INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Erroneous and prejudicial order - Claim allowed without due inquiries - Non-application of mind by AO

Assessee-company was engaged in managing operations of Ground Power Unit (GPU) and Pre-Conditioned Air Unit (PCA) at an airport. It claimed depreciation on GPU and PCA at normal rate of depreciation, i.e., 15% for plant and machinery in original return of income. However, in revised return of income, it claimed 100% depreciation on those two items by holding that the same would fall under the category of air pollution control equipment, which was allowed by AO. CIT was of the view that the assessee's claim of depreciation at enhanced rate was allowed by the AO without making due inquiries in that regard and accordingly, he invoked his revision power under section 263. Held: It was found that there was no specific query raised by AO with respect to assessee's claim of depreciation @ 100%. He simply asked for details pertaining to fixed assets and no specific query was raised as to why GPU and PCA would fall in the category of air pollution control equipment eligible for depreciation @ 100%. Further, although the assessee filed revised return of income but it did not file any revised tax audit report wherein the depreciation at enhanced rate was stated to be eligible. Thus, it was a clear case of non-application of mind by the AO as he did not examine the complete aspect of the case and allowed the assessee's claim without any inquiry. Hence, CIT was justified in invoking his jurisdiction under section 263 on issue of enhanced depreciation claimed by the assessee.

REFERRED : Deniel Merchants P. Ltd. & Anr. v. ITO & Anr. Special Leave to Appeal (C) No(s). 23976/2017, dt. 29-11-2017: 2017 TaxPub(DT) 5217 (SC) and BSES Rajdhani Power Ltd. v. PCIT (2017) 399 ITR 228 (Delhi): 2017 TaxPub(DT) 4820 (Del-HC)

FAVOUR : Against the assessee

A.Y. :

INCOME TAX ACT, 1961

Section 263

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