1991 (4) TMI 46 - HC - Income Tax

Summary

Issues:
Assessment of initial depreciation, Obligation to disclose fully and truly all material facts necessary for assessment, Validity of reopening assessments under section 147(a) of the Income-tax Act, 1961.

Analysis:

The judgment pertains to a departmental reference concerning the assessee's assessment for the years 1962-63 to 1970-71. The primary issue revolves around the obligation of the assessee to disclose fully and truly all material facts necessary for assessment, particularly in relation to the initial depreciation claimed by the assessee. The Income-tax Officer had initially disallowed the assessee's claim for depreciation and recalculated the depreciation, resulting in higher allowances than claimed by the assessee. Subsequently, the Income-tax Officer reopened the assessments under section 147(a) based on the belief that the assessee had been granted excess depreciation due to under-assessments.

The key contention was whether the under-assessments were a result of the assessee's failure to disclose material facts, justifying the reopening of assessments. The Appellate Assistant Commissioner and the Tribunal found that there was no obligation on the assessee to point out the initial depreciation granted in earlier years, as the Income-tax Officer had allowed higher depreciation based on his calculations. They concluded that the assessee was not at fault, and therefore, the reopening of assessments was deemed invalid.

The Revenue argued that the obligation was on the assessee to disclose correct income by claiming allowable depreciation under the Act. The interpretation of section 147(a) was crucial, emphasizing the requirement for the assessee to disclose fully and truly all material facts for assessment. The court highlighted the Supreme Court's position that the duty of the assessee is to disclose primary facts, leaving the inference to the Income-tax Officer.

Further, the court analyzed the relevant provisions, including the proviso to section 10(2)(vi) of the 1922 Act, which limits depreciation allowances to the original cost of assets. It was noted that the assessee had claimed depreciation based on the written down value, and the initial depreciation was recorded in the tax documents. Referring to precedents like the Calcutta Discount Co. Ltd. case and the Indo-Aden Salt Mfg. case, the court reiterated that the obligation to disclose pertains to primary facts, not inferential facts.

Ultimately, the court concurred with the Tribunal's finding that there was no failure on the part of the assessee to disclose all material facts necessary for assessment. Consequently, the question was answered in favor of the assessee, and no costs were awarded.