VIKRAM MILLS LIMITED Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THE petitioner is a public limited company and it runs a textile mill at Ahemdabad. The respondent is the ITO having jurisdiction to assess the petitioner company under the IT Act, 1961 (hereinafter referred to as "the Act").

(2.) DURING the course of proceedings for assessment to Income tax for asst. year 1964 65 the corresponding previous year being calendar year 1963, the petitioner company was given an allowance in the sum of Rs. 49,354 by way of development rebate under S. 33 on account of its having purchased certain machinery during the relevant previous year. The allowance was made since the petitioner company fulfilled the conditions laid down in S. 34 and more particularly the condition prescribed in S. 34(3)(a) which requires that a certain percentage of the amount allowed as development rebate must be credited to a reserve account to be utilised by the assessee during the period of eight years next following for the purposes of the business of the undertaking other than those specified therein. It might be stated here that the period of eight years aforesaid expired in the present case on December 31, 1971.

(3.) ON April 14, 1975, the respondent issued a notice, exhibit B, to the petitioner company stating that there was a mistake apparent from the record of the assessment proceedings for the asst. yr. 1964 65 and that the assessment order for that year was required to be amended. The notice proceeded to state that the mistake was that development rebate of Rs. 49,354 was wrongly allowed during the assessment proceedings for the said assessment year. The notice called upon he petitioner to show cause why the power of rectification should not be exercised on the facts and in the circumstances of the case. It appears that, after receipt of the notice aforesaid, a representative of the chartered accountants of the petitioner company met the respondent and he was informed that, as the amount standing to the credit of the development rebate reserve was transferred to the general reserve before the completion of eight years, the provisions of S. 34(3) (a) were violated giving jurisdiction to the respondent to act under S. 155(5) of the Act. After the said meeting the chartered accountants of the petitioner company addressed a letter dated May 10, 1975, exhibit C, to the respondent pointing out that none of the conditions prescribed in S. 34 was violated and that provisions of S. 155(5) were not attracted in the facts and circumstances of the case. There was some correspondence exchanged between the parties thereafter which is not relevant for the purpose of the decision of the case. Ultimately, the respondent made an order dated December 27, 1975, exhibit F, amending the order of assessment for the asst. year 1964 65 and recomputing the total income of the said assessment year by adding back the amount of Rs. 49,354 which was originally allowed as development rebate. The material part of the said order reads as under : "From the above it would appear that the amount of Rs. 93,171 which includes Rs. 66,621 relating to the current year 1963 has been transferred from the statutory development rebate reserve to general reserve and the payment of dividend for current year 1970 out of the general reserve can be considered as utilised witin the period of 8 years within the meaning of S. 155(5)(ii) of the IT Act and the development rebate originally allowed shall be deemed to have been wrongly allowed.