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TMI Blog2010 (3) TMI 798X X X X Extracts X X X X X X X X Extracts X X X X ..... ten off in the books of account, without considering the objects of the company and the provisions of s. 36(2)(i) and the fact that interest income from these loans have been accepted in the earlier year as business income in the hands of the appellant. (III) The learned CIT(A) has erred in sustaining the disallowance of the inter-corporate loan of Rs. 27,00,000 to Asia Constructions which had become unrealizable and written off in the books of account, without considering the objects of the company and the provisions of s. 36(2)(i) and the fact that interest from these loans have been accepted in the earlier years as business income in the hands of the appellant. (IV) The learned CIT(A) has erred in sustaining the disallowance of unrealized interest without considering the fact that not only the unrealized interest amount of Rs. 7,15,781 is outstanding but also the whole interest receipt of Rs. 21,45,046 is unrealizable and accounted in the books of account and subsequently it is written off. Hence the entire unrealizable interest should be allowed. (V) The learned CIT(A) has erred in sustaining the exclusion of 90 per cent of insurance receipts from the profits while computing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee on this issue in para 5.4 as under: "From the above points raised in paras 5.1 to 5.3, it is seen that the validity of the proceedings initiated under s. 147 validity of the notice issued under s. 148 and consequently the validity of the order of the assessment for the asst. yr. 2002-03 dt. 15th March, 2006 have been challenged. From the records of the assessment, I find that the proceedings under s. 147 were initiated only after the return of income for the asst. yr. 2002-03 was processed under s. 143(1). The Hon'ble apex Court in the case of Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 210 CTR (SC) 30 : (2007) 291 ITR 500 (SC) held that an intimation under s. 143(1) is not an assessment and that it does not debar the AO from issuing a notice under s. 148, if the conditions for initiating proceedings under s. 147 are satisfied and material was available for taking up assessment proceedings. The Hon'ble Court noted that 'the acknowledgement is not done by any AO but mostly by ministerial staff. Can it be said to be assessment done by them? The answer is an emphatic 'no'. The intimation under s. 143(1) was deemed to be a notice of demand under s. 156, for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the jurisdiction High Court. He has relied upon the following decisions: (i) Hon'ble Supreme Court in Trustees of H.E.H. The Nizam's Supplemental Family Trust vs. CIT (2000) 159 CTR (SC) 114 : (2000) 242 ITR 381 (SC); (ii) Hon'ble Madras High Court in the case of CIT vs. K.M. Pachayappan (2008) 304 ITR 264 (Mad); (iii) In the decision of the Hon'ble Delhi High Court in the case of KLM Royal Dutch Airlines vs. Asstt. Director of IT (2007) 208 CTR (Del) 33 : (2007) 292 ITR 49 (Del); (iv) In the case of CIT vs. Qatalys Software Technologies Ltd. (2009) 308 ITR 249 (Mad). (c) Hence, when the revised return was filed on 23rd March, 2004, it substitutes the original return and that any proceeding should be made on the basis of the revised return filed and not, on the original return. Hence, in the instant case, there was time to issue notice under s. 143(2) and complete the assessment till 31st March, 2005 however he had not done the same and had proceeded with issuing notice under s. 148 on 9th July, 2004, thus to extend the time-limit for completing the assessment. Hence, following the abovesaid decision, it is submitted that the assessment is invalid in the eyes of law and hen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pening and reversed the decision in the case of CIT vs. K.M. Pachayappan (2008) 304 ITR 264 (Mad). He has further contended that in view of the decision of the Hon'ble Supreme Court in the case of Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd., the power of AO is not fettered for reopening the assessment even if the time for issuing notice under s. 143(2) of the IT Act, 1961 is still available and not expired. He has relied upon the order of lower authorities as well as the following decisions: (1) In the case of Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd.; (2) In the case of CIT vs. K.M. Pachiappan (2009) 311 ITR 31 (Mad). 6. After considering the rival contentions and the materials on record and the decisions cited and relied upon by both the parities, the question arises regarding the validity of the notice issued under s. 148 of the IT Act, 1961 prior to the expiry of the period for issuing notice under s. 143(2) of the IT Act, 1961. This issue is purely legal in nature and there is no dispute regarding the facts relating to this issue. As per the provisions of ss. 147 and 148 of the IT Act, 1961 there is no bar for issuing notice under s. 148 before expiry of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itiation under s. 147(a) (as the provision stood at the relevant time) fulfilment of the two requisite conditions in that regard is essential. At that stage, the final outcome to the proceeding is not relevant. In other words, at the initiation stage, what is required is 'reason to believe', but not the established fact of escapement of income. At the stage of issue of notice, the only question is I whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the AO is within the realm of subjective satisfaction [ITO vs. Selected Dalurband Coal Co. (P) Ltd. (1996) 132 CTR (SC) 162 : (1996) 217 ITR 597 (SC). Raymond Woollen Mills Ltd. vs. ITO & Ors. (1999) 152 CTR (SC) 418 : (1999) 236 ITR 34 (SC)]. The scope and effect of s. 147 as substituted w.e.f. 1st April, 1989, as also ss. 