1974 (1) TMI 12 - HC - Income Tax

This is an appeal challenging five notices issued under section 148 of the Income-tax Act, 1961 - ITO had allowed depreciation at a particular rate, if he subsequently learns that another ITO had allowed depreciation at a lower rate on similar machinery - whether ITO can reopen the assessment under section 147(b)

Summary

Issues:
Challenge to notices issued under section 148 of the Income-tax Act for multiple assessment years based on alleged incorrect depreciation claimed by the assessee and subsequent information regarding depreciation rates in a sister concern.

Analysis:
The appeal challenged five notices issued under section 148 of the Income-tax Act for the assessment years 1964-65 to 1968-69. The assessee had originally claimed 10% depreciation on blade making machinery, which was allowed. However, the Income-tax Officer later believed that the correct rate should have been 7% based on subsequent information regarding a sister concern's depreciation claims on similar machinery. The question was whether this constituted valid "information" under section 147(b) of the Income-tax Act.

The High Court analyzed the conditions for information under section 147(b) based on judicial precedents. It was held that for information to trigger reassessment, it must be knowledge or instruction concerning facts or law relating to the assessment, acquired after the previous assessment, leading to a belief of under-assessment. The Court emphasized that information must be external and not derived from a previous assessment. The Court also noted that decisions of officers on similar matters in other assessments do not constitute valid information under section 147(b).

Relying on the decision in Reform Flour Mills (Private) Ltd. v. Commissioner of Income-tax, the Court concluded that the Income-tax Officer's opinion based on another assessee's assessment did not meet the criteria for valid information under section 147(b). Therefore, the notices issued for reassessment were quashed as the condition precedent for issuance had not been fulfilled. The appeal was dismissed, and no costs were awarded.

In summary, the High Court upheld the decision to quash the notices challenging the reassessment based on incorrect depreciation claims, as the subsequent information regarding a sister concern's depreciation rates did not meet the criteria for valid information under section 147(b) of the Income-tax Act.