1. The appeal is filed by the revenue against the order of the Commissioner (Appeals) allowing the assessee's request not to allow depreciation.
2. The assessee is a public limited company manufacturing chemical fertilisers. The assessee filed a return on 14-12-1978 disclosing a business loss of Rs. 26,38,48,778. This included current year's depreciation of Rs. 9,63,65,559. On 11-12-1980, before the assessment of the assessee was completed, a revised return was filed claiming a reduced loss of Rs. 16,74,83,219. In this revised return, the current year's depreciation claimed in the first return was withdrawn, as a consequence of which the loss claimed came down to the above noted figure. In the covering letter dated 9-12-1980 accompanying the revised return, the assessee-company explained that no claim for depreciation was made in the revised return as the assessee-company did not wish to claim depreciation and that the assessment should be completed without considering the depreciation. The object in making this claim, which may appear on the very face of it extraordinary, is to secure the benefit of set off of the unabsorbed development rebate of the earlier years which is time-bound as against depreciation which could be carried forward till it is absorbed. In making this claim, the assessee-company placed reliance upon the Special Bench decision rendered by the Bombay Bench 'A' of the Tribunal in the case of Someshwar Sahakari Sakhar Karkhana Ltd v. ITO  1 SOT 81. The ITO rejected the assessee's request and completed the assessment by allowing depreciation. According to the ITO, the claim of the assessee was not acceptable because in order to arrive at the correct profit of a particular year, deduction towards depreciation for that year should necessarily be made and even if the prescribed particulars were not furnished, the ITO could gather the same on his own and allow depreciation. Dealing with the argument of the assessee that while filing the revised return, the claim was withdrawn, the ITO seemed to have thought that first the revised return was not valid and even if it is valid, it did not take away the right of the ITO to look into the depreciation particulars already filed along with the original return.
Reliance was placed upon the decisions of the Madhya Pradesh High Court in the case of Sulemanji Ganibhai v. CIT  121 ITR 373 and of the Allahabad High Court in the case of Ascharajlal Ram Parkash v. CIT  90 ITR 477 and also some other decisions of the Tribunal, Poona Bench. The view taken by the ITO was approved of by the IAC also under Section 144B of the Income-tax Act, 1961 ('the Act').
3. Aggrieved by this decision, the assessee appealed to the Commissioner (Appeals) and reiterated its contention that the assessee is free to claim depreciation or not to claim depreciation and if the assessee chose not to claim the depreciation, the ITO cannot compel the assessee to claim depreciation and allow it even if it is not desired and if the claim was specifically withdrawn. When in the revised return the claim was withdrawn and a specific request was made not to consider the particulars already filed, it was not open to the ITO to still look into the original return filed for the purpose of particulars. The original return having become no nest in law with the filing of the revised return, reliance placed upon by the ITO on the original return was totally illegal. To support this view, the view taken by the Special Bench of the Tribunal, Bombay Bench 'A' is pressed into service. In support of the view of the revenue, the ITO who was present before the Commissioner (Appeals), in particular, relied upon the decision of the Madras High Court in the case of Dasaprakash Bottling Co. v. CIT  122 ITR 9. The Commissioner (Appeals) found that the facts in the present case were on all fours with the facts in the case before the Special Bench of the Tribunal, Bombay Bench 'A' which considered all those arguments and the decisions relied upon. He held that depreciation allowance being a statutory allowance for the grant of which certain statutory requirements have to be fulfilled, if those requirements were not fulfilled, it was not open to the ITO to deem them as having been fulfilled and allow depreciation. He also noted the intention of the Legislature in granting depreciation, development rebate, investment allowance as incentive with a view to see that priority industries were encouraged and development of industries proceed in desired directions keeping in view the general condition and welfare of the society as a whole. It is, therefore, necessary that those provisions should be viewed more liberally so that the intention of the Legislature reaches the assessees and not defeated. It is against this view expressed by the Commissioner (Appeals) that the department has filed this appeal.
