The Commissioner Of Income Tax-Ii, Chandigarh v. The Investment Trust Of India Ltd., Chennai

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. I.T.A. No.223 of 2009 (O&M)Date of decision: 11.8.2009 The Commissioner of Income Tax-II, Chandigarh. -----Appellant Vs. The Investment Trust of India Ltd., Chennai. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOELHON'BLE MRS. JUSTICE DAYA CHAUDHARY Present:-Mr. Urvashi Dhugga, Standing Counselfor the Revenue. -----for the Revenue. ----- ORDER: 1.The Revenue has preferred this appeal under Section260A of the Income Tax Act, 1961 (for short, “the Act”) againstthe order of Income Tax Appellate Tribunal, Chennai Bench ‘A’passed in I.T.A. No120/Mds/99 dated19.5.2006 for theassessment year 1993-94, proposing to raise followingsubstantial question of law:- “Whether the Hon’ble ITAT is justified in law in holdingthat depreciation allowed earlier cannot be withdrawnby revoking the provisions of Section 154 of the I.T.Act, 1961, in the case where asset never existed inpossession of the assessee? 2. In the order of assessment, claim of the assessee fordepreciation was allowed. Later, it was alleged that depreciationwas not allowable as the asset did not exist and on that ground,depreciation had been disallowed in the earlier assessment year.Accordingly, notice under Section 154 of the Act was issued andorder of rectification, disallowing the depreciation, was passed.CIT(A) set aside the disallowance on the ground that the samewas beyond the scope of Section 154 of the Act. The said viewhas been upheld by the Tribunal. The Tribunal observed that thebusiness of the assessee was of hiring out the machinery anddepreciation was permissible, as held by the Hon’ble SupremeCourt inCITv. Shaan Finance Pvt. Ltd. (1998) 231 ITR 308. Itwas further observed that the issue of disallowance ofdepreciation was a debatable issue and thus, could not becovered by scope of rectification in view of law laid down by theHon’ble Supreme Court inT.S. Balaram, ITO, Company CircleIV, Bombayv. Volkart Brothers and others82 ITR 50. 3. We have heard learned counsel for the appellant. 4. Only argument raised is that the asset itself did notexist and thus, the claim of the assessee was bogus. Thissubmission cannot be accepted. There is nothing to substantiatethis argument. Regular assessment had been done underSection 143(3) of the Act and depreciation was held to beadmissible. It has been held that the assessee purchased theasset and leased out the same in the course of its business. Rectification was permissible only if there was error apparent onthe face of the record and not something which could beestablished by long drawn process of reasoning. 5. Learned counsel for the revenue relies upon Delhi High Court judgment in Addl. Commissioner of Income Tax,Delhi-IIv. Kanta Behan(1983) 140 ITR 187 (Del.). 6. In our view, the said judgment does not apply. In thatcase, the assessee purchased a cinema building and machineryand claimed deduction for repairs and hiring charges.Subsequently, reassessment proceedings were undertaken andthe assessee agreed for withdrawal of deductions towards repairsbut pressed the claim for depreciation. While holding thatdepreciation was allowable, the same was not allowed in theoperative part. It was held that the error could be rectified underSection 154 of the Act. Rectification was held to be permissiblewhere there was conflict in the findings and the operative part,which is not the case here. 7. We are, thus, unable to hold that any substantialquestion of law arises. 8. The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE August 11, 2009CHAUDHARY )ashwani ( JUDGE DAYA