1972 (2) TMI 27 - HC - Income Tax

Rectification order time-barred, court rules in favor of petitioner, emphasizing distinct assessment under section 148.

The court held that the rectification order withdrawing development rebate was time-barred as it exceeded the four-year limit under section 154, rejecting ... 1922 Act, 1961 Act, Income Tax Act Issues:1. Validity of withdrawing depreciation on land.2. Validity of withdrawing development rebate.3. Time limitation for rectification order under section 154.Analysis:1. The petitioner, a private limited company, was assessed for income tax for the year 1966-67 and granted development rebate for machinery installed in 1964. However, depreciation on land was also claimed, which was later deemed incorrect based on a Supreme Court ruling. The Income-tax Officer issued a notice under section 148 and withdrew the depreciation on land in a supplementary assessment order.2. Subsequently, the Income-tax Officer noticed that development rebate was wrongly granted as no reserve was created during machinery installation. A notice under section 154 was issued, treating it as a rectification of mistake. The officer withdrew the development rebate in an order after overruling the petitioner's contention on time limitation. The petitioner filed a petition against this order.3. The original assessment order allowing development rebate was passed on February 9, 1967, and could be rectified within four years under section 154. The rectification order on September 10, 1971, was beyond the time limit. The department argued that the limitation should be counted from the order under section 148, claiming the original assessment merged into it. However, the court disagreed, stating that an order under section 148 is separate, dealing only with escaped income, and does not merge with the original assessment order.4. The court cited precedents to support that reassessment under section 148 is limited to escaped income and does not revisit the entire assessment. The development rebate issue was finalized in the original assessment and not subject to reevaluation under section 148. The court held that the rectification order was time-barred, quashing it and the demand notice. The petitioner was awarded costs.