TaxTMI 
TaxTMI 
2021 (7) TMI 1200
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....vised by filing a fresh return of income on 30- 03-2012 declaring total income of Rs. 251,22,81,103/- under the normal provisions and book profit of Rs. 1099,44,00,614/- under section 115JB of the Act. The assessing officer passed a draft assessment order in case of the assessee under section 144C(1) of the Act which was finalized in pursuance to the directions learned Dispute Resolution Panel (DRP), vide assessment order passed under section 143(3) r.w.s. 144C(13) of the Act on 30-01-2015. As it appears, against the final assessment order so passed, the assessee had preferred appeal before the Tribunal. However, we are not concerned with that in the present appeal. When the matter stood thus, the assessing officer, having reason to believe that the assessee was wrongly allowed deduction towards expenditure incurred of Rs. 68,62,780/- for furniture and tools while completing the original assessment resulting in escapement of income, reopened the assessment under section 147 of the Act. Ultimately, the assessing officer passed an assessment order under section 143(3) r.w.s. 147 of the Act on 11-12-2017 disallowing the expenditure of Rs. 68,62,780/-. 3. After completion of assessme....
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....e subsequently in the course of the proceedings under section 147 of the Act. He submitted, the issue relating to claim of deduction was neither a part of the reason for which the assessment was reopened under section 147 of the Act nor it came to the notice of the assessing officer subsequently in course of the re-assessment proceedings. Thus, he submitted, the third Proviso to section 147 of the Act cannot expand the scope of re-assessment so as to include any and every issue. Rather, he submitted, the third Proviso to section 147 of the Act curtails the power of the assessing officer by providing that the assessing officer could only re-assess such income which is not the subject matter of any appeal, reference or revision. He submitted, the issue relating to claim of deduction under section 80IA of the Act is a subject matter of appeal presently pending before the Tribunal arising out of the original assessment proceedings. Thus, by virtue of third Proviso to section 147 of the Act, the assessing officer cannot go into that issue in the re-assessment proceedings. Thus, he submitted, claim of deduction under section 80IA of the Act not being a subject matter for which the assess....
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....ntal representative relied upon the following decisions:- 1. CIT vs Jet Airways India Ltd 331 ITR 236 (Bom) 2. Shoreline Hotels P Ltd vs CIT 259 Taxmann 49 (Bom) 3. HP Financial Corporation Ltd vs CIT 186 Taxmann 106 (HP) 6. In rejoinder, learned counsel for the assessee submitted, the issue of claim of deduction under section 80IA of the Act was a subject matter of dispute in the original assessment proceedings. In this context, he drew our attention to the observations of the assessing officer in the original assessment order on the said issue. Further, drawing our attention to the compliance made in course of original assessment proceedings, learned counsel submitted, the assessee had furnished all necessary details including unit-wise profit and loss account and balance-sheet alongwith form 10CCB before the assessing officer. Thus, he submitted, the issue relating to deduction claimed under section 80IA of the Act being a subject matter of the original assessment proceedings, could not have been looked into again in the re-assessment proceedings. He submitted, since the re-assessment proceeding was for the specific purpose of assessing the escaped income of Rs. 68,62,780....
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.... assessment order) has already expired. Whereas, the time limit for revising the assessment order passed under section 143(3) r.w.s. 147 of the Act was still there. Thus, the crucial issue which requires adjudication is, whether the assessment order passed under section 143(3) r.w.s. 147 of the Act is erroneous and prejudicial to the interest of revenue. 10. A perusal of the reasons recorded for reopening of assessment under section 147 of the Act, as reproduced in the body of the re-assessment order, would reveal that the assessing officer has reopened the assessment under section 147 of the Act for the specific purpose of assessing the amount of Rs. 68,62,780/-, being the expenditure on furniture and tools. In the reasons recorded, the assessing officer has mentioned that the amount in dispute is ineligible for deduction under section 43B of the Act as per the report of the auditor. It is also a fact on record that the assessing officer has ultimately completed the assessment under section 143(3) r.w.s. 147 of the Act by disallowing the amount of Rs. 68,62,780/-, i.e. the income which has escaped assessment as per the reasons recorded. Neither the reasons recorded for reopening....
