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TMI Blog2008 (2) TMI 663X X X X Extracts X X X X X X X X Extracts X X X X ..... e employer company was already pending before the Assessing Officer at the time of initiating proceedings under section 148 of the Act and, therefore, he ought to have considered and allowed the claim while passing the order of assessment. (4)That in the facts and circumstances of the case of the appellant amount of income chargeable to tax was only after excluding the amount of commission and, therefore, Assessing Officer ought to have directed him to determine the correct income. 2. The main issue in this appeal relates to the claim of the assessee for excluding a sum of Rs. 25,00,000 representing commission income from the taxable income. The brief background is that the assessee was the Managing Director of DCM Limited during the financial year 1994-95. On the basis of the profits of the company of the above year the assessee received a commission of Rs. 25,00,000 apart from normal salary in the financial year 1995-96 relevant to the assessment year under consideration. The assessee accordingly filed a return of income for the assessment year 1996-97 on 28-6-1996 declaring an income of Rs. 30,58,060 including therein the commission income. The said return was processed un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi dated 12-5-2000 under section 349(4)/309(5A) of the Companies Act, 1956 the assessee refunded the amount to the company. The said amount no longer constituted income of the assessee. It was therefore contended that the amount of Rs. 25,00,000 refunded to the company was not taxable in the hands of the assessee and in this regard reliance was placed on the judgments of the Hon ble Supreme Court in the case of CIT v. Shoorji Vallabhdas Co. [1962] 46 ITR 144 and Godhra Electricity Co. Ltd. v. CIT [1997] 225 ITR 746 2 (SC). 3.2 It is further submitted that the reliance placed by the lower authorities on the decision of the Supreme Court in the case of Sun Engg. Works (P.) Ltd. ( supra ) to deny the claim of the assessee is not correct. It is submitted that the Supreme Court has laid down that any matter which has already assumed finality cannot be re-agitated in the proceedings under section 147/148 of the Act. So however it is submitted that the judgment of the Supreme Court cannot be construed to mean that an issue which has not been subject-matter of controversy or claim originally and which arises pursuant to a later development cannot be raised in the reass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 147/148 of the Act initiated by the Assessing Officer are only with a view to bring to tax an income which had escaped assessment. The jurisdiction of the Assessing Officer is thus limited to the items which are in the nature escaped assessment whether included in the initial notice issued under section 148 or coming to the knowledge of the Assessing Officer during the course of the reassessment proceedings. In this case the amount sought to be excluded by the assessee does not reflect any escaped income and moreover the same formed a part of the income originally assessed. The Ld. D R. further argued that it was a fresh claim made by the assessee and since the reassessment proceedings were for the benefit of the Revenue, the same have been rightly held by the Assessing Officer to be beyond his jurisdiction following the judgment of the Hon ble Supreme Court in the case of Sun Engg. Works (P.) Ltd. ( supra ). 5. We have carefully considered the rival submissions, perused the record and proceed to decide the controversy as follows. As the foregoing discussion would show the controversy revolves around the scope of the reassessment proceedings initiated under section 147 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had escaped assessment other than or in addition to the item or items which led to the issuance of a notice under section 148 and where reassessment is made under section 147 in respect of income which had escaped tax, the Income-tax Officer s jurisdiction is confined only to such income which has escaped tax or has been under assessed and does not extend to revising, reopening or reconsidering the whole assessment or permitting the assessee to reagitate questions which had been decided in the original assessment proceedings. It is only the under assessment which is set aside and not the entire assessment when reassessment proceedings are initiated. The Income-tax Officer cannot make an order of reassessment inconsistent with the original order of assessment in respect of matters which are not the subject-matter of proceedings under section 147. An assessee cannot resist reassessment proceedings validly initiated under this section merely by showing that other income which had been assessed originally was at too high a figure except in cases under section 152(2). The words such income in section 147 clearly refer to the income which is chargeable to tax but has escaped assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side and not the entire assessment. The Assessing Officer, as per the ratio of the judgment, is not competent to make an order of reassessment which is inconsistent with the original assessment relating to matters which are not the subject-matter of proceedings initiated under section 147 of the Act. The claim of the assessee is that originally the commission income formed part of the total income and it was only subsequently the same was refunded in the face of the provisions of the Companies Act,1956 and therefore it was required to be excluded from the total income. That the said matter was not agitated originally since it did not arise. Secondly it could not be said to have been settled originally since the rectification application of the assessee under section 154 was pending when the proceedings under section 147 were initiated. It is therefore argued that the decision of the Hon ble Supreme Court does not debar its consideration in the reassessment proceedings. In our considered opinion the aforesaid proposition looks attractive at the face of it but on a deeper examination, the same cannot be said to be in consonance with the judgment of the Hon ble Supreme Court in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crucial test is as to whether such a claim, if accepted, would result in determination of income in the reassessment proceedings below the income originally assessed or not. No doubt, the judgment of the Supreme Court permits an assessee to put forward claims or deduction of any expenditure in the reassessment proceedings but with a caveat that it should be relatable to the escaped income. Further that such a claim should not render the income finally determined in the reassessment proceedings to be below the income originally assessed. Factually speaking, in the instant case the claim of the assessee for exclusion of commission income refunded cannot be said to be relatable to the escaped income for which the proceedings under section 147 have been initiated by the Assessing Officer. For this we find from a communication of the assessee dated 12-11-2003 addressed to the Assessing Officer in which the reasons recorded for initiating proceedings under section 147 of the Act have been reproduced, which read as under : "The reasons for taking this case in scrutiny are that DEIL issued 34,99,650 shares at par (Rs. 10 each) to companies and persons who were promoters of DCM on 15-2-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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