4. The first contention of the revenue is that the Commissioner (Appeals) was not justified in ignoring the decision of the Madras High Court which, according to the revenue, is a direct decision in the case of Dasaprakash Bottling Co. (supra). As a corollary to that argument, the revenue contended that having regard to the decision of the Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd v. CIT  82 ITR 363, the allowance of depreciation is a statutory deduction admissible under Section 32 of the Act and that the ITO was bound by law to allow the same even though the assessee did not ask for it. Then comes the third argument that having regard to the ratio of the decision in the case of Monogram Mills Co. Ltd. v. CIT  135 ITR 122 (Guj.) and CIT v. Malwa Sugar Mills Co. Ltd.  134 ITR 56 (Cal.), the allowance of current year's depreciation is a first charge on the profits and, consequently, that charge must be deducted in arriving at the profits and, therefore, the ITO's view in allowing the depreciation should have been upheld by the Commissioner (Appeals). To get out of the difficulty created by the filing of the revised return, a very serious objection to the order of the Commissioner (Appeals) is taken by pointing out that under Section 139(5) of the Act, the revised return filed by the assessee should not have been considered as a valid return because there was nothing that the assessee had omitted to claim in the original return filed. Then there are several other points which we will deal with a little later. The learned departmental representative elaborating these points has taken great pains to explain to us how the Commissioner (Appeals) had not appreciated the import of the decision of the Madras High Court in the case of Dasaprakash Bottling Co. (supra) and arrived at erroneous conclusions.
He pointed out that the Commissioner (Appeals) was wrong in following the Special Bench decision of the Tribunal because that decision did not consider the effect of the decision of the Madras High Court in Dasaprakash Bottling Co.'s case (supra). His emphasis, as we understood from his elaborate arguments, is that the statute fixed the priorities for the allowance of depreciation, development rebate and other time-bound reliefs. The assessee cannot by seeking to withdraw the claim for depreciation, alter the priorities thereby gaining an undue advantage which the Legislature never intended to confer. He also laid stress on that part of the grounds of appeal which related to the validity of the revised return filed by making a pointed reference to the decision of the Supreme Court in the case of Delhi Cloth & General Mills Co. Ltd. v. State of U.P.  118 ITR 277, where the Supreme Court pointed out that if there is an option given to an assessee by a statute, the exercise of the option in a particular way does not amount to a wrong statement made in the return enabling the assessee to revise it by taking the advantage of the provisions of Section 139(5).
5. The learned Counsel for the assessee, in his effort to distinguish the Madras High Court decision in the case of Dasaprakash Bottling Co.
(supra), pointed out that that very decision in a way helped the assessee's case and not the revenue's case. An observation made by the High Court by way of deriving support to its main conclusion cannot be taken to be the ratio decidendi of that case bereft of the facts that gave rise to that decision. The Madras High Court decision is an authority, according to him, for the proposition that even if the assessee did not file the particulars of depreciation in the beginning but filed them later under protest, the ITO is not disempowered to look into them because his duty is to determine the income statutorily for which purpose the statutory deductions have to be allowed. That decision is not an authority for the proposition that when a revised return was filed withdrawing the claim for depreciation particularly pointing out that the particulars filed originally should be ignored, the ITO is still empowered to look into the original return and basing upon these particulars furnished, allow the claim of depreciation.
This, according to him, is not the ratio of the decision and, therefore, the reliance of the revenue on that case is totally misplaced. Then, a reference was made to another decision of the Madras High Court in the case of Hopeville Estate v. State of Tamil Nadu  112 ITR 861, where the Madras High Court, dealing with the allowance of depreciation on building under the Tamil Nadu Agricultural Income-tax Act, 1955, held that if particulars were not furnished, the revenue was entitled to disallow the claim for depreciation by categorically pointing out that the assessee was not eligible to obtain deduction of depreciation if particulars were not furnished. This being the view of the Madras High Court, it cannot be said that in Dasaprakash Bottling Co.'s case (supra) the High Court sought to take an opposite view and, therefore, that decision must be understood in the context of the facts obtaining in that case. That decision should be understood as laying down the proposition that the ITO can grant depreciation even if the particulars are not furnished in the discharge of the statutory function of ascertaining the statutory income. That does not mean that the High Court laid down the rule that the ITO is bound to allow depreciation even if the assessee did not want it.
