1. This is appeal filed by assessee arising out of order of CIT(A) Aurangabad dated 28-3-2005 and solitary ground argued before us reads as follows: "1. learned Commissioner of Income-tax (Appeals) I, Aurangabad erred in sustaining: (a)the valuation of actual cost of Motor Vehicle at Rs. 200000 as against actual cost of Rs. 386607. (b)application of provision of Explanation III of section 43(1) of Income-tax Act, 1961 as same is applicable only if asset was used by any other person for purpose of business. 2. learned Commissioner of Income-tax (Appeals) I, Aurangabad failed to appreciate that erstwhile owner never used vehicle for business and never claimed depreciation on said vehicle." 2. facts as mentioned in impugned order of Assessing Officer passed under section 143(3) dated 30-1-2003, assessee is dealer in seeds and pesticides. It was noticed that assessee has claimed depreciation on motor vehicle which was considered by Assessing Officer as excessive claim. vehicle was purchased in September 1997 by HUF of assessee. During year under consideration i.e.,assessment year 2001-02, said vehicle was brought in capital account of this assessee as Individual tax payer at original cost i.e., Rs. 3,86,607. On said original cost, assessee in status of individual has claimed depreciation at rate of 25 per cent at Rs. 96,651. This was reason of objection of Assessing Officer that since vehicle was purchased in year 1997 why its original cost was taken into account for purpose of claiming depreciation in year under consideration. explanation of assessee was that vehicle was purchased in capacity of HUF and since then, no depreciation was claimed on said vehicle. For year under consideration, it was decided to transfer vehicle in hangs of individual to bring in to business assets with effect from 1-4-2000. Assessing Officer was not convinced and by invoking Explanation-3 to section 43(1) of Income-tax Act, he has held that assessee has claimed excessive depreciation by enhancing cost so Assessing Officer has reduced cost to Rs. 2,00,000 and computed depreciation accordingly. This is cause of grievance which was challenged. 3. When this issue was carried before first appellate authority, action of Assessing Officer was confirmed and it was held that Assessing Officer has rightly invoked Explanation to section 43(1) to arrive at reasonable price on which depreciation was to be allowed. In his opinion, since vehicle was 3 years old, hence subjected to wear and tear, so original cost could not be actual cost in hands of individual. With this reasoning, view taken by Assessing Officer was confirmed. 4. I have heard submissions of both sides and carefully perused orders of authorities below in light of material placed before me and precedent cited. Facts as discussed ante are not in dispute that vehicle in question was purchased by HUF of assessee in year 1997 which was brought to business assets of assessee in his Individual capacity in assessment year 2001-02 on same original cost price at Rs. 3,865,607. question raised before me is interesting question that whether provisions of Explanation-3 to section 43(1) can be applied on asset which has not been used by such other person for his purpose of business or profession. In present appeal, admitted position is that said vehicle has not been utilized by such other person i.e., HUF for purpose of business and it is also admitted factual position that no depreciation was claimed in past on such vehicle. Explanation-3 to section 43(1) reads as under: "Explanation 3 - Where, before date of acquisition by assessee, assets were at any time used by any other person for purposes of his business or profession and [Assessing] Officer is satisfied that main purpose of transfer of such assets, directly or indirectly to assessee, was reduction of liability to income-tax (by claiming depreciation with reference to enhanced cost), actual cost to assessee shall be such amount as [Assessing] Officer may, with previous approval of [Joint Commissioner], determine having regard to all circumstances of case." 4.1 On careful reading of this Explanation, my observation is that as per this provision, it prescribed two pre-conditions, first, which is explicit, is assets were at any time used by any other person for purposes of his business or profession, and second, which is implicit, is formation of opinion as well as arriving at satisfaction that assessee has taken resort to subterfuge or device in order to avoid tax or acted fraudulently or transaction is colourable purposely. In my humble opinion, both these conditions are to be fulfilled so as to justify action of Assessing Officer empowering him to substitute cost or WDV as claimed by assessee. Except these two, there is no other circumstance under which this Explanation can be invoked. So, Assessing Officer is obliged to record his satisfaction that such transfer was device for reducing liability to pay income-tax. 4.2 To arrive at right conclusion and to appreciate arguments of Ld. AR I deem it proper to refer few precedents namely Jose Kuruyilla, v. CAIT [1992] 197 ITR 13 (Ker.) of Honble High Court, Kerala wherein another decision of Honble Calcutta High Court in case of CIT v. Kamala Mills Ltd. [1949] wherein it was expressed that if in previous period, no depreciation has been actually allowed, then actual cost incurred by assessee for incurring machinery would be Written Down Value of actual cost of machinery. It was held that it is not obligatory on assessee to claim depreciation and that being position, difficult to hold that assessee was not entitled to claim depreciation on basis of cost price of machinery. Honble Kerala High Court thus held that though assets in that case were acquired before previous year, no depreciation factually allowed in those year as contemplated by statute and so Court held that depreciation should be on value of assets at cost price. 