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TMI Blog2013 (3) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... e chargeable to tax has escaped assessment or not. - n a case where the Assessing Officer allowed a claim without examining the records but there is possibility of taking a view in favour of the assessee, then it may be said that the Assessing Officer has taken a possible view. But when the claim of the assessee is not allowable and there is no possibility of two views, then allowing the claim by the Assessing Officer without examining and application of mind would definitely render the assessment order erroneous so far as prejudicial to the interest of revenue and Commissioner has the power to exercise the jurisdictional u/s 263. The Full Bench of the Hon’ble Kerala High Court in CIT vs Best Wood Industries & Saw Mills [2010 (12) TMI 748 - KERALA HIGH COURT] has held that there is no difference between the income escaping assessment and regular assessment so far as the proceedings to be followed by the Assessing Officer. It is observed by the Full Bench of the Hon’ble High Court that taking all evidences etc., which are the same for the regular assessment and the income escaping assessment. The Hon’ble High Court has thus, overruled the decision in the case of Travancore Cement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores and book profit u/s 115JA at Rs.73.42 crores. The return of income was processed u/s 143(1) on 8.9.2000. Subsequently, the proceedings u/s 147 were initiated and the assessment was completed u/s 147 r.w.s 143(3) of the I T Act on 30.11.2006. Thereafter, the CIT, after going through the case records noticed that while completing the assessment u/s 147 r.w.s 143(3), the Assessing Officer has not made necessary and adequate enquires on various issues. Accordingly, the CIT proposed to revise the assessment vide show cause notice u/s 263 dt 19.2.2009 in respect of the following issues: i) The assessee had claimed a deduction of Rs. 3,23,30,453/- in the computation of income as expenditure for setting up al 00% export oriented unit of Utkal Alumina International Ltd, a related concern, in which the assessee had 20% equity holding. This amount was shown under the head loans and advances in the balance sheet. This amount was paid to Utkal Alumina International Ltd as advance which was to be adjusted against the assessee s contribution to share capital. Therefore, prima facie, this expenditure is in the nature of capital expenditure and not allowable as deduction. The Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3)/ 147 and set aside the assessment framed u/s 147/143(3). Accordingly, the CIT directed the Assessing Officer to re-frame the assessment to consider various issues as raised in the show cause notice by making necessary and adequate enquiries. 6. Before us, the ld AR of the assessee has submitted that the jurisdiction u/s 263 cannot be invoked on the issues which were not subject matter of the reassessment after expiry of two years from the end of the financial year in which the original assessment was passed. He has further submitted that even in the case of return of income processed u/s 143(1), the notice u/s 263 cannot be issued beyond two years as far as on the issues which are not subject matter of reassessment. In support of his contention, the ld AR has relied upon the decision of the Hon ble jurisdictional High Court in the case of Commissioner of Income-tax v. Anderson Marine and Sons Pvt. Ltd. Reported in 266 ITR 694. He has further contended that the scope of sec. 147 is the same whether the original assessment is completed u/s 143(3) or otherwise. Under reassessment proceedings, the Assessing Officer can assess only such income for which he has reason to believe t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment, then non adjudication of the other issues in the reassessment proceedings cannot be treated as erroneous or prejudicial to the interest of revenue. The ld AR also relied upon the decision of the Hon ble Jurisdictional High Court in the case of CITv. Alagendran Finance Ltd. Reported in 293 ITR 1 (Mum) and the decision of the Hon ble Kerala High Court in the case of Travancore Cement Ltd vs ACIT reported in 219 CTR 359 6.1 On the other hand, the ld DR has submitted that even if the intimation u/s 143(1) is assumed to be an order, but it is not an order of assessment as held in Rajesh Jhaveri Stock brokers 291 ITR 500(SC). He has submitted that the scope of adjustment by Assessing Officer while passing orders u/s 143(1) as it stood in AY 99-00, was restricted only to the checking of arithmetical errors in calculation of tax interest, etc. The ld DR has further submitted that the Assessing Officer was not having any jurisdiction to make any adjustment in respect of the items considered u/s 263 in present case. In other words the Assessing Officer had no powers to make assessment u/s 143(1), as the intimation was not an order of assessment. Hence as far as the order u/s 143( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd is substituted by the fresh assessment order passed. Thus, it can categorically be held that the expression any order u/s 263 would mean even the reassessment order. Therefore for all intent and purposes of the Act the order surviving after reassessment proceedings is only the one passed u/s 147 which only can be rectified u/s 263 provided other conditions are satisfied. 6.3 The ld DR has submitted the order passed u/s 147 is erroneous and prejudicial as the order of the Assessing Officer does not deal with any of these items hence there is no indication of that he has applied his mind. Further, the argument that Assessing Officer had taken conscious decision to grant depreciation on goodwill after accepting the claim of the petitioner, cannot be accepted as there is no discussion whatsoever regarding discrepancy in date of acquisition of the goodwill in the asstt order. He has relied upon the decision of the Hon ble Bombay High Court in the case of Piaggio Vehicles Ltd reported in 290 ITR 377(BOM). The ld DR further submitted that the principle that mere change of opinion cannot be a basis for reopening of assessment would be applicable only to situations where order of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer cannot be launch an enquiry into unrelated issues while passing the reassessment order; accordingly, the reassessment cannot be said to be erroneous. Therefore, invoking the provisions of sec. 263 on the issues which are not subject matter of sec. 147, the limitation would reckoned from the date of original assessment i.e processing the return of income u/s 143(1). The assessment u/s 147 is a regular assessment only for the purpose of sec. 234B for completing the interest and the scope of the said explanation cannot be expanded for the purpose of sec. 263. He has further submitted that the regular assessment means the assessment made u/s 143(3) r.w.s 144 and it does not include the assessment or reassessment u/s 147. Therefore, he has rebutted the contention of the ld DR on this issue. 