CIT Vs. M/s Varindra Construction Company (P&H HC)
Issue- Whether assessing Officer has jurisdiction to rectify the original assessment u/s 154 of the Act, as it was change of opinion and the review of order passed by his predecessor was not permissible under law.
Held – That assessing officer has a power to rectify the assessment by invoking the provisions of Section 154 of the Act. The rate of depreciation claimed by the assessee on trucks at 40% was wrongly allowed as the assessee was not plying trucks owned by it on hire but was utilizing the trucks for its own purposes and hence rate of depreciation applicable was 25%.
HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
ITA No. 209 of 2003
Date of decision: 24.01.2012
The Commissioner of Income Tax- III, Ludhiana
Vs.
M/s Varindra Construction Company
ORDER
Ajay Kumar Mittal, J.
1. This order shall dispose of Income Tax Appeal Nos. 209 and 210 of 2003 relating to the assessment years 1992-93 and 1993-94 respectively, as according to learned counsel for the parties, common questions of law and facts are involved therein. For brevity, the facts are being taken from ITA No.209 of 2003 relevant to the assessment year 1992-93.
2. The revenue has preferred this appeal under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 9.4.2003 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as “the Tribunal”) in ITA No.222 (ASR) 1999 for the assessment year 1992-93, claiming following substantial questions of law:-
“i) Whether on the facts and in the circumstances of the case, the Hon’ble ITAT was justified in law in setting aside the order under section 154 of the Income Tax Act, 1961 passed by the AO and upheld by the CIT(A), wherein the mistake in the application of rate of depreciation on Trucks was rectified?
ii) Whether on the facts and in the circumstances of the case, the Hon’ble ITAT was justified in law in holding that the order in question rectifying the mistake in application of rate of depreciation on assessee’s own trucks used by the assessee for its own business tantamounts to review of the assessment order?”
3. The respondent-assessee filed its return of income for the assessment year 1992-93 on 29.3.1994 declaring net income of Rs.51,290/-. The assessment was framed by the Assessing officer under section 143(3) of the Act on 23.2.1995, Annexure A-1 at a total income of Rs.1,97,217/-. It was noticed by the Assessing Officer that as per Appendix I to Rule 5 of the Income Tax Rules, 1962 (for brevity, “the Rules”), the rate of depreciation applicable on the trucks not plied on hire was 25% and not 40% as claimed and allowed in the assessment order. Accordingly, the Assessing officer rectified the assessment by invoking the provisions of Section 154 of the Act and held that the rate of depreciation claimed by the assessee on trucks at 40% was wrongly allowed as the assessee was not plying trucks owned by it on hire but was utilizing the trucks for its own purposes and hence rate of depreciation applicable was 25%. Vide order dated 16.12.1998, Annexure A-2, assessment framed under section 143(3) of the Act was rectified under section 154 of the Act and income was assessed at Rs.6,74,312/-. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), (CIT(A)), which was dismissed vide order dated 25.3.1999, Annexure A-3. The assessee then filed an appeal before the Tribunal. Vide order dated 9.4.2003, Annexure A-4, the Tribunal set aside the order passed by the CIT(A) and allowed the assessee’s appeal. Hence these appeals by the revenue.
4. The revenue has assailed the findings of the Tribunal wherein it had held that the Assessing Officer had no jurisdiction to rectify the original assessment under section 154 of the Act as it was change of opinion and the review of order passed by his predecessor was not permissible under law.
5. Learned counsel for the revenue submitted that under section 154 of the Act, any error which is apparent on the face of the record can be rectified by the revenue. He referred to Section 154(1) of the Act which reads thus:-
“154(1) With a view to rectifying any mistake apparent from the record an income tax authority referred to in section 116 may –
a) amend any order passed by it under the provisions of this Act;
b) amend any intimation or deemed intimation under sub-section (1) of section 143.”
6. In view of Full Bench judgment of this Court in CIT Vs. Smt.Aruna Luthra, (2001) 252 ITR 76, it was submitted that the Assessing Officer was within his jurisdiction to rectify the order as the assessee had claimed 40% depreciation on the trucks which were being used by it as private carrier. According to him, under Sub-Item (1) of Item III of Appendix I to the Rules, the assessee was entitled to 25% rate of depreciation on trucks which were being used for its own business of transportation of goods. However, 40% was admissible in those cases where the trucks had been used for public carrier transport. Reliance was placed on the decisions of the Karnataka High Court in [A] Veeneer Mills v. CIT, (1993) 201 ITR 764 and Rajasthan High Court in CIT v. Sardar Stones, (1995) 215 ITR 350 in support of his submissions.
7. Controverting the aforesaid submissions, learned counsel for the assessee submitted that the assessment was framed under Section 143 (3) of the Act and recourse to rectification under Section 154 of the Act was in the nature of review which was not permissible. On the strength of judgments in Jaipur Udyog Limited v. ITO, (1985) 156 ITR 377 (Raj.), Harbans Lal Malhotra and Sons (P) Limited v. ITO, (1972) 83 ITR 848 (Cal.), T.S.Balaram v. Volkart Brothers and others, (1971) 82 ITR 50 (S.C.), it was contended that the rectification order passed by the Assessing Officer under Section 154 of the Act was beyond jurisdiction as there was no mistake apparent on the record. Reliance was placed on Circular No.652 dated 14.6.1993 to urge that the Board itself had clarified with regard to the rate of depreciation on motor buses, motor lorries and motor taxis used in the business of transportation of goods. According to him, under the aforesaid circumstances, in view of judgment of Bombay High Court in CIT v. S.C.Thakur and Brothers (2010) 322 ITR 463, the higher depreciation will be admissible on motor lorries used in the transportation of goods on hire. The higher rate of depreciation, however,` will not apply if the motor buses, motor lorries etc. are used in some other non-hiring business of the asses see.
8. After giving thoughtful consideration to the rival submissions, we find merit in the submissions of learned counsel for the revenue. Full Bench of this Court in Smt. Aruna Luthra,’s case (supra) considered the scope of Section 154 of the Act in the following terms:-
“The power given to the authority is wide. It can correct “any mistake” provided it is “apparent from the record”. The first question that arises for consideration is – when a mistake can be said to be apparent from the record?
The plain language of the provision suggests that the mistake should be apparent. It must be patent. It must appear ex facie from the record. It must not be a mere possible view. The issue should not be debatable.
xx xx xx xx
xx
Only the dead make no mistake. Exemption from error is not the privilege of mortals. It would be a folly not to correct it. Section 154 appears to have been enacted to enable the authority to rectify the mistake. The legislative intent is not to allow it to continue. This purpose has to be promoted. The Legislature’s will has to be carried out. By placing a narrow construction, the object of the legislation shall be defeated. Such a consequence should not be countenanced.”
9. It would be expedient to refer to the relevant entries in Appendix I of the Rules. Sub Item 1 of Item III of Appendix I provides for depreciation on machinery and plant whereas Sub Item 2(ii) of Item III of Appendix I deals with higher rate of depreciation on motor buses, motor lorries and motor taxis used in a business of running them on hire. They read thus :-
Appendix I
WDV
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