Another distinguishing feature pointed out was that in that decision, the High Court pointed out as to why the assessee did not wish to claim depreciation. Therefore, to a case where reason as to why the assessee was not claiming depreciation was available, the decision rendered in a case where reasons were not available, should not be applied. Then he pointed out to a Circular No. 29-D (XIX-14) [F. No. 45/239/65-ITJ], dated 31-8-1965--Taxmann's Direct Taxes Circulars Vol. 1, 1980 edn., p.115 issued by the CBDT where the CBDT explained that in making ex parts assessments, depreciation need not be allowed. If it is the statutory duty of the ITO to allow depreciation, even if it is not claimed, then this Circular issued by the CBDT is in direct conflict with that view. In any case, this Circular of the CBDT should be taken as an authority for the proposition that the ITO is not bound to grant depreciation if it is not claimed by the assessee by furnishing the required particulars and in view of the decision of the Supreme Court in the case of K.P. Varghese v. ITO  131 ITR 597, this Circular is binding upon the ITO, whatever may be the view expressed by the Madras High Court. Then arguments were addressed on the validity of the revised return filed under Section 139(5) and an effort was made to distinguish the Supreme Court decision relied upon by the departmental representative in Delhi Cloth & General Mills Co. Ltd.'s case (supra) by pointing out that decision rendered under the U.P. Agricultural Income-tax Act, 1948, whose language is not in pari materia with the language used under Section 139(5) cannot be read as laying down a rule applicable under the income-tax proceedings also.
6. The departmental representative, in reply, relying upon the decision of the Gujarat High Court in Monogram Mills Co. Ltd's case (supra) reiterated his claim that once the priorities for allowance of depreciation, etc., were fixed under the statute, whatever may be the other consequences, that priority must be followed if violence is not to be done to the statute. He pointed out that incentives granted under the Act are different from the depreciation which is an expense represented by the diminution of the value of the capital by wear and tear of the assets for the use of its business. That expense or loss of capital is to be differentiated from the incentives given under the statute. While the expenses must be allowed, the incentives can or cannot be allowed depending upon the fulfilment of the requirement in that behalf. By relying upon the decision of the Madras High Court in the case of CIT v. B. Nagi Reddi  144 ITR 62, the learned departmental representative submitted that when two decisions of the same High Court holding two different views are available, the later decision is to be followed, and, therefore, the decision of the Madras High Court in Hopeville Estate's case (supra) should not be preferred to the judgment delivered in Dasaprakash Bottling Co.'s case (supra), which is later in point of time.
7. We have to see whether the ratio of the decision of the Madras High Court in Dasaprakash Bottling Co.'s case (supra) would apply to the facts of the case as contended for on behalf of the revenue or whether the decision of the Special Bench of the Tribunal, Bombay Bench 'A', applies as canvassed for on behalf of the assessee. One difficulty in applying the ratio of the decision of the Madras High Court is to see whether the facts here are the same as the facts before the Madras High Court. Before the Madras High Court, though the assessee filed a return without claiming for the allowance of depreciation and on compulsion filed the particulars relating to depreciation, since the particulars are available before the ITO, the Madras High Court did not experience any difficulty in holding that the ITO was right in granting the depreciation allowance though not asked for by the assessee. But the assessee before us, after filing the original return withdrew the claim for depreciation by filing a revised return. Not only that, by a specific request made in the covering letter accompanying the revised return, requested the ITO to ignore the prescribed particulars filed in the original return and apropos to that request did not file the prescribed particulars along with the revised return. This fact made the case before us different from the Madras High Court case and identical with the case before the Special Bench of the Tribunal. As here, there also, arguments were addressed that the revised return should not be acted upon contending that that was not a valid return filed within the meaning of Section 139(5). The contention was, as we have noted earlier, that the revised return can be filed under Section 139(5) only if the assessee discovers any wrong statement in the return filed originally and the claim for depreciation made originally and its withdrawal subsequently is only an option. The exercise of an option even erroneously could not amount to a wrong statement. This argument was not accepted by the Special Bench there and was rejected. The Special Bench held that it was settled law that when an assessee filed a revised return, he, in fact, admits that the original return filed by him was not correct or complete and substituted the same by a revised return which, according to him, was correct and complete, that the effective return for the purpose of