Calcutta High Court
Karan Chand Thapar And Brothers vs Assistant Commissioner Of Income-Tax ... on 15 October, 2004
Equivalent citations: (2005)197CTR(CAL)581, [2005]276ITR105(CAL)
Author: Kalyan Jyoti Sengupta
Bench: Kalyan Jyoti Sengupta
JUDGMENT
Kalyan Jyoti Sengupta J.
1. By this writ application the petitioner challenged the impugned notice dated May 15, 2002, in relation to the assessment year 1994-95 under the Income-tax Act, 1961, (hereinafter referred to as "the said Act"), and also proceedings, notices and orders thereunder, issued by the Assistant Commissioner of Income-tax, Circle-V, Calcutta (hereinafter referred to as "the Assessing Officer"), asking the writ petitioner to show cause as to why depreciation claimed to the extent of Rs. 19,16,50,036 and also the amount of expenditure incurred for travel tour of the managing director should not be disallowed, as it does not fall within Explanation 3 to Section 43 of the said Act. The short facts, which have led to the filing of this application, are stated hereunder.
2. The first petitioner during the financial year of 1994-95 purchased numerous electric meters on different dates from the Gujarat Electricity Board (hereinafter referred to in short as "the Electricity Board") at a total cost of Rs. 35,10,10,450.63 without taking physical delivery of the same. The first writ petitioner thereafter by two separate lease agreements let the same on hire to the said seller (Electricity Board) for a period of 5 years at a total rent of Rs. 47.54 crores. While filing the returns for the assessment year 1994-95, the petitioner claimed depreciation on the meters of purchase price of Rs. 35,10,10,450.62. On May 19, 1997, regular assessment order under Section 143(3) of the said Act was made. The Assessing Officer disallowed the claim of depreciation and further refused to accept the rental income for taxing, rather observed notional income by way of interest on the said sum of Rs. 35,10,10,450.60. The amount of income was calculated at Rs. 4,39,31,807. Petitioner No. 1 preferred appeal against this order before the Commissioner of Income-tax (Appeals). In the appeal the Commissioner of Income-tax (Appeals) called for the report of the Assessing Officer by an order. The appellate authority, thereafter, making various inquiries and considering the remand report made by the Assessing Officer allowed the petitioner's appeal partly and held, inter alia, that the depreciation was allowable on Rs. 11,38,27,600 which was the book value of the meters in the books of the said Electricity Board as per the remand report. The petitioner not being satisfied with the partial relief granted by the Commissioner of Income-tax (Appeals) preferred subsequent appeal to the Income-tax Appellate Tribunal (hereinafter referred to as "the Tribunal"). By an order dated December 31, 2001, the Tribunal set aside the decisions on the issue of depreciation on the meters and sent the same for fresh decision to the file of the Assessing Officer. The issue of expenses incurred on account of foreign travel undertaken by Mrs. J. Thapar was also directed to be heard after considering all relevant facts and materials. Incidentally, the Revenue also filed cross objections against the order of the Commissioner of Income-tax (Appeals) for the above relief granted by him. This was dismissed holding the same as being barred by limitation with no satisfactory explanation was given for the delay in filing the cross objection.
3. In this context the relevant ordering portion of the learned Tribunal is required to be reproduced :
"Since the Assessing Officer has no occasion to appreciate the case from its proper perspective by taking into consideration or account the aforesaid material papers which are not before the authorities below, we find it proper to set aside this issue regarding disallowing the claim of depreciation to the extent of Rs. 23,71,72,400 out of Rs. 35,10,00,000 to the file of the Assessing Officer with the direction to readjudicate the matter afresh after examining and verifying the reliability and veracity of the aforesaid material papers and documents filed by the assessee before us. The Assessing Officer shall adjudicate the issue whether the assessee has claimed depreciation with reference to enhanced costs with a view to reduce liability to income-tax by taking into consideration the papers and materials placed by the assessee before us and by keeping in view the judicial proceedings cited by the parties before us as referred to above. The assessee shall be at liberty to produce or furnish such other material or papers as it may think fit and proper in support of its claim of depreciation on electric meters. The Assessing Officer shall provide adequate opportunity of being heard to the assessee in this respect."
