TMI Blog1999 (8) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under section 143(3) of the Act appeared before the Assessing Officer and produced all the relevant papers. The Assessing Officer, after having been fully satisfied, by his order, dated November 13, 1996, made the assessment under section 143 of the Act whereby, he computed the total income of the petitioners at Rs. 24,86,96,370 as against the income of Rs. 24,84,96,370 as shown in the return. Ultimately, the Assessing Officer determined a sum of Rs. 4,51,405 refundable to the petitioner, the advance tax deducted at source. The order passed in terms of section 145(3) of the Act was later on amended by order dated February 28, 1997, whereby the petitioners were, granted credit for certain deductions at source. By a subsequent notice, dated June 24, 1997, the assessing authority wanted to rectify the assessment order in respect of depreciation allowed on the leased out machinery mainly on the ground that the plant and machinery, which were purchased at a cost less than Rs. 5,000 and were used for a period less than 180 days were entitled to 50 per cent. of depreciation instead of 100 per cent. claimed and allowed in the said assessment year. The assessing authority, after having c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opportunity of being heard, the Assessing Officer, by his order dated January 20, 1998/February 3, 1998, has dropped the proceeding. Subsequently, another notice in terms of section 154 of the Act was issued alleging therein that the assessee was erroneously allowed full depreciation for the item for which the claim was lodged by the assessee, which was a mistake apparent on the face of the record. Accordingly, a proceeding under section 154 of the Act was initiated. The respondent Commissioner of Income-tax, before the matter could be decided by the Assessing Officer, issued a notice under section 263 of the Act on January 12, 1999. The respondent authority, after giving proper opportunity of being heard to the petitioners and after proper enquiry, passed an order withdrawing the depreciation, which was allowed earlier. It is further alleged that from the record, it was found that the assessee had shown the "written down value" (in short "WDV") on flameless furnace by Rs. 2,78,61,000 but at the same time, the depreciation chart for the assessment year 1994-95 for the same business showed that no assets of the WDV was left to be carried over to the next assessment year 1995-96, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on July 19, 1999. It is further submitted that after receipt and perusal of the communication of the Additional Director of Income-tax (Investigation), the assessing authority was fully satisfied, has initiated a proceeding under section 147 of the Act. According to Mr. Jhunjhunwala, the materials on record as well as the subsequent materials received after completion of all the earlier orders, the assessing authority has issued the impugned notice after duly recording the reasons. Mr. Debi Pal, learned counsel for the petitioners, in support of his contention, has relied upon the following decisions : Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC) ; ITO v. Madnani Engineering Works Ltd. [1979] 118 ITR 1 (SC) ; CIT v. Agarwalla Brothers [1991] 189 ITR 786 (Patna) and Ganga Saran and Sons P. Ltd. v. ITO [1981] 130 ITR 1 (SC). Now, coming to the facts of this case, Mr. Jhunjhunwala, learned counsel, appearing on behalf of the Revenue, submits that the petitioner company has mentioned the address of Prakash Industries Limited for lease of equipment as at 15 K. M. Stone, Delhi Road, Hissar, Haryana ; whereas, in the insurance policy, insuring the equipment, namely, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be presumed that Saheb Engineering Works was not in existence when the said flameless furnace was purchased in August, 1994. The Deputy Director of Income-tax, Ludhiana, conducted the investigation in relation to the transactions made by Prakash Industries Ltd. with other limited concerns. According to Mr. Debi Pal, learned counsel for the petitioners, Saheb Engineering Works was very much in existence when the said equipment was purchased by the petitioner company in the year 1994. The said flameless furnace was purchased from the said Saheb Engineering Works and was leased out to Prakash Industries Ltd. From the report of the Deputy Director of Income-tax (Investigation), Bhopal, preliminary enquiry made in the factory premises of Prakash Industries Limited, reveals that such machinery was not installed in the said premises. The report further discloses the fact that the purchases made by Reliance Capital Limited from Saheb Engineering Works through Prakash Industries Limited, and the said machinery was leased out to Prakash Industries Limited but the assessing authorities ultimately found that no such party lived there. The address of Saheb Engineering Works given by Prakash In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, under which the assessment was completed under section 147 of the Act, reads as follows : "147. If the Assessing Officer, has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 145 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. (1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed ; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139. (2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so." The notice is issued by the Income-tax Officer in the case in hand before the expiry of four years of the end of the relevant year of assessment and the reasons recorded and the Commissioner having been satisfied that it is a fit case for issuance of notice in terms of section 147 of the Act. The dispute in the instant case, merely relates to the fulfilment of the conditions aforesaid, which raises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority, and cannot be disbelieved only for the purpose of issuing notice in terms of section 147 of the Act. One of the dominant purposes of section 147 is that the assessee cannot go scot free by making a false and untrue disclosure of fact at the time of assessment. The apex court, in the case of Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 456 has held : "We have to look to the purpose and intent of the provisions. One of the purposes of section 147 appears to us to be to ensure that a party cannot get away by wilfully making a false or untrue statement at the time of original assessment and when that falsity comes to notice, to turn around and say 'you accepted my lie, now your hands are tied and you can do nothing'. It would be a travesty of justice to allow the assessee that latitude". and, accordingly, it has been held that the Income-tax Officer has rightly initiated a reassessment proceeding on the basis of the subsequent information, which was relevant and reliable. The first decision in Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC) relied upon by Mr. Debi Pal will not help him, firstly, on the ground that the said decision relates to the preamended pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment after accepting the claim of the assessee in terms of section 143(3) of the Act. Subsequently, the Income-tax Officer received a letter from the Deputy Director (Investigation) on March 21, 1974, stating therein that on information obtained from the Bombay Stock Exchange Directory, the book value per equity share of the company rose from Rs. 318.55 in the year ending December 31, 1965, to Rs. 401 in the year ending December 31, 1970, and the earning per share rose from Rs. 8.37 per share to Rs. 44 per share, during the period, but the quotations of the shares on the Calcutta Stock Exchange fell from Rs. 168 to Rs. 85 per share during the period, and, accordingly, it was held that the quotations were the results of certain manipulated transactions and could not be said to have reflected the fair market value of the share, in question. The Deputy Director along with the said letter has enclosed the information, which he had received on the basis of the Bombay Stock Exchange Directory and other information. Pursuant to the letter received from the Deputy Director, the Income-tax Officer issued notice in terms of section 147(b) of the Act. The said notice was challenged ..... X X X X Extracts X X X X X X X X Extracts X X X X
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