TaxTMI 
TaxTMI 
2007 (7) TMI 304
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....rns for assessment under the Act for the assessment years 1994-95, 1995-96 and 1996-97 on November 23, 1994, November 27, 1995, and November 26, 1997, respectively. Assessment for the year 1994-95 was completed on February 27, 1997, and those of the assessment years 1995-96 and 1996-97 were completed on May 12, 1997, and March 30, 1998, respectively. In the said orders of assessment, the assessee's return under the head "Lease Equalisation Fund" was accepted. However, proceedings for reassessment were initiated by the Assessing Officer on March 5, 2004. Orders of reassessment were passed on March 28, 2002. Proceedings for reassessment, however, were initiated only in respect of three items, viz., (i) the expenses claimed for share issue, (ii) bad and doubtful debts and (iii) excess depreciation on gas cylinders and goods containers. Although the assessee's return in respect of lease equalisation was not the subject-matter of the reassessment proceedings, the Commissioner of Income-tax purported to invoke his revisional jurisdiction in terms of section 263 of the Act and by an order dated March 29, 2004 held as under: "5. In short, from the example given it is the depreciation....
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.... subsequent events are in respect of the matters other than the allowance of lease equalisation fund. In other words, the error, if any, has been committed, it was done in the order of the Assessing Officer passed for the assessment year 1997-98. Therefore, these orders very much subsist despite the subsequent proceedings under section 148 of the Act." The learned Tribunal referred to several decisions of this court and other High Courts for arriving inter alia at the following conclusion: "8. In the light of the above decisions and authorities, we are of the opinion. that the impugned orders passed under section 263 on March 29, 2004, are clearly barred by limitation with reference to the orders passed under, section 143(3) by the Assessing Officer for the above assessment years on February 27, 1997, May 12, 1997 and March 30, 1998 respectively. Accordingly, the orders of the Commissioner of Income-tax under section 263 are vacated and the ground taken by the assessee is allowed." The Revenue preferred an appeal there against before the High Court which was dismissed by a Division Bench stating: "2. Learned senior Central Government standing counsel submits that the ve....
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....ing a fresh assessment. Explanation.-For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a)... (b).... (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject-matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, the High Court or the Supreme Court. Explanation.-In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso t....
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....puted. In either case, whether the Income-tax Officer invokes his jurisdiction under clause (a) or clause (b) or both, the proceedings for bringing to tax an 'escaped assessment' can only commence by issuance of a notice under section 148 of the Act within the time prescribed under the Act. Thus, under section 147, the Assessing Officer has been vested with the power to 'assess or reassess' the escaped income of an assessee. The use of the expression 'assess or reassess such income or recompute the loss or depreciation allowance' in section 147 after the conditions for reassessment are satisfied is only relatable to the preceding expression in clauses (a) and (b) viz., 'escaped assessment'. The term 'escaped assessment' includes both 'non-assessment' as well as 'under assessment'. Income is said to have 'escaped assessment' within the meaning of this section when it has not been charged in the hands of an assessee in the relevant year of assessment. The expression 'assess' refers to a situation where the assessment of the assessee for a particular year is, for the first time, made by resorting to the provisions of section 147 because the assessment had not been made in the regular ....
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....e judgment in Jaganmohan Rao's case [1970] 75 ITR 373 (SC), therefore, cannot be read to imply as laying down that, in the reassessment proceedings validly initiated, the assessee can seek reopening of the whole assessment and claim credit in respect of items finally concluded in the original assessment. The assessee cannot claim recomputation of the income or redoing of an assessment and be allowed a claim which he either failed to make or which was otherwise rejected at the time of original assessment which has since acquired finality. Of course, in the reassessment proceedings it is open to an assessee to show that the income alleged to have escaped assessment has in truth and in fact not escaped assessment but that the same had been shown under some inappropriate head in the original return, but to read the judgment in Jaganmohan Rao's case [1970] 75 ITR 373 (SC), as laying down that reassessment wipes out the original assessment and that reassessment is not only confined to 'escaped assessment' or 'underassessment' but to the entire assessment for the year and starts the assessment proceedings de novo giving the right to an assessee to reagitate matters which he had lost durin....
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....he said finding of fact is binding on us. The doctrine of merger, therefore, in the fact situation obtaining herein cannot be said to have any application whatsoever. It is not a case where the subject-matter of reassessment and the subject-matter of assessment were the same. They were not. It may be of some interest to notice that a similar contention raised at the instance of an assessee was rejected by a three-judge Bench of this court in CIT v. Shri Arbuda Mills Ltd. [1998] 231 ITR 50. This court took note of the amendment made in section 263 of the Act by the Finance Act, 1989 with retrospective effect from June 1, 1988, inserting Explanation (c) to sub-section (1) of section 263 of the Act stating: "The consequence of the said amendment made with retrospective effect is that the powers under section 263 of the Commissioner shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in an appeal. Accordingly, even in respect of the aforesaid three items, the powers of the Commissioner under section 263 shall extend and shall be deemed always to have extended to them because the same had not been considered and decided i....