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TMI Blog2006 (12) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... ay assess or reassess such income and 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 etc. 3. That the ld. CIT(A) has also erred in law in directing the Assessing Officer that cost of acquisition for land and building should be based as calculated in view of Dr. A.K. Mukherjee while ld. CIT(A) has himself in his order very clearly observed that since the order has already been cancelled by him, the cost of acquisition is not discussed here. As such ld. CIT(A) has himself gone beyond the direction given by himself in his order." 3. The assessee has raised the following gross objection in support of the order of the ld. CIT(A):- "1. Because considering the facts and the circumstances of the case the proceedings under sections 147 and 148 of the Income-tax Act, 1961 which have been initiated on the basis of erroneous assumption and facts, in absence of any genuine and definite information, without a valid and legal reason and formation of belief for escapement of a particular income, are illegal and bad in law. Consequently the reassessment order dated 23-1-2004 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the course of assessment proceedings does not reflect the above deposit and withdrawal. Apart from the above the assessee has also taken an advance of Rs. 7,50,000 M/s. A.H. Wheeler & Co. (P.) Ltd., where he is a Director. The above amount is a deemed dividend under section 2(22)(e) of the Income-tax Act, 1961. In view of the above I have reason to believe that income chargeable to tax amounting to Rs. 13,36,835 (Rs. 5,86,835 + Rs. 7,50,000) has escaped assessment. Issue notice under section 147/148." 5. Thus, the assessment was re-opened on two grounds, one is that the money paid by the assessee along with his brother Shri Subir Banerjee amounting to Rs. 11,73,679 as freehold charges, the assessee's share being Rs. 5,86,835, was unexplained. The second point taken by the Assessing Officer for reopening the assessment was that the assessee has received a sum of Rs. 7,50,000 as advance from M/s. A.H. Wheeler & Co. (P.) Ltd., where he was a Director and the same was taxable as deemed dividend under section 2(22)(e). 6. Thereafter, the Assessing Officer is issued notice to the assessee on 2-9-2002 which was received by him on 4-9-2002. During the course of re-assessment proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; ------------ During the year under consideration assessee sold total area of 1326.31 sq. mt. for Rs. 15,02,750. The chargeable capital gain was worked out as under: Total sale price, 19,53,350.00 Less: Indexed cost including cost of improvement, (1326.21 X 407.49) 5,40,427.00 ------------ Capital Gain chargeable to tax, 14,12,923.00 & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rate of 75p. per sq. yd. He set an example of one Dr. A.K. Mukherjee, wherein the value of the land has been taken at Rs. 355.56 per sq. yd. as on 1-4-1981. 11. Against this, the ld. D.R. submitted that the assessment has been validly reopened because at the time when original assessment was made under section 143(3), this aspect was not disclosed by the assessee. The Assessing Officer had carried out enquiries from the assessee about the source of sum of Rs. 11,73,679 paid as advance as freehold charges. It was explained by the assessee vide his letter dated 28-6-2002 that the same was paid out of Bank account but the bank account filed during the course of original assessment proceedings did not reflect above deposit or withdrawal. Once this is the position prima facie the Assessing Officer had reason to believe that the amount of Rs. 11,73,670 has escaped the assessment. Therefore, reopening was valid. Further, as per section 147, once an assessment is validly reopened then other item could be validly included while completing the assessment. For this proposition, he analyzed section 147 which provides that not only such income which has escaped assessment but also any othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer does not make any addition of the item on which assessment was reopened then he loses jurisdiction to make addition in respect of other items, which were discovered subsequently during the course of reassessment proceedings. To support his proposition, he has relied on the decision of Tribunal in Ashok Kumar Singh v. ITO [I.T. Appeal No. 255 (Lucknow) of 2003 for the assessment year 1997-98, dated on 28-10-2004] Tribunal and Dubey Land & Finance Ltd. v. ITO [2005] 149 Taxman 11 (Luck.) (Mag.); CIT v. M.P. Iron Traders [2004] 189 CTR 154 (Punj. & Har.) for the proposition that if no material comes to the notice of the Assessing Officer, casting doubts or to the genuineness credits which were concluded during original assessment proceedings could not be reopened in the course of re-assessment proceedings initiated on the basis of information received on another ground; on the decision of Hon'ble Punjab & Haryana High Court in Vipin Khanna v. CIT [2002] 255 ITR 220 again for the preposition that proceedings under section 147 are re-opened only regarding the item of under-assessment and finality of other issues are not effected. 13. In rejoinder, the ld. D.R. subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer to reopen the assessment and not whether the omission or failure and the escapement of income is established. Support is derived from the decision of Hon'ble Supreme Court in Sri Krishna (P.) Ltd. v. ITO [1996] 221 ITR 538. Similarly, it is held in Central Province Manganese Ore Co. Ltd. v. ITO [1991] 191 ITR 662 (SC) that final outcome of proceeding is not relevant. What is important for initiating reassessment proceedings is the satisfaction of the two requisite conditions under section 147 (a). Thus establishment of factum of escapement of income at the stage of initiation of reassessment proceeding is not essential. Further it has been held that the validity of jurisdiction for initiation of reassessment proceedings has to be considered with reference to the material available at the time of initiation. The court is not required to look into the further material that came to light in the course of reassessment proceedings. Reliance is placed on the decision of Hon'ble Madras High Court in Asa John Devinathan v. Addl. CIT [1980] 126 ITR 270. In Chunnilal Surajmal v. CIT [1986] 160 ITR 141 (Patna), it has been held that the material or events becoming available long ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scaping assessment.