VIPAN KHANNA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE petitioner is the proprietor of Khanna Engineers, Pathankot, and was assessed to income tax within the jurisdiction of the ITO. He filed his return of income for the asst. year 1992 93 on 31st March, 1994 declaring a loss of Rs. 8,100. On the same day this return was processed under S. 143 (1)(a) of the IT Act, 1961 ('the Act') wherein a minor adjustment of Rs. 104 was made and the loss was determined at Rs. 7,996. Later on the ITO noticed that in the statement of accounts filed with the return the petitioner had claimed depreciation on trucks at the rate of 50 per cent against 40 per cent admissible to him and that he had not included the income of Rs. 23,391 from B.C. Khanna & Sons, Chamba, in the total income shown in the return. With a view to rectify these mistakes, the ITO issued a notice under S. 154/155 of the Act on 1st May, 1995 requiring the petitioner to file objections, if any, to the proposed rectification of the aforesaid mistakes. In response to the said notice the petitioner furnished replies, dt. 11th May, 1995 and 29th May, 1995 claiming that no rectification was called for. He claimed that the depreciation claimed in the return was Rs. 8,97,902 whereas the depreciation admissible to him even at the rate of 40 per cent worked out to Rs. 8,98,321. For this purpose a depreciation chart was enclosed with the reply. It was explained in the reply that there was one more truck owned by the petitioner on which depreciation had not been claimed in the return and it was because of this reason the claim of depreciation worked out to an amount higher than what was claimed in the return. Similarly, he explained that the income from B.C. Khanna & Sons, Chamba, had duly been accounted for in the returned income.

(2.) DURING the pendency of proceedings under S. 154/155 the petitioner filed his return of income for the asst. year 1993 94 on 31st March, 1995 declaring an income of Rs. 76,586. From the statements of account attached with the return it was evident that the depreciation on trucks had again been claimed at the rate of 50 per cent The ITO, therefore, processed the return under s. 143(1)(a) on 5th May, 1995, wherein he restricted the claim of depreciation to 40 per cent and added the excess depreciation of Rs. 89,790 to the returned income by way of an adjustment. The requisite intimation was sent to the petitioner. The petitioner challenged the adjustment made by the ITO under S. 143(1)(a) before the CIT(A), Jammu, who by his order dt. 14th Aug., 1996 allowed the appeal and deleted the addition of Rs. 89,790 on the ground that such a disallowance did not fall within the ambit of prima facie adjustments permissible under S. 143(1)(a).

(3.) IN response to the aforesaid notices under S. 148 the petitioner filed his returns of income on 1st April, 1997 declaring the same income as had been shown in returns originally filed for both the years. During the pendency of proceedings under S. 147 the jurisdiction of the case stood transferred to the Asstt. CIT, Circle, Pathankot. To finalise the assessments on the basis of proceedings initiated under S. 147, the Asstt. CIT issued notice under ss. 143(3) and 142(1) of the Act requiring the petitioner to produce the books of account and furnish the information specified in his letter dt. 30th July, 1998. Since this letter is in dispute, the same is being reproduced as under for facility of reference :