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TMI Blog2010 (4) TMI 431X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, held that the re-opening of the assessment was not valid in law. The Court has been informed that the appeal against the order of the Tribunal for assessment year 1997-1998' has been dismissed for non-compliance of a; conditional order of removing office objections. Be that as it may, having regard to the nature of the question of interpretation involved; we have heard arguments on the question of law as framed in these appeals and proceed to answer it on merits. 3. Section 147 of the Income Tax Act, 1961 provides that if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153, assess or reassess such 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 this Section". The proviso deals with reopening of an assessment upon the expiry of a period of four years from the end of the relevant assessment year and does not fall for interpretation in this appeal. Explanation 3 to Section 147 was inserted by the Finance (Nn.2) Act of 2009, with ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (No.2) Act of 2009 is that even though the notice that has been issued under Section 148- containing the reasons for; reopening the assessment does not contain a reference to a particular. issue with reference to which income has escaped assessment, the Assessing Officer may assess or reassess the income in respect of any issue which has escaped assessment, when such issue comes to his notice subsequently, in the course of the proceedings. The reasons for the insertion: of. Explanation .3 are to-be found in the Memorandum explaining the provisions of Finance (No.'2) Bill of 2009. The Memorandum treats the amendment to be clarificatory and contains the following explanation : "Some courts have held that .the Assessing Officer has to restrict the reassessment proceedings only to issues in respect of which the reasons have been recorded for reopening the assessment. He is not empowered to touch Upon any other issue for which no reasons have been recorded The above interpretation is contrary to the legislative intent. With a view to further clarifying the legislative intent, it is proposed to insert an Explanation in section 147 to provide that the Assessing-Officer may assess or re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which, he had already recorded reasons is it necessary that he should record reasons for assessing or reassessing any of the items which are totally unconnected with the proceedings already initiated. Suppose under two heads, income has escaped assessment and those two heads are inter-linked and connected, the proceedings initiated or notice already issued under sub-section (2) of section 148 would be sufficient if the escaped income on the second head comes to the knowledge of the officer in the course of the proceedings." which are totally unconnected with the proceedings already initiated. , Suppose under two heads, income has escaped assessment and those two heads are inter-linked and connected, the proceedings initiated or notice already issued under sub-section (2) of section 148 would be sufficient if the escaped income on the second head comes to the knowledge of the officer in the course of the proceedings. But if both the items are unconnected and totally alien then the assessing authority has to follow sub-section (2) of section 148 with regard to the escaped income which comes to his knowledge during the course of the proceedings." Hence, the View of the Punjab and Ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings under the section. 10. Now the-submission of the learned counsel appearing on behalf of the assessee in the present case is; that the words "and also" in Section 147 postulate that the Assessing Officer may assess or reassess the income which he has reason to believe has escaped assessment together with any other income chargeable to tax which has escaped assessment and which comes to his notice during the course of the proceedings. In. other words, unless the Assessing Officer assesses the income with reference to which he had formed a reason to believe within the meaning of Section 147, it would not be open to him to assess or reassess any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings. On the other hand, it has been urged on behalf of the Revenue that even if/during the course of assessment or, as the case may be reassessment, the Assessing Officer\doe$: hot assess or reassess the income which he has reason to believe has escaped assessment and which formed the subject matter of a notice under Section 14S(2), it is nonetheless open to him to assess any other income which; during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must be in respect of the income in respect of which he has formed a reason to believe that it has escaped assessment and also in respect of any other income which comes to his notice subsequently during the course of the proceedings as having escaped assessment. If the income, the escapement of which was the basis of the formation of the reason to believe is not assessed or reassessed, it would not be open to the Assessing Officer to independently assess only that income which comes to his notice subsequently in the course of the proceedings under the section- as having escaped assessment. If upon the issuance of a notice under Section 148 (2), the Assessing Officer accepts the objections of the assessee and does not assess or reassess the income-which was the basis of the notice, it would not be open to him to assess: income under some other issue independently. Parliament when :it enacted the provisions:-of Section 147 with effect from 1 April 1989 clearly stipulated that the Assessing Officer has to assessee to reassess- the income which he had reason: to believe had escaped assessment and also any other income chargeable to tax came which came to his not during the proceeding. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sections 22 (2) and 34 of the Act of 1922 while the judgment in Sun Engineering Works (supra) interprets the provisions of Section 147 as they stood prior to the amendment on 1 April 19.89." 13. The effect of the amended provisions came to be considered, in two distinct lines of precedent on the subject. The first line of authority, to which a reference has already been made earlier, adopted the principle that where the Assessing-Officer has formed a reason ;to believe that income has escaped assessment ;and has issued a notice under Section 148 on certain specific issues, it was not open to him during the course of the proceedings for assessment or reassessment to assess or reassess: any other income, which may have escaped assessment but which did not form the subject matter of the notice, under Section 148.. .This view was adopted in the judgment of the Punjab & Haryana High Court in Vipan Khanna (Supra) and in the judgment of the Kerala High Court in Travancore Cements Limited (Supra). This line of authority, would now cease to reflect the correct position in law, by virtue of the amendment which has been' brought in by the insertion of Explanation 3 to Section 147 by Finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dment by bringing in Explanation 3 to Section 147, Parliament stepped in to correct what it regarded as an interpretational error in the view which was taken by certain courts that the Assessing Officer has : to restrict the "assessment -or reassessment proceedings only to the issues in : respect of which reasons were Recorded for reopening the assessment. The corrective exercise embarked" upon by "Parliament in the form of Explanation 3 consequently provides that the Assessing Officer may assess or reassess the income in respect of any issue which carries' to his notice subsequently in the course of the proceedings- though the reasons: for such issue were not included in the notice under Section 148(2): The decisions of the Kerala High Court Travancore Cements" limited (Supra) and of the Puniab & Haryana High Court in Vipan Khanna (supra) would, therefore, no longer hold the field; However, insofar as the second line of authority is concerned, which is reflected in the judgment of the Rajasthan High Court in Shri Ram Singh (supra), Explanation 3 as inserted by. Parliament would not take away the basis of that decision. The view which was taken by the Rajasthan High Court was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first principle, based on the language used in section 147(1) and on the basis of the precedent on the subject. We agree with the submission which has been urged on behalf of the assessee that section147(1) as it stands postulates that upon the formation of a reason to believe that income chargeable to tax has escaped assessment for any assessment year, the Assessing Officer may assesss or reassess such income "and also" any other income chargeable to tax which comes to his notice subsequently during the proceedings as having escaped assessment. The word " and also" are used in a cumulative and conjunctive sense. To read these words as being in the alternative would be to rewrite the language used by Parliament. Our view has been supported by the background which led to the insertion to Explanation 3 to section 147. Parliament must be regarded as being aware of the interpretation that was placed on the words "and also" by the Rajasthan High Court in Shri Ram Singh (supra). Parliament has not taken away the basis of that decision. While it is open to Parliament, have regard to the plenitude of its legislative powers to do so, the provisions of section 147(1) as they stood after the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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