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TMI Blog2012 (12) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs.31.98 lakhs. The return was accompanied by the audited accounts and the tax audit report required to be filed in Form No.3CD under Section 44AB of the Income Tax Act ("Act", in short). The total income was arrived at on the basis of the book profit computed by the petitioner in accordance with Section 115J of the Act. The profit as per the profit and loss account, stated to be prepared in accordance with Part-II and Part-III of Schedule VI to the Companies Act, 1956 disclosed a profit of Rs.1.06 crores. In accordance with Section 115J, 30% of the book profit was deemed to be the total income of the assessee. Accordingly, the petitioner declared Rs.31.98 lakhs as its book profit. In preparing the profit and loss account and in arriving at a profit of Rs.1.06 crores the petitioner calculated the depreciation on its assets at Rs.2.50 crores. In the "notes to accounts" annexed to the annual accounts under Schedule 16, the petitioner included the following note: "7. Depreciation has been provided on Diminishing Balance Method at the rates prescribed under section 32 of Income Tax Act, 1961, as applicable for the accounting year concerned and full years depreciation has been provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondent stated that there was no mention in the notice as to the ground on which the assessment was sought to be reopened and further requested the respondent to treat the return filed originally as a return filed in response to the notice "under protest". The petitioner also requested that the amounts added back in the original assessment order which were not disputed by the petitioner in appeal may be added to the returned income. A request was also made for supply of the reasons recorded for issuing the notice under Section 148. 6. Accordingly, the reasons recorded for retaining the assessment were supplied to the petitioner. A copy of the reasons is annexed as Annexure 6 to the writ petition and the same is as follows: "REASONS FOR TAKING ACTION UNDER SECTION 148 OF THE INCOME TAX ACT, 1961-IN THE CASE OF M/S SUPER CASSETTES INDUSTRIES LTD, A-289, OKHLA INDUSTRIAL AREA, PHASE-I, NEW DELHI-ASSESSMENT YEAR 1989-90 Return declaring net income at Rs.31.98 lacs was filed on 27th March, 1991. Alongwith the return of Income, audit report u/s 44-AB of I.T.Act, 1961 in form No.3-CD was also enclosed. As per the profit and loss account, profit was disclosed at Rs.69.90 lacs. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e profit and loss account. In view of the above, book profit was under stated by the aforesaid amount and tax payable u/s 115J was also under-stated which resulted in under assessment. 5. The balance-sheet and profit and loss account are prepared under the Companies Act and the assessee was required to claim depreciation as per Companies Act also. But the assessee was claiming depreciation as per Income Tax Rules. From the Asstt. Year 1995-96 the assessee started claiming depreciation under Companies Act has Assessee has not changed this method of claiming depreciation under the Companies Act retrospectively. 6. The Annexure "D" of the return the computation of book profit and working of eligible tax u/s 115J was given which was totally incorrect. Thus in this case, the assessee has deliberately filed inaccurate particulars of income and claimed wrong depreciation to evade proper taxation. Thus, I have reason to believe that in this case there was under assessment of income on account of filing of inaccurate particulars of income by the assessee. (S.RAMCHANDANI) Dy. Commissioner of Income Tax, Central Circle-25, New Delhi" After supply of the reasons recorded to the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, depreciation is admissible for the full year is also based on no valid justification. Here too, it is submitted that there is no justification or a valid basis for the aforesaid allegation. There is no justification to allege that under the Companies Act, deprecation is eligible on pro-rata basis and on actual use of machinery. There is absolutely no authority for the aforesaid allegation. Section 205 of the Companies Act merely prohibits the distribution of dividend without providing for minimum depreciation and Schedule XV is not a table or Schedule which lays down the maximum rate of depreciation which to be provided by the Companies. It has then been stated that during the year, an addition to the fixed assets amounted to Rs.5.75 crores and as such, under the Income Tax Act, depreciation was claimed for the entire year as admissible but under the Companies Act, depreciation could be due only on actual period of use of machinery as per the date of installation. It is submitted hereto, there is no authority for so observing and it is a case of mere change of opinion and that too, without any basis." 7. After filing the objections to the re-assessment proceedings and to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under Section 205 of the Companies Act and since it failed to do so it had suppressed material facts and in these circumstances the initiation of proceedings to reopen the assessment after the expiry of 4 years from the end of the relevant assessment year was permissible and in accordance with law. As regards the contention of the petitioner that there is no allegation in the reasons recorded that the assessee failed to furnish true and full particulars, it is stated in the counter affidavit that the petitioner had claimed substantial by higher depreciation in order to reduce the book profit and thus there was clear-cut understatement of income on account of non-furnishing and wrong furnishing of particulars of income and it was so stated in para 4 of the reasons recorded. It is further submitted on behalf of the revenue that depreciation was claimed for the entire year as admissible, but under the Companies Act depreciation could be allowed only on the actual period of use of machinery from the date of instillation. These facts according to the respondent have been noted in para 4 of the reasons recorded and a specific allegation was also made in the said paragraph that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this year the petitioner filed a return of income on 31.12.1990 declaring book profit of Rs.15,68,157/- under Section 115J of the Act. The assessment was completed under Section 143(3) by order dated 31.3.1993 in which the taxable income under the normal provisions of the Act was computed at Rs.Nil and book profit was computed at Rs.15,68,157/-. Since the book profit was higher than the taxable income computed under the normal provisions, the assessment was completed on the book profit and the demand was raised accordingly. The assessment order was rectified under Section 154 of the Act by order dated 9.11.1993 in which the taxable income under the normal provisions of the Act was computed at Rs.1,54,61,943/-. On 3.3.2000 the assessment was reopened by issue of a notice under Section 148 of the Act which was served on the petitioner on 16.3.2000. By letter dated 10.4.2000 the petitioner objected to the notice and also filed a return under protest. A request was also made for supply of the reasons recorded for reopening the assessment. A copy of the reasons recorded was given to the petitioner under cover of letter dated 3.11.2000. a perusal of the reasons shows that they are subst ..... X X X X Extracts X X X X X X X X Extracts X X X X
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