NELLAI COTTON MILLS Vs. FIRST INCOME TAX OFFICER

JUDGEMENT

(1.) THERE are two petitions before us under article 226 of the Constitution, the one for direction forbidding the 1st Income-tax Officer, Tirunelveli, from reopening the assessment of the petitioner for the assessment year 1959-60, and the other to quash an order which the Income-tax Officer made subsequently reopening the earlier assessment. The Income-tax Officer made that order because this court declined to make any interim order pending the first writ petition, but permitted him to proceed with reassessment.

(2.) THE assessee, who is the petitioner, is a registered partnership carrying on business in the manufacture and sale of earn in Tirunelveli town. For the assessment year 1959-60 the firm filed a return showing a net loss of Rs. 90,958, the accounting year therefor having ended on December 31, 1958. This result was arrived at after deducting depreciation and development rebate. THE development rebate as claimed was allowed. It appears the Assistant Accountant-General in his audit report dated December 4, 1964, pointed out that the development rebate in respect of machinery purchased and installed after January 1, 1958, had been allowed in the assessment year, though development reserve was not created to the extent of 75 per cent. as prescribed in section 10 (2) (vib) of the Income-tax Act, 1922, and that this was a mistake. Since the assessment according to the Income-tax Officer required revision in the light of the audit report, he sought sanction of the Commissioner for reopening the assessment and withdrawing the development rebate that had been allowed by mistake. In answering a query from the Commissioner, the Income-tax Officer stated that only from the balance-sheet as on December 31, 1958, it could be found whether the assessee had created a separate reserve for development rebate, and that at the time of making the claim for allowance of development rebate he failed or omitted to produce evidence regarding such creation of reserve in order to support the claim. THE Income-tax Officer expressed his view in his communication to the Commissioner that his amount could be treated as a failure on the part of the assessee to disclose fully and truly all the material facts in support of his claim which would attract section 147 (a). Sanction of the Commissioner followed and pursuant to it, when a notice under section 148 was served on the assessee, it immediately came up to this court with a petition under article 226 of the Constitution to restrain the Income-tax Officer from proceeding further on the ground that he had no jurisdiction to act under section 147 (a). In the reassessment order dated October 31, 1966 the Income-tax Officer referred to the fact that no reserve had been created in the accounts as required by the statutory provision, that subsequent creation of such reserve was not sufficient compliance and that, therefore, the development rebate originally allowed should be disallowed On that view he added sum of Rs. 86,754 to the assessment.