TMI Blog1992 (10) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on 30-9-1983 under section 143(3) read with section 144B of the Income-tax Act determining the total income of the assessee at Rs. 5,75,366. This assessment was not contested in appeal. A letter dated 27-9-1983 was filed accepting the assessment. Copy of the letter was filed at page 35 of the assessee's paper book No. III. While arriving at the total income in the original assessment, the Assessing Officer estimated the net income from canal work at 12.1 per cent of the gross bills and net income from railway contract at Rs. 1,37,952 which works out to 13 per cent. The assessment was reopened under section 148 of the Income-tax Act by serving a notice on the assessee on 31-3-1986. The re-opening was resorted to on the ground that the assessee had derived amounts under an award relating to contract works part of which relates also to assessment year 1981-82. In pursuance of the notice under section 148 dated 31-3-1986, the assessee firm filed a return declaring an income of Rs. 6,65,630. Again it was revised on 16-3-1987 by another return declaring an income of Rs. 6,40,880. The revised order of assessment was passed on 27-3-1987 by the Assessing Officer under which he determined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctors [1983] 3 SOT 479 (Hyd.)(SB). Before the Commissioner of Income-tax (Appeals) it is stated that in allowing depreciation claim of Rs. 34,257, the Assessing Officer is not correct. It is also stated that interest received on FDRs namely Rs. 21,310 should only be treated as part of business profits and it should not be assessed under the head other sources. Regarding the first ground it was held by the Commissioner (Appeals) that it is a matter of record that the assessee had accepted the income determined on 30-9-1983 at Rs. 5,75,370 without pressing for relief in respect of departmental recoveries by filing an appeal. In the re-assessment it is not open to the assessee to claim any such relief. However admissible it may be since it is an accepted dictum that re-opening of an assessment is always done to benefit the Revenue and not to benefit the assessee. In view of this, the learned Commissioner of Income-tax (Appeals) failed to entertain the assessee's ground about adjustment of departmental recoveries against gross contract bills. According to the Commissioner of Income-tax (Appeals) if the gross contract bills are adjusted with the departmental recoveries, the re-opening w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t may be deducted from the amount claimed. Again it is contended that the Commissioner (Appeals) erred in recording in his impugned orders that re-opening of assessment is always done to the benefit of the Revenue and not to the benefit of the assessee. The re-opened assessment is nullified by virtue of the Commissioner (Appeals) order dated 27-1-1989 and, therefore, the present assessment, namely, dated 28-8-1989 should no longer be taken as a re-assessment. Next it is contended that commercial profits on contract work shall be estimated at certain percentage on net bills received, after giving allowance for the recoveries, made by the Department. in view of the Supreme Court's decision in Brij v Bhushan Lal Parduman Kumar v. CIT [1978] 115 ITR 524. With regard to interest on FDRs (Rs. 21,310) it is contended that they should have been treated as part of business profit estimated since these deposits were made for business expediency only and within the purview of the assessee's business activity. So also the depreciation claim of Rs. 34,257 should have been entertained without rejecting the claim outright on the ground that if they are considered the total income would further go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty in exercise of his powers under section 251 which goes to the extent of conferring jurisdiction on the Assessing Officer where he is not lawfully seized of such jurisdiction. [CIT v. N. Veerswamy Chettiar [1963] 49 ITR 13, 22 (Mad.) ; N. Naganatha Iyer v. CIT [1966] 60 ITR 647, 654 (Mad.)] " Therefore, by merely setting aside the re-assessment order dated 27-3-1987 by the learned Commissioner (Appeals) by his appellate order dated 27-1-1989, the consequential assessment passed would not cease to be re-assessment in itself but it would always remain as re-assessment. Therefore, the contention of the assessee that the assessment dated 28-8-1989 cannot be considered to be re-assessment but should always be considered as a fresh assessment cannot be accepted as correct under law. The next ground which was raised by the assessee was that when a re-assessment is made, it opens the whole proceedings and giving an opportunity to the assessee to make fresh claims which were not made at the original assessment proceedings and which were not considered also at the time of assessment proceedings and therefore claims can also be independent. 6. On the other hand, the learned departmental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal below unless there is an appeal preferred by the dealer objecting to an order passed or proceeding recorded. From this it is clear that the subject-matter of appeal before the Tribunal is only that part of the order of the authority below, which is objected to by the dealer. If the dealer had not objected to any part of the order of assessment even in his appeal before the Asstt. Commissioner, it is impossible to say that he has any objection to that part of the order in the subsequent appeal before the Tribunal. The Full Bench itself disagreed with the ratio of A. Thippanna Rayappa and with regard to the said judgment they held the following : " With great respect to the leamed Judges, we do not agree that either the principle that a court of appeal is a court of rehearing or the provision enabling the Tribunal to pass such orders thereon as it thinks fit, would enable the Tribunal to pass orders on appeal regarding that part of the turnover which was not even objected to before the Assistant Commissioner. The court of appeal is no doubt entitled to rehear the case, but its power to rehear is confined only to the subject-matter of the appeal, unless express powers are confe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Court's