1967 (12) TMI 13 - HC - Income Tax

Account Books - Asst. Accountant-General in his audit report pointed out that the development rebate in respect of machinery purchased and installed had been allowed in the assessment year, though development reserve was not created - whether assessee had created a separate reserve for development rebate, and that at the time of making the claim for allowance of development rebate - Held, no

Summary

Issues:
1. Reopening of assessment for the assessment year 1959-60.
2. Compliance with the proviso to section 10(2)(vib) of the Income-tax Act, 1922.
3. Jurisdiction under section 147(a) of the Income-tax Act.

Analysis:
1. The judgment concerns two petitions under article 226 of the Constitution related to the reopening of the assessment for the assessment year 1959-60. The Income-tax Officer reopened the assessment based on an audit report highlighting a mistake in allowing the development rebate without creating a required reserve. The Commissioner sanctioned the reopening, leading to a notice under section 148 being served on the assessee. The court was tasked with determining whether the Income-tax Officer had jurisdiction under section 147(a) to reopen the assessment.

2. The primary issue revolved around the compliance with the proviso to section 10(2)(vib) of the Income-tax Act, 1922. The court analyzed the facts disclosed by the assessee during the original assessment proceedings. It was found that the assessee had debited the profit and loss account and credited the machinery account with the development rebate claimed, without creating a separate reserve as required by the proviso. The court concluded that the facts presented were adequate for the Income-tax Officer to disallow the claim for development rebate, as the requisites of the proviso had not been fulfilled.

3. The court examined the jurisdiction under section 147(a) of the Income-tax Act, focusing on whether there was an omission on the part of the assessee resulting in under-assessment. It was argued that the filing of a balance-sheet would have disclosed the absence of a separate reserve for development rebate. However, the court held that the primary facts already before the Income-tax Officer clearly indicated the ineligibility for the rebate claimed. The court emphasized that the jurisdiction under section 147(a) would not be available if there was no omission on the part of the assessee leading to under-assessment.

In conclusion, the court allowed one petition to restrain the Income-tax Officer from further proceedings and dismissed the other petition as unnecessary. The judgment clarified the requirements for claiming development rebate and the scope of jurisdiction under section 147(a) of the Income-tax Act, emphasizing the importance of full disclosure of material facts by the assessee during assessment proceedings.