1. GKN DRIVESHAFTS (I) LTD. V/S. I.T.O. [ 259 ITR 19(SC)]

Notices u/s. 148 issued to the assessee for reopening the assessment. The notice carried reasons for reopening. The assessee filed return in response to the said notice. While A.O. proceeded with assessment proceedings by calling certain details, the assessee filed writ petition challenging notice u/s. 148.

The HC dismissed writ by holding that "all that the petitioner is agitating before this court can be submitted by filing reply to notices before the concerned officers. In our considered opinion, the petitioner is not justified in invoking the extraordinary jurisdiction of the court at this stage. The writ petition is premature and is dismissed as such."

On further appeal by the assessee company, the Supreme Court upheld High Court's order. However, Supreme Court held that assessee has right to ask for reasons for re-opening and Assessing Officer is bound to furnish reasons within reasonable time. The Supreme Court also held that Assessing Officer is to dispose of objections of assessee by passing speaking order. Following are observations of the Court :

"However, we clarify that when a notice under section 148 of the Income tax Act is issued, the proper course of action for the noticee is to file a return and if he so desires, to seek reasons for issuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose off the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the Assessing Officer has to dispose off the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years."

2. C.I.T. V/s. Sree Senhavalli Textiles Pvt. Ltd. [259 ITR 77] [Mad]

For the assessment year 1988-89, the assessee company withdraw claim for depreciation by filing revised return. The A.O., however, in the assessment thrust the depreciation allowance upon the assessee.

The tribunal upheld claim of the assessee and directed A.O. to withdraw depreciation allowance.

The department filed appeal against the tribunal's order before the High Court.

The High Court upheld the tribunal's decision by following the decision of the Supreme Court in C.I.T. V/s. Mahendra Mills [243 ITR 56].

The department sought to rely upon Explanation 5 to section 32 inserted by the Finance Act, 2001 with effect from 1.4.2002.

The Explanation 5 mandates grant of depreciation allowance with effect from assessment year 2002-03.

According to department expression "for the removal of doubts" in Explanation 5 would make Explanation operative retrospectively. The High Court, however, did not accept department's contentions. The Court held as under :

(i) Explanation does not apply retrospectively.

(ii) Explanation cannot take away effect of judgement of Supreme Court.

(iii) The law declared by Supreme Court cannot be regarded as having merely raised doubts. In fact, it settles the law.

(iv) Law settled by Supreme Court would remain binding prior to amendment, unless statute is expressly given retrospective effect.

NEW MEMBERS GET TOGETHER Get together for those who have become C. A./ C. S./ Cost Accountant in last two years has been arranged on Tuesday, 11th March, 2003 at Devadiga Center, 1st Floor, Hindtej Buiding, Above Dil Bahar Hotel, Next to Hind Rajasthan Building, Dada Saheb Phalke Road, Dadar [East], Mumbai - 400 014. [Tel. 24112563]. Timings of the meeting is from 5.00 p.m. to 6 p.m. It will be followed by the study circle meeting on Finance Bill, 2003 to be led by Shri Praful Poladia (C.A.). Dilip Gosar Convener, Membership & Publication Committee