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TMI Blog2007 (7) TMI 304X X X X Extracts X X X X X X X X Extracts X X X X ..... f SLP (Civil) No. 18372 of 2006] - - - Dated:- 27-7-2007 - Judge(s) : S. B. SINHA., HARJEET SINGH BEDI JUDGMENT The judgment of the court was delivered by S. B. SINHA J.-Leave granted. Whether for the purpose of computing the period of limitation envisaged under sub-section (2) of section 263 of the Income-tax Act, 1961 (for short "the Act"), the date of order of assessment or that of the reassessment, is to be taken into consideration is the question involved in this appeal which arises out of a judgment and order dated January 18, 2006, passed by a Division Bench of the High Court of Judicature at Madras passed in Income-tax Appeals Nos. 1384 to 1386 of 2005. The said question arises on the following facts: The respondent is a company incorporated under the Indian Companies Act, 1956. It filed its returns for assessment under the Act for the assessment years 1994-95, 1995-96 and 1996-97 on November 23, 1994, November 27, 1995, and November 26, 1997, respectively. Assessment for the year 1994-95 was completed on February 27, 1997, and those of the assessment years 1995-96 and 1996-97 were completed on May 12, 1997, and March 30, 1998, respectively. In the said orders of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by limitation, found favour with it, opining: "6. We have carefully gone through the record and considered the rival submissions. In our view, the contentions of the assessee deserve to succeed. The facts of the case clearly show the claim of lease equalisation fund, if at all accepted, is an error committed by the Assessing Officer in his order passed under section 143(3) of the Act for the assessment year 1994-95 on February 27, 1997, for the assessment year 1995-96 on May 12, 1997, and for the assessment year 1996-97 on March 30, 1998. The assessee, no doubt, took up these assessments in appeal before the Commissioner of Income-tax (Appeals) and thereafter the assessment itself was subject to proceedings under section 148 and ultimately, the orders of reassessment were framed on March 28, 2002. All the subsequent events are in respect of the matters other than the allowance of lease equalisation fund. In other words, the error, if any, has been committed, it was done in the order of the Assessing Officer passed for the assessment year 1997-98. Therefore, these orders very much subsist despite the subsequent proceedings under section 148 of the Act." The learned Tribunal ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in CWT v. A. K. Thanga Pillai [2001] 252 ITR 260. Before embarking upon the rival contentions of the parties raised before us, we may notice the relevant part of section 263 of the Act which is as under: "263. Revision of orders prejudicial to Revenue.-(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation.-For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a)... (b).... (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject-matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has escaped assessment by reason of the omission or failure on the part of the assessee either to make a return under section 139 for the relevant assessment year or to disclose fully and truly material facts necessary for the assessment for that year. Both the conditions must exist before an Income-tax Officer can proceed to exercise jurisdiction under section 147(a) of the Act. Under section 147(b) the Income-tax Officer also has the jurisdiction to initiate proceedings for reassessment where he has reason to believe, on the basis of information in his possession, that income chargeable to tax has been either under-assessed or has been assessed at too low a rate or has been made the subject of excessive relief under the Act or that excessive loss or depreciation allowance has been computed. In either case, whether the Income-tax Officer invokes his jurisdiction under clause (a) or clause (b) or both, the proceedings for bringing to tax an 'escaped assessment' can only commence by issuance of a notice under section 148 of the Act within the time prescribed under the Act. Thus, under section 147, the Assessing Officer has been vested with the power to 'assess or reassess' the esca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side and the whole proceedings would start afresh but the same would not mean that even when the subject-matter of reassessment is distinct and different, the entire proceeding of assessment would be deemed to have been reopened. In Sun Engineering Works P. Ltd. [1992] 198 ITR 297 (SC) also, V. Jaganmohan Rao [1970] 75 ITR 373 (SC) was noticed stating: "The principle laid down by this court in Jaganmohan Rao's case, therefore, is only to the extent that once an assessment is validly 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... The judgment in 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 assessment and be allowed a cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned to only such income which has escaped tax or has been underassessed and does not extend to revising, reopening or reconsidering the whole assessment or permitting the assessee to reagitate questions which had been decided in the original assessment proceedings. It is only the underassessment which is set aside and not the entire assessment when reassessment proceedings are initiated. The Income-tax Officer cannot make an order of reassessment inconsistent with the original order of assessment in respect of matters which are not the subject-matter of proceedings under section 147..." We may at this juncture also take note of the fact that even the Tribunal found that all the subsequent events were in respect of matters other than the allowance of "lease equalisation fund". The said finding of fact is binding on us. The doctrine of merger, therefore, in the fact situation obtaining herein cannot be said to have any application whatsoever. It is not a case where the subject-matter of reassessment and the subject-matter of assessment were the same. They were not. It may be of some interest to notice that a similar contention raised at the instance of an assessee was rejected by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he earlier order of assessment, to assessment. An assessee who has failed to file an appeal against the original order of assessment cannot utilise the reassessment proceedings as an occasion for seeking revision or review of what had been assessed earlier. He may only question the extent of the reassessment in so far as the escaped assessment is concerned. The Revenue is similarly bound..." The same principle was reiterated by a Division Bench of the Calcutta High Court in CIT v. Kanubhai Engineers (P.) Ltd. [2000] 241 ITR 665. We, therefore, are clearly of the opinion that keeping in view the facts and circumstances of this case and, in particular, having regard to the fact that the Commissioner of Income-tax exercising his revisional jurisdiction reopened the order of assessment only in relation to lease equalisation fund which being not the subject of the reassessment proceedings, the period of limitation provided for under sub-section (2) of section 263 of the Act would begin to run from the date of the order of assessment and not from the order of reassessment. The revisional jurisdiction having, thus, been invoked by the Commissioner of Income-tax beyond the period of li ..... X X X X Extracts X X X X X X X X Extracts X X X X
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