4. As far as the issue of foreign travel undertaken by Mrs. J. Thapar is concerned the Tribunal gave the following direction :
"We, therefore, set aside this issue to the file of the Assessing Officer with a direction to bring on record all relevant facts and materials and then to adjudicate upon the matter afresh in accordance with the provisions of law and in view of the decisions cited by the Assessing Officer as well as by the Commissioner of Income-tax (Appeals). The Assessing Officer shall provide reasonable opportunity of being heard to the assessee."
5. Pursuant to the said direction it appears the Assessing Officer by a letter dated February 4, 2002, called upon the petitioner to produce various documents and papers in relation to the aforesaid issues. He fixed the date of production of the documents, papers and also furnishing information on February 19, 2002, at 3:30 p.m. Pursuant to the notice the petitioner on February 14, 2002, supplied all the information and produced the documents and papers after compliance as aforesaid. It appears on February 12, 2002, an order under Sections 147 and 143(3) of the said Act was passed by the Assessing Officer, whereby and whereunder, it appears, he considered and decided some other issues namely excess amount of sales tax.
6. It appears by this impugned order he vacated the demand for payment of tax in relation to the amount of depreciation and the amount of expenses on account of foreign travel, but he kept this matter pending for fresh decision in terms of the order of the Tribunal dated December 31, 2001. He has also made calculation of income being exigible to tax, in this order he had allowed the amount of the depreciation of the aforesaid amount and after calculating everything he has decided a sum of Rs. 3,83,68,942 is refundable.
7. After the aforesaid order was passed the impugned notice has been issued for fresh adjudication in terms of the order of the Tribunal.
8. Mr. Murarka, learned counsel for the petitioner, while questioning the impugned notice dated May 15, 2002, contends that after passing order dated February 12, 2002, the Assessing Officer has no jurisdiction or authority to issue the impugned notices. By the order dated February 12, 2002, the issue of depreciation of the electric meters and the amount of expenses incurred on account of foreign tour undertaken by Mrs. Thapar has been decided and consequently recomputed income and allowed refund. It is clear from the aforesaid order that the assessment for the relevant year, viz., 1994-95, is a complete one and by this impugned notice the Assessing Officer has sought to do piecemeal assessment. According to him this is not permissible under the law as has been settled by a judicial pronouncement rendered in the cases by the Allahabad High Court, Andhra Pradesh High Court and the Kerala High Court reported in Debi Prasad Malviya v. CIT [1952] 22 ITR 539 (All) ; M. M. A. K. Mohideen Thumby and Co. v. CIT [1955] 28 ITR 252 (AP) and M.O. Thomakutty v. CIT [1963] 47 ITR 872 (Ker). He has drawn my attention to Section 143, Sub-sections (2) and (3) of the Income-tax Act, 1961, that provides for assessment and computation of income.
9. His further contention is that admittedly it is not a case of reassessment under Section 147 of the said Act but as a matter of fact this is exactly sought to be done. In support of this case he has relied on a decision of the Supreme Court reported in CIT v. Chittoor Electric Supply Corporation [1995] 212 ITR 404. He has also drawn my attention to the Division Bench judgment of this court reported in Kooka Sidhwa and Co. v. CIT [1964] 54 ITR 54 on the proposition that even in the case of reassessment the Assessing Officer has to proceed under Section 23 which is a corresponding provision of Section 143 of the present Act. Therefore, in this case when the reassessment order was passed the Assessing Officer is deemed to have proceeded under the aforesaid section, which is an attempt of piecemeal assessment. According to him, the Assessing Officer could not take further steps. Therefore, this court should direct the Department to give effect to the order of assessment already passed.
