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TMI Blog1976 (11) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany which carries on the business of manufacture of pottery and sanitary wares at Morvi and other places in the State of Gujarat. In respect of the assessment year 1957-58, the corresponding accounting year for which ended on July 31, 1966, the appellant filed its return under the Indian Income-tax Act, 1922 (hereinafter referred to as " the Act of 1922 "). The predecessor in interest of the respondent by the assessment order dated April 16, 1959, assessed the total income of the appellant at Rs. 4,60,372. In computing the said income the Income-tax Officer allowed depreciation amounting to Rs. 5,05,487. For the assessment year 1959-60 the appellant likewise filed return. Assessment order in respect of that year was made on March 30, 1961, and the income of the appellant was assessed at Rs. 11,04,650 after allowing depreciation of Rs. 3,57,926. On October 5, 1965, a letter was addressed on behalf of the respondent to the appellant stating that there had been a mistake in the calculation of the depreciation allowance in respect of certain items of the capital assets of the appellant for the period covered by the assessment years 1955-56 to 1962-63. As a result of the mistake, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n on the new assets had been allowed was also on the record of the department. If there was any oversight on the part of the Income-tax Officer, the appellant, it was claimed could not be held responsible for that. The petition was resisted by the respondent and the affidavit of Shri N. M. Baxi, Income-tax Officer, was filed in opposition to the petition. According to that affidavit, the appellant did not disclose in the return that initial depreciation in respect of certain items of capital assets had been allowed in the past and that the same should be taken into account while calculating the depreciation allowable for the assessment years in question. The High Court found that the first requirement of section 147(a) of the Act of 1961 was satisfied inasmuch as the Income-tax Officer had reason to believe that the income of the appellant for the two assessment years in question had escaped assessment. The mistake arose because of the fact that the initial depreciation allowance which had been allowed to the appellant in respect of some of the items of the capital assets was not taken into account while computing the depreciation allowance during the relevant years. As a res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (b) in the case of other buildings, to ten per cent. of the cost thereof to the assessee : (c) in the case of machinery or plant, to twenty per cent. of the cost thereof to the assessee : Provided that--- .......... (c) the aggregate of all allowances in respect of depreciation made under this clause and clause (via) or under any Act repealed hereby, or under the Indian Income-tax Act, 1886 (II of 1886), shall, in no case, exceed the original cost to the assessee of the buildings, machinery, plant or furniture, as the case may be ; (via) in respect of depreciation of buildings newly erected, or of machinery or plant being new which has been installed, after the 31st day of March, 1948, a further sum (which shall be deductible in determining the written down value) equal to the amount admissible under clause (vi) (exclusive of the extra allowance for double or multiple shift working of the machinery or plant and the initial depreciation allowance admissible under that clause for the first year of erection of the building or the installation of the machinery or plant) in not more than five successive assessments for the financial years next following the previous yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o account in computing the depreciation regarding those items in the two assessment years in question. The present is, therefore, a case, according to the respondent, of income escaping assessment under section 147 of the Act of 1961. Reliance in this connection is placed upon clause (d) of Explanation (1) to section 147 of the Act of 1961, according to which it would be a case of income escaping assessment where excessive depreciation allowance is computed. The material part of section 147 of the Act of 1961 reads as under : " 147. income escaping assessment.---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 under section 139 for any assessment year to the Income-tax Officer, or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re initiating proceedings as required by section 148(2). Another requirement is that before notice is issued after the expiry of four years from the end of the relevant assessment years, the Commissioner should be satisfied on the reasons recorded by the Income-tax Officer that is a fit case for the issue of such notice. The duty which is cast upon the assessee is to make a true and full disclosure of the primary facts at the time of the original assessment. Production before the Income-tax Officer of the account books or other evidence from which material evidence, could with due diligence have been discovered by the Income-tax Officer will not necessarily amount to disclosure contemplated by law. The duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the Income-tax Officer to draw the correct inference from the primary facts. It is no responsibility of the asseesse to advise the Income-tax Officer with regard to the inference which he should draw from the primary facts. If an Income-tax Officer draws an inference which appeal subsequently to be erroneous, mere change of opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent who has canvassed for the correctness of the view taken by the High Court in the judgment under appeal. It would appear from what has been discussed above that one of the essential requisites for proceeding under clause (a) of section 147 of the Act of 1961 is that the income chargeable to tax should escape assessment because of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. The present is not a case where the assessee had omitted or failed to file the return. Question then arises as to what has been omission or failure on the part of the assessee to make a full and true disclosure. There is nothing before us to show that in the return filed by the assessee-appellant the particulars given were not correct. Form C under rule 19 of the Indian Income-tax Rules, 1922, at the relevant time gives the form of return which had to be filed by the companies. Part V of that form deals with depreciation. The said part requires a number of columns to be filled furnished or any of the particulars given in those columns by the appellant-company were factually incorrect. Nor is it the case of the reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order was once rectified and at another time revised. Despite such rectification and revision, the above mistake in the calculation of the depreciation remained undetected. it was only in October, 1965, that the Income-tax Officer realised that higher amount of depreciation had been allowed to the appellant than was actually due. A letter to that effect was consequently sent to the assesse that the higher amount of depreciation had been allowed and the income as such had escaped assessment because of the omission or failure on the part of the assessee to disclose truly and fully all material facts. Reference to such omission or failure came only in a subsequent communication. The submission made on behalf of the appellant is not without force that reference was made to the assessee's omission or failure to disclose truly and fully all material facts because it was realised that after the expiry of four years from the end of the relevant assessment year, no action for reopening of assessment could be taken on the basis of detection of mistake alone unless there was also an allegation that the income had escaped assessment because of the omission or failure of the appellant to disclo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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