TMI Blog1974 (10) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... ciation allowances including initial depreciation exceeded the original cost of the machinery, but the Income-tax Officer, on the written down value of the machinery computed at Rs. 16,48,053, allowed Rs. 2,59,236 as normal depreciation. In so computing the normal depreciation, the Income-tax Officer apparently lost sight of clause (c) of the proviso to section 10(2)(vi) of the Indian Income-tax Act, 1922, which provided that the aggregate of all allowances in respect of depreciation on machinery and plant was not to exceed the original cost of the same to the assessee. The Income-tax Officer allowed similar depreciation allowance which, because of the aforesaid clause, was not allowable, in the assessment years 1957-58 and 1958-59, as a percentage on the appropriate written down value of the machinery and plant in those years. Subsequently, the Income-tax Officer, on November 20, 1964, issued notices for reopening the company's assessment for the three years, under section 148, of the Income-tax Act, 1961. The company filed fresh returns under protest and objected to the notices issued for reopening its assessments. The company further filed three Writ Petitions Nos. 969 of 196 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epelled the argument raised on behalf of the revenue that in column 2 of Part V of its return, the statement of particulars prescribed to be furnished with regard to claim of depreciation under proviso (a) of section 10(2)(vi), the petitioner furnished wrong particulars of the written down value of the machinery at the beginning of the accounting period inasmuch as it did not, while working out the written down value, take into account the amount of initial depreciation which had been allowed in earlier years. He worked it out only by taking into consideration normal depreciation. This resulted in furnishing of inaccurate particulars and it was because of this that the Income-tax Officer was misled into making a wrong assessment. The learned single judge held that in connection with column 2 of Part V of the return, the petitioner correctly disclosed the amount of the written down value of the machinery. For calculating the amount of the written down value of the machinery at the beginning of the accounting year, the amount of initial depreciation allowed in any earlier year was not to be taken into consideration. The learned judge, however, observed that it was incumbent upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther--- (i) omission or failure on the part of the assessee to make a return of his income under section 22 ; or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. These conditions are cumulative and precedent to the exercise of jurisdiction to issue a notice of reassessment. It observed that while deciding the special appeals, this court had found that the petitioner's income had in fact escaped assessment, but then it had not considered the question whether that income escaped assessment by reason of any omission or failure on the part of the company to disclose fully and truly all material facts necessary for its assessment. In the result, while setting aside the judgment of this court and remanding the case it directed this court to determine the question whether by reason of the omission or failure on the part of the company to disclose fully and truly all material facts necessary for assessment of the company for the three years in question, any income, profits or gains chargeable to income-tax had escaped assessment or that the company has been given excessive depreciation al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals, therefore, deserve to be dismissed on this preliminary ground. So far as the penalty proceedings initiated for the three years in question were concerned, they were proceedings consequential to the assessment orders dated February 10, 1969, which had not been challenged before us. Accordingly, the three writ petitions filed subsequent to the order of remand made by the Supreme Court should also be dismissed, specially when the petitioner can obtain appropriate relief by having recourse to the procedure provided under the Income-tax Act. The petitioner then obtained time and filed Civil Miscellaneous Applications Nos. 6719 of 1974, 6720 of 1974 and 6721 of 1974, in the three special appeals, seeking to amend the respective writ petitions and claiming relief for the quashing of the three assessment orders dated 10th February, 1969, as well. The prayer made in the three amendment applications has been opposed by the learned counsel for the department on the ground that in respect of the assessment orders dated February 10, 1969, the petitioner is already pursuing its remedy provided under the Income-tax Act. Moreover, the assessment orders having been made as far back as Feb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r holding that in so far as the notice for reopening assessment was without jurisdiction, it quashed the ultimate assessment order as well even though it had not been specifically challenged in the writ petition. In view of the observations of the Supreme Court in the Calcutta Discount Co.'s case it becomes clear that in a case where the very initiation of proceeding under section 34 of the Income-tax Act had been challenged at the earliest, the High Court would not be justified in refusing to exercise its jurisdiction under article 226 of the Constitution merely on the ground that the ultimate assessment order made in those proceedings has not been specifically challenged. Accordingly, whether an application for amendment had been filed or not, it would, as directed by the Supreme Court, have been incumbent upon us to examine the question whether initiation of proceedings under section 34/147 of the Income-tax Act was within jurisdiction on merits, specially when while the proceedings were pending before the Supreme Court, no objection to the consideration of this question in proceedings under article 226 of the Constitution, on the ground that the assessee could obtain necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of that Act laid down that every person whose total income exceeded the maximum amount which was not chargeable to income-tax, had to furnish within a period specified in a notice a return in the prescribed form and verified in the prescribed manner setting forth (along with such other particulars as may be required by the notice), his total income and total world income during that year. While filing a return under this sub-section, the person concerned was expected or required to disclose all material facts truly and fully in connection with the information sought for in the prescribed form as also about such other particulars which the Income-tax