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TMI Blog2000 (7) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... ew to rectify these mistakes the Income-tax Officer issued a notice under section 154/155 of the Act on May 1, 1995, requiring the petitioner to file objections, if any, to the proposed rectification of the aforesaid mistakes. In response to the said notice, the petitioner furnished replies dated May 11, 1995, and May 29, 1995, claiming that no rectification was called for. He claimed that the depreciation claimed in the return was Rs.8,97,902 whereas the depreciation admissible to him even at the rate of 40 per cent. worked out to Rs.8,98,321. For this purpose, a depreciation chart was enclosed with the reply. It was explained in the reply that there was one more truck owned by the petitioner on which depreciation had not been claimed in the return and it was because of this reason the claim of depreciation worked out to an amount higher than what was claimed in the return. Similarly, he explained that the income from D.C. Khanna and Sons, Chamba, had duly been accounted for in the returned income. During the pendency of proceedings under section 154/155 of the Act, the petitioner filed his return of income for the assessment year 1993-94 on March 31, 1995, declaring an income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Income-tax, Circle Pathankot. To finalise the assessments on the basis of proceedings initiated under section 147 of the Act, the Assistant Commissioner issued notices under sections 143(3) and 142(1) of the Act requiring the petitioner to produce the books of account and furnish the information specified in his letter dated July 30, 1998. Since this letter is in dispute the same is being reproduced as under for facility of reference: "Office of the Assistant Commissioner of Income-tax, Circle Pathankot, Pathankot. Dated 30-7-1998 To: Shri Vipan Khanna, C/o. Pushap Palace, Dhangu Road, Pathankot. Dear Sir, Sub: Assessment years 1992-93 and 1993-94--Regarding. In order to facilitate the finalisation of your abovesaid assessments, you are required to please fumish/produce the following details/information: (i) Copies of tenders submitted and agreements made with the authorities concerned for carriage contract may please be furnished. (ii) You have claimed carriage expenses. In this connection, you are requested to please furnish copy of agreements in case the carriage contract was given to sub-contractors by you. (iii) Income and expenditure account re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Income-tax vide his order dated October 26, 1998 (annexure P-7), rejected the assessee's contention on the ground that in view of the changes incorporated in sections 143 and 147 of the Act by the Direct Tax Laws (Amendment) Act, 1987, the judgment of the Supreme Court in Sun Engineering Works Pvt. Ltd. [1992] 198 ITR 297 was not applicable. On the other hand, he relied on another decision of the apex court in the case of V. Jaganmohan Rao v. CIT and EPT [1970] 75 ITR 373 to hold that once an assessment was reopened by issue of a notice under section 148 of the Act, the Income-tax Officer's jurisdiction was not restricted only to the portion of escaped income in respect of which the proceedings had been initiated but also to all other items of income which may have escaped assessment. It is against this order that the present writ petition has been filed. Shri Hemant Kumar, advocate, appearing on behalf of the petitioner, contended that the assessments for the assessment years 1992-93 and 1993-94 stood concluded on March 31, 1994 and May 5, 1995, respectively, when intimation under section 143(1)(a) of the Act had been sent. He has conceded that the depreciation on trucks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Deputy Commissioner of Income-tax under section 144A or the Act seeking direction to the Assessing Officer to confine the scope of his enquiry to the issue of depreciation and not to make fishing inquiries into concluded items unconnected with the escapement of income, the Deputy Commissioner wrongly rejected the same by his order dated October 26, 1998, by misapplying certain observations of the Supreme Court in the case of V. Jaganmohan Rao [1970] 75 ITR 373. It was argued that the Deputy Commissioner had failed to notice that the scope of these very observations had duly been explained by the Supreme Court itself in its subsequent judgment in Sun Engineering Works Pvt. Ltd.'s case [1992] 198 ITR 297. Shri R.P. Sawhney, senior advocate, appearing on behalf of the respondents, supported the order dated October 26, 1998, on the ground that once proceedings under section 147 of the Act are validly initiated, the jurisdiction of the Assessing Officer extends to assess or reassess not only the escaped income to which the proceedings related but also other items of income which may have escaped assessment and which come to the notice of the Assessing Officer during the course of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even if the depreciation was to be calculated at the rate of 40 per cent., the depreciation admissible to him would be higher than what has been claimed in the return because he was entitled to depreciation on another truck owned by him on which he had omitted to claim the depreciation. We are unable to accept this contention. From the facts already noticed it is absolutely clear that the petitioner has claimed depreciation in the returns at the rate of 50 per cent. and he has nowhere disputed the fact that the