assessment was the return which was ultimately filed by the assessee and assessment had to be made on that basis. The Special Bench's attention was invited to the decision of the Allahabad High Court in the case of Dhampur Sugar Mills Ltd. v. CIT  90 ITR 236, where the Allahabad High Court held that once a revised return was filed, the original return must be taken to have been withdrawn and substituted by the revised return. The argument similar to the one addressed before us based upon the Supreme Court decision in Delhi Cloth & General Mills Co. Ltd.'s case (supra), does not appear to have been advanced before the Special Bench. In the case before the Supreme Court in Delhi Cloth & General Mills Co. Ltd.'s case (supra), the assessee, a company registered under the Indian Companies Act, possessed agricultural farms, had to file its return of income under the U.P. Agricultural Income-tax Act. Section 6(2) of the U.P.Agricultural Income-tax Act provided two alternative methods of computation of agricultural income. One is rental method, i.e., multiple of annual rental income, and the other, produce method subject to deductions. An option is given to the assessee to select one or the other method depending upon the advantage. Such option is required to be indicated in a declaration in prescribed form to be submitted under Rule 5 of the U.P. Agricultural Income-tax Rules, 1949, along with the return. For the assessment year 1954-55, a return of agricultural income was filed exercising the option to be assessed on produce method. Subsequently, the assessee filed a revised return claiming some more deductions. The assessing authority, however, served upon the assessee a notice to furnish a return in the prescribed form and verified in the prescribed manner. There was a requirement under the U.P. Agricultural Income-tax Act that along with the notice to furnish return of income a provisional estimate of the assessee's agricultural income should also be furnished. That estimate also was furnished by the assessing authority estimating the income on rental method which yielded a far higher income than the one disclosed by the assessee.
Subsequently, the assessing authority served a notice on the assessee to produce evidence in support of its return. Sometime later, another notice was given stating that its income had escaped assessment calling upon the assessee-company to file a return of income. In response to this notice, the assessee filed a third return, this time selecting the method of computation of income on rental method as against the produce method adopted earlier. Then the question arose whether it is open to the assessee to change the option. Several proceedings and interlocutory matters ensued and ultimately when the matter reached the Supreme Court, the debate was as to whether the assessee is entitled to change the option once exercised. The Supreme Court held that it is open to the assessee to change the option provided the other conditions of the U.P. Agricultural Income-tax Act are satisfied. It was argued before the Supreme Court that it would not only be open to the assessee to change the option every year but even to change the option during the year by filing a fresh return for the same year and this argument was accepted by the Supreme Court by observing that there was considerable force in this contention. With the following observations the Supreme Court did not agree with the view of the Division Bench of the Allahabad High Court which held to the contrary : ...In fact, Rule 5 is obligatory and makes it incumbent upon an assessee to file along with his return of income a declaration in Form No. A.I.T.-2 indicating his option under Section 6(1) of the Act and as such the exercise of such option including a change of the option indicated in the declaration filed along with a subsequent return or a fresh return or a revised return will be valid provided the return itself is validly submitted. In this view of the matter it is not possible to accept the view of the Division Bench of the High Court that if once option is exercised by an assessee by filing the requisite declaration along with his return for a particular year he will have no right to change his option by filing a fresh return or a revised return before the assessment is made for that year.
The Supreme Court elsewhere also held in that case that except in regard to the best judgment assessment, there is nothing sacrosanct about the particular option previously exercised by the assessee and he need not be held bound by it provided he changes the option by filing a subsequent or a fresh or a revised return in accordance with the applicable provisions contained in Section 15 of the U.P. Agricultural Income-tax Act, the object being to determine his true agricultural income for the relevant previous year. This decision is, therefore, as we see it, an authority for the proposition that a revised option could be filed along with each of the fresh returns filed and a wrong statement in the earlier return does not mean selection of a wrong option by the assessee, and not an authority for the proposition canvassed for on behalf of the assessee. It, therefore, means that if the assessee discovers a wrong statement made in the return filed originally, it is open to him to rectify that mistake by filing a revised return under the provisions of Section 139(5) of the 1961 Act.
