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Orient Trading Company Vs. Commissioner of Income-tax, Gujarat, Ahmedabad - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberIncome-tax Reference No. 140 of 1978
Judge
Reported in(1985)44CTR(Guj)134; [1985]152ITR26(Guj)
ActsIncome Tax Act, 1961 - Sections 139, 139(2), 143, 143(1), 143(3), 144, 147, 147(1) and 148
AppellantOrient Trading Company
RespondentCommissioner of Income-tax, Gujarat, Ahmedabad
Appellant Advocate K.C. Patel, Adv.
Respondent Advocate B.R. Shah, Adv.
Excerpt:
direct taxation - notice - sections 139, 139 (2), 143, 143 (1), 143 (3), 144, 147, 147 (1) and 148 of income tax act, 1961 - whether tribunal was right in law in holding that service of notice under section 148 prior to commencement of section 263 proceedings did not make commissioner's order legally infirm - proceedings for reassessment under section 147 are independent proceedings - proceedings under section 147 limited and confined to assessment of income which has escaped assessment or recomputation of loss or depreciation allowance - issuance of notice under section 148 did not in any way effect power or jurisdiction of commissioner to revise original assessment order - revisional proceedings under section 263 are legal and valid - question referred answered in affirmative. - - .....mankad j.1. the question that has been referred to us by the income-tax appellate tribunal ahmedabad branch 'a' (hereinafter referred to as 'the tribunal'), under s. 256(1) of the i.t. act, 1961 (hereinafter referred to as 'the act'), for our opinion runs as under : 'whether, on the facts and in the circumstances of the case, the tribunal was right in law in holding that the service of notice under section 148 of the i.t. act prior to commencement of section 263 proceedings did not make the commissioner's order legally infirm ?' 2. the question arises in the following circumstances. the assessee is a registered partnership firm and the assessment year under reference is 1971-1972, previous year being the year ending on december 31,1970. the assessee filed its return of income for the.....
Judgment:

Mankad J.

1. The question that has been referred to us by the Income-tax Appellate Tribunal Ahmedabad Branch 'A' (hereinafter referred to as 'the Tribunal'), under s. 256(1) of the I.T. Act, 1961 (hereinafter referred to as 'the Act'), for our opinion runs as under :

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the service of notice under section 148 of the I.T. Act prior to commencement of section 263 proceedings did not make the Commissioner's order legally infirm ?'

2. The question arises in the following circumstances. The assessee is a registered partnership firm and the assessment year under reference is 1971-1972, previous year being the year ending on December 31,1970. The assessee filed its return of income for the assessment year 1971-72 on June 28, 1971. The Income-tax Officer (hereinafter referred to as 'ITO' for brevity's sake) by an order dated March 18, 1974, passed under s. 143(1) of the Act, assessed the assessee's total income at Rs. 11,079 The ITO thereafter sought to reopen the assessment under s. 147 of the Act, by issuing a notice dated March 6, 1976, under s. 148.

3. The Commissioner of Income-tax, Gujarat-II, Ahmedabad (hereinafter referred to as the 'Commissioner'), on examining the records of the assessment proceedings in the case of the assessee for the assessment year 1971-72, was of the opinion that the assessment order of the ITO passed under s. 143(3) erroneous and prejudicial to the interests of the Revenue. He, therefore, issued a notice dated March 10, 1976, under s. 263 calling upon the assessee to show cause why the assessment order for the assessment year 1971-72 should not be set aside and the ITO should not be directed to make a fresh assessment on the grounds stated in the notice. The Commissioner, after considering the explanation given by the assessee in response to the aforesaid notice, by his order dated March 17, 1976, set aside the assessment made by the ITO and directed ITO to make a fresh assessment in accordance with law.

