TMI Blog1990 (7) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that, therefore, the assessment orders were erroneous and prejudicial to the interests of the revenue. He set aside the assessment orders with the directions to the ITO to pass fresh orders according to law. 2. Challenging these orders, Shri Dewani, the learned counsel for the assessee conceded that the observations of the Commissioner contained in para 3 of the order are correct and cannot be contested. Since Shri Dewani has conceded that the arguments of the assessee's counsel before the Commissioner which have been recorded at length in para 2 of the Commissioner's order have been rightly rejected by the Commissioner in para 3 of his order, we will not detain ourselves with dealing with these arguments. Shri Dewani, however, argued at some length about the merits of the case. He argued that the compressor machine and Boring machine which were used in the assessee's business qualified for depreciation at 30% because they could rightly be classified as earth-moving machinery. In this connection he drew our attention to the special rates prescribed for depreciation admissible on machinery and plant as per Part I of Appendix I which gives the table of rates at which depreciatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... radesh High Court in Super Drillers' case is clearly applicable to the facts of the case. We would, therefore, reverse the order of the Commissioner and allow the appeals for the assessment years 1981-82 to 1983-84. 5. For the assessment year 1979-80 (ITA No. 488/Nag/86) the issue is slightly different. Here again the Commissioner started proceedings u/s 263 of the Act for the assessment year 1979-80 because he felt that the assessment order passed by the ITO u/s 143(3) of the Act read with 148 on 27-3-1984 was prejudicial to the interests of the revenue because consequent to the passing of such order, the ITO had granted refund to the assessee and according to the Commissioner provisions of section 148 cannot be utilised for the purpose of granting refund to an assessee which the assessee has failed to submit within the prescribed time limit. The circumstances under which the Commissioner resorted to action u/s 263 may briefly be stated. For this year (assessment year 1979-80) the return of income was filed by the assessee on 21-10-1982, that is after the prescribed time limit for filing the return for that year had elapsed. The ITO issued a notice u/s 148 on 1-12-82 and treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment proceedings. Shri Dewani then relied on the decision of the Supreme Court in the case of V. Jaganmohan Rao v. CIT [1970] 75 ITR 373. Here also the Supreme Court held that once valid proceedings are started u/s 34(1)(b) of the Indian Income-tax Act, 1922, the ITO not only had the jurisdiction but it was his duty to levy tax on the entire income that had escaped assessment during that year. Shri Dewani then relied on the decision of the Kerala High Court in CIT v. K. Kesava Reddiar [1989] 178 ITR 457/44 Taxman 146. In this case the Kerala High Court held that the effect of reopening of an assessment is to vacate or set aside the initial order of assessment and substitute in its place the order made in reassessment proceedings. The result of reopening the assessment is that a fresh order of assessment should be made. Finally Shri Dewani relied on a Circular of the Board dated 6-2-1988 bearing Circular No. 503 [(F.No. 203/201/87-IT(A-II)]. In the said circular the Board had authorised the ITO to admit belated refund claims in respect of amounts upto Rs. 10,000 provided certain conditions laid down in that circular are fulfilled. This circular became effective from 10-2-1988. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the type of case which the authors had in mind when they made those observations. What the authors have contemplated is a situation where in a reassessment proceeding u/s 148 the assessee's total income is found to be actually less than the income already assessed which means that there has already been an original assessment and on reassessment the total income is found to be less than what is already assessed. In such circumstances, the authors have said that the assessee would not be entitled to have the assessment revised under this section or in order to get a refund or it is found that actually there is a loss which the assessee could have carried forward, the assessee would not be entitled to claim that the ITO should assess under this section, i.e., section 148 and pass an order u/s 157 notifying the loss. In the present case the assessee is not making any such claim. Further in the present case, there is no original assessment where income has been determined and on reassessment it is found that the income is less than what is originally assessed. In the present case, the refund arises on a proper assessment of total income and proper application of the provisions of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ITO had no jurisdiction to reopen the entire assessment originally made and determine afresh the assessable profits. In our opinion, the facts of this case are clearly distinguishable. In the present case the notice u/s 148 was passed not with the intention of bringing to tax any income which had escaped assessment and which could be brought within the purview of section 147(1)(a). Secondly as decided by the Supreme Court in V. Jaganmohan Rao's case, once an assessment is reopened or once valid proceedings are started u/s 34(1)(b), the ITO not only had the jurisdiction but it was his duty to levy tax on the entire income that had escaped assessment during that year. In the present case what the ITO was doing was to bring to tax the total income of the assessee which was on facts taxable and had to be subjected to the process of assessment u/s 143(3). Such process of assessment was validly started by issue of notice u/s 148 and validly completed by passing an order u/s 143(3) so as to bring to tax the total income of Rs. 30,130. There is nothing invalid or erroneous in such assessment. It so happens that in the present case the tax deducted at source was excessive and the complet ..... X X X X Extracts X X X X X X X X Extracts X X X X
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