RDS CVCC JV vs ACIT Circle 33(1) – Dispute Over Depreciation Disallowance for AY 2016-17

RDS CVCC JV vs ACIT Circle 33(1): Dispute Over Depreciation Disallowance for AY 2016-17

Case Number: ITA 6522/DEL/2019

Appellant: RDS CVCC JV, New Delhi

Respondent: ACIT Circle-33(1), New Delhi

Assessment Year: 2016-17

Order Type: Final Tribunal Order

Date of Order: 2022-06-20

Pronounced on: 2022-06-20

Background of the Case

The appellant, RDS CVCC JV, a joint venture based in New Delhi, filed its return of income electronically on 17th October 2016 for the assessment year 2016-17. The return claimed a loss of Rs. 23,10,281. The case was selected for scrutiny, and the assessment was finalized under Section 143(3) of the Income Tax Act, 1961. The Assessing Officer (AO) determined the total loss at Rs. 3,37,070 after disallowing depreciation of Rs. 19,73,210 on certain plant and machinery.

Appeal Before CIT(A)

Aggrieved by the AO’s order, the appellant approached the Commissioner of Income Tax (Appeals) [CIT(A)], challenging the disallowance of depreciation. However, the CIT(A) dismissed the appeal through an ex parte order dated 25th June 2019, without addressing the merits of the appellant’s contentions. The appellant claimed that the CIT(A) failed to consider the additional evidence submitted and did not provide a fair hearing, thereby violating the principles of natural justice.

Grounds of Appeal

The appellant raised the following grounds before the Income Tax Appellate Tribunal (ITAT):

• The CIT(A) erred in confirming the AO’s disallowance of Rs. 19,73,210 on account of depreciation on plant and machinery, particularly when the assets were purchased and used for business purposes. The disallowance was based on incorrect facts and findings, and the appellant was not provided with adequate opportunity to present its case.
• The CIT(A) acted contrary to the principles of natural justice by dismissing the appeal without providing a hearing or considering the merits of the case.
• The appellant sought to introduce additional evidence that could substantiate its claim, which the CIT(A) ignored.

ITAT’s Decision

The ITAT bench, comprising Shri Anil Chaturvedi (Accountant Member) and Shri Narender Kumar Choudhary (Judicial Member), heard the case on 20th June 2022. After reviewing the submissions, the Tribunal noted that the CIT(A) had indeed passed an ex parte order without addressing the merits of the case or the additional evidence submitted by the appellant.

The Tribunal observed that Sub-Section (6) of Section 250 of the Income Tax Act mandates the CIT(A) to state the points in dispute and assign reasons for their conclusions. By dismissing the appeal without considering the merits, the CIT(A) failed to fulfill this mandate.

Further, the Tribunal emphasized the importance of providing a fair hearing to the parties involved, a fundamental principle of natural justice. The CIT(A)’s failure to do so was a significant procedural lapse.

In light of these findings, the Tribunal set aside the CIT(A)’s order and remanded the case back to the AO for fresh adjudication. The AO was directed to consider the merits of the appellant’s claims and the additional evidence submitted, ensuring that the appellant is granted a fair hearing.

The Tribunal concluded that, given the remand, it was unnecessary to adjudicate the merits of the grounds raised by the appellant at this stage.

Conclusion

In conclusion, the ITAT allowed the appeal for statistical purposes, remanding the case to the AO for a fresh decision. This case underscores the importance of adherence to the principles of natural justice and the requirement for appellate authorities to consider the merits of a case thoroughly before issuing an order.

The case, involving a dispute over the disallowance of depreciation on plant and machinery, highlights the need for adequate opportunity to be provided to taxpayers to present their case, ensuring that justice is not only done but also seen to be done.

RDS CVCC JV vs ACIT Circle 33(1) – Dispute Over Depreciation Disallowance for AY 2016-17