ANUPAM RASAYAN INDIA LTD. Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) The petitioner has challenged a notice dated 28.08.2009 issued by the respondent No.1 Assessing Officer under Section 148 of the Income Tax Act, 1961 ("the Act" for short) for reopening the petitioner's assessment for the assessment year 2004-2005. The brief facts are as under :

(2.) The petitioner is a company registered under the Companies Act and was incorporated with effect from 30.08.2003 from a erstwhile partnership firm. For the Assessment Year 2004- 2005, the petitioner filed the return of income on 01.11.2004 which was taken by the assessing officer in scrutiny. The assessing officer passed an order of assessment under Section 143(3) of the Act on 28.12.2007 in which he computed the petitioner's total income as nil and allowed the company to carry forward the unabsorbed depreciation of Rs. 3.81 Lakhs.

(3.) The Assessing Officer issued the impugned notice on 28.08.2009 seeking to reassess the petitioner's income for the said assessment year 2004-2005. This notice was thus issued beyond a period of four years from the end of the relevant assessment year. In order to do so, the assessing officer had recorded the following reasons : "The return of income for the year under consideration, declaring a total income of Nil was filed on 01.11.04. Assessment in the case was completed under section 143(3) r.w.s. 147 of the Act on 28.12.07, determining the total income of the assessee at Nil. 2. The assessee company is engaged in the business of manufacturing of chemicals. On going through the office records, it is seen that the assessee company had claimed deduction of an amount of Rs. 89,92,832/- on account of depreciation, for the year under consideration. The assessee has acquired the status of company by undergoing registration under the Companies Act, 1956 w.e.f. 31.08.03. Prior to acquiring the status of company the assessee was a partnership firm viz M/s. Anupam Rasayan. According to the fifth proviso to section 32(1) of the Act, whenever there is a succession as per clause (xiii) and clause (xiv) of 47 of section 170 of the Act, depreciation is allowable on the assets to the predecessor and the successor. The said proviso also stipulates that the depreciation shall be apportioned between the predecessor and the successor in the ratio of the number of days for which the assets were used by them. The amount of Rs. 89,92,832/- claimed by the assessee company as depreciation is for the whole year i.e. 365 days, which is in contravention of the provisions of the fifth proviso to section 32(1) of the Act. The amount of depreciation claimed by the assessee in respect of the assets extracted by it from the firm on acquiring the status of company is Rs. 78,30,983/-. As per the provisions cited supra, the assessee company is eligible to claim depreciation for only 214 days (from 31.08.03 to 31.03.04) in respect of the assets of Rs. 3,47,40,825/- extracted from the firm-M/s. Anupam Rasayan, which works out to Rs. 45,91,305/-, the working of which is given below: <IMG>JUDGEMENT_72_LAWS(GJH)10_2016.jpg</IMG> Thus, the assessee-company has claimed depreciation in excess of Rs. 32,39,678/- which is not allowable. Thus, income to the extent of Rs. 32,39,678/- has escaped assessment within the meaning of section 147 of the Act. 3. It is seen from the office records that the assessee was issued a bill of Rs. 35,000/- dated. 01.02.04 by M/s. E Mecklai towards subscription charges for comprehensive forex information for the period from 01.03.04 to 28.02.05, which is debited by the assessee company on 15.03.04, under the head 'Consultancy charges' in the P and L account. It is apparent that the above expense is for 12 months, out of which, 11 months pertain to the subsequent year. Thus, out of the above expense, only an amount of Rs. 2917/- (35000+12) pertain to the year under consideration. However, the assessee has debited the entire amount to its P&L account, which is incorrect. As such, the remaining amount of Rs. 32,083/- pertain to the accounting period relevant to A.Y. 2005-06. Since these expenses do not pertain to the year under consideration, the same is not allowable. Thus, the assessee has claimed excess expense to the extent of Rs. 32,083/- during the year under consideration, which has resulted in suppression of its income to that extent. Thus, income to the extent of Rs. 32,083/- has escaped assessment within the meaning of section 147 of the Act.