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M/s. Southern Ferro Steels Ltd. Versus Income-tax Officer, Ward 3 (2) , Hubli.

2016 (5) TMI 931 - ITAT BANGALORE

Revision 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 .....

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bility 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 impossibl .....

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see, 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 - ITA No.429/Bang/2014 - Dated:- 12-4-2016 - SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER and SHRI VIJ .....

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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 detai .....

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s conclusion that the Order passed by the ITO on 29.12.2011 u/s 143(3) of the IT Act of 1961 was erroneous and prejudicial to the Interest of Revenue and therefore must be quashed. 3. In the case of the assessee, assessment was completed u/s 143(3) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] on 29/12/2011. Subsequently, the CIT, on perusal of the records found that the AO allowed depreciation on enhanced value of fixed assets without examining the matter .....

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show cause notice. Therefore, the CIT was not justified in invoking the provisions 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 .....

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n of the assets purchased by the assessee, then the same cannot be held as erroneous or prejudicial to interest of the revenue. He referred to the details and documents filed by the assessee in response to notice by the AO placed at pages 6 and 7 of the paper book III and submitted that beside other details and documents, assessee also produced bills of fixed assets and copies of invoices of the fixed assets. Therefore, the AO duly applied his mind on the issue so far as the relevant record was .....

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ee further submitted that in the proceedings pursuant to revision order, valuation was referred to the valuation cell which has valued the fixed assets at ₹ 3.9 crore as against ₹ 4.50 crores valued by the assessee. Therefore, difference in the value of the fixed assets is only about 13% which cannot be considered 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 contenti .....

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at the fixed asset in questions were used by the seller for business purpose and the value has been enhanced in the books of the assessee in comparison to the written down value in the books of seller to the extent of 20 times more than the written down value. Therefore, the provisions of section 43(1) read with Explanation 3 are attracted in this case. Since the AO completely failed to apply his mind to verify the valuation as per the provisions of section 43(1), therefore, the order of the AO .....

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the CIT was well within the powers to invoke the provisions of sec.263 of the Act when the AO has failed to apply his mind on the issue. He has relied upon the impugned order of the CIT. 6. We have considered the rival submissions as well as relevant material on record. The assessee has purchased/acquired assets from M/s.Southern Ferro Ltd. 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. Th .....

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ion 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 assets, directly or indirectly to the assessee, was the reduction of a liability to income- tax (by claiming depreciation with reference to an enhanced cost), the actual cost to the assessee shall be .....

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n a detailed order on the issue is not necessary. However, the primary requirement is the factum of conducting of enquiry and not the finding of the AO on a particular issue. In this case, the AO did not issue any notice or questionnaire on this point of valuation of fixed assets already used by the seller. Therefore, the issue was out of view of the limited enquiry conducted by the AO on the other aspects of the assessments to verify the correctness of the record. The issue in question is not r .....

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