INCOME TAX OFFICER v. N.R. PANDURANGA SETTY
[Citation -2006-LL-0113-8]

Citation 2006-LL-0113-8
Appellant Name INCOME TAX OFFICER
Respondent Name N.R. PANDURANGA SETTY
Court ITAT
Relevant Act Income-tax
Date of Order 13/01/2006
Assessment Year BLOCK PERIOD : 1998-99 TO 1998-99
Judgment View Judgment
Keyword Tags disallowance of depreciation • unabsorbed depreciation • regular assessment • business premises • block assessment • block period
Bot Summary: The assessee had claimed depreciation on the building used for the purpose of business. The assessee in the block return, deliberately and suo motu allotted certain portion of cash found unexplained at the time of search, to each year, treating it as business income and then claimed depreciation for each year. The assessee did not file any revised return in the regular assessment claiming the depreciation. The assessee had converted the amount of cash found during the search as business income and claimed depreciation of each year. The first para of the assessment order reads in continuation of the search carried out under s. 132 of the IT Act both in the residence and business premises of the assessee, Mr. N.R. Panduranga Setty, certain materials were seized, based on which it was found that the assessee had not disclosed his taxable income. Now coming to the claim of the depreciation the learned CIT(A) had considered the decisions of various High Court s and the Tribunal in his order meticulously while granting relief to the assessee on depreciation. The assessee did not claim in any of the assessment years prior to search, he is entitled to claim the current depreciation for the block period.


P. Mohanarajan, J.M.: This appeal by Revenue is directed against order of learned CIT(A)-II, dt. 24th June, 2003, for block period 1988-89 to 1998-99. We have heard both sides and perused records. assessment in this case has been passed under s. 158BC of IT Act, on basis of search conducted under s. 132 of IT Act. assessee had claimed depreciation on building used for purpose of business. This claim was disallowed by AO. However, learned CIT(A), granted relief in this issue. Still aggrieved, Revenue is in appeal before this Tribunal. following are main grounds as under: "That CIT(A), erred in deleting disallowance of depreciation amounting to Rs. 5,16,740 claimed by assessee, by holding that said disallowance made by AO is bad in law and on facts. That CIT(A), ought to have considered fact that though assessee states that building is used as business premises and claims depreciation for block period, he never claimed depreciation on said building in his regular returns. That CIT(A), failed to appreciate fact that there is no element of business income involved in this case. assessee in block return, deliberately and suo motu allotted certain portion of cash found unexplained at time of search, to each year, treating it as business income and then claimed depreciation for each year. This is wrong and goes against principle of s. 132(4) of IT Act. This aspect is ignored by CIT(A)." learned Departmental Representative contended that case of assessee does not fall within purview of s. 139(5) of IT Act, as assessments have been completed either under s. 143(1)(a) or 143(3) of IT Act. assessee did not file any revised return in regular assessment claiming depreciation. As per provisions of s. 158BC, total income of previous year falling within block period has to be computed in accordance with provisions of Chapter XIV-B, based on evidence found during course of search. There is no element of business income involved in this case. assessee had converted amount of cash found during search as business income and claimed depreciation of each year. claim is not in accordance with s. 132(4A) of IT Act. On other hand, learned counsel for assessee fully supported order of learned CIT(A). We have heard rival submissions and perused records. At outset, it is pertinent to note that col. 8 of preamble to assessment order describes nature of business of assessee as "deals in dry fruits". first para of assessment order reads "in continuation of search carried out under s. 132 of IT Act both in residence and business premises of assessee, Mr. N.R. Panduranga Setty, certain materials were seized, based on which it was found that assessee had not disclosed his taxable income." This being case of AO, we find much force in stand taken by learned counsel for assessee that grounds of Revenue are misconceived and suffer from non-application of mind. Besides that, from records it is seen that assessee is proprietor of M/s Ramesh & Suresh & Co., which deals in kirana goods and has been assessed to sales-tax. Therefore, case of Revenue that there is no element of business income involved in this case, is totally devoid of merits. Now coming to claim of depreciation learned CIT(A) had considered decisions of various High Court s and Tribunal in his order meticulously while granting relief to assessee on depreciation. Though, assessee did not claim (depreciation) in any of assessment years prior to search, he is entitled to claim current depreciation for block period. In decision of Tribunal, Pune Bench, in case of Balaji Construction vs. Asstt. CIT (2000) 66 TTJ (Pune) 718, it has been held that "the provisions of Chapter XIV-B of IT Act for block assessment proceedings do not have overriding effect over entire provisions of Act but only those provisions which have been specially excluded by this chapter would not be applicable to assessment of undisclosed income/expenditure". learned counsel for assessee also pointed out explanatory note to return Form No. 2B which explains computation of total income as under: "The total income is to be computed in col. (2) without giving effect to set off of brought forward loses under Chapter VI or unabsorbed depreciation under s. 32(2) in excess of whatever has been allowed for determining total income returned/assessed in col. (3)." Further, it is pertinent to note that learned CIT(A), before granting relief to assessee called for remand report from AO as well as from Jt. CIT and after considering each and every detail meticulously granted relief to assessee. After going through entire material, we do not find any infirmity in order of learned CIT(A), granting relief to assessee in this issue. ground raised by Revenue in this appeal therefore fails. It is ordered accordingly. In result, appeal filed by Revenue is dismissed. *** INCOME TAX OFFICER v. N.R. PANDURANGA SETTY
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