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TMI Blog2011 (6) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... ght in law in holding that the Assessing Officer had jurisdiction to re-assess issues other than the issues in respect of which proceedings were initiated especially when the reasons for the latter ceased to survive?" 3. The appellant company is engaged in the business of manufacturing and trading of pharmaceuticals products. It filed return of income on 31st October, 1994 which was processed under Section 143(1)(a) of the Act at the returned income. Vide notice dated 23rd January, 1998 issued under Section 148 of the Act, reassessment proceedings were initiated by the Assessing Officer under Section 147 of the Act. The Assessing Officer intimated the assessee that the items viz. club fees, gifts and presents and provision for leave encashment having escaped assessment and therefore initiated reassessment proceedings under Section 147. The assessee vide its letter dated 15th December, 1998 explained that there was no escape of income on account of these items. This persuaded the Assessing Officer not to make any disallowance in respect of these items. However, during the course of assessment proceedings, the Assessing Officer found that deduction under Section 80HH and 80-I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance or relief in the return it will amount to the case where income chargeable to tax had escaped assessment." "It is immaterial for validity of action under section 147 whether the addition/disallowance proposed in the reasons recorded were ultimately made or not. Thus even if in the reassessment order various additions/disallowance have not been made, it does not affect upon assumption of jurisdiction under section 147. Once the jurisdiction has been validly assumed the Assessing Officer may reassess any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of proceedings under this section i.e., section 147." However, in the present case it is seen that when the jurisdiction was assumed the Assessing Officer had reason to believe that income has escaped assessment due to claim and allowance of various expenses. It is only after the enquiries were made during reassessment proceedings the Assessing Officer came to conclusion that no addition are required to be made in this regard. But by such subsequent action original action of assuming jurisdiction under Section 147 is not affected. Whether the assumption of jurisdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (c) Where an assessment has been made, but - (i) Income chargeable to tax has been underassessed; or (ii) Such income has been assessed at too low a rate; or (iii) Such income has been made the subject of excessive relief under this Act; or (iv) Excessive loss or depreciation allowance or any other allowance under this Act has been computed. Explanation 3.- For the purpose of assessment or reassessment under this 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 this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148. 148. Issue of notice where income escaped assessment. (1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 reassess income in respect of any issue which comes to his notice subsequently in the course of proceedings under this section, notwithstanding that the reason for such issue has not been included in the reasons recorded under sub-section (2) of section 148. This amendment will take effect retrospectively from 1st April, 1989 and will accordingly apply in relation to assessment year 1989-1990 and subsequent years." 9. By virtue of explanation 3 to Section 147 interpretive confusion came to be clarified and thus the decisions rendered by the Punjab & Haryana High Court in the case of Vipin Khanna v. Commissioner of Income Tax (2002) 255 ITR 220 (P&B) and Kerala High Court in the case of Travancore Cements Limited v. Assistant Commissioner of Income Tax (2008) 305 ITR 170 (Ker), no longer hold the field on the subject. 10. The ratio of both the aforecited cases was that upon the issuance of notice unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , of the proceedings under the section." 12. The submission of learned counsel for the Revenue was that when reassessment is reopened by issuance of notice under Section 148, the previous assessment is set aside and the whole assessment proceedings start afresh and the Assessing Officer has power to levy taxes on the entire income which has escaped assessment. The learned counsel relied upon the cases of Supreme Court in Commissioner of Income Tax v. Sun Engineering Work Limited 198 ITR 297 and V. Jaganmohan Rao and Ors. Vs. Commissioner of Income-tax and Excess Profits Tax, Andhra Pradesh (1970) 75 ITR 373 (SC). On the other hand learned counsel for the assessee submitted that the words, „and also‟ in Section 147 signify that unless the Assessing Officer assesses the income with respect to which he has formed reason to believe within the meaning of Section 147, it would not be open for 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 proceedings. Learned counsel relied upon the case of Jet Airways (supra) and also Commissioner of Income Tax v. Shri Ram Singh (20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made for the first time under Section 147, whereas "reassess" as referring to a situation where the assessment has already been made, but the Assessing Officer has reason to believe that there is under assessment on account of the existence of any of the grounds stipulated in Section 147. The Supreme Court referred to the judgment in the case of Jaganmohan Rao (supra) wherein it was held that the object of Section 147 enures to the benefit of the Revenue and it is not open to the assessee to convert the reassessment proceedings as an appeal or revision and thereby seek relief in respect of items which were rejected earlier or in respect of items not claimed during the course of the original assessment proceedings. 15. In Dr.Devendra Gupta's case (supra), learned Tribunal has relied upon the judgment of the Punjab & Haryana High Court, in Atlas Cycle Industries case (supra), and concluded that the basic condition is, that the AO has reason to believe, that any income chargeable to tax has escaped assessment, for any assessment year, and it was found, that the section puts no bar on the powers of the AO, to put to tax, any other income, chargeable to tax, which has escaped ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by Parliament otiose. Parliament having used the words "assess or reassess such income and also any other income chargeable to tax which has escaped assessment", the words "and also" cannot be read as being in the alternative. On the contrary, the correct interpretation would be to regard those words as being conjunctive and cumulative. It is of some significance that Parliament has not used the word "or". The Legislature did not rest content by merely using the word "and". The words "and" as well as "also" have been used together and in conjunction." ... Evidently, therefore, what Parliament intends by use of the words "and also" is that the Assessing Officer, upon the formation of a reason to believe Under Section 147 and the issuance of a notice under Section 148(2) must assess or reassess: (i). 'such income'; and also (ii) 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. The words 'such income' refer to the income chargeable to tax which has escaped assessment and in respect of which the Assessing Officer has formed a reason to believe that it has escaped as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e may also note that the heading of Section 147 is "income escaping assessment" and that of Section 148 "issue of notice where income escaped assessment". Sections 148 is supplementary and complimentary to Section 147. Sub-section (2) of Section 148 mandates reasons for issuance of notice by the Assessing Officer and sub-section (1) thereof mandates service of notice to the assessee before the Assessing Officer proceeds to assess, reassess or recompute escaped income. Section 147 mandates recording of reasons to believe by the Assessing Officer that the income chargeable to tax has escaped assessment. All these conditions are required to be fulfilled to assess or reassess the escaped income chargeable to tax. As per explanation (3) if during the course of these proceedings the Assessing Officer comes to conclusion that some items have escaped assessment, then notwithstanding that those items were not included in the reasons to believe as recorded for initiation of the proceedings and the notice, he would be competent to make assessment of those items. However, the legislature could not be presumed to have intended to give blanket powers to the Assessing Officer that on assuming jur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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