2012 (6) TMI 616 - HC - Income Tax

Reassessment income escaped assessment under section 147 of the Act Addition subsequently in the course of assessment proceedings Held that - Explanation 3 to section 147 clearly depicts that the Assessing Officer has power to make additions even on the ground on which reassessment notice might not have been issued in case during the reassessment proceedings, he arrives at a conclusion that some other income has escaped assessment which comes to his notice during the course of proceedings for reassessment under section 148 of the Act. The provision no where postulates or contemplates that it is only when there is some addition on the ground on which reassessment had been initiated, that the Assessing Officer can make additions on any other ground on the basis of which income may have escaped assessment Against Assessee.

Summary

Issues:
1. Appeal under section 260A of the Income-tax Act, 1961 against Tribunal's order for the assessment year 2001-02.
2. Whether the Tribunal's order contradicts previous court rulings and failed to consider jurisdictional limits of the Assessing Officer.
3. Whether the Tribunal's decision was contrary to its own previous ruling in a similar case.

Issue 1:
The appellant-assessee filed a return declaring income, which was later revised. Reassessment proceedings were initiated under section 147 read with section 148 due to alleged understatement of income. The Assessing Officer concluded that significant income had escaped assessment, leading to additions to the taxable income returned by the assessee. The Commissioner of Income-tax (Appeals) allowed the appeal, canceling the reassessment. The Revenue appealed to the Tribunal, arguing that the Commissioner ignored detailed facts and that prima facie satisfaction was sufficient for initiating reassessment. The Tribunal decided to restore the case to the Commissioner for fresh adjudication on both legal and merit grounds, allowing the Revenue's appeal for statistical purposes.

Issue 2:
The appellant contended that the reassessment order was invalid as it sought to make an addition without any basis from the grounds of reassessment. Citing previous court judgments, the appellant argued against the validity of the reassessment. However, the court found no merit in this argument, highlighting the insertion of Explanation 3 to section 147 by the Finance (No. 2) Act, 2009. Explanation 3 grants the Assessing Officer the power to make additions on any issue that comes to notice during reassessment proceedings, even if not part of the original grounds for reassessment.

Issue 3:
The court referenced previous judgments that were rendered before the insertion of Explanation 3 to section 147. It noted that these judgments, including the ones cited by the appellant, no longer hold relevance post the insertion of Explanation 3. Consequently, the court found no merit in the appeal and dismissed the same.

In conclusion, the court upheld the Tribunal's decision, emphasizing the Assessing Officer's authority to make additions during reassessment proceedings based on any issue that comes to notice, as per Explanation 3 to section 147.