Punjab State Electricity Board v. President, Income Tax Appellate Tribunal And Others

ITA No. 41 of 2004 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 41 of 2004 Date of Decision: 28.1.2011 Punjab State Electricity Board ....Appellant. Versus President, Income Tax Appellate Tribunal and others ...Respondents. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Rajiv Malhotra, Advocate for the appellant. Mr. Tajendar K. Joshi, Advocate for respondents No.2 & 3. AJAY KUMAR MITTAL, J. 1.This appeal has been preferred by the assessee underSection 260A of the Income Tax Act, 1961 (in short “the Act”) againstorder dated 9.7.2003 passed by the Income Tax Appellate Tribunal,Chandigarh Bench “B”, Chandigarh (hereinafter referred to as “theTribunal”) in ITA No. 1266/Chandi/96, relating to the assessment year1993-94, claiming the following substantial questions of law:- “I)Whether the courts below are right in proposingrectification u/s 154 of the Income Tax Act?rectification u/s 154 of the Income Tax Act? II)Whether the orders passed by the courts below whiledeciding the case of the appellant are incontravention of the provisions of Section 143(1)(a)deciding the case of the appellant are incontravention of the provisions of Section 143(1)(a) of I.T. Act wherein it has been specifically stated thatA.O. has limited powers as he can only vary and notrecompute the assessment? III) Whether the orders of the courts below are againstthe set principles of law as appellant's case was fully supported by various judgments of this Hon'ble HighCourt and Hon'ble Supreme Court of India? IV) Whether the courts below have acted illegally andarbitrarily, while not granting 100% depreciation forthe items costing less than Rs.5,000/-? V) Whether in the facts and circumstances of thepresent case, the orders Annexures A-1 to A-3 arebased on presumptions and surmises which cannotbe made the basis of law?” 2. 2.The facts necessary for disposal as pleaded in the appealare that the assessee-Board filed its return of income declaring loss ofRs.2,34,38,62,874/- for the assessment year 1993-94 on 30.12.1993which was processed at a loss of Rs.2,34,31,71,679/- after adjustmentof an amount of Rs.6,91,195/-. The assessee received consumercontributions from the consumers amounting to Rs.42,44,73,495/- and ititself disallowed depreciation amounting to Rs.10,61,18,374/- onconsumer contributions of Rs.42,44,73,495/-, i.e. @ 25%. TheAssessing Officer while observing that the assessee had not disallowedthe depreciation on Written Down Value (WDV) of the consumercontributions as on the Ist day of the previous year, issued a showcause notice under Section 154 of the Act proposing to disallow depreciation of the same. The assessee duly replied the said noticepleading that in case proposed rectification is done, the assessee begiven 100% depreciation for the items costing less than Rs.5000/-. TheAssessing Officer vide order dated 17.1.1996 computed the WDV ofcontributions as on 31.3.1992 by reducing depreciation @ 25% of grossvalue contributions and disallowed depreciation aggregating toRs.35,67,84,294/-. Feeling aggrieved, the assessee took the matter inappeal and the Commissioner of Income Tax (Appeals) [in short “theCIT(A)”] vide its order dated 12.9.1996 partly allowed the appeal andreduced the disallowance of depreciation from Rs.23,58,43,342/- toRs.5,89,60,835/-. On further appeal by the assessee, the Tribunal videorder dated 9.7.2003 upheld the view of the CIT(A) and dismissed theappeal. Hence, the present appeal by the assessee. 3.We have heard learned counsel for the parties. 4.The point for determination in this appeal is whether theAssessing Officer was right in invoking Section 154 of the Act andrectifying the mistake which was apparent on the record regarding claimof depreciation made by the assessee. 3.We have heard learned counsel for the parties. 4.The point for determination in this appeal is whether theAssessing Officer was right in invoking Section 154 of the Act andrectifying the mistake which was apparent on the record regarding claimof depreciation made by the assessee. 5.Learned counsel for the assessee submitted that theassessee had rightly claimed the depreciation which was allowed by theAssessing Officer and the mistake which was sought to be corrected byinvoking Section 154 of the Act was not a mistake apparent on therecord and in view of the pronouncements of the Apex Court in T.S.Balaram, ITO v. Volkart Bros. (1971) 82 ITR 50 (SC); Smt. NitaTaneja v. Assistant Controller of Estate Duty, (1994) 211 ITR 462(SC); CIT v. Keshri Metal Pvt. Ltd. (1992) 237 ITR 165 (SC) and ITA No. 41 of 2004-4- Khatau Junder Ltd. v. K.S. Pathania (1992) 196 ITR 55, the samecould not have been resorted to. 6.Learned counsel for the revenue on the other handsupported the order passed by the Tribunal. 7.We have given our thoughtful consideration to therespective submissions of learned counsel for the parties and do notfind any substance in the plea raised by the learned counsel for theassessee. 