HIND SYNTEX LTD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under Section 256(1) of the Income Tax Act, 1961 (for brevity "the Act") for opinion of this Court in respect of the following questions of law:

(2.) THE facts which are essential to be stated are that the Assessee is a public limited company engaged in the business of manufacturing of synthetic blended yarn. For the assessment year 1988 -89 relevant to the previous year ending on April 30, 1987, the Assessee submitted its return on June 21, 1988, declaring its income at Rs. 35,77,693 which was later on revised by filing a revised return on March 6, 1989, declaring the income therein at Rs. 25,42,627 on March 30, 1989. The Assessee put forth a stand that the provisions contained in Section 115J of the Act were not applicable to the case of the Assessee. The income was assessed under Section 143(1)(a) of the Act at Rs. 25,42,627 on March 30, 1989. Later on, the Assessing Officer passed an order of rectification under Section 154 of the Act and made an addition of Rs. 10,35,066.

(3.) BEING aggrieved by the order of the first appellate authority, the Assessee approached the Income Tax Appellate Tribunal (for short "the Tribunal") in I.T.A. No. 565/Ind/91. Before the Tribunal, it was contended by the Assessee that it had been providing depreciation on straight -line method till the previous year ending on April 30, 1986 relevant to the assessment year 1987 -88. It changed the method of providing depreciation from the assessment year 1988 -89 from the straight -line method to the written down value (WDV) method and, accordingly, the depreciation was charged at Rs. 2,60,84,138. In the subsequent assessment year, i.e., 1989 -90, the Assessee had changed the method of providing depreciation consequent upon the introduction of Schedule XIV to the Companies (Amendment) Act, 1988 and filed the return of income before the Revenue authorities. During the course of assessment for the year 1989 -90, the Assessing Officer noticed from the annual report in which the Assessee had notified at item No. 6 in the notes of account that the company has provided for depreciation on the written down value method as per rates provided under the Income Tax Rules, 1962, up to April 1, 1987. Consequent to the introduction of Schedule XIV to the Companies (Amendment) Act, 1988, the company provided for depreciation as per the rates specified therein for the period April 2, 1987 to April 30, 1987, and in view of the above change the company had written back the excess provision of depreciation amounting to Rs. 12,86,486. Relying upon the information with regard to the earlier assessment year, the Assessing Officer reopened the assessment for the assessment year 1988 -89 after forming an opinion that the income chargeable to tax had escaped assessment and that it would have an impact on the working of income under Section 115J of the Act. The Assessing Officer issued notice under Section 148 of the Act and reassessment was framed under Section 143(3) read with Section 147 of the Act and he made an addition of Rs. 95,17,841 as excess depreciation charged in respect of the assessment year. The Tribunal, after recording the facts, came to hold that there was sufficient material, on record to have reasonable belief that the Assessee had not disclosed fully or truly the material facts necessary for the year.