Officer might have, by means of a notice mentioned in that section, required him to furnish. Similarly, sub-section (2) authorised the Income-tax Officer to call upon any person to file a return of his income in the prescribed form. The person who had been called upon to file a return under this sub-section also became liable to disclose to the Income-tax Officer truly and fully all relevant information to his assessment which he was required to supply in accordance with the prescribed form. If, however, the Income-tax Officer so li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess of making an assessment was where a return in the prescribed form had been filed but the Income-tax Officer felt that although the information conveyed by the return was sufficient for making an assessment order, but before that information could be acted upon, the assessee should be required to verify the same by producing evidence. In such circumstances, he could require the assessee to produce evidence in support of his return. Here again the assessee was required to produce evidence only in support of the statements made by him in the prescribed form of return and there was no obligation upon him to convey any other or further information or to produce evidence in support of any other matter which may ultimately be found to be relevant for the purposes of making an assessment in his case. There could yet be a third stage where the Income-tax Officer felt that not only the information conveyed in the return required verification but also that it was not sufficient for making an assessment order. In such a case, he was required to specify the points and to ask the assessee to produce evidence on that point. He could also require the assessee to produce some particular eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessment proceedings it was incumbent upon the assessee to disclose to the Income-tax Officer all material facts necessary to make out its claim and it was not open to him to set out only those facts which had the effect of exaggerating his claim. Accordingly, if during the assessment proceedings the petitioner did not disclose to the Income-tax Officer the total amount of depreciation allowed to it in the earlier years, it meant that it failed to disclose truly and fully material fact which was necessary for its assessment of that year. As explained above, apart from the information conveyed by the petitioner in the prescribed form of return, it would have been required to furnish further information only if the Income-tax Officer had required it to disclose such information or produce evidence or the material relating to his claim for depreciation allowance on the written down value of the machinery and plant as disclosed by him in his return . It is not the case of the department that the Income-tax Officer had at any stage required the petitioner to furnish any information in connection with its claim for depreciation on the written down value of its machinery and pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f partnership in a firm of which such individual is a partner.' The assessee was bound to disclose under section 22(5) the names and addresses of his partners, if any, engaged in business, profession or vocation together with the location and style of the principal place and branches thereof and the extent of the shares of all such partners in the profits of the business, profession or vocation and any branches thereof, but the assessee was not required in making a return to disclose that any incomes was received by his wife or minor child admitted to the benefits of partnership of a firm of which he was a partner." The Supreme Court further went on to consider that certain notes for guiding the drawing up of the return had also been printed in the prescribed form. According to those notes the assessee had been informed that he had to disclose the income received by his wife and minor child from a firm of which the assessee was partner. It was urged that, in the circumstances, non-disclosure of the fact that the three sons of Muthiah, who were minors, in the prescribed form, resulted in non-disclosure of material which was necessary for making Muthiah's assessment. While deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fully and truly all material facts necessary for his assessment. As stated, the obligation for supplying such other information could arise only if the Income-tax Officer had required the assessee to furnish information in connection with the amount of depreciation on the written-down value of his machinery and plant. It may be mentioned here that the case taken up by the department in its counter-affidavit is that there was an omission and failure on the part of the assessee in truly and fully disclosing the particulars of its income inasmuch as the written-down value of its machinery and plant as at the beginning of the accounting period was wrongly mentioned by it in the column meant for the same, in Part V of the return. According to the department, while mentioning the amount of the written-down value as at the beginning of the accounting period, the assessee should have taken into account not only the normal depreciation to which it was entitled, but it should also have accounted for the amount of further depreciation which had been allowed to it under section 10(2)(via). Consequently, the amount of claim of depreciation made in column 9 of the return was inaccurate. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rescribed form of return. In the circumstances, we are not inclined to permit the counsel for the department to raise this argument for the first time at this stage. Moreover, during the course of hearing of these cases learned counsel for the department brought to our notice that the petitioner supplied the information sought for in Part V of the prescribed form of the return, on a separate sheet of paper in which no amount meant to be stated in column 6 of the return was mentioned. This means that in its return the petitioner did not mention any amount on which depreciation was now allowable. Even if the case of the department is accepted, all that the assessee in the circumstances could do was not to mention any amount under column 6. In this view of the matter also it cannot be said that the petitioner had either supplied inaccurate information or had failed to supply information meant to be supplied under column 6. We are, therefore, of opinion that in this case there was no failure on the part of the company in disclosing fully and truly all material facts necessary for its assessment for the three years in question. Accordingly, it cannot be said that the excessive depreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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