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.... Act was a subject matter there. In fact, the assessing officer has dealt with the issue of deduction claimed under section 80IA of the Act at length in the final assessment order passed under section 143(3) r.w.s. 144C(13) of the Act. Thus, the issue relating to deduction claimed under section 80IA of the Act, cannot be a subject matter of re-assessment under section 147 of the Act, as, such reopening of assessment was for assessing a particular income, which escaped assessment. Pertinently, to justify his action of revising the re-assessment order, learned PCIT has referred to the third Proviso to section 147 of the Act, which reads as under:- "Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment." 13. A careful reading of the aforesaid Proviso would make it clear that, though, it has come into effect from 01-04-2008; however, it is not in the nature of an enabling provision. Rather, it restricts powers of the assessing officer in assessing or re-assessing escapement of income, as, it excludes ....
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....which is subject to Section 148, divides cases of income escaping assessment into two clauses i.e. viz. (a) those due to the non- submission of return of income or non-disclosure of true and full facts and (b) other instances. Explanation (1) defines as to what constitutes escape of assessment. In order to invoke jurisdiction under Section 147(a) of the Act, the ITO must have reason to believe that some income chargeable to tax of an assessee has escaped assessment by reason of the omission or failure on the part of the assessee either to make a return under Section 139 for the relevant assessment year or to disclose fully and truly material facts necessary for the assessment for that year. Both the conditions must exist before an ITO can proceed to exercise jurisdiction under Section 147(a) of the Act. Under Section 147(b) the Income-tax Officer also has the jurisdiction to initiate proceedings for reassessment where he has reason to believe, on the basis of information in his possession, that income chargeable to tax has been either under- assessed or has been assessed at too low a rate or has been made the subject of excessive relief under the Act or excessive loss or deprecia....
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....ment is set aside and the whole assessment proceedings start afresh. When once valid proceedings are started under section 34(1)(b), the Income-tax Officer had not only the jurisdiction, but it was his duty to levy tax on the entire income that had escaped assessment during that year." 10. There may not be any doubt or dispute that once an order of assessment is reopened, the previous underassessment will be held to be set aside and the whole proceedings would start afresh but the same would not mean that even when the subject matter of reassessment is distinct and different, the entire proceeding of assessment would be deemed to have been reopened. 11. In Sun Engineering Works P. Ltd (supra) also, V. Jaganmohan Rao (supra) was noticed stating: "The principle laid down by this Court in Jaganmohan Rao's case, therefore, is only to the extent that once an assessment is validly reopened by issuance of a notice under Section 22(2) of the 1922 Act (corresponding to Section 148 of the Act) the previous under assessment is set aside and the ITO has the jurisdiction and duty to levy tax on the entire income that had escaped assessment during the previous yearThe judgment in Jagan....
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.... 147 of the Act, the Income Tax Officer may bring to charge items of income which had escaped assessment other than or in addition to that item or items which have led to the issuance of notice under Section 148 and where ressessment is made under Section 147 in respect of income which has escaped tax, the Income Tax Officer's jurisdiction is confined to only such income which has escaped tax or has been under-assessed and does not extend to revising, reopening or reconsidering the whole assessment or permitting the assessee to reagitate questions which had been decided in the original assessment proceedings. It is only the under- assessment which is set aside and not the entire assessment when reassessment proceedings are initiated. The Income Tax Officer cannot make an order of reassessment inconsistent with the original order of assessment in respect of metters which are not the subject-matter of proceedings under Section 147" 12. We may at this juncture also take note of the fact that even the Tribunal found that all the subsequent events were in respect of the matters other than the allowance of 'lease equalization fund'. The said finding of fact is binding on us....
