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TMI Blog2010 (4) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... tions 391 to 394 of the Companies Act, 1956 by which six companies were amalgamated with the assessee with effect from 1 April 2006. Consequent to the order of amalgamation a consolidated return had to be filed. On 30 October 2005 the return was revised. On 27 December 2006 the Assessing Officer passed an order of assessment under Section 143 (3). The assessment was sought to be reopened on 6 March 2007. The basis on which the assessment was sought to be reopened was that the benefit of Section 72A, which deals with the carry forward and set off of accumulated losses and unabsorbed depreciation allowances in cases inter alia of amalgamation and merger was wrongly allowed. On 27 December 2007 an order of reassessment was passed under Section 143(3) read with Section 147 in terms of which the claim under Section 72A was disallowed. On 30 April 2009 the Commissioner of Income Tax-I, Nasik issued the impugned notice by which the powers conferred by Section 263 are sought to be invoked. It has been observed that the assessment order passed on 27 December, 2007 for assessment year 2004-05 was erroneous and prejudicial to the interests of the Revenue. 4) The submission which has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and reassessed. Hence for the sake of clarity, it would be appropriate to set out at this stage the basis on which the notice under Section 263 has been issued. According to the impugned notice : (i) On a perusal of the assessment order, it was seen that several payments were made to associated concerns which fell in the category of Section 40A(2)(b) which expenses were allowed by the Assessing Officer without calling for the assessee to explain the reasons for the entries in the expenses for the previous year; (ii) The Assessing Officer did not examine the claim under Section 36(1)(iii) as regards interest on advances furnished by the assessee to associate companies for which interest was paid on funds borrowed from Financial Institutions; (iii) In respect of the squared up accounts, the Assessing Officer did not examine the genuineness of the transactions pertaining to certain losses and advances at the time when he made the assessment; (iv) The Assessing Officer failed to examine the increase in deposits in the previous year; (v) The Assessing Officer did not conduct an inquiry into the genuineness of the advances and depreciation during the year; (vi) The Assessing Officer fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner of Income Tax V/s. Alagendran Finance Ltd. The issue which arose before the Supreme Court was whether, for the purpose of computing the period of limitation envisaged under sub- section (1) of Section 263, the date of the order of assessment or of the order of reassessment is to be taken into consideration. In that case, the assessee filed its return for assessment years 1994-95, 1995-96 and 1996-97 and the assessments were completed on 27 February 1997, 12 May 1997 and 30 March 1998. In the orders of assessment, the return of the assessee under the head of "Lease Equalisation Fund" were accepted. Proceedings for reassessment were initiated by the Assessing Officer and orders of reassessment were passed in respect of the following items namely (i) expenses claimed for share issue; (ii) bad and doubtful debts; and (iii) excess depreciation on gas cylinders and goods containers. Though the return of income in respect of the "Lease Equalisation Fund" was not the subject matter of the reassessment proceedings, the Commissioner of Income Tax invoked his revisional jurisdiction under Section 263 and by his order came to the conclusion that the assessee had not furnished complete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een passed. 9) Section 147 empowers the Assessing Officer, if he has reason to believe that any income chargeable to tax has escaped assessment for any assessment year to assess or reassess the said income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the Section. Explanation 3 which has been inserted by the Finance Act (No.2) of 2009 with retrospective effect from 1 April, 1989 provides that for the purpose of assessment or reassessment under the Section, the Assessing Officer may assess or reassess the income in respect of any issue which has escaped assessment and such issue comes to his notice subsequently, in the course of the proceedings under the Section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of Section 148. The substantive part of Section 147 empowers the Assessing Officer to assess or reassess the income chargeable to tax which has escaped assessment and any other income which comes to his notice subsequently in the course of proceedings under the Section. The effect of Explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment on a particular issue, it is open to him to make a reassessment on that issue as well as in respect of other issues which subsequently come to his notice during the course of the proceedings under Section 147. The submission of the Revenue is that by not passing an order of reassessment in respect of other independent issues, the order of the Assessing Officer can be construed to be erroneous and to be prejudicial to the interest of the Revenue within the meaning of Section 263. The submission cannot be accepted in the facts of the present case. The substantive part of Section 147 as well as Explanation 3 enables the Assessing Officer to assess or reassess income chargeable to tax which he has reason to believe had escaped assessment and other income which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the section. There is nothing on the record of the present case to indicate that there was any other income which had come to the notice of the Assessing Officer as having escaped assessment in the course of the proceedings under Section 147 and when he passed the order of reassessment. The Commissioner, when he exercised ..... X X X X Extracts X X X X X X X X Extracts X X X X
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