TaxTMI 
TaxTMI 
2007 (8) TMI 329
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....n 147 which provides that the Assessing Officer can reopen the assessments even if the assessments have not been completed under section 143 and only intimation had been sent, if the conditions laid under section 147 are fulfilled? 2. Whether, on the facts and circumstances of the case, the Income-tax Appellate Tribunal is right in not considering that the addition of incentive bonus to the total income is proper or not, in view of the decision of the Madras High Court in the case of CIT v. E.A. Rajendran [1999] 235 ITR 514 in which it has been held that no deduction except what has been allowed under section 16, is admissible?" 2. The facts, as culled out from the statement of facts, are as under : The assessee is a Developm....
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....contentions of the assessee and allowed the appeals by setting aside the order of the Commissioner of Income-tax (Appeals) holding that during the pendency of the valid return, reassessment proceedings could not be initiated. The correctness of the same is now canvassed before this court. 3. We heard the arguments of counsel on either side and perused the materials available on record. 4. In order to resolve the first question of law, we are of the view that it is better to have the relevant provision extracted. Section 147 read as under : "147. Income escaping assessment. - If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisi....
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....though his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (c) where an assessment has been made, but- (i) income chargeable to tax has been underassessed ; or (ii) such income has been assessed at too low a rate ; or (iii) such income has been made the subject of excessive relief under this Act ; or (iv) excessive los....
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....fter an order has been passed under section 143(3) of the Act, but even otherwise before such an order is passed. Furthermore, clause (b) of Explanation 2 also makes the position amply clear that where a return of income has been furnished by the assessee, but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return, that would be deemed to be a case where income chargeable to tax has escaped assessment and becomes a cause for invoking the power under section 147 of the Act. 6. This issue has been considered by various High Courts. In the case of CIT v. Abad Fisheries [2002] 258 ITR 641, the Kerala High C....
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....sessing Officer had reason to believe that any income chargeable to tax had escaped assessment for any assessment year, he could proceed to assess or reassess such income. Thus, the condition precedent for proceeding under section 147/ 148 was that the Assessing Officer should have reason to believe that income had escaped assessment. Nothing more. It was not necessary that assessment should have been finalised under section 143(3) before it could be reopened. The intimation under section 143(1) operated as an order of assessment unless the authority proceeded to give notice under section 143(2) and passed an order under section 143(3). The court further held that if the competent authority had reason to believe that income had escaped asse....
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.... firstly, the Assessing Officer must have reason to believe that income profits or gains chargeable to income-tax have escaped assessment, and, secondly, he must also have reason to believe that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a). But under the substituted section 147 existence of only the first condition suffices. In other words, if the Assessing Officer for whatever reason has reason to believe that income has escaped....