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TMI Blog2011 (11) TMI 462X X X X Extracts X X X X X X X X Extracts X X X X ..... facts, in brief, are that the assessee was engaged in the business of poultry farming in the name & style of Royal Poultry Farm. The assessee filed the income return for the AY 1997 - 98 on 22-12-1997 declaring its income of Rs.1,49,854/-. The return was processed under Section 143 (1) on the finding that the capital work in progress under the head building as per scheduled `c' shown in the balance sheet as on 31-3- 1996 for a sum of Rs.15,35,551/- was not carried forward to the balance sheet as on 1-4-1996. The total fixed assets on closing balance as on 31-3-1996 was Rs.52,51,629/- whereas the opening balance as on 1-4-1996 was shown at Rs.31,35,246/-, showing the difference of Rs.20,16,383/- (sic Rs.21,16,383/-). 4. With regard to validity of the notice, as reasons were not informed to the assessee a notice under Section 143 (2) (i) of the Act, 1961 was served on the assessee on 28-2- 2001. As projected by the Revenue, none appeared on behalf of the assessee in compliance with the said notice. The assessee along with its Chartered Accountant appeared before the Assessing Officer (for short "the AO") on 12-3-2001 wherein the assessee was directed to file reply on the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chedule `c' of audit report for A.Yr.96-97. It is seen that bldg. (work-in- progress) was Rs.15,35,551/- in above schedule `c' for A.Yr. 96-97. This work-in- progress is not carried forward in schedule `D' of fixed assets for A.Yr. 97-98. The total of fixed assets closing for A.Yr. 96-97 was Rs.52,51,629/- which should be obviously carried forward for next year but in A.Yr. 97-98 the total net block assets (opening) was Rs.31,35,246/-. So there is a difference of Rs.20,16,383/-. On the above facts I have reason to believe that the above discrepancies of fixed assets at Rs.20,16,383/- is escaped from taxation. Hence, notice u/s 148 should be issued." 9. The Tribunal held that "the assessee, therefore, rightly proceeded to invoke the provisions of Section 152 (2) in so far as having been confronted with the notice under Section 147 to resist the AO to reopen the whole assessment and show that income alleged to have escaped assessment has in truth and in fact not escaped assessment but has been brought in under some inappropriate head." It was further held that the AO proceeded in framing assessment under Section 143 (3) read with Section 147 beyond the provisions of law. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Income Tax v. Sun Engineering Works (P) Ltd.1. 13. On the other hand, Shri Shashank Dubey, learned senior counsel appearing with Shri Neelabh Dubey, learned counsel for the respondent, would submit that in the present case the department issued notice under Section 148 against the assessee for income under a particular head. The notice did not pertain to income under different heads, but which were discovered in the course of reassessment proceedings. The original ground for issuing reassessment notice was no where taken up and was in effect dropped. 14. Shri Dubey would further submit that in the case on hand the case was reopened on the basis of a belief that income `x' had escaped assessment. But in the reassessment order passed under Section 147 by the AO no addition was made in respect of the `x' income, but an addition was made for `y' income, which was said to have escaped assessment. Such addition of `y' income cannot be sustained when no addition was made for `x' income. There is indeed a power with for AO to assess escaped income other than those on the basis of which notice under Section 148 is issued. 15. Shri Dubey would next submit that as per the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:- (a) where no return of income has been furnished by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , as it stood immediately before the amendment of said sub-section by the Finance Act, 2002 (20 of 2002) but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified in sub- section (2) of Section 153, every such notice referred to in this clause shall be deemed to be a valid notice: Provided further that in a case- (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005, in response to a notice served under this section, and (b) subsequently a notice has been served under clause (ii) of sub-section (2) of Section 143 after the expiry of twelve months specified in the proviso to clause (ii) of sub-section (2) of Section 143, but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified in subsection (2) of Section 153, every such notice referred to in this clause shall be deemed to be a valid notice. Explanation.-For the removal of doubts, it is hereby declared that nothing contained in the first proviso or the second proviso shall apply to any return which has been furnished on or after the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment, and such issue comes to his notice subsequently in the course of the proceedings under Section 147 of the Act, 1961, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of Section 148. 22. From bare perusal of the entire provisions, it is clear that the AO should have reason to believe to reopen assessment under the provisions of Section 147 before making the assessment, reassessment or recomputation. 23. The assessee has a right to inform the AO that the income which has allegedly escaped assessment was shown and had been taken into account and the assessment had been properly made. In that event the AO has an obligation to drop the proceedings of the said income, under the provisions of Section 152 (2) of the Act, 1961. 24. Explanation 3 to Section 147 of the Act, 1961 provides that if the proceedings on the basis of reasons recorded under sub-section (2) Section 148 in the course of proceedings of the income reasons have been recorded under Section 148 (2), the other income may also be included, which has escaped assessment for the purpose of assessment or reassessment under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an help or assist the Court in interpreting the true purport and intendment of the enactment, and (e) it cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same." 27. The Bombay High Court in Jet Airways (supra) observed that after issuing a notice under Section 148, the income which has initially formed a reason to believe that the income has escaped assessment, but as a matter of fact has not escaped assessment. The AO cannot proceed to assess some other income independently, however, it was observed that it is open for the AO to issue a fresh notice under Section 148 and proceed thereafter. 28. The High Court of Delhi in Ranbaxy Laboratories Limited (supra), has taken the similar view. 29. In the facts of the case, the income in respect of building to the tune of Rs.20,16,383/- (sic Rs.21,16,383/-) formed reason to believe that the same had escaped assessment, as in the notice issued under Section 148, as aforestated, in the preceding para 8. In the course of proceeding other incomes were also found to have escaped ..... X X X X Extracts X X X X X X X X Extracts X X X X
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