Section 139(5) postulates filing of a revised return at any time before the assessment is made if a person having furnished a return under Sub-section (1) or Sub-section (2), discovers any omission or any wrong statement therein. The claim put up by the assessee in the original return for depreciation, when it did not want to avail of it, is undoubtedly and unmistakably a wrong statement insofar as the assessee-company is concerned. It is, therefore, entitled to correct it by filing a revised return. Therefore, it cannot be said that the revised return filed by the assessee in this case withdrawing the claim for depreciation is an invalid return suggesting that the withdrawal of the claim for depreciation is an exercise of the option given to the assessee and the wrong exercise of the option did not amount to a wrong statement made in the original return. We have endeavoured to show how the basis for this argument, namely, the Supreme Court decision in Delhi Cloth & General Mills Co. Ltd.'s case (supra) does not help the revenue's case.
8. Once we come to the conclusion that the revised return is a valid return, it is an undisputed fact that the revised return completely effaces and obliterates the original return filed and it is totally in substitution thereof and it is that return that has to be taken into account for the purpose of making the assessment. This is settled law and we do not have to refer to any authorities on the subject.
9. Now it is to be seen whether the filing of a revised return withdrawing the claim for depreciation makes any difference for the application of the rule laid down by the Madras High Court in the case of Dasaprakash Bottling Co. (supra). If the effect of filing a revised return is to obliterate the return filed along with all the statements accompanying that return, then there are no prescribed particulars before the ITO to allow depreciation because along with the revised return, the assessee did not furnish the prescribed particulars. The question then would be whether the ITO could look into those particulars. In our opinion, it is not open to him to look into those particulars at all once the revised return is held to be a valid, genuine and legal document. The next question would be whether the ITO would be entitled to grant depreciation even if the particulars are not furnished. There is a specific injunction against the grant of depreciation unless the prescribed particulars are furnished by the assessee.
10. The allowance of depreciation under Section 32 is made subject to the provisions of Section 34 of the Act. Section 34 provided in specific terms that no depreciation shall be allowed unless the prescribe d particulars have been furnished. It is a clear mandate and the legislative intention not to allow depreciation unless the prescribed particulars are furnished. It is not as if the legislative intention is not considered by the Madras High Court in the case of Dasaprakash Bottling Co. (supra). We find, on a reading of the judgment, that the Madras High Court observed that reading Section 32 and Section 34 together, the allowance of depreciation is available to the assessee in all cases and the ITO can disallow the claim if the assessee did not furnish the prescribed particulars. But, the Madras High Court observed that it would be open to the ITO to grant depreciation even if the assessee had not furnished the prescribed particulars as the computation of income under the Act is the computation of real and proper statutory income and that income could be arrived at only after allowing the deductions available under the law. This observation, in our opinion, does not mean that the ITO shall grant the depreciation to the assessee even if the prescribed particulars were not furnished. The way in which it is expressed in the report would only show that the High Court's anxiety is to remind the ITOs their legal obligation to grant depreciation even if the prescribed particulars are not furnished by the assessee. That is why the observation opens with the words 'it would be open to the officer to grant depreciation'. When it is said that it is open to the ITO to grant depreciation even if the assessee had not furnished the prescribed particulars, it would also mean that the ITO could, in suitable cases, refuse to grant the depreciation allowance also.
However, in that case the High Court upheld the action of the department in granting depreciation only because the prescribed particulars were furnished by the assessee though under protest. This is evident from the following observations made by the Madras High Court in Dasaprakash Bottling Co.'s case (supra) in the last part of its judgment : ... In the present case, it has also to be remembered that, though the figures have not been furnished in the return as such, still the figures were furnished by the assessee and the fact that it was done under protest is of no significance as far as the requirements of Section 34 are concerned. Section 34 does not state that the particulars should be furnished in the return and that too the assessee should do so on his own without any prompting by the officer. ...