4.3 another decision of jurisdictional High Court in case of Ginners & Pressers (P.) Ltd. v. CIT [1978] (Bom.) is also worth mentioning and paid petition from head note is reproduced below: "The proviso to section 10(5)(a) of Indian Income-tax Act, 1922 win apply if following two conditions are satisfied: (i) assets prior to date of acquisition by assessee must have been used by another person for purpose of his business (ii) Income-tax Officer must be satisfied that main purpose of transfer of such assets directly of??? to assessee was reduction of liability to income-tax of claiming depreciation with reference to enhanced cost. proviso nowhere speaks of market value being determined by Income-tax Officer but it speaks of actual cost being determined by Income-tax Officer and such actual cost has to be determined by Income-tax Officer with previous approval of Inspecting Assistant Commissioner having regard to all circumstances of case. Held, that first condition for attracting proviso to section 10(5) business before they were transferred to assessee-company. Tribunal was justified in rejecting valuation report and drawing adverse inference against assessee. proviso to section 10(5)(a) was properly applicable and basis adopted by department in fixing actual cost of transferred assets to assessee-company was not unreasonable or erroneous and was in accordance with requirements of law." purpose of this Explanation is to safeguard against certain illusory transaction purposely incorporated for tax avoidance. At this juncture, it is also necessary to clarify, since I am relying upon decision in case of Ginners & Pressers (P.) Ltd. (supra), that Explanation-3 corresponds to proviso to section 10(5)(a) of 1922 Income-tax Act. I have also noticed that there was no vital difference except slight verbal change. So, situation which was taken into account by Statute is that when assessee sells his asset to another person after using them for some time and assessee has acquired such second-hand asset and transaction is not genuine creating certain doubts, then AC has discretion to substitute alleged enhanced cost by cost which, according to him, should be actual cost to be arrived affairly having regard to all circumstances of case. Before I proceed further, I may also like to mention that in light of above precedent of Honble Kerala High Court in case of Jose Kuruvilla (supra) and several other decisions, whether Assessing Officer is under statutory obligation for years under consideration to impose upon assessee or thrust upon assessee depreciation which has not been claimed or otherwise in certain conditions, it was not allowable to assessee. Honble Courts have taken unanimous view that unless and until depreciation has actually been allowed in any of assessment year prior to year under considerations, Written Down Value of asset continues to remain same cost price incurred by assessee in acquiring said asset Dharampur Leather Co. Ltd.s case (supra). Honble Supreme Court has also approved such view in case of CIT v. Mahrindra Mills [2000] and held that provisions for claim of depreciation is certain for benefit of assessee. If he does not wish to avail that benefit for some reason, benefit cannot be force upon him. It is for assessee to see if claim of depreciation is to his advantage. So proviso in hand has actually been set at right by Honble Supreme Court that if in situation, where no depreciation has been claimed and assets having not been used for purpose of business, then Assessing Officer cannot substitute cost by suo motu forcing depreciation upon assessee. In present case, action of Assessing Officer of reduction of cost means forcing upon assessee imaginary depreciation which has never been calmed and to put him in dis- advantageous position by substituting he actual cost by cost so arrived at by Assessing Officer. 4.4 On basis of above precedents, I am of considered opinion that statute has purposely introduced words "assets were at any time not used by any other person for purposes of his business or profession" so as to take into account depreciation from cost of asset, though also I am n o t disregarding view expressed by Ld. CIT(A) in toto that said vehicle being three years old, hence subjected to wear and tear, resulted into reduction to cost but applicable provision had not been taken into account such situation so as to, given discretion to Assessing Officer to presume as if depreciation ought to have been imposed. On account of this fine interpretation of statute, I am of considered view that since HUF admittedly has not claimed depreciation in past and since HUF has admittedly not used vehicle for purpose of business, hence Assessing Officer has no jurisdiction to substitute asset by any other figure. T h e statute also do not give discretion for purpose of Explanation-3 to section 43(1), to enforce depreciation on presumption, during years of acquisition and thereafter, arrived at WDV taking into "account such presumed depreciation. Rather, statute has specified in this Explanationthat Assessing Officer has to satisfy by himself that main purpose of transfer of such asset was reduction it liability of income-tax by claiming depreciation with reference to enhanced cost. Rather, in present case, there is nothing on record to establish that assessee has purposely enhanced cost of asset to reduce tax liability by claiming unreasonable depreciation. On this count as well, I am not convinced with view of revenue authorities. Resultantly, I hereby direct to allow depreciation as claimed by assessee and grounds raised in this regard are allowed. 5. In result, appeal is allowed. *** Shashikant Janardan Kulkarni v. Income-tax Officer, Ward 2(4), Kudal