Re: Depreciation on Bogus purchases
This is a case of bogus purchases. Brief facts of the case are as under:
1) In year 1, the AO disallowed capital bogus purchases and the depreciation thereon. Thereafter, in appeal before the ITAT, the ITAT set aside the matter back to the AO for fresh adjudication (as additional evidence was filed before ITAT).
2) In year 2, the AO once again disallowed the depreciation portion in respect of the capital assets which were disallowed in year 1. The CIT(A) in year 2, deleted the said addition as on that particular date when the CIT(A) order was passed, the AO has not passed any order for year 1 as per the directions of the ITAT.
The assessee is opting for VSV scheme in year 1 wherein the matter in dispute relates to addition on account of capital assets and depreciation thereon (set aside matter)
The assessee is opting for VSV scheme in year 2 as well, however, in year 2, the disputes are in respect of other matters before the ITAT (i.e. the depreciation portion which is already deleted by the CIT(A) is not in dispute)
Based on the facts stated above, our questions/queries are as under:
1. Do we need to pay tax under the VSV scheme on the depreciation disallowance for year 2? Please note that the said depreciation for year 2 is not in dispute presently and the assessee will be paying tax on the depreciation under the VSV scheme in year 1.
2. As the assessee will be paying tax under VSV scheme in year 1 in respect of depreciation disallowance, whether the same will have any impact on the assessee’s position in year 2.
3. For year 2, can we write a letter to the AO to give effect to order of CIT(A) in respect of deletion of depreciation which has arisen on account of bogus purchases in year 1?
As we understand, in case of year 1, the case is pending before the AO and no order is passed; therefore, no appeal exists on the specified date. Therefore, Year 1 is not eligible for VSVA.
Year 2 is pending before the ITAT on the specified date i.e. January 31, 2020, the same is eligible under VSVA.
As per explanation to section 5 of VSVA, making a declaration under this Act shall not amount to conceding the tax position and it shall not be lawful for the income-tax authority or the declarant being a party in appeal or writ petition or special leave petition to contend that the declarant or the income-tax authority, as the case may be, has acquiesced in the decision on the disputed issue by settling the dispute.
The assessee can write to the Assessing Officer to grant consequential relief as per the order of CIT (A )
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