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TMI Blog2015 (1) TMI 191X X X X Extracts X X X X X X X X Extracts X X X X ..... y of depreciation on two dredgers and applicability of provisions of section 40(a)(ia) on equipment contractual charges. 3. Briefly the facts are, assessee is a company. For the AY under consideration, it filed its return of income on 29/09/2009 declaring income of Rs. 2,11,29,290. Assessment u/s 143(3)in case of assessee was completed vide order dated 23/08/2006 by accepting the income returned. After completion of the assessment as aforesaid, CIT in exercise of power u/s 263 of the Act called for the assessment record of the assessee for the impugned assessment year and after examining the same along with assessment record for the AY 2008-09 noticed that in AY 2008-09, AO has disallowed assessee's claim of depreciation in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue was thoroughly enquired into by AO at the time of assessment proceeding and only thereafter AO has passed the order, it cannot be said that the assessment order passed is erroneous and prejudicial to the interests of revenue. The CIT after considering the submissions, however, was not convinced with the same and ultimately passed the impugned order u/s 263 setting aside the assessment order with the following observations: "2. In the application made u/s 154 the assessee before the AO has made an alternative plea for recomputing the total income in the back drop of disallowance of depreciation in the AY 2008-09. The contention made before the AO u/s 154 of the IT Act is also considered. All the factual position regarding the correctn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f applicability of section 40(a)(ia) on the equipment contractual charges is concerned, learned AR submitted that this issue was thoroughly inquired into by the AO at the time of assessment proceeding and after considering all facts and materials on record submitted by assessee and being satisfied with the fact that assessee has complied with the TDS provisions has passed assessment order. In this context, the learned AR referred to his reply dated 13/12/2011 submitted before the AO in course of assessment proceeding. Learned AR submitted that the issue was also examined by ITO (TDS) while verifying assessee's compliance to TDS provisions. Referring to the show cause notice issued by ITO(TDS) on 16/03/2011, learned AR submitted that ITO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Thus, on this reason alone, assessment order passed is erroneous and prejudicial to the interests of revenue. Learned DR submitted that even if on one issue the assessment order is found to be erroneous and prejudicial to the interests of revenue, exercise of jurisdiction u/s 263 will be valid. 6. We have considered the submissions of the parties as well as the materials on record. As can be seen, CIT has held the assessment order to be erroneous and prejudicial to the interests of revenue for the following two reasons: 1. AO has allowed the claim of depreciation in respect of two dredgers whereas depreciation claimed on these two dredgers were disallowed in the preceding AY 2008-09. 2. AO has not examined the applicability of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application filed u/s 154 of the Act as the proceedings are different. The application filed u/s 154 will be dealt with by AO independently as it is on a different issue. Therefore, in the aforesaid facts and circumstances, we are of the view that CIT was justified in revising the assessment order u/s 263 of the Act so far as the issue of allowability of depreciation claimed on the two dredgers is concerned. 8. However, so far as the second issue of applicability of provisions of section 40(a)(ia) is concerned, in our view, on this issue assessment order passed cannot be considered to be erroneous and prejudicial to the interests of revenue. As can be seen, from the facts and evidences brought on record ITO(TDS) while examining assessee&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat assessee has not complied to TDS provisions so far as payment of equipment contractual charges is concerned. Therefore, considering the facts and evidences on record, we are of the view that as AO has considered the issue of TDS on equipment contractual charges and since the order passed u/s 201 & 201(1A) also reveals that assessee has complied to TDS provisions, direction of CIT in respect of applicability of section 40(a)(ia), is not correct and the assessment order on this issue cannot be considered to be erroneous and prejudicial to the interests of revenue. In the aforesaid facts and circumstances, though, we uphold the validity of the order passed u/s 263 of the Act, but, at the same time we direct the AO to only examine the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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