8.The Tribunal while concluding that there existed a mistakewhich was apparent from the record noticed that amount which hadbeen collected by the assessee from its customers towards cost ofcapital assets had to be reduced from the actual cost while calculatingdepreciation. It was further observed that the said issue had attainedfinality in the assessment year 1982-83 and the assessee had beenclaiming depreciation after reducing consumer's contribution from costof capital assets. It was also recorded that the assessee had itself notclaimed depreciation @ 25% on Rs.42,44,73,495/- which wasconsumer's contribution towards capital cost. The Assessing Officerthrough rectification had sought to disallow depreciation on WDV ofConsumer Contribution as on 1.4.1992 which was on the basis of pastpractice of the assessee. Adverting to the assessee's claim of 100%depreciation in respect of assets costing less than Rs.5,000/-, it wasfound that the assessee had been allowed depreciation in respectthereof in earlier assessment years as claimed in the returns and ifthere was some substance in the plea of the assessee, it could fileseparate rectification application for those assessment years including the present assessment year. It was further noted that no such specificground had been raised by the assessee before the Tribunal. It wouldbe relevant to reproduce the findings recorded by the Tribunal in paras7 and 8 of its order, which read thus:- “7.Now the question that requires to be considered iswhether there was a mistake apparent from record in thereturn of income documents and copies of accountsaccompanying the return and whether the AO was justifiedin resorting to provisions of section 154 of the Income TaxAct? The facts discussed above clearly show that theamounts contributed by the consumers were on capitalaccount. The ld. Counsel for the assessee was fair enoughto concede that there was no obligation on the part of theassessee to refund such contributions collected from thecustomers. Therefore, as per provisions of sub-section (6)of section 43 of the Income Tax Act, the amounts collectedfrom the customers towards the cost of capital assets wererequired to be reduced from the actual cost for the purposeof claiming depreciation. The facts discussed above furthershow that the issue of capital assets had attained finality inthe assessment year 1982-83 and thereafter the assesseehad been claiming depreciation by reducing the consumers'contributions from the cost of capital assets. In fact evenfor the assessment year under reference, the assessee haditself disallowed depreciation @ 25% on the contributionsby the consumers amounting to Rs.42,44,73,495/-. However, the assessee had not disallowed depreciation onthe WDV of the consumers' contributions as on 1.4.92,which had been done in the past. It is further clear from theorder that the assessee had been disallowing depreciationon the consumers' contributions. The facts placed onrecord and discussed in para 2.4 of CIT(A)'s order clearlyshow that the details of the consumers' contributions weregiven in the chart filed along with the return. Thus for thepurpose of disallowing deprecation, the AO was notrequired to refer to the past records of the assessee, assuch details were available on the basis of documents,copies of accounts filed along with the return. Further,there is no dispute about the fact that there was an error onthe part of the assessee in claiming depreciation even onthe WDV of consumers' contributions. This being amistake apparent from record, we are of the consideredopinion that the AO was justified in rectifying the mistakeu/s 154 of the Income Tax Act. Even such adjustment u/s143(1)(a) on the basis of information in the return,documents and copies of accounts accompanying thereturn is permissible. 8.The submission of the ld. Counsel for the assesseethat as per Board's circular No. 549 dated 31.10.89 the AOcould only vary the rates of depreciation and could notrecompute the depreciation is without any substance. Theexamples given in para 5.4 of the aforesaid circular are only illustrative and not exhaustive. What is required to be seenis, whether the mistake is apparent from record on thebasis of documents and copies of accounts filed along withthe return? The facts discussed above clearly suggest thatassessee had made a wrong claim of depreciation withoutreducing consumers' contributions from the WDV. Thisbeing a mistake apparent from record, the AO rightlyrectified the same u/s 154 of Income Tax Act. We also donot find any merit in the submissions of the ld. Counsel thatthe AO ought to have allowed depreciation @ 100% inrespect of assets with cost less than Rs.5,000/-. Theassessee had been allowed depreciation in respect of suchassets in the earlier assessment years as claimed in thereturns. If the assessee was serious about such claim, itcould have filed separate applications u/s 154 for thoseassessment years or even for the assessment year underreference. No such application was filed. In fact nospecific ground to this effect has been raised before us.Therefore, such submission is also rejected. Having regardto these facts and circumstances of the case and the legalposition discussed above, we are of the considered opinionthat Ld. CIT(A) was justified in confirming the order of theAO. Thus, we confirm the order of the CIT(A) and dismissall the grounds of assessee's appeal.” 9.The aforesaid findings have not been shown to be perversein any manner by the learned counsel for the assessee. Further, it may ITA No. 41 of 2004 -8- be noticed that so far as the judgments relied upon by the learnedcounsel for the assessee are concerned, the legal principles enunciatedtherein are well recognized but in view of the findings noticed above inwhich no perversity has been pointed out, the same do not advance thecase of the assessee any further. 10.Accordingly, the substantial questions of law are answeredagainst the assessee and in favour of the revenue. The appeal isdismissed. (AJAY KUMAR MITTAL) JUDGE January 28, 2011gbs (ADARSH KUMAR GOEL)JUDGE