TMI Blog2011 (4) TMI 922X X X X Extracts X X X X X X X X Extracts X X X X ..... The record reveal that the AO has failed to make any inquiry on both the issues in the reassessment proceedings despite specific material was available on record to prove prima facie that income escaped assessment on both the issues. AO has thus failed to make any inquiries on both the issues at the reassessment proceedings. He has not issued any notice to the assessee raising query on both the items. The AO has not applied his mind on both the items in reassessment stage and thus, he has failed to make any inquiry on both the items. Thus CIT(A) has noted that in the absence of detailed inquiry on both the items, the matter required fresh consideration by the AO. - against assessee. - 1560 (AHD.) OF 2010 - - - Dated:- 8-4-2011 - BHAVNESH SAINI, A.N. PAHUJA, JJ. Tushar P. Hemani for the Appellant. R.K. Dhanista for the Respondent. ORDER Bhavnesh Saini, Judicial Member. This appeal by the assessee is directed against the order of the learned Commissioner of Income-tax-I, Ahmedabad dated 22-3-2010 for assessment year 2000-01, challenging the order under section 263 of the IT Act on the following grounds: "(1) The learned CIT has grossly erred in law and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss of Rs. 4,07,46,217. The same was processed under section 143(1) of the IT Act on 2-5-2001 accepting the same. Later on the assessment was reopened under section 147 of the IT Act and reassessed at a loss of Rs. 3,87,04,430 under section 143(3) read with section 147 of the IT Act on 28-12-2007. On 12-3-2010, the DCIT, Central Circle-1 (1), Ahmedabad has submitted a proposal under section 263 of the IT Act through his Addl. CIT, Central Range-1, Ahmedabad stating that the assessment order under section 143(3) read with section 147 of the IT Act dated 28-12-2007 was erroneous insofar as it is prejudicial to the interest of revenue for the reasons given as under: "(1) According to the Assessing Officer the balance sheet of the relevant assessment year reveals that the assessee's capital account shows a debit balance of Rs. 4,38,82,105. It was further seen that the assessee was showing loans and deposit of Rs. 23,26,61,071 for which a total interest of Rs. 89,27,765 was debited to the Profit and Loss Account. It is further submitted by the Assessing Officer that since a debit balance of capital account is like an interest-free loan and advance to the assessee who is the proprie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of business. Further, it is submitted that the closing huge debit balance of capital is purely due to business losses during the year. Regarding conversion of investment of shares into stock-in-trade, it is submitted on behalf of the assessee that during the relevant year there are no profits and losses on sale of shares and therefore provisions of section 45(2) read with section section 2(47) of the Act are not relevant for the present assessment year. In view of the explanation put forth above, the written submission dated 19-3-2010 states that the Assessing Officer had taken a judicial view in his assessment orders so far and his assessment order dated 28-12-2007 cannot be treated as erroneous or prejudicial to interests of revenue. According to the learned Counsel for the assessee the time-limit for revision under section 263 has expired because the CIT(A) through his appellate order dated 13-11-2009 has already decided the appeal against order dated 28-12-2007. Lastly, the above mentioned written submission dated 19-3-2000 gives a large number of judicial pronouncements which states that where the Assessing Officer has made relevant inquiries and the assessee has filed replie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsions. In view of the discussion in the immediately preceding paragraph, I am of the considered opinion that prima facie a credible case exists to give credence that the assessment order dated 28-12-2007 was erroneous and prejudicial to the interests of revenue. Further, since detailed enquiries on the abovesaid two points by the Assessing Officer are considered essential, the said assessment order dated 28-12-2007 is set aside to be completed afresh along the guidelines discussed above." 4. The learned Counsel for the assessee reiterated the submissions made before the authorities below and referred to PB-32 which is show-cause notice under section 263 of the IT Act which was issued on the two points/issues mentioned above with regard to disallowance of interest and conversion of investment in shares as stock-in-trade during the relevant financial year. He has submitted that reassessment proceedings were initiated with regard to the issue of deemed dividend under section 2(22)(e) of the IT Act and referred to the reasons recorded under section 147/148 of the IT Act filed at PB-62 to 65 of the paper book. He has submitted that the Assessing Officer has passed the reassessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income. The doctrine of merger did not apply in a case of this nature: the period of limitation commenced from the dates of the original assessments and not from the reassessments since the latter had not had anything to do with the Lease Equalisation Fund. This was not a case where the subject-matter of reassessment and the subject-matter of the assessment were the same. CIT v. Shri Arbuda Mills Ltd. [1998] 231 ITR 50 (SC) relied on. CWT v. A.K. Thanga Pillai [2001] 252 ITR 260 (Mad.) approved. There may not be any doubt or dispute that once an order of assessment is reopened, the previous under-assessment will be held to be set aside and the whole proceedings would start afresh, but that would not mean that even when the subject-matter of reassessment is distinct and different, the entire proceedings would be deemed to have been reopened. Explanation (c) appended to sub-section (1) of section 263 of the Income-tax Act, 1961, which deals with the power of the Commissioner in revision, is clear and unambiguous, as in terms thereof the doctrine of merger applied only in respect of such items which were the subject-matter of appeal and not in respect of those which were not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as stock-in-trade, therefore, provisions of section 45(2) of the IT Act would not apply in the case of the assessee. He has submitted that even otherwise according to the provisions of section 45(2) of the IT Act the capital gain on such transaction would arise on the income of the previous year in which stock-in-trade is sold or otherwise transferred. The learned Counsel for the assessee, therefore, submitted that since two views were possible on the matter in issue and the Assessing Officer