Even though the earlier observation does appear in conflict with the later observations now quoted above, the allowance of depreciation was eventually upheld by the High Court because the prescribed particulars were furnished by the assessee, though under protest. The position would have been entirely different, as seen from the judgment of the Madras High Court, if the prescribed particulars were not at all furnished by the assessee. There is another point which has to be borne in mind, namely, in the earlier part of the judgment, the High Court pointed out why the assessee was indulging in the self-denial of a statutory deduction available under the law was not clear, meaning thereby that were it clear to the High Court as to why the assessee was not claiming depreciation, the position would have been different.
Here, in the case before us, the assessee clearly stated that it did not want the current year's depreciation as it wants the benefit of the other time-bound reliefs like unabsorbed development rebate, unabsorbed investment allowance, unabsorbed relief under Section 80J of the Act, etc., which would not be available if the depreciation is allowed first.
11. Here, we may deal with an argument raised by the departmental representative that if this claim of the assessee is permitted, it would disturb the priorities fixed by the statute for the allowance of depreciation and other allowances referred to in Sections 32A, 33, 33B of the Act, etc. We are entirely in agreement with the departmental representative and in fact that is also the view expressed by the several High Courts in the country, more recently by the Gujarat High Court in the case of Monogram Mills Co. Ltd. (supra). But the point to be seen is if all the claims are made by an assessee, then the question of priority comes in which event, the assessee would not be permitted to change the priorities. But if some claims are left over, that would not alter the priorities fixed under the Act. In order to preserve and conform to all the priorities fixed under the Act, the department cannot foist upon the assessee a claim it does not seek. For a variety of reasons, one of which the assessee has now stated, an assessee may not take advantage of a deduction provided for under the Act. That does not mean the ITO should force the assessee to claim. If that is the law then, in our view, it becomes impossible for the ITO to make an assessment and it is also very impracticable. Take the case of an assessee who does not claim bad debt or interest on borrowed capital or repairs to buildings or salaries to managing director or commission payments or outstanding liabilities or rents, rates and taxes. If the law is that the ITO should allow all the permissible deductions under the Act whether claimed or not, would it mean that the ITO should go about enquiring into the affairs of the assessee, find out the allowances which he has failed to claim and then allow Will it not put an impossible burden on the ITO What the law says is that the income from business shall be computed in accordance with the provisions contained in Sections 30 to 43A of the Act, which means that if the claims referred to in those sections are made by the assessee, the ITO shall examine and allow. It does not mean that the ITO should suo motu go about and find out the claims that could be made by an assessee but not made and then allow them. We do not think it is a proper understanding of the law or the functioning of the Act. If so, how do we proceed about the residuary allowances allowable under Section 37 What applies to Section 32 must also apply to Section 37.
Is it possible for the ITO to find out what are the admissible deductions under Section 37 and allow them Should not the allowance of the claim, therefore, depend upon the claim by the assessee and furnish the necessary particulars in support thereof If the law is that the ITO should allow expenditure like depreciation even if not claimed, as in the present case, how can he proceed to allow expenditure, if the allowance is subject to satisfaction of certain legal requirements, which the assessee alone could furnish The assessee, when required to submit information does not comply, what should the ITO do Should he allow the expenditure, though the legal requirements are not satisfied, or should he disallow In the former case, he is acting against law ; and in the latter, he assesses not the real income and acts against the present contention. Thus, a stalemate is reached. The only course then open to him, is to complete the assessment ex parte for non-compliance with the notice issued for supply of information. Even so, what will he do Again the same stalemate. This eventuality makes us believe firmly that the law is to allow the expenditure only when claimed and on satisfaction of all the legal requirements. That is why the Madras High Court very aptly and advisedly observed that Section 32 is an enabling provision. So too are the other provisions, relating to allowance of other categories of expenditure. It is by allowing all categories of expenditure necessary to carry on business, that the real income should be arrived at. If the assessee does not claim a permissible allowance, he must be left to his fate.