4. Being aggrieved by the order passed by the Commissioner, the assessee carried the matter in appeal before the Tribunal. The contention which was raised by the assessee before the Tribunal was that once the ITO issued a notice dated March 6,1976, under s. 148 the assessment made by the ITO on March 18,1974, stood set aside and, consequently, there was no assessment order in existence which could be set aside by the Commissioner in exercise of the powers under s. 263 of the Act. In support of this contention, reliance was sought to be placed on a decision of the Supreme Court in Jagamohan Rao v. CIT : [1970]75ITR373(SC) . The Tribunal, by its order dated February 15, 1977, held that the previous assessment or under-assessment could be said to have been set aside only when the reopening of the assessment was valid. Since the assessee had not accepted that reopening of the original assessment was valid, the assessment could not be said to have been set aside. In the result, the Tribunal dismissed the assessee's appeal. It is in the background of the about facts that the question which we have set out above has been referred to us for our opinion.

5. The question which we are called upon to answer is whether by initiation of proceedings under s. 147 by issuance of notice under s. 148 of the Act, the assessment order made under s. 143(1) stands set aside. It is urged on behalf of the assessee that service of notice under s. 148 results in the commencement of de novo assessment proceedings which are governed by the relevant provisions of the Act. It was urged that under s. 148, the ITO is required to serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub-s. (2) of s. 139, and the provisions of the Act shall, so far as may be, apply accordingly as if the notice were a notice issued under the sub-section. It is contended that notice under s. 148 is deemed to be one under sub-s. (2) of s. 139 and notice under sub-s. (2) of s. 139 cannot be issued when the assessment order made under s. 143 is in existence. Therefore, when stands set aside or ceases to exist. According to the assessee, notice under s. 139(2) and the assessment order under s. 143 cannot exist or stand together and, therefore, the only conclusion which can be reached is that the assessment order passed under s. 143 stands quashed and set aside.

6. Section 147 empowers the ITO to assess the income which has escaped assessment in the relevant assessment year. Proceedings under s.147 can be undertaken only if the conditions precedent mentioned either in clause (a) or clause (b) are satisfied. The ITO may, subject to the provisions of ss. 148 to 163, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned. There is no question of recomputation of loss or depreciation allowance in the instant case. Proceedings under s. 147 have been initiated against the assessee on the ground that the income chargeable to tax has escaped assessment for the assessment year in question. As pointed out above, what s. 147 empowers the ITO to do is to assess or reassess 'such income' meaning thereby income which has escaped assessment. In other words, the only power which the ITO derives under s. 147 is to assess or reassess the income chargeable to tax which has escaped assessment. The section does not empower the ITO to reopen the entire assessment already made by him under s. 143 and to reassess or recompute the income which was the subject-matter of the assessment made by him. It is conceded on behalf of the assessee that there is no specific provision with regard to setting aside of the original assessment on initiation of proceedings under s. 147 by a notice under s. 148. What is urged on behalf of the assessee is that, since the ITO is required to issue notice containing all or any of the requirements which may be included in the notice under sub-s. (2) of s. 139, the assessment made under s. 143 must be deemed to have been set aside. the argument is that notice under s. 139(2) cannot be issued when assessment is already made and, consequently, on issuance of notice under s. 148, which is deemed to be a notice under s. 139(2) the assessment made under s. 143 stands set aside. We are unable to find any substance in the above argument. The notice which is issued under s. 148 is not a notice under s. 139(2). All that s. 148 says is that a notice issued under that section shall contain all or any of the requirements which may be included in a notice under sub-s.(2) of s.139. The notice need not contain all the requirements which may be included in a notice under s. 139(2). It was urged that the provisions of the Act including the assessment or reassessment are attracted as if the notice issued under s. 148 were a notice under s. 139(2). The provisions relating to the assessment contained in s. 143, it was urged, would not apply, if there was already an assessment in existence. Therefore, the assessment made by the ITO under s. 143 should be deemed to have been set aside. we do not see any force in this argument also. The notice under s. 148 is deemed to be a notice under s. 139(2) only for the limited purpose of taking the aid of the relevant provisions of the act for making the assessment. The Legislature instead of repeating or re-enacting the same provisions which deal with assessment, for the purpose of assessment or reassessment of income escaping assessment has, for the sake of convenience laid down that the relevant provisions of the Act shall apply as if the notice under s. 148 were a notice under s. 139(2). This is a well-known legislative device which is adopted to avoid repetition of identical provisions. For the assessment of the income which has escaped assessment, the Legislature wanted the authorities concerned to follow the same procedure which is laid down for the assessment of income contained in s.143 and it was for that reason that notice under s. 148 was deemed to be a notice under s.139(2). We are, therefore, unable to accept the assessee's argument that the notice issued by the ITO under s. 148 becomes a notice under s. 139(2) and consequently the assessment made under s. 143 stands set aside. The very premise on which the argument is advanced is wrong or fallacious. As pointed out above, the assessment or reassessment contemplated under s. 147 is confined to income which has escaped assessment. The section does not empower the ITO to reopen an assessment of income which is already assessed.

