1996 (6) TMI 60 - HC - Income Tax

Assessment Proceedings Claiming Depreciation Failure To Disclose Material Facts Fluctuation In Rate Foreign Exchange Reassessment Proceedings

Summary

Issues:
Challenge to notice under section 148 of the Income-tax Act, 1961 for assessment year 1989-90 based on alleged escapement of income. Claim for additional investment allowance on foreign currency loan liability due to exchange rate fluctuation. Validity of notice under section 148 issued after four years without failure to disclose material facts.

Analysis:
The petitioner challenged the notice under section 148 of the Income-tax Act, 1961, issued for the assessment year 1989-90, alleging escapement of income. The Assessing Officer had reason to believe that there was escapement and issued the notice, calling for a response within 30 days. The assessment order for the relevant year was passed under section 143(3) of the Act, with specific reference to investment allowance. The Commissioner of Income-tax had earlier questioned the assessment order and remanded the matter to the Assessing Officer for further consideration. Subsequently, a new assessment order was passed, followed by the issuance of the impugned notice under section 148 in December 1994.

The petitioner claimed additional investment allowance on a foreign currency loan liability due to exchange rate fluctuation, arguing that the increased liability should be considered part of the "actual cost" for the relevant assessment year. The Assessing Officer allowed depreciation but raised a query regarding the investment allowance, ultimately rejecting the claim. The Commissioner of Income-tax, in a separate notice under section 263, acknowledged that there was no precondition of actual repayment for depreciation allowance, supporting the petitioner's position.

The petitioner contended that all material facts necessary for assessment were fully and truly disclosed, challenging the validity of the notice under section 148 issued after four years without any failure to disclose material facts. The petitioner argued that the notice was invalid and without jurisdiction, citing the proviso to section 147 of the Act, which restricts such actions after four years unless there is a failure to disclose material facts. The reasons provided by the Deputy Commissioner of Income-tax sought permission for the notice under section 148 based on the lapsed four-year period, without indicating any failure to disclose material facts.

The court held that there was no indication of a failure to disclose material facts necessary for assessment in the reasons provided, noting that the Assessing Officer was aware of the investment and exchange rate fluctuations. The court found that the petitioner had fully disclosed all relevant facts, leading to the allowance of the petition. Consequently, the notice under section 148 dated December 28, 1994, was quashed and set aside, with no order as to costs.