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of s. 147, separate cls. (a) and (b) laid down the circumstances under which income escaping assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision is prior to the decision of the Hon'ble apex Court in the case of Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd., which is dt. 23rd May, 2007 and thus the Hon'ble Delhi High Court had no occasion to consider the said decision of the Hon'ble Supreme Court. 8. Similarly, the decision of Hon'ble jurisdictional High Court in the case of CIT vs. K.M. Pachayappan (2008) 304 ITR 264 (Mad) has been passed without considering the decision of the Hon'ble Supreme Court in the case of Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd. We note that in the subsequent decision of ITO vs. K.M. Pachiappan (2009) 311 ITR 31 (Mad), Hon'ble jurisdictional High Court after considering the decision of the Hon'ble Supreme Court in the case of Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd. has decided the issue in paras 5 to 10 as under: "Sec. 147 authorizes or empowers the AO to assess or reassess any income chargeable to tax, if he has reason to believe that the income for the assessment year has escaped assessment. The powers so vested with the AO have to be exercised subject to the provisions of ss. 148 to 153 of the IT Act. Thus, the condition precedent for proceeding under s. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery of the amount indicated to be payable in the intimation became permissible. And nothing more could be inferred from the deeming provision. The Kerala High Court held that so long as the ingredients of s. 147 are fulfilled, the AO was free to initiate proceedings under s. 147 and failure to taken steps under s. 143(3) would not render the AO powerless to initiate reassessment proceedings even when intimation under s. 143(1) had been issued. The Punjab & Haryana High Court in the case of Punjab Tractors Ltd. vs. Jt. CIT (2002) 173 CTR (P&H) 84 : (2002) 254 ITR 242 (P&H) held that if the AO had reason to believe that any income chargeable to tax had escaped assessment for any assessment year, he could proceed to assess or reassess such income. Thus, the condition precedent for proceeding under s. 147/148 was that the AO should have reason to believe that income had escaped assessment. Nothing more. It was not necessary that assessment should have been finalized under s. 143(3) before it could be reopened. The intimation under s. 143(1) operated as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents of s. 147 are fulfilled, the AO is free to initiate proceedings under s. 147 and failure to take steps under s. 143(3) will not render the AO powerless to initiate reassessment proceedings even when intimation under s. 143(1) had been issued.' For the reasons stated above and in the light of the pronouncement of the Supreme Court and the judgments of the High Courts referred to supra, we are of the considered view that the order of the Tribunal impugned in this appeal has to be set aside and the same is set aside by allowing the appeal." The subsequent decision of the Hon'ble jurisdictional High Court in the case of ITO vs. K.M. Pachayappan (2009) 311 ITR 31 (Mad) has rendered the earlier decision as no more good law on the point. In the case of CIT vs. Qatalys Software Technologies Ltd., the Hon'ble jurisdictional High Court by following the decision in the case of CIT vs. K.M. Pachayappan (2008) 304 ITR 264 (Mad), has held as under: "After hearing the parties, the Tribunal held in favour the assessee on the issue or reopening of the assessment when the time for issuing notice under s. 143(2), was not expired, by following the decision of this Court in the case of CIT vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elp the assessee. 9. When there is diversion of views of the Hon'ble High Court on the same issue, then the decision which laid down the principle of law and based on the latest decision of the Hon'ble Supreme Court shall be followed by the lower authorities. Though, this Tribunal is no authority to distinguish the decision of the Hon'ble High Court but when there are decisions taking different views, then the lower authorities have to follow the latest decision which has laid down the law more elaborately and logically. In this respect, we may take help of the decision of the Full Bench of the Hon'ble Andhra Pradesh High Court in the case of Ushodaya Enterprises Ltd. vs. CST 111 STC 711 (AP). The Hon'ble Andhra Pradesh High Court has observed in para No. 12 as under: "12. We may also notice a Full Bench decision of the Punjab & Haryana High Court in Indo Swiss Time Ltd. vs. Umrao AIR 1981 P&H 213, in which the majority Judges took the view similar to the one expressed by Jagannatha Shetty, J. It was observed: 'When judgments of the superior Court are of co-equal Benches and therefore of matching authority, then their weight inevitably must be considered by the