CIT (LTU), KOLKATA vs CENTURY PLY BOARD INDIA LTD.

The Court : The marginal delay of about 56 days in preferring the appeal is condoned. GA No.3335 of 2016 is allowed accordingly. The appeal is

taken up for consideration of two questions:

i. Whether an Appellate Tribunal ought ordinarily to interfere with an order passed under Section 263 of the Income Tax Act, 1961 for a fresh

assessment to be conducted by the Assessing Officer?

ii. Whether depreciation at the enhanced rate of 30% for a vehicle can be claimed by an assessee who does not run a business of hiring out the

vehicle for consideration?

Upon the assessment being completed, a complaint was received from the Director General of Income Tax, Mumbai as to certain bogus transactions

apparently entered into by the assessee herein with one Duralloy Cutters Limited. The value of the fraudulent transactions was said to be to the tune

of Rs.3,94,90,558/-. On the basis of such communication, the jurisdictional Commissioner called upon the assessee to explain the position; or else the

Commissioner would deal with the matter under Section 263 of the Income Tax Act, 1961. It is the admitted position that no report of the complaining

income tax official from Mumbai was forwarded to the assessee nor was any statement that may have been obtained in course of the Mumbai

investigation from any official of Duralloy furnished to the assessee.

In response to the show-cause notice dated March 24, 2014, the assessee issued a prompt reply on March 28, 2014 disclosing voluminous documents

and claiming such documents to be the evidence of the genuineness of the transactions between the assessee and Duralloy.

The Commissioner did not refer to the documents that had been furnished by the assessee but he was swayed by the allegation that the assessee had

indulged in bogus transactions of value of nearly Rs.4 crore and directed the Assessing Officer to make a fresh assessment. In the assessee’s

appeal against the order passed under Section 263 of the Act, the Appellate Tribunal noticed the copies of invoices and challans, proof of payments,

bank statements, transportation payments, vouchers for movement of the goods and like documents to be satisfied on facts that the transactions

between the assessee and Duralloy for the relevant assessment year were not bogus or fraudulent.

Ordinarily, an Appellate Tribunal has to be slow in receiving an appeal from an order passed under Section 263 of the Act if the order of the

Commissioner is confined to requiring the Assessing Officer to make a fresh assessment. In other words, a distinction ought to be made between the

two parts to Section 263 of the Act: the first part which permits the Commissioner to enhance or modify the assessment and the second part which

permits the Commissioner to cancel the assessment and direct a fresh assessment. There is an element of finality which is involved when the

Commissioner exercises authority under the first part as indicated above. There is also an element of finality when the commissioner cancels the

assessment, but there is no real prejudice to the assessee â€" other than the assessee suffering the process once again â€" in a fresh assessment

being required to be undertaken.

However, since in this case the Appellate Tribunal looked into the documents that were furnished by the assessee in response to the show-cause

notice issued under Section 263 of the Act and found, on facts, that the perceived bogus transactions were genuine, the order impugned does not call

for any interference on such ground.

The other ground pertains to the rate of depreciation that the assessee had claimed and the permissibility thereof. The Appellate Tribunal took into

consideration the fact that depreciation at the enhanced rate had been permitted in at least one subsequent assessment year. Further, it was the case

of the assessee that the assessee may not have let out its vehicles to third parties, but the assessee used the vehicles for transporting the goods

pertaining to the business of the assessee and such activity permitted the claim of enhanced depreciation.

Again, the Appellate Tribunal assessed the facts and found the justification to be worthy. No real question of law arises in such regard either.

Accordingly, ITAT No. 408 of 2016 and GA No. 3336 of 2016 are dismissed. There will be no order as to costs.