1990 (5) TMI 97 - AT - Income Tax

Issues Involved:
1. Jurisdiction under Section 147(a) of the Income-tax Act.
2. Disclosure of material facts by the assessee.
3. Nature of the receipt of Rs. 38,90,240.
4. Withdrawal of excess depreciation.

Issue-wise Detailed Analysis:

1. Jurisdiction under Section 147(a) of the Income-tax Act:
The primary issue was whether the Income-tax Officer (I.T.O.) had jurisdiction to reopen the assessment under Section 147(a) of the Income-tax Act. The I.T.O. had recorded reasons on 26-3-1984, stating that the assessee had received Rs. 38,90,240 as additional levy price from the Government of Tamil Nadu, which was not included in the sales and was credited to a suspense account, resulting in an understatement of income. The I.T.O. believed that due to the omission or failure of the assessee to disclose fully and truly the material facts necessary for assessment, income had escaped assessment.

2. Disclosure of Material Facts by the Assessee:
The assessee contended that there was no omission or failure on its part to disclose all material facts. The amount of Rs. 38,90,240 was included under 'Current Liabilities & Provisions' and was specifically mentioned in the Auditor's Report and the Directors' Report. The C.I.T.(A) concluded that the records showed that the facts regarding the additional sugar price were disclosed, leading to the conclusion that there was no failure or omission on the part of the assessee. The C.I.T.(A) referred to the Supreme Court decision in Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191, which emphasized that mere production of account books does not amount to full disclosure. The C.I.T.(A) concluded that the I.T.O. had no jurisdiction to act under Section 147(a) and canceled the reassessment.

3. Nature of the Receipt of Rs. 38,90,240:
The C.I.T.(A) also considered the nature of the receipt and held that on merits, the amount was clearly business income. The assessee had disclosed the amount in the Auditor's Report and the Directors' Report, which were integral parts of the Annual Report. The Auditor's Report clarified that the amount represented additional collection as per the Court's interim order and was deposited separately pending disposal of the Writ Petition on levy sugar price. The Directors' Report mentioned that the loss was arrived at without taking into account the additional sales realization of Rs. 38.90 lakhs collected as per the Madras High Court order. The C.I.T.(A) concluded that the assessee had fully and specifically described the nature of the amount and brought it to the attention of the I.T.O.

4. Withdrawal of Excess Depreciation:
The C.I.T.(A) also addressed the issue of withdrawal of excess depreciation. The I.T.O. had initially granted depreciation at 15% and later restricted it to 10% on change of opinion. The C.I.T.(A) held that there was no failure on the part of the assessee since the initial grant of depreciation was a decision of the I.T.O. The change of opinion could not justify the restriction of the depreciation rate.

Conclusion:
The Tribunal concluded that the assessee had disclosed all material facts fully and truly. The Auditor's Report and the Directors' Report, which were integral parts of the Annual Report, clearly brought out the facts regarding the additional levy price. The Tribunal agreed with the C.I.T.(A) that the provisions under Section 147(a) were not attracted and the cancellation of the assessment was in order. Consequently, the appeal of the Revenue was dismissed.

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