rationale and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital in nature. The AO thus disallowed the claim in respect of Rs. 25 lakhs to Mercantile Credit Corporation Ltd. and Rs. 27 lakhs to M/s Alsa Constructions. On appeal, the CIT(A) has confirmed the order of the AO on this issue by taking similar view. 12. Before us, the learned Authorised Representative has submitted that the assessee offered interest on these advances as income in the earlier years which was accepted. He has further submitted that as per cl. 15 of the memorandum and articles of association the assessee has been authorized to make the advance. Therefore, once the amount has become bad and written off by the assessee, the same is allowable under s. 36(2)(i) of the IT Act, 1961. He has relied upon the order of the Hon'ble Bombay High Court in the case of Director of IT (International Taxation) vs. Oman International Bank SAOG (2009) 223 CTR (Bom) 382: (2009) 21 DTR (Bom) 193 : (2009) 313 ITR 128 (Bom). On the other hand, the learned Departmental Representative has submitted that the regular business of the assessee was manufacturing of yarn and not moneylending activity. Therefore, the investment of surplus funds by advances to the other companies is nothing but cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e referred by the assessee is regarding a bank. Therefore, the decision of the Hon'ble Bombay High Court in the case of Director of IT (International Taxation) vs. Oman International Bank SAOG is not applicable in the facts and circumstances of the present case. Even otherwise, the said decision is on the point of writing off the bad debts in the books of account and in view of the amendments, the assessee is not required to establish that the concerned debt has actually become bad. 14. In view of the above discussion, we are of the considered view that in the facts and circumstances of the present case, the claim of the assessee is not allowable with respect to the unrecoverable advances. Accordingly, the orders of the lower authorities, qua this issue are upheld. Ground No. IV: Regarding disallowance of unrealized interest: 15. While disallowing the advance to two companies, M/s Mercantile Credit Corporation Ltd. and M/s Alsa Constructions the AO allowed the interest return of Rs. 7,15,781 out of Rs. 21,45,047 on the ground that only this amount was shown as due on 31st March, 2001 in the accounts of the assessee. The CIT(A) while confirming the order of the AO on disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Hon'ble jurisdictional High Court in the case of CIT vs. V. Chinnapandi (2006) 201 CTR (Mad) 13 : (2006) 282 ITR 389 (Mad), wherein the jurisdictional High Court has held that while computing the income under the head 'Profits and gains of business or profession', if any receipt by way of brokerage, commission, interest, rent charges or any other receipt of a similar nature is included in such profits, the same has to be reduced by 90 per cent from the profits computed as aforesaid. The deductions to be made are from the amount of profits so computed and not from the amount computed under any other head of income of that assessee. No reference of net interest is mentioned in cl. (baa) of Explanation to s. 80HHC of the IT Act, 1961. Their Lordships have observed that what they have to see is only the nature of receipt as contemplated under the clause. No deduction is permissible. Once the receipt of the interest is known, 90 per cent of the same is to be reduced from the profits without deducting any amount. Ground No. VIII: Regarding interest receipts treating as income from other sources: 19. We have heard the learned Authorised Representative as well as the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the view proposed by learned Brother relating to the ground No. 1 in paras 6 to 10 of his proposed order and therefore, I hereby pass a separate dissenting order, in relation to this issue alone. And in respect of the other grounds/issue I am in agreement with the order proposed by learned Brother. 23. The aforesaid ground is about the validity of the notice issued by the AO under s. 148 of the Act, and it has to be examined in the light of the decisions of the jurisdictional High Court and of the Supreme Court in the following cases: ------------------------------------------------------------------- S.No. Name of the case Date of order ------------------------------------------------------------------- 1. Rajesh Jhaveri Stock Brokers (P) Ltd. 23.05.2007 2. CIT vs. K.M. Pachayappan (2008) 304 ITR 264 (Mad) 04.07.2007 3. ITO vs. K.M. Pachiappan (2009) 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ---------------------------- 25. In the case of Rajesh Jhaveri Stock Brokers (P) Ltd. the return was filed on 30th Oct., 2001, and the time available for issuing notice under s. 143(2) expired on 31st Oct., 2002. The notice under s. 148 was issued on 12th May, 2004, much after the time for issuing notice under s. 143(2) had expired on 31st Oct., 2002. These facts are presented below: Rajesh Jhaveri Stock Brokers (P) Ltd. (Date of judgment: 23rd May, 2007) ------------------------------------------------------------------- S.No. Particulars Date ------------------------------------------------------------------- 1. Return filed (asst. yr. 2001-02) 30.10.2001 2. Processed under s. 143(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 (Mad), the AO's action of initiating proceeding under s. 147 was not upheld by the Madras High Court. 