7. In support of the contention that the assessment made under s. 143 stands set aside on issuance of notice under s. 148, reliance was sought to be placed on the decision of the Supreme Court in Jaganmohan Rao's case : [1970]75ITR373(SC) , which was cited before the tribunal. The assessee relied on the following observations made by the Supreme Court in that case(p. 380) :

'... once proceedings under section 34 are taken to be validly initiated with regard to two-thirds share of the income, the jurisdiction of the Income-tax Officer cannot be confined only to that portion of the income. Section 34 interms states that once the Income-tax Officer decides to reopen the assessment he could do so within the period prescribed by serving on the person liable to pay tax a notice containing all or any of the requirements which may be included in a notice under section 22(2) and may proceed to assess or reassess such income, profits or gains. It is,therefore, manifest that once assessment is reopened by issuing a notice under subsection (2) of section 22, the previous under-assessment 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.'

8. The provisions contained in ss. 147 to 153 of the Act correspond to those of s. 34 of the Indian I.T. Act, 1922 (hereinafter referred to as '1922 Act'). The provisions similar to the provisions contained in s. 147 of the Act find a place in s. 34(1) of the 1922 Act. In the case of Jaganmohan Rao : [1970]75ITR373(SC) , the Supreme Court was dealing with a case arising under s. 34of the 1922 Act. Now what the supreme Court has held in the aforesaid decision is that 'previous under-assessment is set aside', and the whole assessment proceeding start afresh. These observations were made in context of proceedings started under s. 34(1)(b) of the 1922 Act which is in pari materia with s. 147(b) of the act. The Supreme Court has not laid down that the entire assessment made before initiation of proceedings under s. 34(1)(b) stand quashed and set aside. What is set aside is only under-assessment and assessment proceedings start afresh only to the extent that there is under-assessment. The assessment made before initiation of proceedings for assessment of income which had escaped assessment does not depend upon the validity or otherwise of initiation of the said proceedings. The Tribunal seems to have taken the view that if the proceedings initiated under d. 147 are valid, the assessment made under s. 143 would stand set aside. It was, therefore, that the Tribunal held that since the assessee had not accepted that the proceedings under s. 147 were validly initiated, the assessment made under s. 144 did not stand set aside. We are unable to subscribe to this view. The assessment made under s. 143 does not depend upon the validity or otherwise of the proceedings under s. 147. The assessment which is described as original assessment made under s. 143 stands on its own and even if the proceedings under s. 147 are validly initiated, it does not get obliterated or wiped off. In other words, on valid initiation or completion of the proceedings under s. 147 for assessment or reassessment of income which has escaped assessment, the original assessment does not stand set aside. In our opinion, the Supreme Court has not expressed any such view in the context of section 34(1)(b) of the 1922 Act in the case of Jaganmohan Rao : [1970]75ITR373(SC) . If the contention raised on behalf of the assessee is accepted, it would mean that the assessment of total income made in the original assessment would be set at naught and the entire assessment including the assessment of income already assessed would be at large. In other words, all questions which were concluded in the original assessment would reopened, for example, it would be open to the assessee to contend that certain expenses, deduction of which was claimed and disallowed at the time of original assessment, is an allowable deduction. It would be equally open to the ITO to change his opinion with regard to the expenses of which deduction has been allowed. The proceedings taken by away of appeal against the original assessment would, as a result of setting aside of the assessment, fall to the ground. It was, however, contended on behalf of the assess that such would not to be the position in the cace of initiation of proceedings under s. 147 will be commenced and continued on the footing that the assessment of total income under the original assessment was final and conclusive subject to the right of appeal to the Appellate Assistant Commissioner or the commissioner (Appeals), as the case may be, and Tribunal. We will refer to the decisions having a bearing on the above question in the latter part of our judgment.

