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2016 Supreme(Guj) 1937
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
Akil Kureshi and A.J Shastri, JJ.
Anupam Rasayan India Ltd. - Petitioners
Vs.
Income Tax Officer & Ors. - Respondents
Special Civil Application No. 13822 of 2010
Decided On : 03-10-2016
For the Petitioners: Mr. R.K Patel
For the Respondents: Mr. Sudhir M. Mehta
The duty of the assessee to disclose fully and truly all material facts necessary for assessment, and the assessing officer's authority to reopen the assessment based on the reasons recorded.
Headnote:
Income Tax Act - Reopening of Assessment - Section 148 - 143(3) - 32(1) - 37(1) - The court examined the notice issued by the Assessing Officer under Section 148 of the Income Tax Act, 1961 for reopening the petitioner's assessment for the assessment year 2004-2005. The court analyzed the reasons recorded by the assessing officer and the objections raised by the petitioner, and considered the legal principles related to the duty of the assessee to disclose fully and truly all material facts necessary for assessment. The court found that the reasons for reopening the assessment were based on materials already on record and that the assessee had made full disclosures in the return itself. The court also examined the assessing officer's scrutiny during the original assessment and found that the claims were processed and examined, indicating no failure on the part of the assessee to disclose true and full facts. Therefore, the court set aside the impugned notice, allowing the petition and disposing of the case.
Fact of the Case:
The petitioner challenged a notice issued by the Assessing Officer under Section 148 of the Income Tax Act, 1961 for reopening the petitioner's assessment for the assessment year 2004-2005. The petitioner, a company registered under the Companies Act, filed the return of income on 01.11.2004, which was taken by the assessing officer in scrutiny. The assessing officer passed an order of assessment under Section 143(3) of the Act on 28.12.2007, computing the petitioner's total income as nil and allowing the company to carry forward unabsorbed depreciation of Rs. 3.81 Lakhs. The Assessing Officer issued the impugned notice on 28.08.2009, seeking to reassess the petitioner's income for the said assessment year 2004-2005. The petitioner raised objections to the notice of reopening, which were rejected by the Assessing Officer, leading to the filing of the petition challenging the authority of the assessing officer to reopen the assessment.
Finding of the Court:
The court found that the reasons for reopening the assessment were based on materials already on record and that the assessee had made full disclosures in the return itself. The court also examined the assessing officer's scrutiny during the original assessment and found that the claims were processed and examined, indicating no failure on the part of the assessee to disclose true and full facts. Therefore, the court set aside the impugned notice, allowing the petition and disposing of the case.
Issues: The issues involved in the case were the validity of the notice issued by the Assessing Officer under Section 148 of the Income Tax Act, 1961 for reopening the petitioner's assessment for the assessment year 2004-2005, and the authority of the assessing officer to reopen the assessment based on the reasons recorded.
Ratio Decidendi: The court held that the reasons for reopening the assessment were based on materials already on record and that the assessee had made full disclosures in the return itself. The court also found that the assessing officer's scrutiny during the original assessment indicated no failure on the part of the assessee to disclose true and full facts. Therefore, the court set aside the impugned notice, allowing the petition and disposing of the case.
Final Decision: The court set aside the impugned notice, allowing the petition and disposing of the case.
AKIL KURESHI, J.
The petitioner has challenged a notice dated 28.08.2009 issued by the respondent No. 1 Assessing Officer under Section 148 of the Income Tax Act, 1961 (‘the Act’ for short) for reopening the petitioner's assessment for the assessment year 2004-2005. The brief facts are as under:-
2. The petitioner lis a company registered under the Companies Act and was incorporated with effect from 30.08.2003 from a erstwhile partnership firm. For the Assessment Year 2004-2005, the petitioner filed the return of income on 01.11.2004 which was taken by the assessing officer in scrutiny. The assessing officer passed an order of assessment under Section 143(3) of the Act on 28.12.2007 in which he computed the petitioner's total income as nil and allowed the company to carry forward the unabsorbed depreciation of Rs. 3.81 Lakhs.
3. The Assessing Officer issued the impugned notice on 28.08.2009 seeking to reassess the petitioner's income for the said assessment year 2004-2005. This notice was thus issued beyond a period of four years from the end of the relevant assessment year. In order to do so, the assessing officer had recorded the following reasons:-
“The return of income for the year under consideration, declaring a total income of Nil was filed on 01.11.04 Assessment in the case was completed u/s. 143(3) r.w.s 147 of the Act on 28.12.07, determining the total income of the assessee at Nil.
2. The assessee company is engaged in the business of manufacturing of chemicals. On going through the office records, it is seen that the assessee company had claimed deduction of an amount of Rs. 89,92,832/- on account of depreciation, for the year under consideration. The assessee has acquired the status of company by undergoing registration under the Companies Act, 1956 w.e.f 31.08.03 Prior to acquiring the status of company the assessee was a partnership firm viz M/s. Anupam Rasayan. According to the fifth proviso to section 32(1) of the Act, whenever there is a succession as per clause (xiii) and clause (xiv) of 47 of section 170 of the Act, depreciation is allowable on the assets to the predecessor and the successor. The said proviso also stipulates that the depreciation shall be apportioned between the predecessor and the successor in the ratio of the number of days for which the assets were used by them. The amount of Rs. 89,92,832/- claimed by the assessee company as depreciation is for the whole year i.e. 365 days, which is in contravention of the provisions of the fifth proviso to section 32(1) of the Act. The amount of depreciation claimed by the assessee in respect of the assets extracted by it from the firm on acquiring the status of company is Rs. 78,30,983/-. As per the provisions cited supra, the assessee company is eligible to claim depreciation for only 214 days (from 31.08.03 to 31.03.04) in respect of the assets of Rs. 3,47,40,825/- extracted from the firm - M/s. Anupam Rasayan, which works out to Rs. 45,91,305/-, the working of which is given below:
| Sr. No. | Assets | WDV of assets extracted from firm (Rs.) | Rate of depre. (%) | Amount of depre. Claimed assets at col. B (Rs.) | Amount allowab le to the assessee for 214 days (Rs.) | Excess dep. Claimed by the assessee (Rs.) |
| A | B | C | D | E | F | G |
| 1 | Building | 5995961 | 10 | 599596 | 351543 | 248053 |
| 2 | Plant & Machinery | 27298507 | 25 | 6824627 | 4001279 | 2823348 |
| 3 | Motor car | 855644 | 20 | 171129 | 100333 | 70796 |
| 4 | Furniture & fixtures | 263993 | 15 | 39599 | 23217 | 16382 |
| 5 | Computer | 326720 | 60 | 196032 | 114934 | 81098 |
| TOTAL | 7830983 | 4591305 | 3239678 |
| ||
Thus, the assessee company has claimed depreciation in excess of Rs. 32,39,678/- which is not allowable. Thus, income to the extent of Rs. 32,39,678/- has escaped assessment within the meaning of section 147 of the Act.
3. It is seen from the office
