1976 (12) TMI 11 - HC - Income Tax

High Court rules wooden staging in cold storage as plant, not building, under Income Tax Act

The High Court of Allahabad ruled in favor of the petitioner in a case challenging a notice issued under section 148 of the Income Tax Act. The court held ... Income Tax Act, Valuation Officer Issues:1. Validity of notice issued under section 148 of the Income Tax Act.2. Disclosure of investment particulars by the petitioner.3. Consideration of wooden staging as part of plant or building.4. Jurisdiction of the Income Tax Officer to issue notice under section 148.5. Time limitation for issuance of notice under section 148.Analysis:The judgment delivered by the High Court of Allahabad pertains to a petition challenging a notice issued under section 148 of the Income Tax Act. The petitioner had constructed a cold storage and filed a return for the assessment year 1961-62, stating that no business was conducted, only installation and construction took place. Subsequently, a valuation report estimated the investment in the building portion of the cold storage at Rs. 1,46,530, leading the Income Tax Officer (ITO) to issue the notice under section 148, alleging income escapement. The petitioner contended that the notice was invalid for various reasons, including lack of proper application of mind by the ITO and the notice being time-barred.The court highlighted the Supreme Court's stance on the duty of the assessee to disclose primary facts during the original assessment, emphasizing that the onus is on the ITO to draw correct inferences. The core issue revolved around whether the petitioner fully disclosed the investment particulars on the cold storage building in the assessment year 1961-62. The valuation officer's report indicated a total investment of Rs. 1,46,530, with a portion attributed to wooden staging. The petitioner argued that wooden staging should be classified as part of the plant, not the building, citing relevant case law.The court agreed with the petitioner that wooden staging in the cold storage should be considered part of the plant, not the building. By excluding the value of wooden staging, the total investment on the building amounted to Rs. 82,178, undermining the ITO's belief of income escapement exceeding Rs. 50,000. Consequently, the court deemed the notice beyond the permissible time limit and invalid, thereby quashing it. The judgment favored the petitioner, directing each party to bear its own costs.In conclusion, the court's decision hinged on the proper classification of the investment components in the cold storage construction and the ITO's adherence to the statutory conditions for issuing a notice under section 148. The judgment underscored the significance of accurate disclosure by the assessee and the ITO's obligation to make informed assessments based on primary facts.