27. In case of K.M. Pachiappan (2009) 311 ITR 31 (Mad), the return for asst. yr. 1994-95 was filed on 28th March, 1996, and the time for issuing notice under s. 143(2) was available upto 31st March, 1997. The notice under s. 148 was issued on 18th June, 1996, when the time for issuing notice under s. 143(2) had not expired. These facts are presented below: K.M. Pachiappan (2009) 311 ITR 31 (Mad) (Date of judgment: 16th Aug., 2007) ------------------------------------------------------------------- S.No. Particulars Date ------------------------------------------------------------------- 1. Return filed (asst. yr. 1994-95) 28.03.1996 2. Processed under s. 143(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder s. 148 05.10.2004 ------------------------------------------------------------------- 28.1 In the case of Qatalys Software Technologies Ltd., the AO's action of initiating proceeding under s. 147 was not upheld, on the ground that the time for issuing notice under s. 143(2) had not expired. 29. It is seen that in the present case the notice under s. 148 was issued before the expiry of the time available for issuing notice under s. 143(2), whereas in the case of Rajesh Jhaveri Stock Brokers (P) Ltd. the notice under s. 148 was issued after the expiry of the time available for issuing notice under s. 143(2). This is the crucial difference in facts, because of which the decision of the Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P) Ltd. has no application to the present case. 29.1 Therefore, the aforesaid issue in the present appeal has to be decided in the light of the decisions of the Madras High Court. 30. In the three cases of K.M. Pachayappan (2008) 304 ITR 264 (Mad), K.M. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; 22nd Dec., 2009 There being a difference between the two Members who originally heard the appeal, the Hon'ble President was pleased to nominate the zonal Vice President as the Third Member by his order dt. 13th Oct., 2009. Accordingly, I proceed to resolve the points of difference referred to the Third Member which are as follows: "1. Whether, on the facts and circumstances of the case, the proceedings initiated by the AO under s. 147 of the Act for asst. yr. 2002-03, vide notice issued under s. 148 on 9th July, 2004, was valid? 2. Whether, on the facts and circumstances of the case, the AO could initiate proceedings under s. 147 of the Act when the time for issuance of notice under s. 143(2) had not expired?" 2. The facts as narrated in the orders of both the Members are not in dispute and hence, they are not repeated here. The short question for consideration is whether proceedings under s. 147 can be initiated or not when the time for issuance of notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking of the assessment order. For this proposition, reliance was placed on the judgment of the Supreme Court in the case of Auto & Metal Engineers vs. Union of India (1997) 7 SCC 734. The learned counsel after referring to several other judgments contended that it is a settled proposition that the proceedings under s. 148 can be initiated when no assessment under s. 143(3) can be made. 4. The contention of the learned Departmental Representative was that the assessee should not have any grievance as to whether the assessment is made under s. 143 or 147 or whether it is rectified under s. 154 or revised under s. 263 of the Act as ultimately the assessee is going to pay the tax at the same rate. Hence, in the present case if the assessment is made under s. 147 instead of s. 143, there is no damage to the assessee. It was contended that when the notice under s. 148 was issued in the present case, no proceedings were pending and hence, the notice was valid. It was also argued that the assessee cannot dictate terms to the Department as to which provision of the Act should be made applicable to him. There could be some overlapping of the provisions but that cannot oust the jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no jurisdictional fact in existence which straightaway empowers the AO to enter jurisdiction. He can assume jurisdiction to reopen a completed assessment only on the basis of his own honest belief. Therefore, though s. 147, in essence, is a machinery section, it also affects the substantive right of the assessee which had accrued to him on completion of original assessment. This is an example of what Chief Justice Venkatachaliah said in the case of CWT vs. Sharvan Kumar Swamp & Sons (1994) 122 CTR (SC) 380 : (1994) 210 ITR 886 (SC) that a substantive right can be found secreted in the interstices of procedure. This is one principle which we shall keep in mind while adjudicating the matter on hand. 7. As mentioned earlier, in s. 147 we are concerned with income escaping assessment. The Law Lexicon by P. Ramanatha Aiyar (Second Edition) gives several shades of meaning for the expression "escape assessment." One of the meanings given is as follows: "At all events, income has not escaped assessment if they are pending at the time of proceedings for the assessment of the assessee's income which have not yet terminated in a final assessment thereof." In simple words, the above mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely,- (a).............. (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the