Law:

Section:

Section 154 of the Income-tax act, 1961-Rectification of mistakes-Mistake apparent from record-ITO computed income from cinema building including machinery and furniture let out by assessee by allowing deduction for repairs, but later withdrew deduction in reassessment on discovering that repair charges were to be met by lessee under Agreement-Later, ITO rectified these orders to allow depreciation-Commissioner Cancelled rectification orders on the grounds that these were time-barred with reference to dates of original assessments and that income being properly assessable under the head "income from house property", depreciation was not admissible-Whether tribunal justified in cancelling commissioner's orders by holding that rectification was made in time with reference to dates of reassessments and that income being properly assessable under the head "income from other sources",ITO 's orders were not prejudicial to revenue-'Held, on facts, yes Facts The assessee owned a cinema building which, together with machinery and furniture therein was leased out on rental basis. While concluding the original assessment, the ITO apportioned, the annual rent between the building on the one hand, and the machinery and furniture on the other, and computed the income by allowing deduction for repairs on the former and the depreciation on the latter. However, later on he reopened the assessments to withdraw the deduction for repairs in view of the provision in the lease agreement that the cost of repairs would be met by the lessee, and completed the reassessments. Still later, pursuant to an audit objection, he rectified these assessments under section 154 so as to allow depreciation on the building, but these orders were cancelled by the Commissioner under section 263 on the grounds, inter alia, (i) that the ITO had acted suo motu ; (ii) that the orders were time-barred, having been made beyond four years from the dates of the original assessments ; (iii) that the ITO had erred in his conclusion that the building, machinery and plant were let out together ; and (iv) that since income from the building was correctly assessable under the head "Income from house property",…

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