisation its revenue expenses. We find that inspite of specific directions from the IAC Jodhpur the Assessing Officer has not been able to give any proper basis for not allowing the capitalisation of those expenses particularly when that has been the normal practice of the assessee. The IAC Jodhpur had directed that the question of capitalisation of heavy repairs may be decided after verification of the factual position and having regard to the established principles of law. In this context, the ITO was also directed to refer to the practice followed in the cases of other comparable bus operators but nothing was done in compliance with these directions and hence we hold that the claim of the assessee had to be accepted. 9. The assessee has also objected to allowing of depreciation on the basis of WDV adopted for the assessment year 1982-83 when that assessment year was not in consideration before the CIT (A). We fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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