TMI Blog1980 (1) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... erty because of the nature of that machinery and these immovable properties were taken to have been sold at the aggregate sum of Rs. 4,00,000 by the vendor to the petitioner-company and the balance amount of Rs. 36,00,000 was treated as towards the rest of the machinery, furniture, etc., which were all treated as movables in which property passed on mere delivery of possession. There was no itemisation of the machinery in the sale deed but at the time of sale, the vendor furnished a list of the different machineries in this textile mill and the value allocated to the different items was shown in the list. In this list, there was one item showing as follows: " Electrification complete with transformers, switch gears, switches, starters and electric motors to and for all these items concerning electrical machinery a sum of Rs. 7,00,000 was shown in the list. The accounting year of the petitioner-company being the calendar year, for the period October 3, 1963, to December 31, 1963, income-tax return was filed for assessment year 1964-65 and along with the return filed, details were given regarding the machinery and also regarding the basis on which depreciation was being claimed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ft allowance were not accurately furnished by the petitioner-company. The value of the total machinery of Rs. 35,90,000 included cost of electrical machinery shown in the list of plant and machinery as "Electrification complete with transformers, switch gears, switches, starters and electric motors". As per the Rules, extra shift allowance could not be allowed on the above electrical machinery except the electric motors which formed part of the textile machinery and, in the absence of any details regarding the cost of electric motors, the ITO proposed to estimate the same at Rs. 2,49,100 and also proposed to withdraw the extra shift allowance given to the petitioner-company on the balance of cost of electrical machinery of Rs. 5,00,000. The second ground on which the reopening of the assessment was sought was that the petitioner-company had deducted the sale price of machineries from the written down value of machineries in two assessment years. In the assessment year 1966-67, the sale price of Rs. 1,32,135 was sought to be deducted and for the assessment year 1967-68, the sale price of Rs. 1,30,644 was sought to be deducted. The sale prices had been deducted from the written dow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen, the fault was of the ITO who passed the original assessment order and it was not because of any omission or failure on the part of the petitioner-company that extra shift allowance came to be granted in a larger amount. Under s. 147(a), if the ITO has reason to believe that, by reason of the omission or failure on the part of the assessee to make a return under s. 139 for any assessment year to the ITO or to disclose fully and truly all material facts necessary for the assessment for that year, he may, subject to the provisions of ss. 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned. All that we are required to find out as a condition precedent for the exercise of power under s. 147(a) in the instant case is whether there was any failure or omission on the part of the petitioner-company to disclose fully and truly all material facts necessary for the assessment for the assessment years for which the assessment is sought to be reopened. In the affidavit-in-reply filed by the first respondent it has been clearly stated in para. 6(d) that, the petitioner-company claimed deprec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions laid down therein being satisfied. According to the first-respondent, per para. 6(1), the petitioner did not disclose true and full particulars of depreciation and though the statement was filed, the attention of the ITO was not drawn to the fact that electrical in machinery was not eligible for depreciation except for electric motors. In para. 6(m) of the affidavit-in-reply it was contended that if the attention of the ITO was not drawn to the fact that electrical machinery did not qualify for allowance of depreciation (extra shift allowance), the action under s. 147(a) could be validly taken. Thus, the affidavit-in-reply makes it clear that the proceedings were initiated after an audit objection by the audit section of the I.T. department and consequently the proceedings were sought to be taken under s. 147(a) because the pointed attention of the ITO was not drawn at the time of the original assessment to the fact that part of the electrical machinery only was confined to electrical motors and that the entire amount of Rs. 7,00,000 did not pertain to electric motors. It is to be borne in mind that in the original assessment orders for the relevant years, the ITO had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciation allowance for the particular assessment year with which he was dealing at the moment. If he has not done so, then, he has to thank himself. If all the figures which would enable the ITO to arrive at the correct amount of depreciation have been furnished by the assessee, the rest has to be done by the ITO himself and to say that the pointed attention of the ITO at the time of the original assessment was not drawn to this or that particular feature is no ground for reopening the assessment. In Parashuram Pottery Works Co, Ltd. v. ITO [1977] 106 ITR 1 (SC) the Supreme Court held that when an ITO relies upon his own records for determining the amount of depreciation allowance to the assessee and makes a mistake in doing so, responsibility for that mistake cannot be ascribed to an omission or failure on the part of the assessee and it was further held that where for certain items the ITO lost sight of the fact that the aggregate of the depreciation, including the initial depreciation allowed under the different heads, could not exceed the original cost to the assessee of those items of capital assets, the assessee could not be held responsible for the remissness on the part of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 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 assessee to advise the Income-tax Officer with regard to the inference which he should draw from the primary facts." and it was pointed out from the decision in Calcutta Discount Co.'s case [1961] 41 ITR 191 (SC), that once all the primary facts were before the assessing authority, he required no further assistance by way of disclosure. It was for him to decide what inferences or facts could be reasonably drawn and what legal inferences have ultimately to be drawn. It was not for somebody else-far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn. Indeed, when it is remembered that people often differed as regards what inference should be drawn from given facts, it would be meaningless to demand that the assessee must disclose what inferences-whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enced by the drafts it was for the officer to make the necessary inquiries and draw proper inferences as to whether the amounts represented by the drafts could be treated as part of the total income of the appellant. That the officer did not do. It was plainly a case of oversight and it could not be said that income chargeable to tax had escaped assessment by reason of the omission or failure on the part of the appellant to disclose fully and truly all material facts. He could not, therefore, take recourse to s. 147(a) to remedy the error resulting from his own oversight. In view of these two decisions of the Supreme Court in Gemini Leather Stores' case [1975] 100 ITR 1 (SC) and the other in Parashuram Pottery Work's case [1977] 106 ITR 1 (SC), it is clear that even if the extra shift allowance as part of depreciation allowance was wrongly allowed in the assessment years under consideration such extra shift allowance resulted from the omission on the part of the ITO himself to check correctly and interpret correctly the legal provisions and work out the correct figure of extra shift allowance permissible on the facts of this particular case. If any large amount had been allowed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f balancing charge. De hors or apart from the depreciation allowance, the concept of s. 41(2) does not exist and if any mistake occurred in depreciation allowance even in respect of these machineries which were sold, it cannot be said that the original cost of the seven Bowl Calender Machines which were sold in assessment year 1966-67 was Rs. 70,000 and the original cost of the Singeing Machine which was sold in the previous year 1967-68 was Rs. 84,000. If these facts were available on the record of the ITO at the time when he issued the notices on January 27, 1976, it was an omission on his part at the time when he passed the original assessment orders for 1966-67 and 1967-68, not to have ascertained from his own record what the cost was in respect of these pieces of machinery which were sold and not to have worked out the correct written down value and not to have worked out the correct balancing charge and also capital gains in respect of the seven Bowl Calender machines and the Singeing Machine in question. As pointed out earlier in the course of this judgment from the case of Ahmedabad Cotton Manufacturing Co. [1974] 95 ITR 639 (Guj), it is enjoined upon the ITO to work out th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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