1976 Supreme(SC) 445

SUPREME COURT OF INDIA
H.R. KHANNA AND V.R. KRISHNA IYER, JJ.
The Parashuram Pottery Works Co. Ltd., Appellant
Versus
The Income-tax Officer, Circle I, Ward A, Rajkot, Gujarat, Respondent.
Civil Appeal No. 1792 of 1971, D/- 16-11-1976.
Advocates appeared
M/s. R. H. Dhebar, S. K. Dholakia and Mr. R. M. Mehta, Sr. Advocate, (Mr. Girish Chandra, Advocate with him), for Respondent.

Headnote:

Indian Income-tax Act, 1922 - Income-tax Act, 1961 - Section 148 - Constitution of India, 1950 – Article 226 - Acquisition of various capital assets – Quash of order - Whether on disclosure by assessed or discovered by him on basis of facts disclosed or otherwise assessing authority has to draw inferences as regards certain other facts - Whether of facts or law should be drawn - Whether of facts or law-he would draw from primary facts - Matter relates to the assessment years - Appellant is a public limited Company which carries on the business of manufacture of pottery and sanitary wares and other places in the State - In respect of the assessment year corresponding accounting year for which ended on July appellant filed its return under the Indian Income-tax Act, 1922 - Predecessor-in-interest of the respondent by assessment order dated April assessed the total income of the appellant - In computing the said income the Income-tax Officer allowed depreciations amounting - For the assessment year appellant likewise filed return. Assessment order in respect of that year was med on March and the income of the appellant was assessed after allowing depreciation - On October a letter was addressed on behalf of the respondent to the appellant stating that there had been a mistake in the calculation of depreciation allowance in respect of certain items of the capital assets of the appellant for the period covered by the assessment years - As a result of the mistake, it was stated, a sum of had been allowed as depreciation allowance in excess of the permissible limit - Enclosed with the letter was a chart showing excess depreciation allegedly allowed during the above-mentioned period - Excess amounts of depreciation for the years were mentioned in the chart respectively - Appellant company was asked if it had any objection to the rectification of the mistake - Above letter was followed by another letter wherein the respondent wrote to the appellant that mistake in depreciation arose because the initial depreciation was not taken into account in finding out whether the total depreciation allowed exceeded original cost - On February Income-tax Officer addressed another letter to the appellant stating that for the assessment years income of the appellant had escaped assessment for failure of appellant to disclose all material facts within the meaning of Section 147 (a) of the Act of 1961 – Held, Present is not a case where assesses had omitted or failed to file the return - Question then arises as to what has been omission or failure on the part of assesses to make a full and true disclosure - There is nothing before us to show that in the return filed by the assesses-appellant, the particulars given were not correct - From C under Rule 19 of the Indian Income-tax Rules,1922 at the relevant time gives form of return which had to be filed by the companies. Part V of that form deals with depreciation - Said part requires a number of columns to be filled in by assesses - It has not been suggested that any of the information furnished or any of the particulars given in those columns by the appellant company were factually incorrect - Nor is it the case of the revenue that the appellant failed to furnish the particulars required to be inserted in those columns – Indeed copy of the return has not been filed and consequently no argument on that score could be or has been addressed before us - Part of the form no doubt requires assesses to state the written down value in column - Such written down value had to be specified without taking into account initial depreciation because such depreciation in terms of clause (vi) of Section 10 (2) of the Act of 1922 could not be deducted in determining written down value for the purpose of that clause - Case of the appellant is that in determining amount of depreciation at the time of the original assessment for two assessment years in question Income-tax Officer relied upon the written down value of various capital assets as obtaining in the records of department - This stand has not been controverter - When as income-tax officer relies upon his own records for determining the amount of depreciation and makes a mistake in doing so court fail to understand as to how responsibility for that mistake can be ascribed to an omission or failure on the part of assesses - It also cannot be disputed that initial depreciation in respect of items of capital assets in the shape of new machinery plant and building installed or erected is normally claimed and allowed - It seems that Income-tax Officer in working the figures of depreciation for certain items of capital assets lost sight of fact that aggregate of depreciation including the initial depreciation allowed under different heads could not exceed the original cost to assesses of those items of capital assets - Appellant cannot be held liable because of this remissness on the part of the Income-tax Officer in not applying the law contained in clause (c) of proviso to Section 10 (2) (vi) of the Act of 1922 - Submission made on behalf of the appellant is not without force that reference was made to assesses omission or failure to disclose truly and fully all material facts because it was realized that after the expiry of four years from the end of the relevant assessment year no action for reopening of assessment could be taken on the basis of detection of mistake alone unless there was also an allegation that the income had escaped assessment because of omission or failure or the appellant to disclose fully and truly material facts - Looking to all the facts court are of the opinion that it cannot be said that excess depreciation was allowed to appellant company and its income as such escaped assessment because of its omission or failure to disclose fully and truly all material facts - Appeal allowed