| The Tax Publishers2020 TaxPub(DT) 4148 (Bang-Trib) INCOME TAX ACT, 1961
Section 263
Where assessee followed different treatment for leased assets for book purposes and for income tax purposes and further, the assessee furnished a reply with regard to the claim of principal component of lease payment and the treatment given in the books of account for leased assets, however, the AO did not further probe the matter, which should have been made, therefore, the CIT was justified in holding that assessment order passed by the AO was erroneous and prejudicial to the interest of Revenue.
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Revision under section 263 - Erroneous and prejudicial order - AO did not duly probe the issue -
Assessee-company took certain assets on lease and capitalized those assets in books of account. Accordingly, it debited its profit and loss account with depreciation on those leased assets and also interest expenses. However, in computation of total income, the assessee claimed deduction relating to repayment of principal component of lease rental payments. It was submitted by the assessee that it had not claimed depreciation for income-tax purposes. However, CIT was of the view that the assessee had taken contradictory stand. He noticed that, as per AS-19, in the case of finance lease, the principal payment for acquisition of asset on lease is recognized as capital in nature and hence depreciation and financial charge is charged to the profit and loss account in the place of lease rent payment. Therefore, the CIT took the view that the AO had not properly examined the said issue and accordingly held that assessment order was erroneous and prejudicial to the interest of Revenue. Held: It was found that the assessee followed different treatment for leased assets for book purposes and for income-tax purposes. Further, the assessee furnished a reply with regard to the claim of principal component of lease payment and the treatment given in the books of account for leased assets. However, as pointed out by CIT, the AO did not further probe the matter, which should have been made. Before Tribunal also, the assessee could not immediately show that it did not claim depreciation on leased assets and submitted that it would furnish the details and accordingly forwarded a reconciliation statement. The very fact that the contention of the assessee could be understood only after examining the reconciliation statement would show that the AO should have also examined the submission of the assessee. Accordingly, the assessment order was rendered erroneous and prejudicial to the interest of Revenue in terms of Explanation 2 to section 263. Accordingly, the revision order passed by the CIT was upheld.
REFERRED : Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 (SC) : 2000 TaxPub(DT) 1227 (SC)
FAVOUR : Against the assessee
A.Y. : 2012-13
IN THE ITAT, BANGALORE BENCH
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