Back
1986 Supreme(Cal) 345
High Court Of Calcutta
Ajit Kumar Sengupta
JAMESON AND MAGRUDAR CO.PVT.LTD. - Appellant
Versus
INCOME-TAX OFFICER - Respondent
Civil Rule 10112 Of 1976
Decided On : 08/18/1986
AJOY DEV, RUPEN MITRA
The conditions precedent for assumption of jurisdiction for initiation of the proceedings in respect of income escaping assessment are fulfilled if the Income-tax Officer has reason to believe that income has escaped assessment due to omission or failure of the assessee to disclose fully or truly all material facts, or if the Officer has new information which calls for reassessment of escaped wealth.
Headnote:
INCOME TAX - Reassessment - Notice - Validity - Conditions precedent - Whether fulfilled - Income-tax Act, 1961, ss. 147 (a), 147 (b), 148 - Held, yes.
Fact of the Case:
The petitioner challenged two notices issued under Section 148 of the Income-tax Act, 1961, for the assessment year 1971-72. The original assessment was completed on March 20, 1971, under Section 143 (3) of the said Act. The petitioner preferred an appeal against the said assessment, which was partly allowed by the Appellate Assistant Commissioner. The petitioner then went to the Income-tax Appellate Tribunal, which referred a question of law to the High Court under Section 256 (1) of the Act relating to the assessability of import entitlement. Thereafter, the Income-tax Officer issued notices under Section 148 on March 8, 1976, and March 29, 1976, for the assessment year 1971-72.
Finding of the Court:
The court held that the Income-tax Officer had jurisdiction to reopen the assessment for the assessment year 1971-72 based on the reasons recorded for initiation of the proceeding under Section 148 of the Act. The court found that the deductions under Sections 80k, 80l, and 80m of the Act had been wrongly allowed in the original assessment, and that this information would clothe the Income-tax Officer with the power to issue the impugned notice.
Issues: Whether the conditions precedent for assumption of jurisdiction for initiation of the proceedings in respect of income escaping assessment have been fulfilled.
Ratio Decidendi: The court held that the conditions precedent for assumption of jurisdiction for initiation of the proceedings in respect of income escaping assessment had been fulfilled. The court relied on the decision of the Supreme Court in Cambay Electric Supply Industrial Co. v. CIT, which held that unabsorbed depreciation and unabsorbed development rebate were liable to be deducted in arriving at the figure of profits and gains exigible to deduction contemplated in Section 80e (1). The court also relied on the decision of the Supreme Court in Distributors (Baroda) Put. Ltd. v. Union of India, which approved the decision in Cambay Electric Supply Company.
Final Decision: The court dismissed the petition and discharged the rule.
( 1 ) IN this application under article 226 of the Constitution, the petitioner has challenged two notices, one dated March 8, 1976, and the other dated March 29, 1986 (76?) issued under Section 148 of the Income-tax Act, 1961, for the aseessment year 1971-72. The original assessment for the assessment year was completed on March 20, 1971, under Section 143 (3) of the said Act.
( 2 ) THE petitioner also preferred an appeal against the said assessment. The Appellate Assistant Commissioner heard the appeal for the assessment year 1971-72 along with the appeals for other two years and granted certain reliefs to the petitioner. The petitioner thereafter went to the Income-tax Appellate Tribunal and the Income-tax Appellate Tribunal disposed of the appeal and a question of law was referred at the instance of the petitioner by the Tribunal under Section 256 (1) of the Act relating to the assessability of import entitlement.
( 3 ) THEREAFTER, the Income-tax Officer issued notice under Section 148 on March 8, 1976, for the assessment year 1971-72. He also issued another notice for the said assessment year on March 29, 1976, which was handed over to the petitioner's representative presumably by way of abundant caution to avoid limitation. The Revenue authorities have not filed any affidavit-in-opposition. The records were directed to be produced and the reasons recorded for initiation of the proceeding under Section 148 of the Act have been produced. The reasons as recorded for reopening the said assessment for the assessment year 1971-72 are as follows: "it is seen that the assessse's income has escaped assessment, inter alia, because of the following reasons: (1) In consequence of information received from Revenue audit, it is seen that the deductions under Sections 80k, 80l, 80m have been wrongly allowed in the original assessment. For this year, there is no gross total income within the meaning of Section 80b (5), the net result after allowing depreciation being a negative figure. Section 80 (2) lays down that the aggregated amount of deduction under Chapter VI-A shall not, in any case, exceed the gross total income of the assessee. In the instant case, since there is no gross total income within the meaning of Section 80b (5), the net result being a minus figure, no deductions under sections 80k, 80l and 80m can be allowed in view of the restriction imposed under Section 80a (2 ). In the circumstances, excess loss to the extent of Rs. 4,29,027 has been carried forward due to the following incorrect deductions :
Rs .
Under section 80k 98,233
Under section 80l 3,000
Under section 80m 3,27,794
Total 4,29,027
(2) The cement unit of the assessee-company started manufacture from January, 1969. For this assessment year, being the third year of allowance, unabsorbed deficiency under Section 80j to the tune of Rs. 26,60,874 as per computation filed by the assessee was accepted and carried forward in the original assessment. In the computation of capital employed worked out under Rule 19a, Income-tax Rules, 1962, no deduction as provided in Rule 19a (3) (b) for medium term loan obtained from the State Bank of India, H. O. , Calcutta, for rupees two crores was made. It transpires that as per terms of repayment, the loan was repayable during a period of less than seven years and it was utilised in setting up of the cement factory and as such the loan should have been deducted in the computation of capital. The assessee neither deducted the amount of loan in capital computation under Rule 19a nor disclosed the material facts regarding the utilisation and terms of the loan during the course of the original assessment. Thus 6% of 2 crores, i. e. , Rs. 12 lakhs have been allowed in excess in computation of relief under Section 80j, Besides an amount of Rs. 10,76,283 has been included in the written down values of fixed assets which is the value of incomplete jobs. As the assets worth Rs. 10,76,283 were not used
