TMI Blog2012 (12) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... the reasons for reopening the assessment within 15 days from today. All the objections filed by the petitioner in the four writ petitions shall be disposed of by the assessing officer on or before 31st January, 2013 by appropriate orders passed in writing and those orders shall be served on the petitioner within reasonable time thereafter. - W.P.(C) 3406/2000, W.P.(C) 6310/2000, W.P.(C) 6320/2000, W.P.(C) 6308/2000 - - - Dated:- 30-11-2012 - MR. S. RAVINDRA BHAT MR. R.V. EASWAR JJ. Petitioner: Mr. Satyen Sethi with Mr. Arta Trana Panda, Advocates. Respondent: Mr. Sanjeev Rajpal, Sr. Standing Counsel. R.V. EASWAR, J.: These are four writ petitions, two each by Super Cassettes Industries Ltd. and Tony Electronics Ltd., which later merged with the former company. Since the facts and the controversy are more or less similar in all the four writ petitions, and since they were also heard together, they are disposed of by a common judgment. 2. We may first take up the writ petitions filed by Super Cassettes Industries Ltd. The petitioner is a public limited company having its registered office at Greater Kailash, New Delhi and is engaged in the manufacture of audio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o disallowed depreciation of Rs.1,08,104/- claimed by the petitioner in respect of its building at Bombay, which was held under Power of Attorney basis, without legal ownership. Thus after examining the return filed by the petitioner and the various items claimed as deductions, including depreciation, the assessing officer first arrived at the taxable income as per the normal provision of the Act at Rs.Nil after making various additions and disallowances and after allowing depreciation of Rs.2,67,36,938/-. 4. Thereafter, the assessing officer proceeded to compute the book profit in accordance with Section 115J of the Act. He accepted the assessee s computation of the book profit at Rs.1,06,63,302/- and determined the book profit at 30% thereof i.e. at Rs.31,98,990/-. This figure was the same as declared by the petitioner as book profit. Since the figure of book profit was higher than the figure of taxable income arrived at under the normal provisions of the Act, the assessment was completed on the book profit and demand was raised accordingly. 5. On 3.3.2000, the respondent issued a notice to the petitioner under Section 148 of the Act on the ground that income chargeable to ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Companies Act. 4. Thus book profit is to be calculated after debiting depreciation as per Companies Act to the profit and loss account. But in this case the depreciation has been debited as per Income Tax Rules, 1962. Depreciation as per Companies Act comes to a very nominal amount whereas the depreciation as per Income Tax Act is a substantial amount. Under the Companies Act, depreciation is eligible on pro-rata basis and on actual use of machinery whereas under the Income Tax depreciation is admissible for the full year. During the year, addition to the fixed assets amounted to Rs.5.75 crores. Under the Income Act, depreciation was claimed for the entire year as admissible but under the Companies Act depreciation could be admissible only on actual period of use of machinery from the date of installation. Thus in this case, substantial higher depreciation as been claimed in order to reduce the book profit which resulted in under statement of book profit and thereby under statement of minimum tax as per Section 115J of the I.T.Act. Thus in this case there was clear cut under statement of income on account of non-furnishing and inaccurate furnishing of particulars of income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debit and claim depreciation only in accordance with the Companies Act. Disputing the observations of the respondent in the reasons recorded, the petitioner contended as follows in the objections: 8. It is submitted that section 205 of the Companies Act which provides for providing of depreciation before declaring dividend and under the aforesaid provision the companies are required not to distribute dividend without providing for depreciation. No rates of depreciation has been provided in the Schedule VI of Companies Act and Schedule XIV of the Companies Act only provide the rate of minimum depreciation to be provided before declaring dividend. From the aforesaid table it cannot be concluded, as now your are attempting to conclude, as a result of your change of opinion, that the rates of deprecation stated in the Schedule XIV are statutory rate of deprecation under Companies Act and no Balance Sheet even for the purposes of section 115J(1A) can be prepared providing depreciation at per the schedule of deprecation under the Income Tax Act. This assumption of yours is highly arbitrary and is based on no valid authority and in any case is based on a mere change of opinion. 9. Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rts II and III of Schedule VI of the Companies Act, 1956, it is not open to the respondent to call the same in question as held by the Supreme Court in Apollo Tyres Ltd. v. CIT (2002) 255 ITR 273 and Dynamic Orthopedics P. Ltd. vs. CIT (2010) 321 ITR 300. Reliance has also been placed on the judgments of this Court in Sun Investment Pvt. Ltd. Vs. Assistant Commissioner of Income Tax (2012) 344 ITR 1 and Properties Pvt Ltd Vs. DCIT (2011) 343 ITR 141 (Del.) as well as the judgment of the Bombay High Court in CIT Vs. Kotak Securities Ltd. (2012) 346 ITR 351 (Bom). It is further contended that in fact, the rates of depreciation provided in the Companies Act are the same as provided in the Income Tax Rules and therefore, it cannot be said that the profit and loss account was not prepared in the manner required by Parts II and III of Schedule VI to the Companies Act. 9. In the counter affidavit, it is stated by the respondent that the petitioner has admittedly claimed depreciation in accordance with the provisions of the Income Tax Rules by application of the written down value method and this has been admitted by the tax auditors in their report under Section 44AB. It is accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... response to the notice under protest. It has been stated before us that no reasons have been given to the petitioner so far. This Court on 7.11.2000, issued Rule and made the interim order absolute. 11. We may now take up the writ petitions filed by Tony Electronics. WP(C) 6320 relates to the assessment year 1989-90 for which a return was filed by the petitioner on 9.10.1990 declaring total income of Rs. Nil. It may be mentioned here that the petitioner company was incorporated as a private limited company on 7.7.1981 and was converted into a deemed public limited company on 8.2.1989 and ultimately merged with Super Cassettes Industries Ltd. on 1.4.1989. In the assessment made under Section 143(3) of the Act on 27.3.1992, the Assessing Officer examined the return in detail and determined the total income at Rs. Nil. On 3.3.2000 a notice under Section 148 of the Act was issued which was served upon the petitioner on 16.3.2000. On 10.4.2000, the petitioner wrote a letter to the assessing officer objecting to the reassessment proceedings; a return was also filed in response to the notice, under protest. By the letter the petitioner also sought the reasons recorded for issuing the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years. The judgment of the Supreme Court is dated 25.11.2002. The present writ petitions were filed in the year 2000. It is only in respect of WP(C) Nos.3406/2000 and 6308/2000 that the petitioner has been given the reasons recorded for reopening the assessment. In respect of the other two writ petitions, the reasons recorded have not been furnished to the petitioner. Therefore, there is no question of the petitioner filing any objections to the same. In the two writ petitions in which the reasons have been provided to the petitioner, objections have been filed only in one namely, WP(C) 3406/2000; in respect of WP(C) 6308/2000, though reasons have been provided to the petitioner, it appears that no objections have been filed so far. We are of the view that the procedure envisaged by the Supreme Court in the judgment cited supra should be adopted and followed in the present writ petitions as the judgment is based on fairness and transparency in the action of the assessing authority in reopening the assessment. We therefore, iss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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