accepted the return of the assessee under section 143(1) of the IT Act by applying his mind to the material on record, therefore, the same should not be the subject-matter of revision under section 263 of the IT Act. He has submitted that nothing has prevented the Assessing Officer from applying his mind even at the reassessment stage. The learned Commissioner of Income-tax considered all material on record. No new investment is made in the year. He has relied upon the written submission filed before the learned Commissioner of Income-tax filed at pages 1 to 5 of the paper book and also relied upon the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT [2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s well as prejudicial to the interests of the revenue. He has submitted that the Commissioner of Income-tax has not exercised jurisdiction under section 263 of the IT Act against processing of the return under section 143(1) of the IT Act dated 2-5-2001, therefore, the impugned order is passed within the period of limitation because the Commissioner of Income-tax has considered the order under section 143(3)/147 of the IT Act dated 28-12-2007 as erroneous insofar as prejudicial to the interests of the revenue. In support of his contention he has relied upon the decision in the case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500/161 Taxman 316 (SC). The learned DR further submitted that once proceedings under section 147 of the IT Act have been initiated, all issues have to be considered on merit on which income escaped assessment. He has submitted that the Assessing Officer has not conducted any inquiry on both the issues at the reassessment stage and no notice was issued to the assessee on these issues at the reassessment stage, therefore, no mind was applied by the Assessing Officer at the reassessment stage on both the items. Therefore, the order of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be sent after the expiry of two years from the end of the assessment year in which the income was first assessable." 7.1 The Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra) considering the above provisions held as under: "Under the first proviso to the newly substituted section 143(1), with effect from June 1, 1999, except as provided in the provision itself, the acknowledgement of the return shall be deemed to be an intimation under section 143(1) where (a) either no sum is payable by the assessee, or (b) no refund is due to him. It is significant that the acknowledgement is not done by any Assessing Officer, but mostly by ministerial staff. It cannot therefore be said that an "assessment" is done by them. The intimation under section 143(1)(a) was deemed to be a notice of demand under section 156 for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible. Nothing more can be inferred from the deeming provisions. Therefore, there being no assessment under section 143(1)(a), the question of change of opinion d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Haryana High Court in the case of CIT v. Kartar Singh Co. (P.) Ltd. [2008] 300 ITR 440/169 Taxman 219 held as under: "The omission of the expression "intimation" from section 263 of the Income-tax Act, 1961, establishes the intention of Parliament to limit the power of revision of a Commissioner only to cases where an order has been passed. A perusal of section 263 brings out that the Legislature never intended to clothe the Commissioner with the power of revision in summary cases where intimation and acknowledgement had been sent to the assessee after filing of the return." 7.6 Considering the above provisions of law and the decisions noted above, it is clear that when return of income is processed under section 143(1) of the IT Act, the acknowledgement of the return shall be deemed to be an intimation under section 143(1) and intimation shall be sent to the assessee for any sum payable or any refund due thereof. Therefore, such was not considered as an assessment under section 143(1) of the IT Act by the Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra). The Assessing Officer has no power to make any adjustment. His powers are very lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both the cases relied upon by the learned Counsel for the assessee; the exercise of revisional jurisdiction was in respect of the original order of assessment, was held to be barred by limitation. 8. However, considering the facts of the case in the light of the above discussions it is clear that in the present case the original intimation/assessment order issued under section 143(1) of the IT Act on which the Assessing Officer has not applied his mind at all and return was processed as it is accepting the returned income. The Hon'ble Jurisdictional High Court in the case of Vikrant Crimpers (supra) held that the order under section 143(1) of the IT Act (summary assessment) cannot be revised under section 263 of the IT Act. Therefore, the decisions relied upon by the learned Counsel for the assessee are clearly distinguishable and cannot be applied to the facts of the present case. The decisions of the Hon'ble Bombay High Court and the Hon'ble Madras High Court cited by the learned Counsel for the assessee in the case of Anderson Marine Sons (P.) Ltd. (supra) and in the case of Chidambaram Construction Co. (supra) cannot be given preference as against the decision of the Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of the Hon'ble Madras High Court in the case of K.A. Ramaswamy Chettiar v. CIT [1996] 220 ITR 657/88 Taxman 526. Since the Assessing Officer has not applied his mind on both the issues at the reassessment stage, therefore, there is no question of having taken one view on the matter or taking two different views by the Assessing Officer or by the learned Commissioner of Income-tax. The learned Counsel for the assessee has not pointed out any material to show if the Assessing Officer made any inquiry on both the issues at the reassessment stage. Further, the Assessing Officer in the order under section 143(3) read with section 263 of the IT Act dated 29-12-2010 made additions on both the issues after making inquiries. Therefore, decisions cited by the learned Counsel for the assessee would not apply to this case. Considering the above discussions, we do not find any merit in the appeal of the assessee. The same is liable to be dismissed. The learned Counsel for the assessee in the alternative contention submitted that in case the impugned order is confirmed, the Assessing Officer may be directed to pass an order as per law so that he may not be influenced by the observation of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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