9911796707
TMI Blog1969 (2) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... he court was delivered by SHAH J.--M/s. Modi Spinning & Weaving Mills Co. Ltd., hereinafter called "the company", was incorporated in 1946. From time to time the company purchased and installed machinery of the value of Rs. 75 lakhs for its factory. In proceedings for assessment of income-tax, the company was allowed in computing its income from business for the assessment years 1950-51, 1951-52 and 1952-53 "initial depreciation" aggregating to Rs. 15,91,511 in respect of new machinery installed in the relevant previous years. The company was also allowed "normal depreciation" at the appropriate rates. In the assessment year 1956-57 the aggregate of all depreciation allowances including "initial depreciation" exceeded the original cost of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e income chargeable to tax had escaped assessment. But it was urged that the income had not escaped assessment "by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment of that year", for--(1) the Indian Income-tax Act, 1922, and the forms of returns prescribed under the Rules did not require the assessee to disclose that initial depreciation had been allowed in the earlier years ; and (2) that in any event the Income-tax Officer knew that initial depreciation had been allowed to the company in the years 1950-51, 1951-52 and 1952-53. R. S. Pathak J., who heard the petitions, held that the company committed no error in failing to take into account the initial d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The written down value of the machinery of the company in the year 1956-57 was Rs. 16,48,053, but for the application of clause (c) of the proviso to section 10(2)(vi), the initial depreciation allowed in the years 1950-51, 1951-52 and 1952-53 had to be take into account. The Income-tax Officer inadvertently failed to be taken into account the initial depreciation, and the company was allowed normal depreciation in the year 1956-57 in excess of the amount permissible under proviso (c) to section 10(2)(vi). The Income-tax Officer later sought to rectify the error and to bring to tax the income which had escaped tax. Before R. S. Pathak J., it was contented that the definition of "written down value" in section 10(5)(b) applies wherever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd truly all material facts necessary for the assessment that the error was committed by the Income-tax Officer as a result of which some income had escaped assessment. The High Court then observed : "It is difficult to hold that the Income-tax Officer while issuing the notices under section 148 of the new Act could not reasonably hold the view that prima facie the assessee was responsible for the escape in the assessment", and held that the notices were not liable to be quashed. Section 34(1)(a) of the Income-tax Act, 1922, provided : "(1) If-- (a) the Income-tax Officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return of his income under section 22 for any year or to disclos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Officer, Companies District I, Calcutta. In deciding the appeal, the High Court held that the Income-tax Officer did in fact decide that the income had escaped assessment, but the High Court did not consider whether the income escaped assessment by reason of omission or failure on the part of the company to disclose fully and truly all material facts necessary for assessment. The judgment of the High Court is set aside and the 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 assessment of the company for the three years in question, any income, profits or gains chargeable to income-tax have escaped ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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