- (1.) THE petitioner-company in this writ petition has challenged the notice issued by the ITO under s. 154 of the IT Act, 1961 ("the Act"), and made the following prayer, "It is, therefore, respectfully prayed that this Honourable Court be pleased to issue : (a) a writ, order or direction in the nature of certiorari and/or otherwise quashing the notice dated October 31, 1972 ; (b) a writ, order or direction in the nature of prohibition and/or otherwise directing the respondent not to act under or in pursuance of the said notice, Ex. 2, or modify the earlier assessment dated December 31, 1971 ; (c) a writ, order or direction which be deemed fit and proper in the circumstances of the case. Costs of the petition be allowed. THE notice dated October 31, 1972, reads as under : "NOTICE UNDER S. 154/155 OF THE IT ACT, 1961 To M/s Jaipur Udyog Ltd. Sawaimadhopur. THE assessment order under s. 143(3) for the asst. yr. 1967-68, made on 31-12-1971, requires to be amended as there is a mistake apparent from the record within the meaning of s. 154/155 of the IT Act, 1961. THE rectification of the mistake, as per details given below will have the effect of enhancing the assessment/reducing the refund/ increasing your liability and if you wish to be heard, you are requested to appear in person or by an authorised representative in my office on 10-11-1972 at 10.00 a.m. If, however, you intend sending a written reply to this notice and do not wish to be heard in person, you are requested to ensure that your reply reaches me on or before the date mentioned above. (Sd.) ............ ITO, Central Circle-II, Jaipur."
(2.) THE assessment order was passed by the ITO on December 31, 1971, for the asst. yr. 1967-68, and allowed deduction to the petitioner amounting to Rs. 39,40,376 on account of depreciation on buildings machinery and plant and furniture and fittings as per rates prescribed by Appendix I, Part 1, of the IT Rules, 1922 ("the Rules") r/w r. 5 of these Rules. The respondent while computing the depreciation applied the percentage of rates for buildings as mentioned in item No. 1 of Appendix 1, Part I, for furniture and fittings at the rates mentioned in item No. 11, for machinery and plants of cement work at the special rate as mentioned in item No. III(ii)C(2), for machinery and plant covered by remark column of item No. III(ii), the special rates mentioned in cl. (iii) of item No. III, and for other machinery and plant, not related to the cement works, the special rates mentioned in cl. (iii) of item No. III. According to the petitioner, item No. I of Appendix I, Part I, provides rates of depreciation for buildings, item No. II prescribes rates for furniture and fittings and item No. III prescribes rates for plant and machinery. There are three clauses in item No. III relating to machinery and plant. Clause (i) prescribes general rate of depreciation, which is 7 per cent. of the written down value (WDV) of the machinery and plant. Clause (ii) provides for special rates to be applied to the whole of the machinery and plant used in certain specified industries or concerns. Cement works using rotary kilns is mentioned as one of the industries under this cl. (ii) to which special rate of 10 per cent. is applicable. In the remarks column of cl. (ii) there is a provision that "The special rates specified hereinafter may be adopted at the option of the assessee for electrical machinery, air- conditioning machinery, locomotives, rolling stock, tramways and railways, weighing machines, calculating machines, typewriters, neopost, franking machines, accounting machines, other office machinery, refrigeration plant, containers, etc., and motor vehicles used in these concerns". The special rates mentioned in this provision applicable to the various kinds of machinery covered by this provision are contained in cl. (iii) to item No. III. The heading of cl. (iii) of item No. III is "special rates to be applied to other machinery and plant". The ITO, while computing the depreciation for machinery and plant, applied the special rates as per cl. (ii) of item No. III keeping in view the provision contained in remarks column, and the special rates provided in cl. (iii) of item No. III as will appear from the chart of depreciation (Ex. 1). The ITO computed the amount of depreciation at the rates mentioned therein against each item after considering the facts in detail and the provisions of law applicable in respect of computation of depreciation. The petitioners' case is that right from 1954-55 to 1966-67, the ITO has computed the depreciation in the same manner as he did in 1967-68, that is to say, he applied special rate mentioned in cl. (ii) of item No. III to the machinery and plant of cement works but to the machinery and plant covered by the provision contained in remarks column of cl. (ii) of item No. III he had applied the special rates mentioned in cl. (iii) of item No. III. This method of computation adopted in the past years has been accepted by the Department throughout and has never been challenged as incorrect or erroneous. Further, the case of the petitioner is that the ITO now wants to reduce the rates of depreciation for machinery and plant to the general rate of 7 per cent. Provided in cl. (i) of item No. III instead of the special rates applied by the assessing ITO under cls. (ii) and (iii) of item No. Ill. In the enclosure to the notice, the respondent has indicated that the rectification will reduce the amount of depreciation by Rs. 85,985 which is apparently wrong inasmuch as the proposed rectification by applying the general rate of 7 per cent. to the entire machinery and plant will result in the reduction of the amount of depreciation by lakhs of rupees.
(3.) AFTER service of the notice, the petitioner replied on November 10, 1972, to the above notice and explained that the rates of depreciation allowed in the assessment order were in accordance with the provisions of Part I of Appendix I. It was submitted that there was no mistake apparent on the record and, therefore, the proceedings should be dropped. Since the proceedings were not dropped, this writ petition has been filed. The petitioner's case is that on May 11, 1973, the respondent disclosed to the representative of the petitioner-company, Shri P. L. Ajmera, that he had initiated rectification proceedings because of the objection by the Revenue Audit Department regarding the rates of depreciation applied by the assessing ITO in his assessment order. The respondent has filed reply and the petitioner has filed rejoinder. According to the respondent, there was mistake in applying rates of depreciation, which is apparent from the record. ;