Law: Income Tax Act, 1961

Section: 147b

Income-tax----Reassessment---Information that income has escaped assessment---Audit note which was erroneous---Reassessment based on such audit note was not valid---Indian Income Tax Act, 1961, S.147(b). The assessment of the assessee-company for 1972 73 was completed. Subsequently, the audit party pointed out that in the original assessment, depreciation on roads was wrongly allowed and that 80 per cent. of the initial contribution of Rs.46,950 to the superannuation fund was wrongly deducted under section 36(l)(iv) of the Income Tax Act, 1961, in computing the income of the assessee. The Income-tax Officer, therefore, reopened the assessment under section 147(b). The Tribunal held that reassessment was not valid. On a reference: Held, that in the case of CIT v. Hyderabad Asbestos Cement Products (1988) 172 ITR 762 (AP), it had been held that in accordance with section 36(1)(iv) of the Act and Rule 88 of the Income-tax Rules, 1962, the assessee was entitled to claim deduction of the entire sum contributed to the approved superannuation fund during the previous year relevant to the assessment year. In so far as depreciation on roads was concerned, the Supreme Court in CIT v. Gwalior Rayon Silk Manufacturing Co. Ltd. (1992) 196 ITR 149 held that roads were buildings for the purpose of depreciation, and, therefore, the assessee was entitled to depreciation under section 32 of the Act. The audit note relied upon by the Income-tax Officer was an erroneous one. Therefore, on the basis of the erroneous report, re¬opening could not be made, since it would not constitute information under section 147(b). CIT v. Gwalior Rayon Silk Manufacturing Co. Ltd. (1992) 196 ITR 149 (SC); CIT v. Hyderabad Asbestos Cement Products Ltd. (1988) 172 ITR 762 (AP); Indian and Eastern Newspaper Society v. CIT (1979) -l 19 ITR 996 (SC) and Malhotra (R.K.), ITO v. Kasturbhai Lalbhai (1977) 109 ITR 537 (SC) ref. JUDGMENT K.A. THANIKKACHALAM, J.---At the instance of . the Department, the, Tribunal referred the following question for the opinion of this Court under section 256(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"): "Whether, on the facts and in the circumstances…

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