Rajes Kumar, J.@mdashBy means of the present writ petition the Petitioner is challenging the validity of the notice dated 6-5-2002 for the assessment year 2000-01 u/s 148 of the income tax Act, 1961 (called the ''Act'' for short).
2. The Petitioner is a company incorporated under the Indian Companies Act, 1956. The case of the Petitioner is that its manufacturing unit was established in a free trade zone in the year 1993 and was engaged in the manufacturing and export of electrical lamp and, thus, its profit derived from such undertaking was exempted from tax for a period of 10 consecutive assessment years u/s 10A of the Act. Ten years expired in the assessment year 2002-03 relevant to the financial year 2001-02. The Petitioner filed income tax returns for the assessment years 1993-94 onwards. The Petitioner has also filed income tax return for the assessment year 2000-01 on 23-11-2000 declaring NIL taxable income. The Petitioner claimed exemption on an income of Rs. 8,21,01,337 u/s 10A of the Act. In the record there is nothing to show that any assessment order either u/s 143(1)(a) or Section 143(3) of the Act was passed. Learned Counsel for the Petitioner, Sri O.P. Bajpai, during the course of arguments, has stated that no assessment order, either u/s 143(1)(a) or Section 143(3), has been passed.
3. The assessing authority, on 19-7-2002, recorded the reasons and issued notice u/s 148 of the Act. The reasons recorded are as follows :
The return declaring income nil has been filed on 23-11-2000. The net income of Rs. 8,21,01,337 has been claimed exempt u/s 10A.
A perusal of the balance sheet show that the Assessee company has not claimed depreciation on the value of Plant & Machinery of Rs. 14,56,17,518 being on a/c of exchange fluctuation. The 25 per cent depreciation on this amount comes to Rs. 3,64,04,380 which has not been deducted from the income and instead of Rs. 4,56,96,957 an amount of Rs. 8,21,01,337 has been claimed exempt u/s 10A resulting in excess claim of exemption during the year and reduction in tax liability.
As such, I have reason to believe that an amount of Rs. 3,64,04,380 has escaped assessment for which the proceedings u/s 147 required to be initiated. Issue notice of u/s 148 for assessment year 2000-01.
4. In the present writ petition the Petitioner is challenging the notice u/s 148 of the Act.
5. Heard Sri O.S. Bajpai, learned Counsel for the Petitioner, assisted by Sri Sujeet Kumar and Sri Shambhu Chopra, learned Standing Counsel.
6. Learned Counsel or the Petitioner submitted that u/s 147 of the Act action can be taken only in case where the income chargeable to tax is escaped assessment. He submitted that since the income of the Petitioner was exempted to tax u/s 10A of the Act and was not chargeable to tax, therefore, no action could be taken. He submitted that Explanation 2 to Section 147 of the Act is to be read along with Section 147(1) of the Act. He submitted that whether the Assessee has claimed lesser amount of depreciation and increased the amount of income is wholly irrelevant as the entire income of the Assessee was exempted from tax u/s 10A of the Act in the year under consideration. He submitted that the depreciation in the year under consideration has been claimed in the same way as it was claimed in the preceding and subsequent year and the same has always been allowed and the income of the Assessee has been exempted u/s 10A of the Act. He further submitted that by the Finance Act, 2002, Section 43A the Act has been inserted with effect from 1-4-2003, which is applicable to the assessment year 2003-04, coincidently the year when the Assessee was liable to tax after completing 10 years of the exemption. He submitted that Section 43A of the Finance Act has been inserted to remove the anomaly in claiming the depreciation. Now, to arrive to a cost of plant & machinery for claiming depreciation, the written down value has no relevance and the cost of plant & machinery would be calculated in accordance to Section 43(3) of the Finance Act and, therefore, whether the Petitioner has claimed less depreciation or higher depreciation in the year under consideration, in which the exemption is available, has no relevance for the claim and the allowance of the depreciation in the year when the income would be chargeable to tax. He submitted that having regard to the said provision of Section 43A the Tribunal has allowed the depreciation claimed by the Petitioner on a notional value and not on the value of the plant & machinery on a consideration of the exchange fluctuation in the earlier year. He submitted that the reasons recorded for initiation of proceeding for arriving to the conclusion of escaped assessment is wholly irrelevant and has no nexus to the escaped income chargeable to tax vis-a-vis the assessment year involved. In support of the contention, he relied upon various decisions of the Supreme Court and the High Courts.
7. Sri Shambhu Chopra, learned Standing Counsel, raised a preliminary objection that the Petitioner should have filed objection to the reasons recorded before the assessing authority in the light of the law laid down by the Apex Court in the case of
8. Having heard learned Counsel for the parties, we have gone through the record.
9. The Apex Court in the case of GKN Drives hafts (India) Ltd. (supra) has held as follows :
We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice u/s 148 of the income tax Act is issued, the proper course of action for the notice is to file a return and if he so desires, to seek reasons for issuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the notice is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the Assessing Officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years.
10. In the present case we find that learned Counsel for the Petitioner has placed more emphasis and reliance on the provision of Section 43A of the Act, which has been inserted by the Finance Act, 2002 with effect from 1-4-2003, which, according to learned Counsel for the Petitioner, has set at rest all the controversies relating to the claim of depreciation. Since this provision was not available with the assessing authority when the notice u/s 148 of the Act was issued, it would be appropriate that the Petitioner should file objections to the reasons recorded raising all the pleas and objections, which have been taken in the writ petition, and the assessing authority shall dispose of the objection by passing a speaking order before proceeding with the assessment.
11. In the circumstances, without dealing with the various pleas and submissions of the Petitioner, we direct the Petitioner to file objections before the assessing authority within a period of four weeks along with a certified copy of this order and the assessing authority is directed to decide the objections by a speaking order before proceeding with the assessment.
With the aforesaid observation, the writ petition stands disposed of.