9. It is pertinent to note that s. 246 of the Act which deals with appealable orders specifically makes an order made under s. 143(3) and an order made under s. 147 appealable. The order under s.143(3) is made appealable under clause (c) while the order under s. 147 is made appealable under clause(e) of sub-s. (1) of s. 246. If what is contended on behalf of the assessee is the true legal position, it was not necessary to make specific provision with regard to the order of assessment, reassessment, or recomputation under s. 147 in s. 246, for, according to the assessee, since all the relevant provisions of the Act applicable to a notice under s. 139(2) are applicable to a notice under s. 148, the reassessment order would be under s. 143, the original assessment order having stood set aside. Provisions contained is sub-s. (2) of s. 152 also militate against the view canvassed on behalf of the assessee. This provision contemplates an appeal under ss. 246 to 248 or revision under s. 246 against the original assessment order even when an assessment is reopened in the circumstances falling under clause(b) of s. 147. The said provision lays down that where an assessment is reopened in the circumstances falling under clause(b) of s. 147, the assessee may, if he has not impugned any part of the original assessment order for that year, either under ss. 246 to 248 or under s. 264, claim that the proceedings under s. 147 shall be dropped on his showing that he had been assessed on an amount or to a sum not lower than what he would be rightly liable, for, even if the income alleged to have escaped assessment had been taken into account, or the assessment or computation had been properly made. Proviso to sub-s. (2) of s. 152 is not relevant for our purpose. Section 263 of the Act which confers revisional powers on the Commissioner provides that no order under sub-s. (1) of that section shall be made to revise an order of reassement made under s. 147. There is no embargo to revise the original assessment order in case reassement is made under s. 147. The embargo is only with regard to revision of the order of reassement made under s. 147. Thus the scheme of the Act clearly indicates that the assessment order made under s. 143 and assessment order made under s. 147 are distinct and independent of each other. Section 147 contemplates a separate order and such an order is not and cannot be said to have been made under s. 143. The original assessment order made under s. 143 and assessment order made under s. 147 can co-exist.

10. The assessee had sought to rely on the decisions of the Supreme Court in CST v. H.M. Esufali H.M.Abdulali : [1973]90ITR271(SC) and Dy. CCT v. Sri Ramulu (1977) 39 STC 177. Both these decisions which are rendered in the context of the provisions of the sales tax acts have, in our opinion, no relevance in resolving the controversy involved in the present reference. The observations made by the Supreme Court in the context of the provisions of the Madhya Pradesh General Sales Tax Act, 1958, and the Mysore Sales Tax Act, 1957, cannot be of any assistance to the assessee.

11. The next decision on which reliance was placed on behalf of the assessee is a decision of the Bombay High Court in Deviprasad Kejriwal v. CIT [1975] 102 ITR 180. Once of the question which arose for consideration before the Bombay High Court was whether the expression 'regular assessment' occurring in s. 18A(9) of the 1922 Act would cover reassessment proceedings. It was in the context of this question that the following observations on which reliance was placed on behalf of the assessee were made by the High Court (page 184) :