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....ax on that which had escaped tax earlier. Cases of underassessment are also treated as instances of escaped assessment. The order of reassessment is one which deals with the assessment already made in respect of items which are not required to be reopened, as also matters which are required to be dealt with in order to bring what had escaped in the earlier order of assessment, to assessment. An assessee who has failed to file an appeal against the original order of assessment cannot utilise the reassessment proceedings as an occasion for seeking revision or review of what had been assessed earlier. He may only question the extent of the reassessment in so far as the escaped assessment is concerned. The Revenue is similarly bound" The same principle was reiterated by a Division Bench of the Calcutta High Court in Commissioner of Income-Tax v. Kanubhai Engineers (P.) Ltd. [241 ITR 665]." 15. We, therefore, are clearly of the opinion that keeping in view the facts and circumstances of this case and, in particular, having regard to the fact that the Commissioner of Income Tax exercising its revisional jurisdiction reopened the order of assessment only in relation to lease equalizat....
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....on which has been urged on behalf of the assessee would have to be accepted in view of the judgment of the Supreme Court in Commissioner of Income Tax V/s. Alagendran Finance Ltd. The issue which arose before the Supreme Court was whether, for the purpose of computing the period of limitation envisaged under sub-section (1) of Section 263, the date of the order of assessment or of the order of reassessment is to be taken into consideration. In that case, the assessee filed its return for assessment years 1994-95, 1995-96 and 1996-97 and the assessments were completed on 27 February 1997, 12 May 1997 and 30 March 1998. In the orders of assessment, the return of the assessee under the head of "Lease Equalisation Fund" were accepted. Proceedings for reassessment were initiated by the Assessing Officer and orders of reassessment were passed in respect of the following items namely (i) expenses claimed for share issue; (ii) bad and doubtful debts; and (iii) excess depreciation on gas cylinders and goods containers. Though the return of income in respect of the "Lease Equalisation Fund" was not the subject matter of the reassessment proceedings, the Commissioner of Income Tax invoked his....
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....commence from the date of the order of assessment and not from the date on which the order reopening the reassessment has been passed. 9) Section 147 empowers the Assessing Officer, if he has reason to believe that any income chargeable to tax has escaped assessment for any assessment year to assess or reassess the said income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the Section. Explanation 3 which has been inserted by the Finance Act (No.2) of 2009 with retrospective effect from 1 April, 1989 provides that for the purpose of assessment or reassessment under the Section, the Assessing Officer may assess or reassess the income in respect of any issue which has escaped assessment and such issue comes to his notice subsequently, in the course of the proceedings under the Section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of Section 148. The substantive part of Section 147 empowers the Assessing Officer to assess or reassess the income chargeable to tax which has escaped assessment and any other i....
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.... of the reassessment, the original assessment continues to hold the field. When the Assessing Officer reopens an assessment on a particular issue, it is open to him to make a reassessment on that issue as well as in respect of other issues which subsequently come to his notice during the course of the proceedings under Section 147. The submission of the Revenue is that by not passing an order of reassessment in respect of other independent issues, the order of the Assessing Officer can be construed to be erroneous and to be prejudicial to the interest of the Revenue within the meaning of Section 263. The submission cannot be accepted in the facts of the present case. The substantive part of Section 147 as well as Explanation 3 enables the Assessing Officer to assess or reassess income chargeable to tax which he has reason to believe had escaped assessment and other income which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the section. There is nothing on the record of the present case to indicate that there was any other income which had come to the notice of the Assessing Officer as having escaped assessment in the co....
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....he Revenue from taking recourse to any other remedy that may be available in law." 17. Similar is also the view expressed by the Hon'ble Jurisdictional High Court in case of CIT vs ICICI Bank Ltd (supra). 18. Now, let us deal with the decisions cited by the learned departmental representative. In case of CIT vs Jet Airways Ltd (supra), the issue was whether the assessing officer in a re-assessment proceeding can assess any other income which are not subject matter of reopening while not assessing the income for which assessment was reopened. Thus, the ratio laid down by the jurisdictional High Court is not applicable to the present case, as, in the case of the present assessee the escaped income was assessed. The other decisions relied upon by learned departmental representative, on careful perusal, are found to be not applicable to the present case. 19. In any case of the matter, in our considered opinion, the ratio laid down by the Hon'ble Supreme Court in case of CIT vs Alagendran Finance Ltd (supra) and the Hon'ble jurisdictional High Court in the case of Ashoka Buildcon vs CIT (supra) clinches the issue in favour of the assessee. Further, a reading of the original assessmen....