AO that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (c)..............." The Department wants to interpret the expression "no assessment has been made" in the above clause to mean that it also includes situation where assessment under s. 143(3) is still possible but not yet made. If this interpretation is to be accepted, it will set at naught the fundamental principles underlying s. 147 of the Act and which principles have been followed till date. These principles are applicable even to the extended meaning given to the term "escaped assessment" in the amended provision. The above clause is intended to cover the following two situations: (i) where a return is filed and non-action is taken either under s. 143(1) or under s. 143(3) and the time-limit for issuing notice under s. 143(2) has expired; (ii) where a return is filed and is processed under s. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notice under s. 148 was issued much after the time for issuing notice under s. 143(2) had expired. In other words, action under s. 147 was initiated only on the termination of the proceedings under s. 143(3) of the Act. Therefore, the said action was upheld by the Supreme Court which is in consonance with the earlier judgments of the same Court referred to in para 7 above. The observation in placitum 18 of the Supreme Court judgment has to be understood in the right perspective. It is mentioned that failure to take steps under s. 143(3) will not render the AO powerless to initiate reassessment proceedings even when intimation under s. 143(1) had been issued. The failure of the AO which the Court is talking about will be deemed to have occurred only when the hands of the AO are tied down by law and he is unable to initiate the proceedings under s. 143(3) of the Act. Till the time-limit to issue notice under s. 143(2) is available, it cannot be said that the AO has failed to take steps under s. 143(3) of the Act. The question of failure arises only when by operation of law he cannot take any steps. Further, this observation of the Court is in connection with the intimation under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollows: "The Hon'ble Supreme Court has emphatically made it clear that the power of the AO is not fettered for initiating the proceedings under s. 147 by issuing notice under s. 148, even prior to the expiry of the period for issuing notice, the under s. 143(2)" (sic). The judgment of the Supreme Court referred to in the above observation is that in the case of Rajesh Jhaveri. I have read the said judgment more than once. Unfortunately, I have not found anywhere in the judgment the above observation made by the Court either directly or indirectly. Nowhere in the judgment is there any reference about the time-limit of notice to be issued under s. 143(2) of the Act. 12. Coming to the three decisions of the jurisdictional High Court, there is indeed a divergence of opinion in the two judgments viz., one in the case of ITO vs. K.M. Pachiappan (2009) 311 ITR 31 (Mad) and Qatalys Software in which the decision in the case of K.M. Pachayappan (2008) 304 ITR 264 (Mad) has been followed. I am of the view that in such a situation, the decision which appeals to one's conscious more should be followed. The decision in the case of Qatalys Software is in consonance with all the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pts from the profits while computing deduction under s. 80HHC. (VI) The learned CIT(A) has erred in sustaining the exclusion of 90 per cent of miscellaneous income (scrap sales, etc.) from the profits while computing deduction under s. 80HHC. (VII) The learned CIT(A) has erred in sustaining the exclusion of 90 per cent of interest income from the profits while computing the deduction under s. 80HHC, without first netting off the interest expenditure against the interest income. (VIII) The learned CIT(A) in his order has erred in not considering the following ground raised before him: "The learned AO has erred in assessing the interest receipts amounting to Rs. 59,27,318 under the head 'Income from other sources' without considering the facts and circumstances of the receipts." (IX) The learned CIT(A) has erred in sustaining the disallowance of the claim under s. 80-IA." 3. There was a difference of opinion between the JM and the learned AM with respect to ground No. 1 on the issue of validity of initiation of proceedings under s. 147 and notice issued under s. 148 on 9th July, 2004 when the time for issuance of notice under s. 143(2) had not expired. The JM has held that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of proceedings under s. 147 are satisfied. In this connection, the scheme of the Act has to be appreciated. Chapter XIV of the Act deals with the procedure for assessment. Secs. 139 to 140A deal with the filing of return and matters connected with the return. Secs. 142 to 145A deal with assessment procedures. It is only after s. 145A the subject of reopening of assessment follows. This is one indication that an assessment can be reopened only on the termination of the procedure prescribed in the preceding provisions viz., from ss. 142 to 145A. Further, s. 147 uses the expression 'assess or reassess'. The word 'reassess' is used to indicate the termination of proceedings as a result of an assessment made under s. 143(3) of the Act. The word 'assess' is used to cover those situations where the return has or has not been processed under s. 143(1) but the time-limit to issue notice under s. 142(1) has expired. When the legislature has logically arranged the relevant provisions, there is no need to put a specific bar in. s. 147/148 to the effect that the AO cannot initiate proceedings under s. 147 when the time available for issuing notice under s. 143(2) has not expired. In my vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 147 and notice under s. 148 stands allowed in favour of the assessee. 