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TMI Blog2007 (4) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... ust [ 2000 (2) TMI 4 - SUPREME COURT] , were not concluded, it could not indeed be said that any income had escaped the assessment. The AO was thus indeed erroneous in holding the view that income has escaped assessment. The reassessment proceedings were thus vitiated in law and the very issuance of notice u/s 147 is thus liable to be set aside. The legal plea is well taken by the assessee and we approve the same. Thus, we quash the reassessment proceedings. The orders passed as a result of these reassessment proceedings are, therefore, set aside. The appeal is allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... order is dt. 20th May, 2002 and the relevant assessment is framed under s. 143(3) r/w s. 147 of the IT Act, 1961, for the asst. yr. 1997-98. 5. So far as the additional plea, which we propose to deal with first is concerned, the relevant facts are like this. The original assessment was completed under s. 143(1)(a) vide intimation dt. 9th March, 1998. On 16th Oct., 1998, however, the AO required the assessee to show cause as to why, inter alia, the following mistake not be rectified under s. 154 of the Act: "Loss of Rs. 14 lakhs on share financing business cannot be set off against business income." 6. In response to the notice so issued by the AO, the assessee, vide letter dt. 28th Oct., 1998, submitted as follows: "With reference to your above notice, we have pursued the entire matter and present the following facts for your kind consideration: 1. There are three business activities conducted: (a) M/s Snagam Stone Supply Co., (b) M/s J.K. Transport (c) Share finance business. While submitting the computation of income, the profit from share financing business was classified under the head income from other sources instead of business income. The past years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business loss. 5. As regards bank interest of Rs. 64,720 not shown, we submit that the interest income of Rs. 64,720 has already been considered in the computation as the account bank charges, and interest is the net of receipts and payments. The interest paid was Rs. 1,42,703 and the interest received was Rs. 64,720. The net result of Rs. 77,983 being excess of interest payment over receipt has been debited to P&L a/c as an expenditure. A zerox copy of ledger account of bank charges and interest is enclosed for your ready reference. Since there is no mistake apparent from record, we object to such rectification and we request you to drop the proceedings." 7. Even as there was no further communication by the AO on the response submitted by the assessee, a notice was issued on 20th Feb., 2001 for reassessment of the income escaping assessment. In the reasons recorded by the AO, under s. 147 of the Act, it was stated that: "(1) The bad debt of Rs. 14,00,000 was wrongly allowed in order under s. 143(1)(a). This amount is pertaining to income from other sources as admitted by the assessee in the return of asst. yr. 1996-97 vide order under s. 143(3) dt. 7th Sept., 1998. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 or s. 154, and gives up later, the recourse to another is inappropriate. Learned counsel then refers to the judgment of Hon'ble Gujarat High Court in the case of Damodar H. Shah vs. Asstt. CIT (2000) 163 CTR (Guj) 1 : (2000) 245 ITR 774 (Guj) to suggest that if no mistakes are found and proceedings under s. 154 are dropped, issue of notice under s. 147 on the basis of the same material is not valid. Learned counsel submits that income cannot be said to have escaped assessment if assessment proceedings in respect of income are still pending and have not yet culminated in a final order. Learned counsel contends that the law is so laid down by the Hon'ble Supreme Court in the case of Trustees of H.E.H. Nizam Trust vs. CIT (2000) 159 CTR (SC) 114 : (2000) 242 ITR 381 (SC). On the basis of this web of reasoning, it is contended that the proceedings under s. 154 are also part of the assessment proceedings and unless these proceedings are concluded, there cannot be any question of any income escaping the assessment. There is thus, according to Shri Pai, no question of any income escaping the assessment The very initiation of reassessment proceedings, on the facts of this case, i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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