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TMI Blog2022 (7) TMI 1207X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter and for the reasons that we have indicated, we do not regard the decision of the Tribunal in the present case as being in error. The question of law shall, accordingly, stand answered against the revenue and in favour of the assessee. - ITA No. 1166/PUN/2018 - - - Dated:- 14-7-2022 - SHRI S. S. GODARA , JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE , ACCOUNTANT MEMBER Assessee by : None Revenue by : Shri M. G. Jasnani ORDER PER S. S. GODARA , JM : This assessee s appeal for AY 2011-12 arises against the CIT(A)-2, Aurangabad s order dated 09-12-2015 passed in case No. ABD/CIT(A)-2/202/2014-15 involving proceedings under Section 143(3) of the Income Tax Act, 1961, in short the Act . Case called twice. None appears at the assessee s behest. It is accordingly proceeded ex-parte. 2. We notice at the outset that the instant appeal suffers from 835 days delay in filing, which has been stated to be attributable to various communication gaps as well as approval requirements at official level. The hon ble apex court s landmark decision in Collector, Land Acquisition vs. MST Katiji Ors. (1987) 167 ITR 471 (SC) had settled the law long back that the cau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escaped assessment, when such issue comes to his notice subsequently in the course of the proceedings. The reasons for the insertion of Explanation 3 are to be found in the Memorandum explaining the provisions of Finance (No. 2) Bill of 2009. The Memorandum treats the amendment to be clarificatory and contains the following Explanation : Some courts have held that the Assessing Officer has to restrict the reassessment proceedings only to issues in respect of which the reasons have been recorded for reopening the assessment. He is not empowered to touch upon any other issue 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. 7. In order to appreciate the reasons for the amendment inserting Expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d connected, the proceedings initiated or notice already issued under sub-section (2) of section 148 would be sufficient if the escaped income on the second head comes to the knowledge of the officer in the course of the proceedings. But if both the items are unconnected and totally alien then the assessing authority has to follow sub-section (2) of section 148 with regard to the escaped income which comes to his knowledge during the course of the proceedings. Hence, the view of the Punjab and Haryana High Court and the Kerala High Court was that, once the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment and proceeds to issue a notice under section 148, it is not open to him to assess or, as the case may be, reassess the income under an independent or unconnected issue, which was not the basis of the notice for reopening the assessment. 8. Parliament stepped in to correct what it regarded as an incorrect interpretation of the provisions of section 147. The Memorandum explain-ing the provisions of Finance (No. 2) Bill of 2009 states in this background that some courts had held that the Assessing Officer has to restrict the rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h has escaped assessment and which comes to his notice subsequently in the course of the proceedings. On the other hand, it has been urged on behalf of the revenue that even if, during the course of assessment or, as the case may be reassessment, the Assessing Officer does not assess or reassess the income which he has reason to believe has escaped assessment and which formed the subject-matter of a notice under section 148(2), it is nonetheless open to him to assess any other income which, during the course of the proceedings is brought to his notice as having escaped assessment. 11. The rival submissions which have been urged on behalf of the revenue and the assessee can be dealt with, both as a matter of first principle, interpreting the section as it stands and on the basis of precedents on the subject. Interpreting the provision as it stands and without adding or deducting from the words used by Parliament, it is clear that upon the formation of a reason to believe under section 147 and following the issuance of a notice under section 148, the Assessing Officer has the power to assess or reassess the income, which he has reason to believe had escaped assessment and also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer accepts the objections of the assessee and does not assess or reassess the income which was the basis of the notice, it would not be open to him to assess income under some other issue independently. Parliament when it enacted the provisions of section 147 with effect from 1-4-1989 clearly stipulated that the Assessing Officer has to assess or reassess the income which he had reason to believe had escaped assessment and also any other income chargeable to tax which came to his notice during the proceedings. In the absence of the assessment or reassessment of the former, he cannot independently assess the latter. 12. In CIT v. Sun Engg. Works (P.) Ltd. [1992] 198 ITR 2971 , the Supreme Court dealt with the following question of law in the course of its judgment:- Where an item unconnected with the escapement of income has been concluded finally against the assessee, how far in reassessment on an escaped item of income is it open to the assessee to seek a review of the concluded item for the purpose of computation of the escaped income? The issue which arose before the Supreme Court was whether, in the course of a reassessment on an escaped item ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment or reassessment to assess or reassess any other income, which may have escaped assessment but which did not form the subject-matter of the notice under section 148. This view was adopted in the Judgment of the Punjab and Haryana High Court in Vipan Khanna's case (supra) and in the judgment of the Kerala High Court in Travancore Cements Ltd.'s case (supra). This line of authority, would now cease to reflect the correct position in law, by virtue of the amendment which has been brought in by the insertion of Explanation 3 to section 147 by Finance (No. 2) Act of 2009. The effect of the Explanation is that once an Assessing Officer has formed a reason to believe that income chargeable to tax has escaped assessment and has proceeded to issue a notice under section 148, it is open to him to assess or reassess income in respect of any other issue though the reasons for such issue had not been included in the reasons recorded under section 148(2). 14. The second line of precedent is reflected in a judgment of the Rajasthan High Court in CIT v. Shri Ram Singh [2008] 306 ITR 343 . The Rajasthan High Court construed the words used by Parliament in section 147 particula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notice under section 148(2). The decisions of the Kerala High Court in Travancore Cements Ltd.'s case (supra) and of the Punjab Haryana High Court in Vipan Khanna's case (supra) would, therefore, no longer hold the field. However, insofar as the second line of authority is concerned, which is reflected in the judgment of the Rajasthan High Court in Shri Ram Singh's case (supra), Explanation 3 as inserted by Parliament would not take away the basis of that decision. The view which was taken by the Rajasthan High Court was also taken in another judgment of the Punjab Haryana High Court in CIT v. Atlas Cycle Industries [1989] 180 ITR 3191. The decision in Atlas Cycle Industries' case (supra) held that the Assessing Officer did not have jurisdiction to proceed with the reassessment, once he found that the two grounds mentioned in the notice under section 148 were incorrect or non-existent. The decisions of the Punjab Haryana High Court in Atlas Cycle Industries' case (supra) and of the Rajasthan High Court in Shri Ram Singh's case (supra) would not be affected by the amendment brought in by the insertion of Explanation 3 to section 147.- 16. Expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which comes to his notice subsequently during the proceedings as having escaped assessment. The words and also are used in a cumulative and conjunctive sense. To read these words as being in the alternative would be to rewrite the language used by Parliament. Our view has been supported by the background which led to the insertion of Explanation 3 to section 147. Parliament must be regarded as being aware of the interpretation that was placed on the words and also by the Rajasthan High Court in Shri Ram Singh's case (supra). Parliament has not taken away the basis of that decision. While it is open to Parliament, having regard to the plenitude of its legislative powers to do so, the provisions of section 147(1) as they stood after the amendment of 1-4-1989 continue to hold the field. 18. In that view of the matter and for the reasons that we have indicated, we do not regard the decision of the Tribunal in the present case as being in error. The question of law shall, accordingly, stand answered against the revenue and in favour of the assessee. The appeal is, accordingly, dismissed. There shall be no order as to costs. 5. We adopt the foregoing detailed discussi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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