K.C. Singhal, Judicial Member - (1.) THE only issue arising in this appeal is whether the assessee could claim depreciation Under Section 32 by moving an application for rectification Under Section 154 of Income-tax Act, 1961.
(2.) The assessee is a public sector undertaking which filed its original return of income on 31st December, 1991 declaring total income of Rs. 7,39,63,395/-. The original assessment Under Section 143(3) was made on 12th October, 1993 accepting the returned income of the assessee. Subsequently, notice Under Section 148 was issued on 21st September, 1994. In the course of such re-assessment proceedings, the assessee noticed that it forgot to claim depreciation in respect of assets owned by it and accordingly, made an application Under Section 154 on 18.11.96, which was filed in the office of AO on 22.11.96. The contents of the said application are being reproduced as under: "The income-tax case for the asstt. year 1991-92 of our company is at present pending for assessment Under Section 147 of the Income-tax Act, 1961. During the proceedings of the case, it has come to our notice that depreciation as per income-tax Act amounting to Rs. 11,45,168.00 inadvertently could not be claimed in the income-tax return for the assessment year under reference. This is a clear-cut case of clerical error well covered by Section 154. In our income-tax computation, starting with profit as per Profit and Loss account before depreciation, a clerical mistake occurred by not deducting the depreciation as per the Income-tax Act. It is, therefore, humbly requested to kindly amend the original order passed Under Section 143(3) on 29.10.93 and allow us the depreciation while making the other adjustments, if any, Under Section 147. " (Note: The original order was passed on 12.10.93, which was received by assessee on 29.10.93) The re-assessment order Under Section 147 as well as the order Under Section 154 were passed by the AO on the same date i.e. 28.11.96. In the rectification order Under Section 154, it was observed by the AO that the assessee did not claim depreciation either in the computation of income of the original return or in the course of assessment proceedings. Even the assessee did not move any application after the assessment was finalized Under Section 143(3). According to him, the application Under Section 154 was made during the pendency of re-assessment proceedings and, therefore, the claim of the assessee could not be accepted in view of the Supreme Court judgment in the case of Sun Engineering Works P. Ltd., 198 ITR 297. The matter was carried in appeal before the CIT(A) before whom it was contended that depreciation was not claimed while filing the original return by mistake. It also forgot to attach the depreciation statement calculated as per Income-tax Rules with the return. It was urged that claim of depreciation is a statutory right and, therefore, it has right to ask for rectification It was also urged that the depreciation was being allowed in subsequent years also on the basis of calculations as if the depreciation for asstt. year 1991-92 was allowed by the department. Hence, the mistake was apparent from record which deserves rectification. However, the said contention of the assessee was rejected by holding that there was no mistake apparent from record since neither the return of income was accompanied with any depreciation chart as per the requirement of Income-tax Rules nor the depreciation was claimed by the assessee. The CIT(A) also placed reliance on the judgment of Bombay High Court in the case of Shri Someshwar Sahkar Sakhar Karkhana Ltd., 177 ITR 443 wherein it was held that depreciation could not be allowed if no such claim had been made by the assessee. It was also observed by him that the request for rectification could not be entertained by AO in re-assessment proceedings in view of the judgment of Supreme Court in the case of Sun Engineering Works P. Ltd. (supra). Lastly, it was held that since the original assessment did not exist after the issue of notice Under Section 148, the question of rectification did not arise. Accordingly, the appeal of the assessee was dismissed. Aggrieved by the same, the assessee is in appeal before the Tribunal.
(3.) THE learned counsel for assessee has vehemently assailed the order of CIT(A) by raising various submissions. Firstly, it was contended that assessee was not seeking any relief in the course of re-assessment proceedings Under Section 147 but was seeking rectification of the original order dated 12.10.93. THErefore, the lower authorities were not justified in rejecting the application of assessee Under Section 154 on the basis of judgment of Supreme Court in the case of Sun Engineering Works P. Ltd. (supra). It was urged by him that both the proceedings Under Section 154 and 147 were different, separate and independent proceedings and therefore his claim could not be rejected by applying the aforesaid judgment of Supreme Court. Secondly, it was submitted that depreciation was also allowed in subsequent year on the written down value which was arrived at on the footing that depreciation had been allowed in the year under consideration. According to him, the assessee by sheer mistake forgot to make a claim of depreciation as is apparent from the computation sheet. He invited our attention to the computation sheet to point out that computation of income started with the figure of Net Profit and Loss A/c before depreciation but in the end forget to claim the same. According to him, all facts relevant for claiming depreciation are on record. He drew our attention to the list of fixed assets forming part of Schedule 2 attached with the balance sheet. Accordingly, it was urged that AO was duty bound to allow the depreciation to the assessee. Failure to carry out such duty resulted in mistake apparent from record. In support of his above submissions, he relied on the judgment of Supreme Court in the case of Anchor Pressings (P) Ltd., 161 ITR 159 and judgment of Calcutta High Court in the case of Metal Imports P. Ltd., 72 Taxman 375. He also referred to the Commentary of Kanga, Palkiwala & Vyas on THE Law & Practice of Income-tax (9th Edition) for the following proposition: "If all the facts necessary for the grant of deduction or exemption under the relevant section are on record but the assessee has by mistake omitted to make a claim in the original assessment proceedings, he may apply to the AO to grant deduction by way of rectification under this section.";