'The last portion of the section underlined by us says that 'the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section' meaning sub-section (2) of section 22. This provision, in our view, clearly brings out the fact that notice issued under section 34(1) is deemed to be a notice issued under section 22(2) of the act and thereafter further proceedings undertaken by the Income-tax Officer are proceedings to which the provisions of the Act shall, so far as may be, apply accordingly. It clearly means that the provisions of the Act which are made applicable to such de nova proceedings would include section 18A (9) of the Act, for, if the provisions of section 18A(9) are applicable to assessment proceedings that are initially undertaken under section 23 of the Act, we fail to understand as to why the said provision should not apply to the assessment proceedings that are undertaken upon issuing a notice under section 34(1) which is deemed to be a notice under section 22(2) and the proceedings thereunder are de novo proceedings as if undertaken under section 23 of the Act. Looked at form this angle, it seems to us very clear that the expression 'regular assessment' occurring in section 18A(9) of the Act would cover reassessment proceedings undertaken by the Income-Tax Officer under section 34(1) of the Act, if the provisions of section 18A(9) are read in the context of the last portion of section 34(1).'

12. It was submitted that the view taken by the Bombay High Court was that the proceedings that are undertaken upon issuance of notice under s. 34(1) are de novo proceedings as if undertaken under s. 23 of the 1922 Act. Section 23 Of the 1922 Act corresponds to s.143 of the Act and therefore, the proceedings which are taken on the basis of a notice under s. 148 which is deemed to be a notice under s. 139(2) of the Act are de novo proceeding as if undertaken under s. 143 of the Act. Consequently, it must be held that the original assessment order would stand set aside on initiation of proceedings under s. 147. We are unable to accept the above submission. As pointed out above, the observations of the Bombay High Court on which reliance was placed on behalf of the assessee were made in a different context. The Bombay High Court was not called upon to decide whether or not assessment or original assessment made under s. 23 of the 1922 Act stands set aside on initiation of proceedings under s. 34(1) of the 1922 Act. The question which was considered by the Bombay High Court while making the above observations was whether the expression 'regular assessment' occurring in s. 18A(9) of the 1922 Act would cover reassessment proceeding undertaken by the ITO under s. 34(1) of the said Act. In our opinion, therefore, the abve observation are of no assistance to the assessee. In any case what s. 148 lays decided onwn is that the relevant provisions of the Act would be applicable as if notice under s. 148 is a notice under s. 139(2) of the Act. This provision, as already pointed out above, is made only for convenience to avoid repetition of the same procedure which is laid down for assessment while making reassessment. The mere fact that the same procedure is applicable for reassessment does not make an order of assessment or reassessment made under s. 147 an order made under s. 143 of the Act. The fiction created under s. 148 has only limited application to make procedure for assessment applicabl e to reassessment. It was next urged that some of the contentions which are raised by the assessee in the present reference were raised by the Revenue before the Madras High Court in CWT v. Rajamma : [1979]120ITR132(Mad) . Our attention was drawn to page 138 of the report, where reference is made to the submission made on behalf of the revenue. The Revenue placed reliance on a decision of the Supreme Court in Jaganmohan Rao's case : [1970]75ITR373(SC) . The Madras High court, however, held that the said decision had no application to the facts of the case before it. We fail to see how the mere fact that submission similar to those made by the assessee in the present case were made on behalf of the Revenue can be of any help to the assessee.

