Smt. R. Lakshmi vs Deputy Commissioner of Income Tax and Another

C.N. Ramachandran Nair, J.—Petitioner is challenging Ext. P14 order whereunder the CIT has dismissed the revision petition filed by the petitioner challenging the orders of the AO declining to rectify Income Tax assessments applied for by the petitioner u/s 154 of the IT Act for the years 1992-93 to 1996-97. Assessments for these years were originally completed u/s 143(1)(a) of the Act granting depreciation based on the WDV declared by the petitioner in the returns. However, assessments for two preceding years namely, 1990-91 and 1991-92 were under contest before the CIT(A) and Tribunal, respectively wherein the issue involved was WDV of some items, such as plant, machinery, furniture, etc. for the purpose of depreciation. Consequent upon orders of these two authorities, WDV after granting depreciation for 1990-91 and 1991-92 changed and therefore WDV for granting depreciation for 1992-93 and later years had to be modified. As a consequence of change in WDV of eligible items for depreciation based on the orders of the Tribunal and CIT(A) for the two preceding years, petitioner applied for rectification of mistake in the subsequent assessments for grant of depreciation, which was declined by the officer on the ground that there was no mistake apparent on the face of the record to rectify assessments u/s 154 of the IT Act. The CIT(A) agreed with the AO and declined the relief in revision petitions on the ground that assessments completed based on returns cannot be rectified as there is no mistake apparent on the face of the record.

I have heard senior counsel Sri P. Balachandran appearing for the petitioner-assessee and standing counsel Sri George K. George appearing for the IT Department and I have gone through the impugned orders. WDV u/s 43(6) of the IT Act in the case of assets acquired before the previous year is the actual cost of assessee less depreciation actually allowed to him under the Act. Therefore depreciation has to be granted for any assessment year on the WDV after taking into account depreciation actually allowed in the preceding year. Since there is a change in the WDV, consequent upon the order of the Tribunal and the first appellate authority for the immediately preceding years, necessarily depreciation for the year 1992-93 and subsequent years has to be recomputed based on orders of the appellate authority for the preceding year. The findings of the authorities below that there cannot be mistake in respect of WDV after filing of the returns is therefore incorrect. The mistake in the return, so far as WDV is concerned is a consequence of the order in appeal. There was a mistake in the WDV of the original items for depreciation for the year 1992-93 and subsequent years. Accordingly the impugned orders are set aside. The AO is directed to modify the assessments and grant depreciation based on WDV consequent upon the order of the CIT(A) and Tribunal for earlier years.

OP is allowed as above.