10. Mr. P. K. Ghosh, learned senior counsel appearing for" the Department, contends that the impugned notice was passed to give effect to the direction and the order of the learned Tribunal for settling the issue of depreciation on account of the price of the electric meters as claimed by the assessee and further issue of deduction from the taxability of the amount of expenses incurred on account of the foreign tour of Mrs. J. Thapar. The order of reassessment has been passed in connection with the escapement of income under Section 147 of the said Act, in relation to the payment of sales tax. This issue has nothing to do with the issues required to be decided. Pursuant to the direction of the Tribunal the assessment order had to be passed in view of the time-limit of the matter. He has drawn my attention to the last portion of the order of the Assessing Officer dated February 12, 2002, which makes it amply clear that the issue of depreciation and the foreign tour of Mrs. J. Thapar has been kept pending for fresh decision and this has not been decided. The computation made in the order as regards depreciation does not relate to any piecemeal assessment. In the said order it has been shown, accepting the decision of the Tribunal, that the earlier demand on account of the amount of depreciation is reversed and set aside to facilitate the fresh decision on these two issues.
11. Mr. Ghosh reminds me of the self-imposed discipline of the writ court that a notice of this nature shall not be interfered with at this stage and this should be kept untouched for fresh decision of the authority concerned, since there is no allegation of improper and illegal exercise of jurisdiction.
12. Having heard the respective contentions of learned counsel in this matter, I think the issue is whether the Assessing Officer is justified in issuing the impugned notice in the context of the order dated February 12, 2002. Mr. Murarka says that the aforesaid order is a final one, as the question of depreciation has been taken care of and after considering every thing a refund order has been passed, so it reaches its finality. I have examined the order carefully and I hold Mr. Ghosh is right in saying the order does not relate to any decision on the issue of depreciation or the expenditure on account of the foreign tour of Mrs. J. Thapar. I have already quoted the direction of the Tribunal upon the Assessing Officer. It is clear that the Assessing Officer is to decide upon fresh hearing on these two issues. Therefore, the contention of Mr. Murarka that this order being a final one and on fresh decision of the aforesaid two issues is not correct. From the order dated February 12, 2002, it does not appear the Assessing Officer has heard the assessee/petitioner or touched the issue not to speak of deciding the same. So, I hold that irrespective of the effect and implication of the order dated February 15, 2002, the Assessing Officer has to decide afresh, pursuant to the direction of the Tribunal and this cannot be left outstanding in any manner whatsoever. According to him if it is not done the same tantamounts to gross breach of discipline in the quasi-judicial proceedings. It is a settled position of law that the principle of maintaining hierarchical discipline is equally and vigorously applicable in the case of quasi-judicial proceedings. This court is duty bound to see such discipline is followed in the strict sense.
13. The decisions cited by Mr. Murarka, namely Debi Prasad Malviya v. CIT [1952] 22 ITR 539 (All) ; M. M. A. K. Mohideen Thumby and Co. v. CIT [1955] 28 ITR 252 (AP) ; T. Manavedan Timmalpad v. CIT [1955] 28 ITR 615 (Mad), were rendered on the established principle of law that the assessment has to be in complete sense except in the case of escapement of assessment. The scheme of the old Act as well as the new Act in the matter of assessment is that the Revenue authorities will try as far as practicable to complete the assessment at one go not in piecemeal manner. But some times for some reason or other, this may not be possible. In the case of escapement of assessment for various reasons to safeguard against evasion and dodging of payment of revenue the Legislature in its wisdom for the welfare of the country, has provided for reassessment on given conditions and situations with pre-conditions for exercise of jurisdiction in the case of reassessment. Here the notice impugned was sought to be issued not in relation to any reassessment, but to implement the direction of the Tribunal, and the same stands on a different footing. I agree with the contention of Mr. Ghosh that the order dated February 12, 2002, has nothing to do in relation to the aforesaid two issues of the computation of income and the reference to deduction on account of depreciation is in consonance with the direction of the Tribunal as a first step to rehear the matter on these two issues.
14. I do not think, therefore, that the Assessing Officer has exceeded his jurisdiction or has improperly exercised jurisdiction. The order dated February 12, 2002, substantially relates to the reassessment under Section 147 of the said Act in relation to the payment of sales tax. Therefore, I dispose of the writ petition having found no merit in the contention upon deep and close scrutiny.
15. I direct the Assessing Officer to complete the rehearing pursuant to the direction of the Tribunal as early as possible and the same shall be done within two months from the date of receipt of this order.
16. There will be no order as to costs.