1969 (2) TMI 13 - SC - Income Tax

Case is remanded for determination of the question whether by reason of the omission or failure on the part of the company to disclose fully and truly all material facts necessary for assessement of the company for the three years in question, any income, profits or gains chargeable to income-tax have escaped assessment or the company has been given excessive depreciation allowance in computing its income

Summary

Issues:
1. Interpretation of provisions related to initial depreciation under the Income-tax Act, 1922.
2. Assessment of income-tax for the assessment years 1950-51, 1951-52, 1952-53, and 1956-57.
3. Validity of notices of reassessment issued under section 148 of the Indian Income-tax Act, 1961.
4. Disclosure of material facts necessary for assessment by the assessee.
5. Jurisdiction of the Income-tax Officer to issue notices of reassessment under section 34 of the Income-tax Act, 1922.

Detailed Analysis:

1. The case involved the interpretation of provisions related to initial depreciation under the Income-tax Act, 1922. The company had claimed initial depreciation for machinery installed in previous years, leading to a dispute regarding the computation of depreciation allowances for the assessment years.

2. The assessment of income-tax for the assessment years 1950-51, 1951-52, 1952-53, and 1956-57 was crucial. The company had been allowed initial depreciation in earlier years, which impacted the calculation of normal depreciation for the assessment year 1956-57, leading to discrepancies in the assessment process.

3. The validity of notices of reassessment issued under section 148 of the Indian Income-tax Act, 1961, was challenged by the company. The issue revolved around whether the notices issued more than four years after the expiry of the assessment years were barred and if the income had escaped assessment.

4. The disclosure of material facts necessary for assessment by the assessee was a key point of contention. The company argued that it was not required to disclose the initial depreciation in the earlier years as it was not mandated by the rules, while the Income-tax Officer contended that full disclosure of all material facts was necessary for a correct assessment.

5. The jurisdiction of the Income-tax Officer to issue notices of reassessment under section 34 of the Income-tax Act, 1922, was also examined. The conditions for issuing a notice of reassessment, including the belief that income had been under-assessed due to omission or failure on the part of the assessee to disclose material facts, were analyzed in the context of the case.

In conclusion, the High Court held that the case be remanded for a determination on whether the income had escaped assessment due to the company's failure to disclose all material facts necessary for assessment. The appeals were allowed, and the costs were to be borne by the company in the High Court.