2006 (2) TMI 60 - HC - Income Tax

Calculation of period of limitation for the purpose of Section 153(2A) of ITA Period between sending draft order and receiving direction from Inspecting Assistant Commissioner shall be excluded

Summary

Issues:
Challenging exhibit P14 order dismissing revision petition for rectifying income-tax assessments under section 154 of the Income-tax Act, 1961 for 1992-93 to 1996-97 based on changed written down value due to preceding years' orders.

Analysis:
The petitioner challenged exhibit P14 order where the Commissioner of Income-tax dismissed the revision petition filed by the petitioner. The petitioner sought rectification of income-tax assessments under section 154 of the Income-tax Act, 1961, for the years 1992-93 to 1996-97. Assessments for these years were initially completed under section 143(1A) of the Act, granting depreciation based on the written down value declared by the petitioner in the returns. However, assessments for the two preceding years, 1990-91 and 1991-92, were under contest before the Commissioner (Appeals) and the Income-tax Appellate Tribunal. The issue revolved around the written down value of items like plant, machinery, furniture, etc., for depreciation. Orders of these two authorities changed the written down value for 1990-91 and 1991-92, leading to a modification in the written down value for granting depreciation for 1992-93 and later years.

The Assessing Officer declined the petitioner's request for rectification, stating no mistake was apparent on the face of the record to rectify assessments under section 154. The Commissioner upheld this decision, stating assessments completed based on the returns cannot be rectified as no mistake was evident. The High Court analyzed the case, considering the written down value under section 43(6) of the Income-tax Act, which is the actual cost of the assessee less depreciation allowed. It concluded that since there was a change in the written down value due to the orders of the appellate authority for the preceding years, depreciation for 1992-93 and subsequent years had to be recomputed based on these orders. The court found the authorities' view that there could be no mistake in the written down value post-return filing to be incorrect. It held that the mistake in the written down value was a consequence of the appellate order, necessitating a modification in assessments and granting depreciation based on the revised written down value.

In the final judgment, the High Court allowed the original petition, setting aside the impugned orders. It directed the Assessing Officer to modify the assessments and grant depreciation based on the written down value following the orders of the Commissioner of Income-tax (Appeals) and the Tribunal for the earlier years.