2008 (2) TMI 663 - AT - Income Tax

Summary

Issues Involved:
1. Legality of the CIT(A)'s order.
2. Exclusion of Rs. 25 lakhs commission refunded by the appellant from taxable income.
3. Consideration of the appellant's claim pending before the Assessing Officer during section 148 proceedings.
4. Determination of income chargeable to tax after excluding the refunded commission.

Issue-Wise Detailed Analysis:

1. Legality of the CIT(A)'s Order:
The appellant argued that the CIT(A)'s order was "bad in law" as it did not properly discuss and appreciate the appellant's contentions and the case law relied upon. The Tribunal did not find merit in this argument and upheld the CIT(A)'s order, indicating that the CIT(A) had appropriately considered the relevant issues.

2. Exclusion of Rs. 25 Lakhs Commission Refunded by the Appellant:
The main contention was whether the Rs. 25 lakhs commission refunded by the appellant should be excluded from the taxable income. The appellant received the commission as Managing Director of DCM Limited based on the profits for the financial year 1994-95, declared it in the return for the assessment year 1996-97, and later refunded it in October 2000 due to statutory provisions under the Companies Act, 1956. The Tribunal noted that the appellant's claim for exclusion was made in the reassessment proceedings initiated under section 148 of the Income-tax Act. The Assessing Officer and CIT(A) both rejected the claim, relying on the Supreme Court's decision in CIT v. Sun Engg. Works (P.) Ltd., which limits the scope of reassessment proceedings to escaped income and does not allow revisiting settled matters unless they relate to the escaped income.

3. Consideration of the Appellant's Claim Pending Before the Assessing Officer During Section 148 Proceedings:
The appellant contended that the claim for exclusion of the refunded commission was pending before the Assessing Officer at the time of initiating section 148 proceedings and should have been considered. The Tribunal, however, held that the claim was a fresh one and did not relate to the escaped income for which the reassessment was initiated. The Tribunal emphasized that reassessment proceedings under section 147/148 are primarily for the benefit of the revenue to tax escaped income and not for the benefit of the assessee to reduce taxable income below the originally assessed amount.

4. Determination of Income Chargeable to Tax After Excluding the Refunded Commission:
The appellant argued that the income chargeable to tax should exclude the refunded commission, citing Supreme Court judgments in CIT v. Shoorji Vallabhdas & Co. and Godhra Electricity Co. Ltd. The Tribunal, however, reiterated that the reassessment proceedings cannot reduce the income below the originally assessed amount. The Tribunal found that the claim for exclusion of the refunded commission did not relate to the escaped income identified in the reassessment notice, which concerned the siphoning of funds through share transactions. Therefore, the Tribunal upheld the Assessing Officer's decision not to entertain the appellant's claim in the reassessment proceedings.

Conclusion:
The Tribunal concluded that the reassessment proceedings under section 147/148 of the Act are intended to tax escaped income and not to allow the assessee to reduce taxable income below the originally assessed amount. The appellant's claim for exclusion of the refunded commission was not related to the escaped income and was thus rightly rejected by the Assessing Officer and CIT(A). The appeal of the assessee was dismissed.