decision in H. R. Sri Ramulu's case appears to be supporting the assessee in its contention since in that case it was held as follows : " Once an assessment is reopened, the initial order of assessment ceases to be operative. The effect of re-opening the assessment is to vacate or set aside the initial order for assessment and to substitute in its place the order made on re-assessment. The initial order for re-assessment cannot be said to survive, even partially, although the justification for re-assessment arises because of turnover escaping assessment in a limited field or only with respect to a part of the matter covered by the initial assessment order. The result of re-opening the assessment is that a fresh order for re-assessment would have to be made including for those matters in respect of which there is no allegation of the turnover escaping assessment. " However, the learned Departmental Representative contends that this judgment of the Supreme Court is distinguishable inasmuch as the ratio laid down is only in connection with examining the question of limitation for taking up revision. The question before their Lordships of the Supreme Court was whether fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the turnover assessed on 7-2-1963 includes the sales of humidifiers of the value of Rs. 1,26,778.32 and this sum was not properly brought to tax. The Appellate Asstt. Commissioner observed that the assessment order taxing the said sum had been served on 15th December 1963 and if the assessee was aggrieved against that order of assessment, it ought to have preferred an appeal within the period allowed under the law, which it failed to do and that it was not proper to contend that the sales of humidifiers were exempt from tax in the appeal against the re-assessment before him. He, therefore, rejected the assessee's claim on this point. In that case it was the case of Revenue that sum now in dispute had actually been offered for assessment of the original assessment stage and that the taxation of the said amount cannot be disputed in the appeal against the re-assessment proceedings whereas the contention of the assessee in that case was that the original assessment order no longer existed after the re-assessment order was passed and that the assessee could in the appeal against the re-assessment, take any objection to any part of the turnover, so long as, it was included in the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... courts and the assessee would in that case have to start utilising the appellate or other machinery over again. This would involve waste of time and energy of not only the assessee but also of the hierarchy of authorities. This would hardly have been contemplated by the Legislature in enacting section 16. " 7. Justice Balasubrahmanian struck a different note in his judgment. He held that it would be indeed a distortion of statutory provision if the assessing authorities were to pass orders of re-assessment displaying only the amounts comprising the escaped turnover, as if they alone occupied the field of re-assessments. He appeared to have followed the earlier Supreme Court decisions in H. R. Sri Ramulu's case and CST v. H. M. Esufali H. M. Abdudali [1973] 32 STC 77 (V. H. M. Esufali H. M. Abdulali). Seeking to answer to the further question whether an appellate authority sitting in judgment from an order of re-assessment can interfere with the determination of turnover in the first instance, in the original assessment, he held in his judgment as follows : " Equally manifest from the other side of the picture is the anxiety of modern Legislatures to protect the subject against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessed. Even if the assessee's fresh claims during the course of re-assessment enquiry are accepted, still the allowance of the claim should be limited to the extent to which they reduce the income to that originally assessed under section 143(3). " The Full Bench decision of the Andhra Pradesh High Court in Sri Venkata Rama Lingeshwara Rice Mill's case was neither cited nor considered by the Division Bench which had decided the case of State Bank of Hyderabad's case. However, there is a presumption that the High Court duly keeps in mind the latest legal position and the ratio of the decisions rendered till the time judgment is delivered and therefore, the Division Bench which had decided the case as reported in State Bank of Hyderabad's case is deemed to have kept in mind the Full Bench decision of the A. P. High Court in Sri Venkata Rama Lingeshwara Rice Mill's case. Therefore, following the A. P. High Court's Division Bench decision in State Bank of Hyderabad's case, we have to hold that the claim of the assessee that the departmental recoveries of Rs. 9,94,174 from out of the total contractual bill amount of Rs. 39,49,890 was not raised in the original assessment order out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings. " Thus we have already held that the claim with regard to interest on FDRs of Rs. 21,310 should be deemed to have been considered and deemed to have been considered at the time of original assessment since it was added as part of income from other sources and, therefore, since this claim was made and decided at the time of original assessment it cannot once again be made in the re-assessment proceedings especially when the original assessment was accepted and it was not appealed against. 10. Now remains the objection of the Revenue that even if the fresh claims of the assessee with regard to deductibility of departmental recoveries and also with regard to the claim of depreciation and even though were accepted by the Tribunal, still, the allowance of the claims should be limited to the extent to which it reduce the income to that originally assessed income under section 143(3). That means the total income which is liable to be determined under the re-assessment order should not go below the originally assessed income under the original assessment order. The objection of the learned Departmental Representative in this connection should be upheld since we are bound ..... X X X X Extracts X X X X X X X X Extracts X X X X
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