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TMI Blog2013 (10) TMI 1168X X X X Extracts X X X X X X X X Extracts X X X X ..... March 6, 1998, February 25, 1999, and March 8, 2000, respectively. Later on, the Assessing Officer noticing that the exemptions claimed by the assessee in respect of income earned on the sale of liquor amounting to Rs.2,14,978, Rs. 14,88,000 and Rs. 1,83,153 for the three years, respectively, which are not eligible for deduction under section 80P of the Income-tax Act, 1961 (in short "the Act"), issued notice under section 148 to reassess the income. In the income adjusted statement filed subsequently on February 14, 2003, along with the return of income, which was in response to the notice under section 148, the assessee has claimed deduction under section 80P(2)(d) on the interest income on investment and on the reserve fund interest received from the Erode District Central Co-operative Bank. The aforesaid two fresh claims made subsequent to the original return of income were rejected by the Assessing Officer by relying on the decision of the Supreme Court in Sun Engineering Works [1992] 198 ITR 297 (SC). Ultimately, the Assessing Officer by order dated March 29, 2004, held that the assessee is not entitled for deduction on the income from consumer goods sales and the income fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted its return of income in October 1997, 1998 and 1999 respectively and the same were processed under section 143(1)(a) resulting in "nil" demand after adjusting payment made under section 140A of the Act. In the return of income, the assessee had claimed exemption under section 80P from the sale of consumer goods and on the sale of liquor. Noticing the exemptions claimed by the assessee, which are not eligible under the Act, the Assessing Officer reopened the assessment after issuing notice to the assessee dated January 17, 2003, under section 148 of the Act. In response to the said notice, the assessee filed adjusted statement on February 14, 2003, claiming deduction under section 80P(2)(d) on the interest income on investment from the Erode District Central Co-operative Bank and on the reserve fund interest received from the above bank. These fresh claims made by the assessee were rejected by the Assessing Officer by relying on the decision of the hon'ble Supreme Court in Sun Engineering Works [1992] 198 ITR 297 (SC), which was confirmed by the appellate authority as well as by the Tribunal. This concurrent finding rendered by the authorities as well as the Tribunal is att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lidly reopened by issuance of a notice under section 22(2) of the 1922 Act (corresponding to section 148 of the Act), the previous underassessment is set aside and the Income-tax Officer has the jurisdiction and duty to levy tax on the entire income that had escaped assessment during the previous year. What is set aside is, thus, only the previous underassessment and not the original assessment proceedings. An order made in relation to the escaped turnover does not affect the operative force of the original assessment, particularly if it has acquired finality, and the original order retains both its character and identity. It is only in cases of 'underassessment' based on clause (a) to (b) of Explanation 1 to section 147, that the assessment of tax due has to be recomputed on the entire taxable income. The judgment in V. Jaganmohan Rao's case [1970] 75 ITR 373 (SC), therefore, cannot be read to imply as laying down that, in the reassessment proceedings validly initiated, the assessee can seek reopening of the whole assessment and claim credit in respect of items finally concluded in the original assessment. The assessee cannot claim recomputation of the income or redoing of an asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sale of liquor does not fall under the categories stipulated in section 80P(2) of the Act and, therefore, the Tribunal has rightly rejected the claim of the assessee with regard to the sale of liquor. So far as the deduction claimed by the assessee in respect of income from consumer goods sales is concerned, we are of the opinion that the authorities as well as the Tribunal have committed wrong in disallowing the same. Before going into this question, it would be beneficial to look the background of section 80P and the judicial pronouncement of the hon'ble apex court in this regard. By the Finance (No. 2) Act, 1967, section 81 was omitted and its provisions re-enacted as section 80P of the 1961 Act. The relevant extract of section 80P is : "80P. (1) Where, in the case of an assessee being co-operative society, the gross total income includes any income referred to in subsection (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely :- (a) in the case of a co-operative socie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to the object with which the provisions had been introduced, it was held that the Legislature did not intend to limit the scope of exemption only to primary societies and that the phrase "produce of its members" must be construed as including any society engaged in marketing agricultural produce "belonging to" its members. In this context the hon'ble Supreme Court held as follows (page 821) : "The language adopted in section 80P(2)(a)(iii) with which we are concerned will admit the interpretation that the society engaged in marketing of agricultural produce of its members as agricultural produce 'belonging to' its members which is not necessarily raised by such member. Thus, when the provisions of section 80P of the Act admit of a wider exemption there is no reason, to cut down the scope of the provision as indicated in Assam Co-operative Apex Marketing Society's case [1993] 201 ITR 338 (SC)." The aforesaid decision came in December, 1998. Immediately thereafter, section 80P(2)(a)(iii) was sought to be amended by the Income-tax (Second Amendment) Bill, 169 of 1998. Clause 8 of the Bill, which is relevant for our purposes, reads (see [1999] 235 ITR (St.) 1, 3) : "Amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondents from seeking to assess or reassess the appellant society in respect of any previous year prior to the date of the enactment of the Amendment Act. The Delhi High Court dismissed the writ petition holding that the amendment was valid and that the Legislature was competent to retrospectively take away a benefit granted earlier by an amendment of the law. However, the court recorded the statement of the Solicitor-General appearing on behalf of the respondent authorities that the amendment would apply only to assessments which were yet to be finalised. From the aforesaid decisions of the hon'ble Supreme Court and the discussions made therein, it is apparent that the amendment which was brought in 1999 has became as the Income-tax (Second Amendment) Act, 1999 (Act 11 of 1999), and on recording the submission made by the Solicitor General before the Delhi High Court when the amendment was impugned, it was made clear that the amendments would apply to the assessments which were yet to be finalised. In the present case, the assessments were of the year 1997, 1998 and 1999 and, admittedly the assessments were finalised in 1999 and it were reopened by issuing notice dated January ..... X X X X Extracts X X X X X X X X Extracts X X X X
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