2012 (8) TMI 145 - HC - Income Tax

Reassessment proceeding under Section 147 Disallowance of unabsorbed / unserved depreciation - period of limitation - amendment w.e.f. 1997-98 - Held that - Depreciation has been wrongly allowed pertaining to the assessment year 1993-94 to 1997-98 to which the petitioner was not entitled - deemed to have escaped assessment within the meaning of Section 147 of the I.T. Act for which action under Section 147 was taken and the impugned notice under Section 148 is issued - depreciation which was allowed by the Assessing Officer while completing assessment under Section 143(3) was never before the 1st Appellate Authority and consequently before the ITAT - writ petition is dismissed.

Issues:
1. Challenge to notice issued under section 148 of the Income Tax Act, 1961 for the assessment year 2006-07.
2. Validity of section 147 of the Income Tax Act, 1961 in permitting the reopening of assessments.
3. Interpretation of provisions related to unabsorbed depreciation and carry forward under section 32(2) of the Act.
4. Jurisdiction of the Assessing Officer in reopening assessments based on alleged escaped income.
5. Applicability of the second proviso to section 147 in the context of ongoing appeals.

Issue 1:
The petitioner challenged a notice issued under section 148 of the Income Tax Act, 1961 for the assessment year 2006-07. The petitioner contended that the notice was erroneous as it was based on the premise that the depreciation allowance had lapsed before the relevant assessment year. The petitioner argued that the assessing officer failed to consider relevant amendments and explanatory notes, leading to a wrongful notice issuance.

Issue 2:
The petitioner sought a declaratory relief to declare section 147 of the Income Tax Act, 1961 unconstitutional, alleging that it permits the Assessing Officer to reopen assessments merely on a change of opinion. The petitioner argued that such provisions violated Articles 14 and 19 of the Constitution, seeking a mandamus to restrain the opposite party from acting under section 147.

Issue 3:
The case revolved around the interpretation of section 32(2) of the Income Tax Act regarding unabsorbed depreciation. The petitioner argued that the assessing officer's disallowance of unabsorbed depreciation for certain years was erroneous and contrary to the provisions of the Act. The petitioner relied on circulars and previous orders in support of their position.

Issue 4:
The jurisdiction of the Assessing Officer in reopening assessments based on alleged escaped income was questioned. The petitioner contended that the notice was issued without jurisdiction and contrary to the provisions of section 32(2) as amended by the Finance Act, 2001. The petitioner highlighted the ongoing appeal process and argued against the validity of the notice.

Issue 5:
The applicability of the second proviso to section 147 in the context of ongoing appeals was raised. The petitioner argued that the notice was contrary to the second proviso of section 147, which prohibits reassessment proceedings on income subject to appeal. The opposite party opposed the petition, stating that the grounds for the notice were not part of the appeal process, thus justifying the notice issuance.

In conclusion, the High Court dismissed the writ petition, stating that the petitioner was not entitled to the requested declaration or mandamus. The court found no merit in the petition and allowed the petitioner to participate in the ongoing proceedings before the assessing officer. The judgment highlighted the legal contentions, interpretations of relevant provisions, and the procedural aspects of challenging the notice issued under section 148 of the Income Tax Act, 1961.

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