13. The question identical to the one which is raised in the present reference was raised before the Delhi High Court in Sharda Trading Co. v. CIT : [1984]149ITR19(Delhi) . In that case also, the question which arose before the Delhi High Court was whether it was open to the Commissioner to revise the assessment order when the ITO had initiated proceedings under s. 147 of the Act. The Delhi High Court held that merely by reopening of the assessment or by issue of the notice, the entire assessment is not set aside. It was observed that all the authorities cited by the counsel for the petitioner in that case dealt with the scope of the reassessment proceedings. Reassessment was not confined to only those items in respect of which there is initations proceedings. It was observed that Jaganmohan's case : [1970]75ITR373(SC) and other cases laid down that once an assessment is reopened, the ITO will not only have the jurisdiction but it will also be his duty to determine the taxable liability of the assessee and, for the said purpose, he will have necessarily to take into account not only the escaped income in respect of which a notice under s. 148 read with s. 147 has been issued but also the entire income that has escaped assessment during that years. In other words, according to the Delhi High Court, once an assessment is validly reopened and the ITO proceeds to make reassessment, the initial order of assessment stands automatically cancelled. The orders of assessment would take the place of the original order of assessment and till that is done, the initial order of assessment would still be operative. None of the authorities cited by the councel for the petitioner in that case, observed the Delhi High Court, laid down that mere reopening of the assessment has the automatic effect of the cancellation of the assessment orders. The Delhi High Court, however, observed that if the reassement is made by the ITO in pursuance of the proceedings initiated under ss. 147 and 148, then on reassessment, the entire original assessment is set aside and ceases to exist with the result that the original order of assessment which the Commissioner was seeking to revise becomes non est. By reassessment, the original order is substituted by an order of reassessment which is not open to revision under s. 263 of the Act. However, till a reassessment order is made by the ITO, it is open to the Commissioner to revise the assessment order. In the present case, admittedly, no reassessment was made by the ITO in pursuance of the proceedings initiated under ss. 147 and 148 of the Act when the Commissioner in exercise of his revisional power under s. 263 set aside the original assessment order. Therefore, as held by the Delhi High Court, it was open to the Commissioner to revise the assessment order under s. 263 of the Act. To this extent, we are in agreement with the Delhi High Court. However, with respect, we do not agree with the view of the Delhi High Court that if reassessment is made by the ITO in pursuance of a proceeding initiated under s. 147 and/or s. 148, then on reassessment, the entire original assessment is set aside and ceases to exist with the result that the original order of assessment which the commissioner was seeking to revise becomes non est. As discussed earlier, the assessment order under s. 143 and reassement order under s. 147 are independent and separate orders. Initiation of proceedings under s. 147 or passing of reassessment order under that section will not obliterate or set aside the assessment order made under s. 143 or render it non est as held by the Delhi High Court. As pointed out above, it is not open to the assessee or to the Revenue to reopen the questions which are concludeng by passing of the assessment order under s. 143, subject of course to the provisions regarding appeals and revision. If the view taken by the Delhi high court that on passing of the reassement order, the original assessment is set aside and rendered non est, is correct, the entire assessment, including the questions, concluded would be reopened and the whole matter would be at large, resulting in making appeals and revision against the original assessment order infructuous. For the reasons already recorded with respect, we find ourselves unable to agree with this proposition. However, as pointed out above, the decision of the Delhi High Court supports the view canvassed on behalf of the Revenue to the extent that mere initiation of proceedings under s.147 and 148 would not take away the jurisdction of the commissioner revised the assessment order, reassement proceedings were not concluded, the view taken by the Delhi High Court supports the stand taken by the Revenue.

