2010 (12) TMI 748 - HC - Income Tax

Reassessment Scope of provision Notice to reopen assessment to bring to tax income escaping assessment Once assessment reopened assessment to be made of such income and also any other which has escaped assessment

Summary

Issues:
1. Whether the Assessing Officer has the authority to bring to tax any other income that also escaped assessment in the original assessment in the course of income escaping assessment under section 147 of the Income-tax Act, 1961.

Analysis:
The judgment involved a reference to the Full Bench of the Kerala High Court regarding the authority of the Assessing Officer to bring to tax any other income that escaped assessment in the original assessment during income escaping assessment under section 147 of the Income-tax Act, 1961. The case revolved around the reassessment of an assessee for allowing ineligible depreciation in the original assessment and subsequently bringing unexplained trade credits to tax. The assessee contended that the Assessing Officer exceeded jurisdiction by taxing additional income beyond the specific item for which the assessment was reopened. Both the first appellate authority and the Tribunal sided with the assessee, deeming the reassessments invalid. However, the High Court analyzed the relevant provisions of the Income-tax Act, emphasizing that once an assessment is reopened for any escaped income, the Assessing Officer is empowered to assess any other income that also escaped assessment. The Court highlighted that the procedure for income escaping assessment under section 147 is akin to regular assessment, allowing the Assessing Officer to tax any additional income discovered during reassessment. The judgment overturned the Tribunal's decision, citing the Supreme Court's stance that the Assessing Officer is not confined to the grounds stated for reopening the assessment and can assess any escaped income identified during reassessment. Consequently, the High Court allowed the appeals, reversed the Tribunal's orders, and remanded the matter for further consideration on the merits of the additions made during reassessment.