8. Now, this appeal is placed before us for the purpose of passing consequential order as per the majority view. The order of the learned Third Member appears to us as if it had been passed by an appellate authority sitting over the orders of the Members of the regular Bench of the Tribunal. This has necessitated and persuaded us to discuss the power, authority and jurisdiction of the learned Third Member under s. 255(4) of the IT Act. 9. Secs. 255(4) confers jurisdiction upon the Third Member in case of difference of opinion between two Members constituting the Bench that originally heard the appeal. Sub-s. (4) of s. 255 of the IT Act reads as under: "255(4) If the Members of a Bench differ in opinion on any point, the point shall be decided according to the opinion of the majority, if there is a majority, but if the Members are equally divided, they shall state the point or points on which they differ, and the case shall be referred by the President of the Tribunal for hearing on such point or points by one or more of the other Members of the Tribunal, and such point or points shall be decided according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y with an appellate or revisional authority, if there is any. The power of the Third Member to whom the points of difference have been referred cannot act as if it were an appellate authority over the two Members of the Tribunal and direct them to rehear and dispose of the matter afresh. No doubt, the Third Member, in this case happened to be the Vice President. But that will not clothe him with the power to give directions or remit the matters while functioning under s. 255(4) of the Act. The learned Advocate General appearing for the assessee would say that s. 255(4) of the Act should be read in conjunction with s. 254(1) of the Act which deals with the powers of the Tribunal. According to him, the Third Member to whom the points of difference have been referred, should be taken to have all the powers of the Tribunal under s. 254(1) and as such the Tribunal can pass such orders as it thinks fit. Therefore, the Third Member has got the power to pass any order as he thinks fit. The submission of the learned Advocate General is in direct conflict with the language and the object behind s. 255(4) of the Act. When s. 255(4) says that the Third Member shall decide the points of differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A(7) of the Act, corresponding to s. 255(4) of the new Act wherein it was held that the Third Member can decide only the point that had been referred to him and he cannot formulate the new points himself and reads as follows: The Third Member could, therefore, decide only the point that had been referred to him and he could not formulate a new point for himself on which he could base his decision. It appears to us to be further clear from a reading of the sub-section quoted above that, after the decision of the point or points referred to him by the Third Member, the case should go back to the original Tribunal because so far as we can see the Third Member has not been given any right to decide the appeal. According to s. 5A(6) of the IT Act, the appeal must be decided by the Tribunal which must consist of a Bench of not less than two Members. As we have already said, the point referred to the Third Member was whether there could be a presumption legally drawn from the materials on the record that the bus belonged to the 'appellant', and on that point the Third Member having agreed with Shri Kalbe Abbas that no such presumption could be legally drawn, the majority view was in favo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the Members constituting the Bench. Since the Third Member is not sitting on the orders of the differing Members of the Bench as a superior Court in appeal, he has no jurisdiction to find fault or criticize the orders of the differing Members. The point of difference has to be decided on positive reasoning and assertion or by supporting the reasoning of either of the dissenting Members but should not be on the basis of finding fault in the orders of the differing Members. The resolution of difference of opinion by the Third Member shall be based on fair and positive assertion and appreciation of facts and law and shall not be guided by any personal likes and dislikes. The judicial order shall not exhibit expressly or impliedly any biasness including extra-judicial biasness or partiality in the form of finding faults and dissection of the order by selected sentences. The Third Member acting as an umpire to resolve the differences of opinion of the fellow Members does not enjoy any more power, authority or jurisdiction than the differing Member; rather, the jurisdiction of the Third Member is limited to the point of view already taken. Therefore, the jurisdiction of the Third Memb ..... 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