1998 (3) TMI 187 - AT - Income Tax

Summary

Issues Involved:
1. Validity of reopening of assessment under section 147(a) of the Income Tax Act.
2. Addition of Rs. 95,17,841 in the computation of income under section 115J of the Income Tax Act.
3. Deductions under sections 80HH and 80-I of the Income Tax Act.
4. Rectification order under section 154 of the Income Tax Act.

Detailed Analysis:

1. Validity of Reopening of Assessment under Section 147(a) of the Income Tax Act:
The assessee challenged the reopening of assessment under section 147(a) of the Income Tax Act. The original return was filed on 21-6-1988 and revised on 6-3-1989, but the assessee did not disclose the excess depreciation charged. The court found that the assessee failed to disclose fully and truly all material facts necessary for assessment, which led to the reopening of the assessment. The court upheld the CIT(A)'s observation that there was sufficient material for the Assessing Officer to have a reasonable belief that the income chargeable to tax had escaped assessment due to the non-disclosure of excess depreciation.

2. Addition of Rs. 95,17,841 in the Computation of Income under Section 115J of the Income Tax Act:
The assessee provided excess depreciation for the whole accounting year but only wrote back the excess depreciation for the period from 2-4-1987 to 30-4-1987 in the subsequent assessment year. The court examined the provisions of section 115J of the Income Tax Act and section 205 of the Companies Act, concluding that depreciation should be computed as per the provisions of Schedule XIV of the Companies Act, which was applicable at the end of the accounting year (30-4-1987). The court found that the assessee did not notify the reasons for non-withdrawal of excess depreciation in its return of income, justifying the addition of Rs. 95,17,841 by the revenue authorities.

3. Deductions under Sections 80HH and 80-I of the Income Tax Act:
The assessee contended that deductions under sections 80HH and 80-I should be allowed independently. However, the court agreed with the CIT(A)'s view that since tax was charged on book profit as per section 115J of the Income Tax Act, the issue of deductions under sections 80HH and 80-I became academic and required no adjudication. Nonetheless, the court acknowledged that this issue is covered by the judgment of the jurisdictional High Court in the case of J.P. Tobacco Products (P.) Ltd. v. CIT.

4. Rectification Order under Section 154 of the Income Tax Act:
The appeal emanated from the order passed under section 154 of the Income Tax Act. Since the court had already upheld the validity of the reopening of assessment under section 147(a) and the addition of excess depreciation in the earlier appeal, it found no need to adjudicate this appeal on merits. The court found no infirmity in the CIT(A)'s confirmation of the rectification order under section 154 of the Act.

Conclusion:
Both appeals were dismissed, upholding the reopening of assessment under section 147(a), the addition of Rs. 95,17,841 under section 115J, and the rectification order under section 154 of the Income Tax Act. The issue of deductions under sections 80HH and 80-I was deemed academic due to the tax being charged on book profit.