A combined order of assessment passed by the assessing officer giving effect to directions of Tribunal and also culminating proceeding under section 147(a) was justified.
The Income Tax Officer was justified in passing a combined order. There was nothing in law to prevent the Income Tax Officer from passing a combined order giving effect to the directions of the Tribunal and also culminating the proceedings under section 147(a).
1. This appeal relates to the assessment year 1971-72. Though as many as 14 grounds of appeal had been preferred, only three points were stressed before us by the learned Counsel for the assessee for adjudication.
2. The first grievance of the assessee in the present appeal arises from the nature of the assessment order. The ITO has described the said order as having been passed in term's of Section 143(3)/147(a)/253' of the Income-tax Act, 1961 ('the Act'). The original assessment order in the present case was passed by the ITO on 20-3-1974, on the bas's of the original return filed by the assessee on 16-8-1971. In the original assessment the ITO held that the assessee was doing various businesses in different benami names, such as, Shri S.R. Chetia, Sankarlal Gupta, J.C. Bhu-yan, Tankeswar Saikia, etc. The aforesaid order of the ITO was appealed against by the assessee before the AAC who confirmed the order of the ITO. Thereafter, the assessee appealed to the Tribunal who set aside the original assessment order passed by the ITO vide their order dated 18-11-1978 with the direction that the ITO should reframe the assessment after giving opportunity to the assessee and after making necessary enquiry and investigation regarding the benamidar of the assessee.
3. While the appeals were pending as above, a search was carried out at the residential and business premises of the assessee at Digboi. As a result thereof, fresh material was thrown up indicating that the assessee was having extensive business in timber and was also plying buses in his own name as also in the names of several benamidars and had made huge investments both in movable and immovable properties.
Action under Section 147(a) was, therefore, initiated against the assessee in respect of the assessment year 1970-71 vide notice under Section 148 of the Act dated 18-3-1977 served on the assessee on 22-3-1977. The reassessment proceedings, initiated as above, were pending on the date. i.e.. 18-11-1978. when the Tribunal passed its order setting aside the original assessment order of the ITO, reference to which has been made as above.
4. The ITO has passed the present order keeping in mind the direction of the Tribunal while setting aside the original assessment as also the material which was thrown up in the course of the search and on the basis of which proceedings under Section 147 were initiated by him on 22-3-1977.
5. The contention of the learned Counsel for the assessee is that the two assessment proceedings for the same year cannot co-exist simultaneously, and that the proceedings? initiated under Section 147 would automatically lapse when the original assessment order was set aside by the Tribunal and was sent back to the ITO for remaking the assessment after doing the necessary investigation.
6. On behalf of the revenue, the aforesaid contention of the assessee is resisted and it is pointed out that the proceedings under Section 147 were valid when they were initiated and, therefore, they cannot lapse simply because subsequently the original assessment order in respect of which appeal was pending before the higher authorities had been set aside. The scope of the two proceedings was distinct and different and both could be culminated by passing a combined assessment order. There was nothing in law which could be read against the above procedure.
7. We have given careful consid eration to the rival submissions. The contention of the assessee does not appear to us to have merit. The scope of the action that could be directed to be taken by the appellate authorities in respect of the original assessment could not go beyond the scope of the original assessment. Even the AAC could not give any direction to the ITO to assess any income from sources, w hich were neither disclosed by the assessee in the original return nor were known to the ITO and in respect of which the ITO had said nothing in the original assessment order. The scope of the powers of enhancement, vested in the AAC, has been discussed elaborately by their Lordships of the Hon'ble Supreme Court in the case of CIT v. Rai Bahadur Hardutroy Motilal Chamaria  66 ITR 443 and their Lordships have made it clear there that the power of enhancement under Section 31(3) of the Indian Income-tax Act, 1922, is restricted to the sources of income which have been the subject-matter of consideration by the ITO from the point of view of taxability ...There must be something in the assessment order to show that the ITO applied his mind to the particular subject-matter or the particular source of income with a view to its taxability or to its non-taxability ...The AAC has no jurisdiction under Section 31(3) to assess a source of income which is not disclosed either in the returns filed by the assessee or in the assessment order. That being the position, the AAC could not have, in the present case, directed the ITO to undertake investigation with regard to a source of income, which was not known to the ITO. The Tribunal has no power of enhancement and, therefore, the setting aside of the assessment order by the Tribunal can confer no power on the ITO to go beyond the original assessment order framed by him. Due to this consideration, the ITO could not have considered the additional information regarding the new sources of income thrown up by the search at the assessee's residential house and business premises, while recompleting the assessment as per the direction of the Tribunal. If the ITO wanted to rope in the income from such additional sources, he had no option but to initiate proceedings of reassessment under secfion 147(a) against the assessee. There is nothing in any of the provisions of the Act, which might be interpreted to mean that a validly initiated reassessment proceeding under Section 147(a) would be rendered nugatory on the setting aside of the assessment order passed originally by the ITO by a superior Tribunal giving therein specific direction to the ITO with regard to specific points. The ITO was, therefore, in our opinion, entirely justified in culminating the proceedings under Section 147(a) initiated by him on the basis of the material thrown up by the search at the assessee's premises. The ITO was also under a legal obligation to carry out the instruction of the Tribunal, which was given while setting aside the original assessment. There is, again, nothing in the law to prevent the ITO from passing a combined order giving effect to the direction of the Tribunal and also culminating the proceedings under Section 147(a) initiated by him on valid ground. The order of the ITO is entirely correct and we, therefore, reject the assessee's contention in this regard.
8 to 15. [These paras are not reproduced here as they involve minor issues.)