M/S HINDUSTAN HYDRAULICS vs. C.I.T JALANDHAR

Facts

This case involves a reference from the Income Tax Appellate Tribunal (ITAT) to the High Court of Punjab and Haryana concerning assessment year 1978-79. The assessee, M/s Hindustand Hydraulics (P) Ltd., challenged the ITAT's order upholding the initiation of proceedings under Section 147(a) of the Income-tax Act, 1961, and the disallowance of depreciation and investment allowance on new machinery valued at ₹13,95,964.97 and ₹1,68,900. The ITAT's decision was based on a report from ABC consultants, to which the assessee was not a party. The High Court was asked to opine on these matters following an order dated January 11, 1993.

Held

The High Court ordered that the reference petition be returned unanswered. This decision was based on the assessee's submission that a related petition concerning depreciation and investment allowance for the same machinery and assessment year was pending before the Central Board of Direct Taxes (CBDT). The assessee's counsel, acting on instructions, stated they did not wish to press the current reference. The revenue's counsel had no objection to this course of action. Therefore, the High Court did not decide the referred questions of law on their merits. The operative direction was to return the reference petition unanswered, preserving the assessee's rights in the pending CBDT matter.

Key Issues

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the proceedings under Section 147(a) of the Income-tax Act, 1961, had been validly initiated? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding, merely on the basis of the report of ABC consultants (to which the assessee was not a party), that new machinery of the value of ₹13,95,964.97 and ₹1,68,900 had not been installed during the year under assessment, and thereby upholding the disallowances of depreciation and investment allowance on the same without even testing, much less proving, the material filed in the course of original assessment to be false? Assessee's contention: The assessee's counsel stated that a petition for the claim of depreciation and investment allowance regarding the same machinery for assessment year 1978-79 is pending before the Central Board of Direct Taxes (CBDT). Consequently, the assessee instructed their counsel not to press the present reference petition and requested it be returned unanswered, without prejudice to the assessee's rights before the CBDT. Revenue's contention: The revenue's counsel had no objection to the assessee's request.