₹5.98 Lakh Addition due to Clerical Error in Depreciation: ITAT sets aside for Re-examination [Read Order]

The Raipur Bench of Income Tax Appellate Tribunal (ITAT) set aside the addition of ₹5.98 lakh made due to a clerical error in depreciation for re-examination.

Panchsheel Solvent Pvt. Ltd.,appellant-assessee,was engaged in manufacturing and trading edible oil and rice bran oil. It filed its return for AY 2016-17 on March 27, 2018, declaring Nil income. The case was selected for limited scrutiny under Computer-Assisted Scrutiny Selection (CASS), and a notice under section 143(2) was issued on August 21, 2018. Subsequent notices under section 142(1) were issued, but there was no compliance.

Know Practical Aspects of Tax Planning, Click Here

After a reminder, the assessee submitted an acknowledgment and computation of income on November 29, 2018. A final notice under section 144 was issued on December 4, 2018, but the explanations provided were not found satisfactory. As a result, additions were made, and the total income was enhanced to ₹1,14,90,060.

The assessee challenged the assessment before the Commissioner of Income Tax (Appeals) [CIT(A)] but failed to respond adequately. The CIT(A) dismissed the appeal, confirming the additions made by the Assessing Officer (AO).

The key issue was the addition of Rs. 5,98,030/- as short-term capital gain due to a clerical error. The AO noticed a difference between the closing balance of plant and machinery in AY 2015-16 and the opening balance in AY 2016-17. The AO considered this shortfall as a gain from the sale of assets and asked for an explanation.

The assessee clarified that the difference resulted from a change in the depreciation method, not from any asset sale. The Authorized Representative (AR) submitted a depreciation chart to support this claim, arguing that the amount should not be treated as short-term capital gain.

Read More: ‘Finds Addition Too Harsh’: ITAT directs Re-examination of PCIT’s  Rs. 3.4 cr Addition due to Sales Discrepancy

Know Practical Aspects of Tax Planning, Click Here

The two member bench comprising Ravish Sood (Judicial Member) and Arun Khodpia (Accountant Member) reviewed the submissions, records, and orders of the revenue authorities. It found no entry under the "SOLD" column in the depreciation chart, indicating no asset sale.

Since there was no evidence to support the AO conclusion, the ITAT held that the matter needed further verification. It set aside the issue to the AO for re-examination and fresh adjudication.

In short,the appeal filed by the assessee was partly allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates