2010 (8) TMI 310 - HC - Income Tax

Section 10A of the Income-Tax Act, 1961 - free trade zone - In the present writ petition the petitioner is challenging the notice under Section 148 of the Act - Whether the assessee has claimed lesser amount of depreciation and increased the amount of income is wholly irrelevant as the entire income of the assessee was exempted from tax under Section 10-A of the Act in the year under consideration - In support of the contention, he relied upon various decisions of the Supreme Court and the High Courts - In the case of GKN Driveshafts (India) Ltd. v. Income-Tax Officer 2002 (11) TMI 7 - SUPREME Court it was held - reliance placed on the provision of Section 43-A of the Act, which has been inserted by the Finance Act, 2002 with effect from 1.4.2003, which, according to learned counsel for the petitioner, has set at rest all the controversies relating to the claim of depreciation. Since this provision was not available with the assessing authority when the notice under Section 148 of the Act was issued, that the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order Thus the writ petition stands disposed of

Summary

Issues:
Challenging validity of notice under Section 148 of the Income-Tax Act for assessment year 2000-01.

Analysis:
The petitioner, a company established in a free trade zone, filed income tax returns for several years, including declaring NIL taxable income for the assessment year 2000-01 under Section 10-A of the Act. The assessing authority issued a notice under Section 148, citing excess claim of exemption due to depreciation not deducted from income. The petitioner challenged the notice, arguing that since its income was exempt under Section 10-A, no action could be taken under Section 147. The petitioner emphasized that the depreciation claimed was consistent with previous years and irrelevant to the exemption status. The Standing Counsel contended that the petitioner wrongly claimed depreciation, constituting escaped income under Explanation 2 of Section 147. Referring to GKN Driveshafts case, the Court directed the petitioner to file objections to the reasons recorded before the assessing authority, considering the petitioner's reliance on Section 43-A inserted post-notice issuance.

The Court acknowledged the petitioner's reliance on Section 43-A, absent during the notice issuance, and directed the petitioner to submit objections to the assessing authority within four weeks. The assessing authority was instructed to address the objections through a speaking order before proceeding with the assessment. The judgment was delivered, disposing of the writ petition without delving into the substantive contentions, emphasizing the need for the petitioner to raise objections and the assessing authority to address them comprehensively before further assessment proceedings.