admissible rate of depreciation to him was 40 per cent. This fact alone was sufficient for the Income-tax Officer to initiate proceedings under section 147 of the Act as has been done in the present case. It is interesting to note that on the one hand the petitioner maintains that he is entitled to higher depreciation yet on the other hand while filing the returns in response to the notices under section 148 of the Act, he has once again claimed the same amount of depreciation as claimed in the original return. Even otherwise the petitioner could not possibly be allowed to make a fresh claim of depreciation in the proceedings under section 147 of the Act as has been held by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be served on an assessee after the expiry of 12 months from the end of the month in which the return is furnished. Therefore, in a case where a return is filed and is processed under section 143(1)(a) of the Act and no notice under sub-section (2) of section 143 of the Act thereafter is served on the assessee within the stipulated period of 12 months, the assessment proceedings under section 143 come to an end and the matter becomes final. Thus, although technically no assessment is framed in such a case, yet the proceedings for assessment stand terminated. The Central Board of Direct Taxes vide its Circular No. 549, dated October 31, 1989, has explained the new procedure of assessment in paras. 5.12 and 5.13 as under: "5.12 Since, under the provisions of sub-section (1) of the new section 143, an assessment is not to be made now, the provisions of sub-sections (2) and (3) have also been recast and are entirely different from the old provisions. A notice under sub-section (2) which will be issued only in cases picked up for scrutiny, is now issued only to ensure that the assessee has not understated his income or has not computed excessive loss or has not underpaid the tax in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argument advanced on behalf of the Revenue that in view of the amendment made in section 147 of the Act with effect from April 1, 1989, the Assessing Officer could not only assess or reassess the escaped income in respect of which proceedings under section 147 have been initiated but also any other income chargeable to tax which may have escaped assessment and which comes to his knowledge subsequently in the course of such proceedings. This proposition is not even disputed by learned counsel for the petitioner. However, what is disputed is the action of the Assessing Officer in embarking upon fresh inquiries on issues which are unconnected with the issue which forms the basis of proceedings under section 147 of the Act. From the letter dated July 30, 1998, it is evident that the Assessing Officer was seeking general information on other issues merely to verify the return. As already observed such general inquiry could only be made by issuing a notice under sub-section (2) of section 143 within the stipulated period which in the present case had already expired. Admittedly, it is not the case of the Revenue that during the course of proceedings under section 147 of the Act it had co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcessive claim of depreciation there is no material to suggest any underassessment or escapement of income under any other item. There is no gainsaying the fact that in proceedings under section 147 of the Act it is only the escaped income which has to be assessed or reassessed. Thus, we are of the considered view that as per the law laid down by the apex court in the case of Sun Engineering Works Pvt. Ltd. [1992] 198 ITR 297, when proceedings under section 147 of the Act are initiated, the proceedings are open only qua items of underassessment. The finality of the assessment proceedings on other issues remains undisturbed. According to us it makes no difference whether the assessment proceedings have become final on account of framing of an assessment under section 143(3) of the Act or on account of non-issue of a notice under section 143(2) of the Act within the stipulated period. The amendments made in sections 143 and 147 of the Act with effect from April 1, 1989, do not in any manner negate this proposition of law as enunciated by the Supreme Court in the case of Sun Engineering Works Pvt. Ltd. [1992] 198 ITR 297. We may also mention that the interpretation placed on the ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment' or 'underassessment' but to the entire assessment for the year and starts the assessment proceedings de novo giving the right to an assessee to reagitate matters which he had lost during the original assessment proceedings, which had acquired finality, is not only erroneous but also against the phraseology of section 147 of the Act and the object of reassessment proceedings. Such an interpretation would be reading that judgment totally out of context in which the questions arose for decision in that case. It is neither desirable nor permissible to pick out a word or a sentence from the judgment of this court, divorced from the context of the question under consideration and treat it to be the complete 'law' declared by this court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this court. A decision of this court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, the courts must carefully try to ascertain the true principle laid down by the decision of this court and not to pick out words or s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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