TMI Blog2016 (1) TMI 1404X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed the depreciation on these vehicles @ 30%. Hence we hold that the order passed by the AO cannot be termed as erroneous. Bogus purchases - based on report of DGIT (Inv.), Mumbai - No material provided to assesse - No material was part of record also - HELD THAT:- We find no details / evidence whatsoever has been mentioned in the impugned show cause elaborating on the so called ‘information’. We find that no specific information is discernible from the impugned notice. We also find that the assessee has not been provided with any specific evidence which would in any manner suggest that the purchases made by the assessee were bogus. Whether any statement on oath has been recorded from M/s DCL is not on record before us and even if it be, the same has not been provided to the assessee for his records and rebuttal. Hence we find that the show cause notice issued by the Learned CIT on this issue is only a mere allegation that has been raised against the assessee without any material evidence on record. The information alleged to have been obtained from DGIT (Inv.), Mumbai by the Learned CIT ought to have been shared with the assessee for his rebuttal in line with the principles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ritten off. The said assessment was subjected to revision proceedings u/s 263 of the Act by the Learned CIT by issuance of show cause notice dated 21.3.2014 treating the order passed by the Learned AO as erroneous in so far as it was prejudicial to the interests of revenue. In the said notice, the Learned CIT felt that the assessee had claimed depreciation on vehicles @ 30% which is applicable only for assessee s engaged in the business of running the vehicle on hire instead of 15%. According to Learned CIT, since the assessee was not in the business of running the vehicles on hire, it is not entitled for accelerated depreciation. The Learned CIT also mentioned in the show cause notice u/s 263 of the Act that assessee had made bogus purchases of ₹ 3,94,90,558/- from M/s Duralloy Cutters Ltd based on information received from DGIT (Inv.) , Mumbai. Since these two aspects were not considered in the original assessment, the Learned CIT found the order passed by the Learned AO to be erroneous in so far as it is prejudicial to the interests of the revenue and set aside the assessment to frame the assessment denovo . Aggrieved, the assessee is in appeal before us on the following g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment was considered erroneous only for two specific issues and in that view of the matter the CIT could not set aside the assessment and direct the AO to make the fresh assessment de novo. 8. For that on the facts and in the circumstances of the case and in law, the order passed by the CIT u/s. 263 be set aside and the order of the AO u/s 143(3) be restored. 9. For that the appellant reserves the right to add to, alter or amplify the above grounds of appeal. 3. The Learned AR argued , with regard to claim of depreciation at the rate of 30% on vehicles being the rate applicable to vehicles used in the business of running them on hire, that the Learned CIT made factual mistakes in not appreciating the income offered in the form of transportation hire charges by using the vehicles in the business of running them on hire. Hence the order passed u/s 263 of the Act on the basis of wrong appreciation of facts is bad in law. He further argued that the Learned AO in the scrutiny assessment proceedings u/s 143(3) of the Act dated 27.2.2015 for the Asst Year 2011-12 had allowed the depreciation on these vehicles @ 30% appreciating the contentions of the assessee. 3.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the assessee company claimed depreciation @ 15% in 30% Block amounting ₹ 82,43,974/- against purchase of vehicles after 30.09.2008 at a cost of ₹ 5,79,59,825/-. Depreciation on vehicles @ 30% Block is admissible when the same vehicles are used in the. business of running them on hire. But the assessee company not engaged in business of vehicles are used in the business of running them on hire. But the assessee company not engaged in business of vehicles running and not showing any income on account of vehicles hire charges during the previous year 2008-09. In this case depreciation is allowable @ 7.5% in 15% Block to the tune of ₹ 41,21,987/-. At the time of assessment uls.l43(3), A.O. Did not disallow excess depreciation claim of ₹ 41,21,987/- (Rs.82,43,974/-) - ₹ 41,21,987/.,). Further, as per information received from DGIT(lnv), Mumbai during the F.Y.2008-09 the assessee company had made a bogus purchase of ₹ 3,94,90,558/- from M/s. Duralloy Cutters Ltd. In view of the above, the assessment order is erroneous and prejudicial to the interest of the revenue and requires to be reviewed under section 263 of the Income Tax-Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them on hire thereby becoming eligible for depreciation @ 30% as against 15% stated by the Learned CIT in his section 263 order. Hence we find that the Learned AO had rightly appreciated the factual position of the assessee and had granted depreciation @ 30%. We also find that the Learned AO even in subsequent assessment year 2011-12 u/s 143(3) proceedings dated 27.2.2015 had allowed the depreciation on these vehicles @ 30%. Hence we hold that the order passed by the Learned AO cannot be termed as erroneous. Hence invoking revision jurisdiction in terms of section 263 of the Act by the Learned CIT is not warranted. 3.4. Bogus purchases ₹ 3,94,90,558/- We find that the assessee is engaged in the business of manufacture, trading and marketing of plywood and its allied products . In addition to this, the assessee has manufacturing units located in West Bengal and Meghalaya for ferro alloy plant and power plant respectively and CFS in Kolkata. We find from the records that the assessee purchases plywood and boards from local dealers located across India. The assessee has branch offices and regional offices on pan India basis. We find that during the assessment year un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the purchases made by the assessee were bogus. Whether any statement on oath has been recorded from M/s DCL is not on record before us and even if it be, the same has not been provided to the assessee for his records and rebuttal. Hence we find that the show cause notice issued by the Learned CIT on this issue is only a mere allegation that has been raised against the assessee without any material evidence on record. The information alleged to have been obtained from DGIT (Inv.), Mumbai by the Learned CIT ought to have been shared with the assessee for his rebuttal in line with the principles of natural justice. Expecting an assessee to reply in a quasi judicial proceeding without knowing for what purpose he has been asked to do so, is not in accordance with law. 3.4.2. We find that the reliance placed by the Learned AR on the decision of the Hon ble Delhi High Court in the case of CIT vs JMD Computers Communications Limited reported in 180 taxman 485 dated 16.1.2009 is well founded. In that case, on investigation carried out at the premises of a certain party, the department gathered that bogus purchases were made by the assessee from that party which was disallowed. On ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order passed by the Learned AO cannot be termed as erroneous and prejudicial to the interest of the revenue. Hence invoking revision jurisdiction in terms of section 263 of the Act by the Learned CIT is not warranted. 3.4.4. We also find that the following case laws support the case of the assessee before us :- Decision of Hon ble Gujarat High Court in the case of CIT vs M.K.Brothers reported in (1987) 30 taxman 547 (Guj) dated 25.10.1985. Decision of coordinate bench of this tribunal in the case of ITO vs Sri Puspal Kumar Das in ITA No. 1442/Kol/2012 dated 10.12.2015. Decision of coordinate bench of this tribunal in the case of ITO vs T C J Mercantile Pvt Ltd in ITA No. 381/Kol/2012 dated 7.10.2015. Decision of coordinate bench of ITAT Jodhpur in the case of ITO vs Permanand reported in (2008) 25 SOT 11 (Jodh.) (URO) dated 11.8.2006. Decision of coordinate bench of ITAT Mumbai in the case of ITO vs Shri Deepak Popatlal Gala in ITA No. 5920/Mum/2013 and ITA No. 6203/ Mum/2013 dated 27.3.2015. 3.4.5. We also find that admittedly the Learned CIT had invoked revision jurisdiction u/s 263 of the Act on this issue only based on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue-recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase prejudicial to the interests of the Revenue is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue . If due to an erroneous order of the Income-tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. The phrase prejudicial to the interests of the Revenue has to be read in conjuncti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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