TMI Blog2011 (9) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(2), the Assessing Officer has no authority to make income escaping assessment under Section 147 of the Act irrespective of whether the conditions of Section 147 are satisfied or not. However, as already stated, considering the consistent view taken by the Madras and Delhi High Courts that an income escaping assessment under Section 147 cannot be completed within the time available for issuing notice under Section 143(2) of the Act and for completion of assessment under Section 143(3) and since these decisions remain unchallenged by the department, we dismiss the departmental appeal for the year 2003-2004 i.e. ITA No.254/2010. - IT APPEAL NOS. 243, 254,258 & 263 OF 2010 - - - Dated:- 2-9-2011 - C.N. RAMACHANDRAN NAIR, K. SURENDRA MOHAN, JJ. P.K.R. Menon for the Appellant. O. Sarangan and P. Balakrishnan for the Respondent. JUDGMENT C.N. Ramachandran Nair, J. These are appeals filed by the Revenue challenging the orders of the Income Tax Appellate Tribunal declaring the re-assessments completed on the respondent-assessee under Section 147 of the Income Tax Act (hereinafter called "the Act") for the assessment years 1999-2000, 2000-2001, 2002-2003 and 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiated for the assessment years 1999-2000, 2000-2001 and 2002-2003 were within the time provided for issuing notice under Section 143(2) of the Act for completion of regular assessment under Section 143(3) was factually wrong and the time was in fact over for regular assessment, Senior counsel for the assessee fairly conceded that the Tribunal committed a factual error in this regard because time for issuing notice under Section 143(2) was over for all the three years and so much so, the assumption of the Tribunal that regular assessments under Section 143(3) could have been completed for those years based on which Section 147 orders were cancelled is wrong. It is clearly stated in the decision of the Supreme Court in Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra) relied on by the Revenue that absence of a regular assessment under Section 143(3) of the Act does not bar re-assessment under Section 147 of the Act. Applying the actual factual position, i.e. issuance of notice-for re-assessment under Section 147 after expiry of the period provided for issuing notice under Section 143(2) for making regular assessment under Section 143(3), the two decisions of the Madras High Court a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel, when time for regular assessment under Section 143(3) after issuing notice under Section 143(2) is not over, the only course open to the department is to make a regular assessment and not to resort to income escaping assessment under Section 147 of the Act. The specific contention raised by the assessee's counsel based on the above decisions of Madras and Delhi High Court is that even income not disclosed in the return by the assessee could be brought to tax in a regular assessment which to be completed under Section 143(3) by issuing notice under Section 143(2). So far as the two decisions of the Madras High Court are concerned, the finding of the High Court is consistent in as much as according to them, if escaped income comes to the notice of the Assessing Officer after issuing intimation under Section 143(1), the course open to the officer is to issue notice under Section 143(2) and to make regular assessment under Section 143(3) bringing to tax any escaped income in respect of which information is available to the Assessing Officer. So much so, within the time available under the Act for issuing notice under Section 143(2) and for making assessment under Section 143(3) th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctness of the decisions of the Madras and Delhi High Courts by referring to the decision of the Supreme Court above referred, we feel we should express our views on the subject. For this purpose we extract hereunder the relevant provisions with reference to which the mailer has to be considered: "Assessment S. 143(1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:- (a) the total income or loss shall be computed after making the following adjustments, namely:- (i) any arithmetical error in the return; or (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; (b) the tax and interest, if any, shall be computed on the basis of the total income computed under clause (a); (c) the sum payable by, or the amount of refund due to, the assessee shall be determined after adjustment of the tax and interest, if any, computed under clause (b) by any tax deducted at source, any tax collected at source, any advance tax paid, any relief allowable under an agreement under section 90 or section 90A, or any rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year concerned (hereinafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: .." In our view, the sequence in which assessment has to be made by the Assessing Officer is very clear from Sections 143(1) to 147 of the Act. Sub-section (1) of Section 143 only authorises limited adjustments of the income returned permitting the Assessing Officer to make corrections of essentially mistakes in the return which do not call for any enquiry or notice to the assessee. In other words, the Assessing Officer can make adjustments in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs for assessment under Section 147 and notice has to be issued under Section 148 and if assessee calls for justification for initiation of proceedings, the Assessing Officer is bound to communicate reasons for initiating the income escaping assessment for any year against the assessee. Therefore, an income escaping assessment need not be based on return filed or the materials available therein or in the statement of accounts or documents attached thereto, but can be based on materials independently collected by the Assessing Officer and available with him. In our view, Section 147 is a distinct and separate power conferred on the Assessing Officer to initiate action for assessment or re-assessment and the only condition provided in the statute is that the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. This, however, does not mean that in order to make an assessment or re-assessment, there should be already an assessment or even a return filed by the assessee. In our view, Section 147 cannot be related to an intimation under Section 143(1) or a regular assessment under Section 143(3), though in a case where assessee has filed return e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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