1997-VIL-104-ITAT-JAI

Equivalent Citation: TTJ 059, 733,

Income Tax Appellate Tribunal JAIPUR

Date: 06.10.1997

MODERN MINERALS.

Vs

ASSISTANT COMMISSIONER OF INCOME TAX.

BENCH

Member(s)  : PRADEEP PARIKH., R. K. GUPTA.

JUDGMENT

This is an appeal by the assessee against the order of the CIT under s. 263 relating to asst. yr. 1987-88. The assessment in this case was completed under s. 143(3) on 15th Feb., 1990. A show-cause notice was issued to the assessee on 13th Feb., 1992 proposing to suitably modify/cancel/set aside the assessment on the point of investment allowance claimed and allowed by the Department on the tractor and the excessive depreciation allowed on air compressor and rockdrill. In response to show-cause notice a reply was filed. A copy of the Board’s Circular F.No./236/27/2/74-A & PAC-II, dt. 24th Feb., 1975, and a copy of the order of the Tribunal in ITA No. 1164/Jp/87 dt. 20th April, 1990, was filed. It was further submitted that the order of the investment allowance did not suffer from any error and the investment allowance was correctly allowed. It was further submitted that the AO particularly raised the query regarding the depreciation of these items and reply was filed and after considering the same the claim was allowed. Therefore, no action is warranted under s. 263. The CIT was not satisfied with the reply and he stated in para 2 of his order that:

"2. The assessee’s arguments have been considered. It is noted that the compressor is used for the purpose of mining operations after being mounted on the tractor. It is further noted that even without being so mounted it can be used for the mining operations. The mounting of the compressor on the tractor is for convenience and mobility as the compressor is required to be used at different places. the tractor, therefore, remains a road transport vehicle as it is registered and is not a part of the mining machinery. This view is in conformity with the Board’s Circular dt. 24th Feb., 1975 referred to above."

The CIT further considered the ratio of this decision of Tribunal and he was of the opinion that this decision does not help to the assessee and by taking action under s. 263 he modified the order of the AO.

2. Now the assessee is in appeal before us. The same contentions were repeated before us as made before the CIT by the learned counsel. It was further submitted that the assessment was completed after examining the aspect of depreciation and investment allowance. Therefore, the order of the CIT is bad in law. It was further contended that the order under s. 263 was taken after an audit objection by the audit party of the Department and, therefore, the order under s. 263 is also erroneous. In support of this contention the learned counsel placed reliance on Indian & Eastern Newspaper Society vs. CIT (1979) 12 CTR (SC) 190 : (1979) 119 ITR 996 (SC). It is further stated that it is a change of opinion and because of change of opinion the assessment cannot be held erroneous under s. 263. On merit, the learned counsel also made submissions and he placed reliance on few decisions of the Tribunal and other High Courts of the country.

3. On the other hand, the learned Departmental Representative strongly supported the order of the CIT and he further stated that tractor is a road transport vehicle and cannot be allowed full depreciation by holding that this is part of machine used for mining activity. Regarding the decision of the Supreme Court, it was submitted by the learned Departmental Representative that this is a distinguishable case because in that case the action was taken under s. 147(b) and here in this case the action is taken under s. 263.

4. We have heard the rival submissions and considered them carefully. We find that assessment was completed under s. 143(3) and a query in writing was raised by the AO regarding the allowability of depreciation and investment allowance. The reply was filed by the assessee and after considering the reply the AO admitted the claim of the assessee and it was allowed by him at the time of assessment. The action taken by the CIT is after finding of an audit objection by the audit party of the Department. The decision of the Hon’ble Supreme Court in case of Indian & Eastern Newspaper Society vs. CIT, wherein it was held that:

"the opinion of the audit party on a point of law could not be regarded as "information" enabling the ITO to initiate reassessment proceedings under s. 147(b). The ITO had, when he made the original assessment, considered the provisions of ss. 9 & 10 of the Indian IT Act, 1922. Any different view taken by him afterwards on the application of those provisions would amount to a change of opinion on material already considered by him."

After perusing the ratio of this decision of the Supreme Court, we notice that though the action was taken under s. 147(b) but that was also taken after noting an objection by the audit party. In this case also CIT took action under s. 263 after noting an objection which was raised by the audit party of the Department. Therefore, the ratio of the Hon’ble Supreme Court is applicable here also and helps the assessee.

4.1 We have also perused the ratio of decision of the Tribunal of Jaipur Bench in case of Mewar Chemical Products Ltd. vs. Asstt. CIT (1994) 50 TTJ (Jp) 80 : 80 Taxman-(Mag) 229, wherein it was decided that whether CIT having brought nothing on record to show that information furnished by the assessee before AO was false or incorrect, his order under s. 263 setting aside AO’s assessment, being based on suspicion, conjectures and surmises, was liable to be cancelled. Here in the present case we notice that the AO had raised a query regarding the investment allowance and allowability and the clarification was filed by the assessee which was accepted. Therefore, there was no material on record that any adverse or incorrect material was furnished by the assessee before the AO. Only an objection was there which was pointed out by the audit party. Therefore, in view of these facts and circumstances, we are of the considered view that the order passed by CIT under s. 263 was unwarranted.

4.2 On merits also we find substance in the contention of the learned counsel. We have also perused the decisions filed by the learned counsel. In case of CIT vs. Popular Borewell Service (1991) 94 CTR (Mad) 240, wherein it was observed that "drills, air-compressors and jack-hammers used in construction of dams, tunnels, etc. would not fall under entry No. III(ii)D(7) meant for mineral and oil concerns—but can be classified as earth-moving machinery employed in heavy construction work falling under entry III(ii)D(4)—therefore, entitled to higher depreciation @ 30 per cent". Regarding the investment allowance it was further observed that "rig and compressor mounted on a lorry cannot be treated as a ‘road transport vehicle’—Investment allowance is, therefore, allowable on rig and compressor mounted on a lorry and used for drilling borewells".

4.3 We have also seen the order in case of CIT vs. Super Drillers (1988) 73 CTR (AP) 97 : (1988) 174 ITR 640 (AP), of the Andhra Pradesh High Court wherein it was held that "An assessee would be entitled to investment allowance in respect of machinery purchased for drilling borewells" and in the same case it was also held that the assessee is entitled to depreciation @ 30 per cent. After considering all the decisions and other merits of the case, we are of the firm opinion that the action of the CIT was not justified and on merits also the claim of the assessee is allowable which was allowed by the AO correctly. In view of these facts and circumstances, we cancel the order of the CIT under s. 263 and restore the order of the AO passed earlier.

5. In the result, the appeal of the assessee is allowed.

 

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