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of <h1>High Court overturns dismissal of revision petitions challenging reassessment under Income Tax Act. Clarity on depreciation calculations and assessing officer errors.</h1> <h3>Bharat Suryodaya Mills Co. Limited Versus CN. Vaishnav</h3> Bharat Suryodaya Mills Co. Limited Versus CN. Vaishnav - [1980] 121 ITR 694, 9 CTR 325 Issues:Challenge to order under section 264(1) of the Income Tax Act for multiple assessment years. Validity of reassessment proceedings under section 147(a) for exceeding depreciation claims. Correctness of depreciation calculations and applicability of initial depreciation. Interpretation of duty to disclose material facts for assessment. Revision petitions against AAC's decision. Judicial review of the respondent's order dismissing revision petitions.Analysis:The petitioner, a textile manufacturing limited company, challenged the order passed by the respondent under section 264(1) of the Income Tax Act for assessment years 1963-64, 1964-65, 1965-66, and 1967-68. The dispute arose from the allowance of excess depreciation by the Income Tax Officer (ITO) in previous assessments. The ITO reopened assessments for subsequent years under section 147(a) due to depreciation claims exceeding 100% of original asset costs. The petitioner contested these reassessment orders before the AAC and the Income-tax Appellate Tribunal, citing discrepancies in depreciation calculations and the applicability of initial depreciation. The Tribunal allowed the petitioner's appeal, emphasizing the duty of the ITO to ensure accurate depreciation allowances and the petitioner's duty to disclose material facts. The respondent, however, dismissed the revision petitions challenging the AAC's decision, leading to the present Special Civil Application.In the landmark case of Ahmedabad Cotton Mfg. Co. Ltd. v. Union of India, the High Court highlighted the dual duty of the taxpayer and the ITO in ensuring correct depreciation calculations. The Court emphasized that excess depreciation should not have been allowed due to the failure of the petitioner to disclose material facts and the ITO's oversight in verifying depreciation limits. This decision formed the basis for challenging the reassessment proceedings initiated under section 147(a).Contrary to the respondent's order, the Supreme Court's ruling in Parashuram Pottery Works Co. Ltd. v. ITO clarified that mistakes in depreciation calculations solely attributable to the ITO cannot be grounds for reopening assessments under section 147(a). The Court held that the responsibility for such errors does not lie with the taxpayer, especially when the law regarding depreciation limits is not correctly applied by the assessing officer. This decision reinforced the position that excess depreciation resulting from calculation errors does not constitute an omission or failure on the part of the taxpayer.Given the conflicting interpretations of the duty to disclose material facts and the responsibility for accurate depreciation calculations, the High Court set aside the respondent's order, citing errors of law apparent on the face of the record. The Court directed the Commissioner of Income-tax to reconsider the revision petitions in accordance with the legal principles established by the Supreme Court and the High Court judgments referenced in the analysis. Consequently, the Special Civil Application was allowed, quashing the respondent's order and providing guidance for future assessment proceedings.
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