14. We now proceed to refer to some of the decisions which clearly indicate that reassessment proceedings do not set aside the original assessment. In Anglo-French Textile Co. Ltd v. CIT : [1950]18ITR906(Mad) , the Madras High Court held that when an assessment has been made under s. 23(1) of the 1922 Act, determining an assessee's income as 'nil' and when proceedings under s. 34 were subsequently started to assessee the income which the ITO believed to have escaped assessment, the assessee was not entitled to claim that the loss of profits and gains (including depreciation allowance) sustained by it in the previous year should be determined in the course of such proceedings. It was observed that the relief contemplated by. 24 (3) could be granted only in the course of th e assessment of the total income of an assessee and a proceeding initiat ed under s. 34 was not one intendeded to assess the total income of the assessee. In fact, there was no duty cast upon him to start an enquiry with reference to his total income during the assessment year and he had no power to revise the original assessment except to the limited extent to which such power was recognised under s. 34. It was observed that if, after issuing notice under s. 34, the ITO was satisfied that really no income had escaped assessment in the year, it was open to him to drop th e proceedings without proceeding to assess or reassess the income and the assessee was not entitled, in such an event, to insist that the ITO should proceed to assess the income and give him relief under s. 24(3). Sections 23(1), 24(3) and 34(1) of the 1922 Act correspond to ss. 143, 157 and 147, respectively, of the 1961 act. Therefore, as held by the Madras High Court, the assessee is not entitled to claim relief which h e had not claimed at the time of the original assessment in the course of reassessment proceeding. In kevaldas Ranchhodas v. CIT : [1968]68ITR842(Bom) , the Bombay High Court held that in reassement proceedings initiated under s. 34(1)(a) of the 1922 act on the ground that loss ha d been over-estimated in the original assessment, the ITO had no juri sdiction to reopen the entire assessment originally made, and determine afresh the assessable profits or to correct errors and omissions made by the assessee in the matter of computation of total income. The power conferred upon the ITO in respect of loss was to 'recompute the loss' and when the legislation spoke of recomputing the loss, it meant only the loss and not the income, profits or gains; s. 34(1)(a) did not empower a general recomputation of the income, profits or gains. This decision also clearly indicates that the original assessment order continues to exist in spite of the proceedings initiated for recomputation or reassessment.

15. One of the questions which arose before the Allahabad High Court in Sir Shadi Lal and Sons v. CIT : [1973]92ITR453(All) , was whether the expense which was not allowed while completing the original assessment could be considered for allowance in the course of assessments reopened under s. 147(a). Dealing with this question, the Allahabad High Court observed that it is settled law that on reassessment, the entire assessment is not opened. Thus, claims which had been disallowed during the original assessment cannot be reagitated on the assessment being reopened for bringing to tax certain income which has escaped assessment. The controversy on reassessment is confined to matters which are relevant in respect of the income which had not been brought to tax during the course of the original assessment. It had not been contended that the disallowance of expenditure made during the course of the original assessment, which the assessee wanted to be reconsidered during reassessment, was relevant for the enquiry on which the ITO had re-embarked on reassessment. The disallowance of these expenses in the original assessment had become final, and that being so, it was not open for the assessee to make a claim for these items of expenditure. It should thus be clear that the matters which had become final at the time of the original assessment cannot be reopened in the course of reassessment proceedings. Similar view was taken by the Kerala High Court in CWT v. C. Ravindran : [1977]107ITR547(Ker) , in the context of the provisions regarding reassessment contained in the W.T. Act,

16. It would thus clearly appear that proceedings for reassessment under s. 147 are independent proceedings. They are confined to assessment or reassessment of income which has escaped assessment or recomputation of loss or depreciation allowance, as the case may be. No other question or matter concluded by the original assessment could be reopened or reagitated in the reassessment proceedings. In other words, the scope of proceedings under s. 147 is limited and is confined only to assessment of income which has escaped assessment or recomputation of loss or depreciation allowance. This being the position, it is difficult to accept the contention that as a result of initiation of reassessment proceedings under ss. 147-148 of the Act, the original assessment stands quashed or set aside.

17. Under the circumstances, in our opinion, the Commissioner had jurisdiction and power to revise the assessment order made by the ITO on March 18, 1974. Issuance of notice under s. 148 on March 6, 1976, by the ITO did not in any way effect the power or jurisdiction of the Commissioner to revise the original assessment order. The original assessment order which was sought to be revised did not stand set aside on the issuance of notice under s. 148 and, therefore, it was open to revision by the Commissioner under s. 263 of the Act. The revisional proceedings under s. 263 initiated by the Commissioner must, therefore, be held to be legal and valid.

18. In the result, we confirm the view taken by the Tribunal to the extent stated above and answer the question referred to us in the affirmative and against the assessee. Reference answered accordingly with no order as to costs.

19. A copy of this judgment shall be sent under the seal of this court and signature of the Registrar to the Income-tax Appellate Tribunal, Ahmedabad Bench 'A'.


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