TMI Blog2016 (5) TMI 931X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of Commissioner of Income Tax -Hubli (CIT) in holding that the assessment order passed u/s 143(3) of the IT Act of 1961 on 29.12.2011 by the Income Tax Officer, Ward 3(4), Hubli (ITO) is erroneous and prejudicial to the Interest of revenue is unsustainable on facts and in law. 2. The learned CIT erred in setting aside the impugned assessment order with the di rection to the Assessing Officer to decide the issue on merits and in accordance with law. 3. The conclusion drawn by the CIT that the depreciation on enhanced cost was allowed by the Income Tax Officer without application of mind, without obtaining and examining all the relevant details is totally contrary on the facts and evidence on record and is therefore unsustainable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of sec.263. He further submitted that this is first year of business of the assessee and therefore, there was no scope of evasion of tax liability. The learned AR of the assessee has contended that the AO conducted due enquiry by calling relevant details and record and only after examination of the record allowed the claim of depreciation. Therefore, when the AO was satisfied with the valuation of the asset, then, the CIT cannot invoke the provisions of sec.263 in this case. As per Explanation 3 to 43(1), only when the AO is satisfied with the main purpose of transfer of the asset which was already used by other person directly or indirectly to the assessee, was a reduction of liability to income-tax by claiming depreciation on enhan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as erroneous on the issue of valuation. He has asserted that revision is not permitted on the ground that inquiry should have been more detailed. In support of his contention, he has relied upon the following decisions: i. CIT vs. Hindustan Marketing Advertising Co.Ltd. (341 ITR 180)(Del); ii. CIT vs. Giridhar Lal (258 ITR 331) (Raj); iii. CIT vs. Arvind Jewellers (259 ITR 502)(Gau.); and iv. CIT vs. Gabriel India Ltd. (203 ITR 108(Bom.) 5. On the other hand, learned DR submitted that the AO did not apply his mind on the issue of valuation of fixed assets which were already used by the seller in the light of Explanation 3 to sec.43(1). There is no dispute that the fixed asset in questions were used by the seller for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks 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 which reads as under: Explanation 3.- Where, before the date of acquisition by the assessee, the assets were at any time used by any other person for the purposes of his business or profession and the Assessing] Officer is satisfied that the main purpose of the transfer of such as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause 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 assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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