PARASHURAM POTTERY WORKS CO. LTD. vs. INCOME TAX OFFICER, CIRCLE-1, WARD A, RAJKOT, GUJARAT

CIVIL APPEAL No. 1792/1971Supreme Court[1977] 2 S.C.R. 9216 November 1976Bench: 2 JudgesAuthor: HANS RAJ KHANNA, V.R. KRISHNA IYER B10 pages
AI SummaryAllowed

What did the Supreme Court hold?

The Tribunal held that for an Income Tax Officer to acquire jurisdiction to issue a notice under section 148 beyond four years but within eight years, two conditions must be met: (i) the ITO must have reason to believe that income chargeable to tax has escaped assessment, and (ii) he must have reason to believe that such escape was due to the omission or failure of the assessee to disclose fully and truly material facts necessary for assessment. The duty of the assessee is limited to making a true and full disclosure of primary facts; it does not extend to advising the ITO on inferences. A mere change of opinion by the ITO regarding an inference drawn from primary facts does not justify reopening. The Tribunal found that the appellant had provided all particulars required in the depreciation part of the return. When the ITO relies on his own records and makes a mistake, the responsibility cannot be ascribed to the assessee's omission or failure. The excess depreciation was allowed due to the ITO's remissness in not applying the law, not due to the appellant's failure to disclose. Therefore, the impugned notices were quashed.

What were the facts?

The appellant, Parashuram Pottery Works Co. Ltd., filed income tax returns for assessment years 1957-58 and 1959-60 under the Income Tax Act, 1922. The Income Tax Officer (ITO) passed assessment orders on April 16, 1959, and March 30, 1961, respectively, allowing certain depreciation. On October 5, 1965, the ITO informed the appellant about a mistake in depreciation calculation and sought objections to rectification. Subsequently, on February 2, 1966, the ITO issued a letter under section 147(a) of the Income Tax Act, 1961, alleging income escaped assessment due to the appellant's failure to disclose material facts. The appellant contended they had disclosed all facts and any oversight was the ITO's. The ITO issued notices under section 147 on March 4, 1966, requiring fresh returns. The appellant challenged these notices via a writ petition, which the High Court dismissed, finding an omission by the appellant.

What were the issues?

1. Whether the Income Tax Officer had the jurisdiction to issue notices under section 148 of the Income Tax Act, 1961, beyond the period of four years but within eight years, for the assessment years 1957-58 and 1959-60, when the alleged escape of income was due to a mistake in depreciation calculation. Assessee's contention: The appellant argued that there was no omission or failure on their part to disclose material facts. All facts were placed before the assessing authority, and the initial depreciation allowance was on record. They contended that if there was an oversight by the ITO, the appellant could not be held responsible. Revenue's contention: The respondent (ITO) contended that the appellant failed to disclose in the return that initial depreciation on certain capital assets had been allowed in the past, which should have been considered for calculating depreciation for the assessment years in question.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 149,Section 10(2)(vi),Section 10

AI-generated summary — verify with the full judgment below

Cited by 486 judgments on BharatTax

See all citing judgments →

Counted from the text of the judgments hosted here. Most recent first.

A B c D E F G H 92 PARASHURAM POTTERY WORKS CO. LTD. v. INCOME TAX OFFICER, CIRCLE-1, WARD 'A', RAJKOT, GUJARAT November 16, 1976 (H. R. KHANNA AND V. R. KRISHNA IYER, JJ.] Income Tax Act, 1961-Secs. 147, 148, 149, lllcome Tax Act 1922-Sec. 10 (2) vi-Reopening of assessment-Omission 011 the part of assessee to disclose fully and truly all material facts-Duty to disclose primary facts-Duty to draw references of l.T.0.-Whether l.T.O. can correct his error or give effect to change in his opinion in reopening proceedings.

The appellant a Public Limited Company filed its Income Tax Return relat- ing to the assessment years 1957-58 and 1959-60 tinder the Income Tax Act, 1922. The Income Tax Offieer passed assessment orders on 16-4-1959 and on 30-3-1961 respectively in respect of the two years.

Certain depreciation was allowed by the Income Tax Officer for both the years.

On 5-10-1965, the Income Tax Officer addressed a letter to the appellant stating that there had been a mistake in the calculation of the depreciation allowance. The appellant was asked by that letter if it had any objection to the rectification of the mistake in the calculation of the deprec

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 147

All 49,210 judgments and leading authorities on Section 147 →

Recent GST High Court judgments

Search GST case law →