9911796707
TMI Blog1983 (4) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 1967-68, made on 31-12-1971, requires to be amended as there is a mistake apparent from the record within the meaning of section 154/155 of the Income-tax Act, 1961. The rectification of the mistake, as per details given below will have the effect of enhancing the assessment/reducing the refund/ increasing your liability and if you wish to be heard, you are requested to appear in person or by an authorised representative in my office on 10-11-1972 at 10.00 a.m. If, however, you intend sending a written reply to this notice and do not wish to be heard in person, you are requested to ensure that your reply reaches me on or before the date mentioned above. (Sd.) ............ Income-tax Officer, Central Circle-II, Jaipur. " The assessment order was passed by the ITO on December 31, 1971, for the assessment year 1967-68, and allowed deduction to the petitioner amounting to Rs. 39,40,376 on account of depreciation on buildings machinery and plant and furniture and fittings as per rates prescribed by Appendix I, Part 1, of the I.T. Rules, 1922 ("the Rules") read with r. 5 of these Rules. The respondent while computing the depreciation applied the percentage of rates for buil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f computation of depreciation. The petitioners' case is that right from 1954-55 to 1966-67, the ITO has computed the depreciation in the same manner as he did in 1967-68, that is to say, he applied special rate mentioned in cl. (ii) of item No. III to the machinery and plant of cement works but to the machinery and plant covered by the provision contained in remarks column of cl. (ii) of item No. III he had applied the special rates mentioned in cl. (iii) of item No. III. This method of computation adopted in the past years has been accepted by the Department throughout and has never been challenged as incorrect or erroneous. Further, the case of the petitioner is that the ITO now wants to reduce the rates of depreciation for machinery and plant to the general rate of 7 per cent. Provided in cl. (i) of item No. III instead of the special rates applied by the assessing ITO under cls. (ii) and (iii) of item No. Ill. In the enclosure to the notice, the respondent has indicated that the rectification will reduce the amount of depreciation by Rs. 85,985 which is apparently wrong inasmuch as the proposed rectification by applying the general rate of 7 per cent. to the entire machiner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Since the depreciation on various items of machinery has been charged at different rates and the specific rate of I 0 percent provided for the cement works using rotary kilns has not been applied to the whole of machinery used in the concern ; the general rate of 7 per cent provided in the Appendix referred to above for the machinery and plant should have been charged. It will be thus seen that the then ITO committed a glaring and obvious mistake in computing the amount of depreciation at the rates mentioned in Part I of Appendix I, and this led to the calculation of depreciation contrary to the provisions of law as contained in Appendix I, Part I, read with rule 5. The respondent's case is that the petitioner-company cannot claim depreciation at the special rate in item No. III. The petitioner-company cannot at one and the same time claim special rates of depreciation on machinery and plant on cement works and different rates of depreciation on other items of machinery and plant mentioned in the remarks column of clause (ii) of item No. III. The petitioner-company did not exercise any option. A careful reading of clause (ii) of item No. III read with rule 5 clearly shows that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to the payment of additional income-tax, and also the fact that the assessee was liable to penal interest under section 18A(8) of the Income-tax Act, the order of the Income-tax Officer under section 35 imposing the additional tax and correcting the omission to impose penal interest in regard to the assessment in dispute was not without jurisdiction. " In this case, their Lordships of the Supreme Court referred to the earlier case of Maharana Mills (P.) Ltd. v. ITO [1959] 36 ITR 350 (SC), wherein the scope of section 35 of the 1922 Act was laid down in the following words (p. 358) : " The power under section 35 is no doubt limited to rectification of mistakes which are apparent from the record. A mistake contemplated by this section is not one which is to be discovered as a result of an argument but it is open to the Income-tax Officer to examine the record including the evidence and if he discovers any mistake he is entitled to rectify the error provided that if the result is enhancement of assessment or reducing the refund, then notice has to be given to the assessee and he should be allowed a reasonable opportunity of being heard. " It was further held that the ITO, un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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