7. We have considered the rival contention as well as the relevant material on record. Section 263 stipulates the power of the CIT to revise the order passed by taxing authorities under the provisions of the Act. For ready reference, we quote the section 263: 263. (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee whether or not any adjustment had been made under the first proviso to section 143(1) and notwithstanding that no tax or interest was found due from the assessee concerned. Between April 1, 1998, and May 31, 1999, sending of an intimation under section 143(1)(a) was mandatory. Thus, the legislative intent is very clear from the use of the word intimation as substituted for assessment that two different concepts emerged. While making an assessment, the Assessing Officer is free to make any addition after grant of opportunity to the assessee. By making adjustments under the first proviso to section 143(1)(a), no addition which is impermissible by the information given in the return could be made by the Assessing Officer. The reason is that under section 143(1)(a) no opportunity is granted to the assessee and the Assessing Officer proceeds on his opinion on the basis of the return filed by the assessee. The very fact that no opportunity of being heard is given under section 143(1)(a) indicates that the Assessing Officer has to proceed accepting the return and making the permissible adjustments only. As a result of insertion of the Explanation to section 143 by the Finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of revision of a Commissioner of Income-tax only to cases where an order has been passed. A plain reading of section 263 of the Act would alone be sufficient to reach the aforementioned conclusion. A perusal of section 263 of the Act brings out that the Legislature never intended to clothe the Commissioner with the powers of revision in summary cases where intimation and acknowledgment had been sent to the assessee after filing of the return. In that regard reliance may be placed on a recent judgment of the hon ble Supreme Court in the case of Assistant CIT v. Rajesh Jhaveri Stock Brokers P. Ltd. [2007] 291 ITR 500. Two expressions assessment and intimation have been inter-preted by their Lordships as used in section 143(1)(a) of the Act. The afore-mentioned exposition of law has flowed from the amendment substituting the word intimation for assessment with effect from June 1, 1999. The view of the Hon ble Supreme Court in that regard reads as under (page 508) 7.4 Further, the Ahmedabad Bench of the Tribunal in the case of Vijay Kumar Gupta (supra) by following the decision of the Special Bench of the Tribunal in the case of Simbhaoli Industries Pvt. Ltd. v. Deputy Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upra), it is clear that the return processes u/s 143(1) is not subjected to revision. 9. Now, we turn to the question whether the order u/s 147 r.w.s 143(3) is erroneous and prejudicial to the interest of revenue as the Assessing Officer has not made any enquiry or examined and adjudicated the issues which are subject matter of impugned revision order and consequently, whether the impugned revision order is barred by limitation so far as on the issues which are not related to the grounds of reassessment and reassessment. Since there is no original assessment in the case in hand and the reassessment is the first order of assessment by the Assessing Officer; therefore, the Assessing Officer was expected to apply his mind on all the issues to see whether the income chargeable to tax has escaped assessment. The Assessing Officer ought to have exercised due diligence and minimum enquiry as expected from ordinary prudent person acting as a quasi judicial authority being an Assessing Officer. Once the assessment has been reopened, the Assessing Officer was expected to follow all the relevant general provisions for framing the assessing as in the case of regular assessment and find out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence between income escaping assessment and regular assessment because the provisions generally provide for issue of notice, hearing of the assessee and taking of evidence, etc., which are the same for regular assessment and income escaping assessment. Therefore in the course of income escaping, assessment, if it comes to the notice of the Assessing Officer that any other item or items of income other than the item of escaped income for the assessment of which, assessment originally completed was reopened, also have escaped from original assessment, he is bound to assess such item or items of income also in the course of reassessment under section 147. In view of the specific provision providing for assessment of other items of income that have escaped assessment, and that comes to the notice of the Assessing Officer in the course of income escaping assessment, the reassessments made are valid and the orders of the Tribunal to the contrary are not sustainable. Standing counsel for the Revenue has brought to our notice the decision of the Supreme Court in Asst. CIT v. Rajesh Jhaveri Stock Brokers P. Ltd.[2007] 291 ITR 500 wherein the Supreme Court has held that at the stage of is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed u/s 147 r.w.s 143(3) as erroneous and prejudicial to the interest of revenue. 13. Now coming to the question of limitation as provided under sub.sec. (2) of sec. 263. 13.1 The assessee has contended that the limitation would reckoned from the original order {in this case, processed u/s 143(1)} - for exercising the jurisdiction u/s 263 in respect of the issues which are not subject matter of the reassessment u/s 147. 13.1 It is settled proposition of law that the limitation for exercising the jurisdictional u/s 263 on such issues which are not subject matter of reassessment order would be counted from the original assessment as held by the Hon ble Supreme Court in the case of CIT vs Alagendran Finance Ltd reported in 211 CTR 69(SC). 14. There is no original assessment in this case and as we have already held that the Assessing Officer was expected to exercise due diligence as expected from a person of common prudent acting as a quasi judicial authority being the Assessing Officer. Therefore, in the absence of any order by the Assessing Officer prior to reassessment, the limitation for exercising of jurisdictional u/s 263 on such issues cannot be counted from the date ..... X X X X Extracts X X X X X X X X Extracts X X X X
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