(Per : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. In the present petition, the petitioner company Garden Finance Ltd. has challenged a notice dated 20.6.2002 issued by the Assessing Officer under section 148 of the Act seeking to reopen the assessment of the petitioner for the assessment year 1998-1999.
2. For the assessment year under consideration, the petitioner filed its return of income on 30.11.1998. In such return, the petitioner claimed depreciation at the rate of 40% on the Written Down Value of the commercial vehicles owned by the assessee company. The return was accepted under section 143(1) of the Act without any scrutiny. It is such return which the Assessing Officer desired to reopen within a period of four years from the end of relevant assessment year for which impugned notice came to be issued.
3. The Assessing Officer had recorded his reasons for reopening the assessment which read as under:
“The assessee company is a non-banking finance company engaged in the business of financing, money lending and trading in shares and financing on lease of motor vehicles. The assessee company has shown source of income viz., lease income, hire purchase income, bill discounting income, profit on sale of long term investment, interest on deposits on loan, loan management fee, merchant banking income and income from other sources.
2. The assessee company filed return of income on 30/11/98 showing taxable income Rs.62,30,570/-. On verification of the depreciation statement attached with the return of income, it is noticed that depreciation of Rs.1,26,71,305 is inclusive of depreciation of Rs.1,26,66,728 on motor vehicles (commercial) claimed at the rate of 40% on WDV/cost of Rs.3,16,66,819. As per Rule 5, the rate of depreciation on motor vehicle in the second column of the table in Appendix-I are as under :
3. The assessee is a leasing company. The assessee company has used the motor vehicles for lease and not for hiring. The assessee company is, therefore, entitled for depreciation at the normal rate of 20% on motor vehicles(commercial) and not at the higher rate of 40% as claimed and allowed while finalizing the assessment.
4. The assessee company has been amalgamated to the Garden Silk Mills Ltd wef 1/7/1997. According to the fifth proviso to section 32(1) of the IT Act, 1961 aggregate deduction in respect of depreciation of the amalgamating company and the amalgamated company in the cases of amalgamation shall not exceed in any previous year the deduction calculated at the prescribed rate as if the amalgamation had not taken place and it shall be apportioned between the amalgamating company and the amalgamated company in the ratio of the assets used by them.
5. The assessee company has claimed total depreciation for the whole year on commercial vehicle at Rs.1,26,66,720 and on furniture at Rs.4,577 totalling to Rs.1,26,71,305. Considering the rate of depreciation of 20% on commercial vehicle in the case of the assessee company, the assessee company is entitled to total depreciation of Rs.15,33,341 for the period upto 30/6/1997 as it has been amalgamated w.e.f. 1/7/1997. The assessee company has claimed excess depreciation of Rs.1,10,064(Rs.1,26,71,305- Rs15,83,341) while computing taxable income which has escaped assessment to that extent.
6. I have therefore, reason to believe that income to the extent of Rs.1,10,87,964 has escaped assessment within the meaning of sub clause(i) of explanation 2 inserted to section 147 of the IT Act. The assessee company has failed to furnish full and true particulars of income.”
4. Counsel for the petitioner submitted that the petitioner had rightly claimed the depreciation on the vehicles at the rate of 40%. He submitted that even if such vehicles were leased out since the lessee was using such vehicles for the business of hire, higher depreciation was allowable. He submitted that in the earlier years the Assessing Officer had not made any disallowance on such depreciation though issue had cropped up in the scrutiny assessment. He therefore, submitted that notice is issued for examining the claim on a mere change of opinion.
5. Counsel for the Revenue however, submitted that in the present cases, the returns were accepted without scrutiny. In that view of the matter by virtue of decision of Division Bench in case of Assistant Commissioner of Income-tax v. Rajesh Jhaveri Stock Brokers P. ltd. reported in (2007) 291 ITR 500(SC), such reopening be permitted. Counsel submitted that the question of permitting higher rate of depreciation on leased out commercial vehicle came up for consideration of this Court in case of Bhagwati Appliance (now Dairyden Ltd.) v. Income-tax Officer reported in (2011) 337 ITR 286 (Guj.), in which issue was decided in favour of the Revenue.
6. Only on the ground that in the present case, reopening is sought to be made within four years in case of returns which were accepted under section 143(1) of the Act, without scrutiny, we are inclined to uphold the impugned notices. In case of Rajesh Jhaveri Stock Brokers P. ltd. (supra), when the question of notice for reopening in the background of returns which were accepted under section 143(1) of the Act came up for consideration, the Apex Court observed as under :
“17. The scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied firstly the Assessing Officer must have reason to believe that income profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either (i) omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a) But under the substituted section 147 existence of only the first condition suffices. In other words if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is however to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso.
18. So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued.“
7. In the result, the petition is dismissed.
(Akil Kureshi,J.) (Harsha Devani,J.) (raghu)