- If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and 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)" Here, the word "May" would not mean "Shall" , because the use of the word "Shall" will take away the discretion from the Assessing Officer to add or not to add an item on which assessment was reopened or discovered subsequently during the course of reassessment proceedings. In general the word "May" is an auxiliary verb clarifying the meaning of another verb by expressing an ability contingency, possibility or probability. When used in Statute in its ordinary sense the word is permissive and not mandatory. But where certain conditions are provided in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord in taxing Statute. It often means the computation of income of the assessee, the determination of tax payable by him and whole of the procedure for making the assessment and for collecting and recovering of tax. The word "Assessment" has been used in its widest connotation and includes the procedure for declaration and imposition of tax liability and the machinery for enforcement thereof including a proceeding for imposition of penalty. In CIT v. Sanjay Kumar Gupta [2005] 276 ITR 73 (All.) the word "Assessment" has been explained as under:- "The word "assessment" is used in the Income-tax Act, 1961, in a number of provisions in a comprehensive sense and it includes all proceedings starting with the filing of the return or issue of notice and ending with the determination of the tax payable by the assessee. Proceedings for the assessment of a firm consist of computation of the income of the firm, determination of tax payable by the firm, apportionment of the income of the firm between its partners in the case of a registered firm, and in appropriate cases the imposition of tax on the firm after including the share of the income of certain partners in the income of the firm, eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 23 as well as the application of the procedure for declaration and imposition of tax liability and the machinery for enforcement thereof. Nor has the expression, "all the provisions of Chapter IV shall so far as may be applied to such assessment" a restricted content; in terms it says that all the provisions of Chapter IV shall apply, so far as may be, to assessment of firms which have discontinued their business. By section 28, the liability to pay additional tax which is designated penalty is imposed in view of the dishonest contumacious conduct of the assessee. This liability arises only if the Income-tax Officer is satisfied about the existence of the conditions which give him jurisdiction and the quantum thereof depends upon the circumstances of the case. 19. Thus, we rejected the contention of the ld. A.R. that the word "Assessed" or "Re-assessed" used in section 147 would only mean "addition" i.e. unless addition of the amount on which re-assessment proceedings were initiated is added only then subsequent addition in respect of items discovered during reassessment proceedings can be sustained. Thus assessment is a much wider term. Any addition to the total income is an as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of assessment and to substitute in its place the new assessment. The relevant part of head notes is as under:- "(i) that as a result of the retrospective amendment in section 5(1)(viii) of the Act, the exemption on jewellery was not admissible and, therefore, the net wealth chargeable to tax had escaped assessment for that year. Thus, the Wealth-tax Officer was justified in initiating proceeding under section 17. (ii) That once the assessment is reopened, the original order of assessment ceases to be operative and the effect of reopening of the assessment is to vacate or set aside the original order of assessment and to substitute in its place the order made on reassessment. Therefore, the assets could be revalued." 21. Similarly, the decision in Dubey Land & Finance Ltd. I.T.A.T., Lucknow Bench is silent on the meaning of the word "May" and "Assessment" and also the decision of Hon'ble Allahabad High Court in Rama Shanker Gupta's case was not before the Tribunal. 22. The decision in M.P. Iron & Traders' case is not applicable as it is different on facts. The assessment in that case was re-opened on the basis of information regarding purchases out of the books. But the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the addition either of the items on the basis of which assessment was reopened or of the items discovered during the course of reassessment proceedings or of both depending upon the material finally available the Assessing Officer during the course of reassessment proceedings. 25. As a result, we reverse the order of the ld. CIT(A) in cancelling the assessment and restore that of the Assessing Officer but since the ld. CIT(A) has not decided on the quantum of capital gains on the ground that he has cancelled the assessment, we restore the matter to his file to adjudicate, in the light of the material available on record and to be furnished by the assessee and Assessing Officer on the quantum of capital gains in accordance with law. 26. As a result, we allow the appeal of the revenue for statistical purposes. The C.O. filed by the assessee is, therefore, dismissed. ITA. No. 193/All./2005 and CO No. 85/All./2005 1. Since the facts and circumstances are identical with the facts and circumstances in the case of Shri Alok Banerjee, we set aside the order of the ld. CIT(A) in cancelling the assessment and restore the matter to the file of the CIT(A) to workout the quantum of capita ..... X X X X Extracts X X X X X X X X Extracts X X X X
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