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TMI Blog1976 (6) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee returned a net loss of Rs. 11,159 in ready and speculation business. The ITO while assessing the firm separated the speculation business and ready business. He determined the net loss in speculation at Rs. 39,206. While arriving at this figure the ITO considered the rate differences which the assessee had to pay in respect of the forward transactions. The copy of the account also shows that the assessee has transferred the rate differences to Vattav Account wherein the receipts from commission were also accounted for. At that stage there was no controversy in respect of the setting of the differences which the assessee had to pay in respect of its forward dealings from the commission receipt. In fact what happened was that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found that the payments were all genuine normally the ITO should have dropped the assessment proceedings. But the ITO found that in identical circumstances in the case of another assessee the Supreme Court decided that rate differences which fall in the speculation business cannot be set off against the commission receipts which are to be treated as income from ready business. That is the case of CIT vs. Pongal Vittal Nayak decided by the Supreme Court (short note appearing in 69 ITR 47). Relying on this decision the ITO held that the rate differences which are basically of the character of speculation business cannot be deducted from the commission receipts earned by the assessee. The assessee s appeal before the AAC proved unsuccessful. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment is at large and the ITO is free to make an assessment de novo. Therefore, it is urged that the ITO is entitled to bring in any escaped assessment within the meaning of s. 147(a) or (b) and there are no limitations to his powers. In this connection he referred to the decisions of the Andhra Pradesh High Court in the case of Pulavarthi Viswanadham vs. CIT (50 ITR 463) which in turn referred to the decision of the same High Court in the case of Parimisetti Setharamamma vs. CIT (50 ITR 450) reported in the same volume at page 450. Reliance was also placed strongly on the decision of the Supreme Court in the case of V. Jaganmohan Rao Ors. vs. CIT and EPT (75 ITR 373). 5. Before we deal with the issue in controversy certain basic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterials invoking jurisdiction under s. 147(a) found to be present. But the former may be done i.e. when a notice under s. 147(a) is issued it can be converted to one under s. 147(b). This is quite permissible especially because the period prescribed for reopening of assessment under 147(b) is four years whereas for reopening of the assessment under 147(2) is larger, normally it is eight years. Yet another thing that is to be noted is that once an assessment is reopened the entire proceedings are to be done do novo and the ITO can bring in any escaped income. In other words, he is entitled not only to bring in the income which has escaped and for which proceedings have been reopened but also income which escaped assessment but for which no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opened under s. 147(a). As already stated reliance was placed on the decision of the Andhra Pradesh High court as well as the Supreme Court which have been referred to above. All these cases, the assessee s counsel distinguished and argued that there is no dispute between the basic propositions laid down by the aforesaid decision but the ITO, it is contended, cannot get over the period of four years prescribed for reopening of the assessment under s. 147(b). We think there is no use in elaborating this point further as all these aspects have been well discussed by a recent judgment of the Madras High Court in the case reported in 91 ITR 116. Evidently that decision fully supports the contention raised on behalf of the assessee. That decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment in cases falling under cl. (b) after the four year period. But those cases can be brought in indirectly be issuing a notice purporting to be under cl. (a)". "We are, therefore, of the view that though the ITO has got the power to bring in to charge the cases falling under cl. (b) in reassessment proceedings validly initiated by the issuance of a notice under cl. (a), such power is subject to a limitation that the reassessment proceedings initiated should be within the period of four years mentioned in that section." The above extracts are sufficient to repel the contentions raised on behalf of the revenue. Therefore, respectfully following the decision of the Madras High Court we have to hold that the ITO cannot modify to origin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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