The insistence by the ITO to allow depreciation may look like adhering to the law, but the time-bound reliefs only become illusory in this process, and certainly that cannot be said to be the intention of the Parliament in enacting those benevolent provisions. The future may or may not bring in profits so as to allow the time-bound reliefs. Thus, the provisions in Sections 32 to 43A and other provisions are enabling provisions to allow those deductions wherever they occur, if claimed by the assessee, or furnishing of necessary particulars, which are in the nature of evidence to justify those claims. The Madras High Court decision is to be understood that way and also as a proposition that even if there is a remissness on the part of the assessees to furnish the particulars, the ITO can in suitable cases, ignore that requirement and yet allow the claim in the performance of his statutory function of arriving at real income and not to force the allowances on an unwilling assessee. We cannot, therefore, understand the claim of the department that the assessee cannot refuse the allowance of depreciation and the department is empowered under the law to foist on the assessee the allowance. We also do not think that the Madras High Court has laid down such a proposition. To repeat, the Madras High Court allowed the claim of the assessee because the prescribed particulars were furnished, at the same time pointing out that it is open to the ITO to allow depreciation even if the particulars were not furnished, more by way of concession because it is the statutory duty of the ITO to compute the real income. As we have noticed earlier, the Special Bench of the Tribunal, dealing with identical facts, held that it is not open to the department to force the relief on the assessee, more particularly when prescribed particulars were not available. That is also a case where a revised return was filed as in the present case before us. The Special Bench also laid down there that the allowance of the depreciation is not in the nature of an unconditional benefit granted by the law. It is a benefit coupled with a condition and, therefore, it should be open to the assessee to claim or not claim the benefit. In this connection, we may also refer to the CBDT Circular No.29-D(XIX-14) [F. No. 45/239/65-ITJ], dated 31-1-1965 which was specifically on the question of estimate of net profits and allowability of depreciation allowance. In para 3, the following instructions were issued : Even where best judgment is made, the above procedure should be adopted provided the required particulars have been furnished by the assessee. In cases where required particulars have not been furnished by the assessee and no claim for depreciation has been made in the return, the Income-tax Officer should estimate the income without allowing depreciation allowance. In such cases, the estimate of net profit would be naturally higher than otherwise and the fact that the estimate has been made without considering depreciation allowance may be clearly brought out in the assessment order. In such case, the written down value of depreciable assets would continue to be the same as at the end of the preceding year as no depreciation would actually be allowed in the assessment year.
It will be seen from the above that where the required particulars are not furnished by an assessee and no claim for depreciation has been made in the return, the ITO should estimate the income without allowing depreciation allowance and the written down value of the depreciable assets would be the same as at the end of the preceding year as no depreciation was actually allowed in the assessment year. It is not shown to us that the circular had been withdrawn. If this is the understanding of the provisions of the income-tax law by the highest authority under the Act entrusted with the duty of administration of the income-tax law in the country, how it could be argued on behalf of the department that the ITO should allow depreciation when no particulars were furnished and no claim for it was made It would be contrary to the instructions given by the CBDT. The circular of the CBDT is binding on the department and the spirit of the circular should have been applied by the department in this case as pointed out by the Supreme Court in K.P. Varghese's case (supra) even if it is bound to be against the provisions of the law.
12. We also do not find much force in the argument of the learned departmental representative that the latter decision given by the Madras High Court should be followed meaning thereby that the decision in the case of Dasaprakash Bottling Co. (supra) should be preferred to the earlier decision given by the Madras High Court in Hopeville Estate's case (supra). We do not think there is any conflict between these two decisions and we do not have to make an attempt to reconcile them. It is now settled that when there is a conflict of judicial opinion, the latter decision in point of time should be followed. But the Madras High Court has been consistent in its view that depreciation could be allowed only if the prescribed particulars are furnished.
Insofar as this point is concerned, both Hopeville Estate's case (supra) and Dasaprakash Bottling Go's case (supra), do not conflict with each other.
13. The Special Bench has summarised its decision at the end of its judgment and laid down four propositions which were also noticed by the Commissioner (Appeals) and referred to in his order. Following, with respect, those propositions, with which we agree, we hold that the view expressed by the Commissioner (Appeals) is correct and rational and should be endorsed. We direct accordingly.
14. In view of our decision on this question, we do not think it necessary to consider the decision of the Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. (supra) because there is nothing in common with that decision of the Supreme Court and the contention before us.
The other conclusions reached by the Commissioner (Appeals) as a consequence of allowing the assessee's claim, are also upheld.15 to 20. [These paras are not reproduced here as they involve minor issues.]