TMI Blog2015 (5) TMI 587X X X X Extracts X X X X X X X X Extracts X X X X ..... e re-assessment under Section 147 is done, the initial order of assessment under Section 143 (3) ceases to be operative. Thus, the result of reopening the assessment under Section 148 is that a fresh order for reassessment would have to be made including for those matters in respect of which there is no allegation of turnover escaping the assessment. Apart from that, in the present case, the notice under Section 154 clearly states that the order under Section 147 of the Act made on 19-03-2010 requires amendment as there is a mistake apparent from the record and the notice also referred to the details of mistake. The difference between the words any order in section 154 and the words the order in section 263 of the Act would also have to be noticed and read to understand the words any order to mean even an order of re-assessment or the amended/rectified order passed by an Income-Tax authority. There cannot be any doubt that the re-assessment order under Section 147 read with Section 148 of the Act is also any order which could be rectified by issuing a notice under Section 154 of the Act. In other words, the words any order in Section 154 (1) (a) of the Act would mean even the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und of jurisdiction or assumption of power not vested in the authority. The petitioners have already filed their objections, which respondent No.1 will have to decide, after following due procedure and taking into consideration the reply filed by the petitioners, by passing a speaking order. The 1st respondent is bound to furnish reasons for deciding the notice and deal with all contentions urged by the petitioners in their reply. In the circumstances, we are not inclined to entertain the second question raised for our consideration, and we keep all contentions of the parties, in respect thereof, open to be considered by the 1st respondent. W.P. dismissed. - WRIT PETITION No.29925 OF 2012 - - - Dated:- 15-4-2015 - SRI DILIP B.BHOSALE AND SRI A.RAMALINGESWARA RAO, JJ. For the Appellant : Ch. Pushyam Kiran For the Respondent : B. Narasimha Sarma ORDER: (per the Honble Sri Justice Dilip B.Bhosale) This writ petition under Article 226 of the Constitution of India impugns a notice issued by the 1st respondent-Assistant Commissioner of Income Tax under Section 154 of the Income Tax Act, 1961 (for short the Act) on 31.08.2012, proposing to rectify the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der dated 19-03-2010. It would be relevant to reproduce the impugned notice dated 31.08.2012, which reads thus: NOTICE UNDER SECTION 154/155 OF THE INCOMETAX ACT, 1961 Office of the Assistant Commissioner of Income Tax Circle-3(1), Visakhapatnam PAN AABCR0435L/2005-06 Date. 31-08-2012. TO M/s.Rashtriya Ispat Nigam Ltd., Visakhapatnam. Sir, The order u/s.143 (3) r.w.s. 147 of the I.T. Act., 1961 for the A.Y. 2005- 06 made on 19-03-2010 in your case requires to be amended as there is a mistake apparent from the record within the meaning of section 154/155 of the income tax Act, 1961. The rectification of the mistake, as per details given below, will have the effect of enhancing the assessment/reducing the refund/increasing your liability and therefore, if you wish to be heard in this connection you are requested to appear in person or by an authorized representative in my office at Visakhapatnam On 17-09-2012 at 11.30 AM. If so however, you intend sending a written reply to this notice and do not wish to be heard in person, you are requested to ensure that your reply reaches me on or before the date mentioned above. Yours faithfully, (Ch.HIMA BIN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference in the re-assessment order dated 19-03-2010 about the income sought to be determined under the regular provisions of the Act. The case of the assessee is that the re-assessment proceedings initiated vide notice dated 20.10.2009 under Section 148 of the Act was only to consider the book-profit that escaped the assessment at the time the original assessment was completed. 4. The question, therefore, falls for our consideration is whether the limitation for issuing notice under Section 154 of the Act, commences from the date of assessment order under Section 143 (3) of the Act or from the order of re-assessment under Section 147 read with Section 148 of the Act? According to the assessee since the dispute relates to allowing unabsorbed depreciation, in the assessment order dated 26.03.2007, under Section 143(3) of the Act, the limitation of four years under Section 154(7) would commence from the date of the assessment order dated 26.03.2007 and not from the date of re-assessment order, under Section 147 read with Section 148 of the Act, dated 19.03.2010. As against this, according to the Revenue, original order dated 26.03.2007 under Section 143 (3) got merged with the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 143 (3) of the Act dated 26-03- 2007 merged with the order of reassessment under Section 147 dated 19-03-2010 and, therefore, the period of limitation would start to run from 31-03-2010, and would expire on 31-03-2013, and since the notice was issued on 31-08-2012, it cannot be stated to be barred by limitation. He also invited our attention to the impugned notice to contend that the notice itself makes it clear that the order under Section 143(3) read with 147 of the Act dated 19-03-2010 requires amendment under Section 154 of the Act. The notice also refers to the details of mistake. He, therefore, submitted that when the notice specifically speaks about reassessment order dated 19-03-2010, the Court, at this stage of the proceedings, cannot proceed on the assumption that it was in respect of the regular assessment dated 26-03-2007. 8. In rejoinder, Sri S.Ravi, the learned Senior Counsel invited our attention to the judgment of the Supreme Court in Commissioner of Income Tax, Chennai Vs. M/s.Alagendran Finance Ltd.,(AIR 2007 SC 3005) and submitted that the Supreme Court has clarified that merger, as observed in Hind Wire Industries Ltd.,(supra), is only on the point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recomputed the loss or the depreciation proceedings under this section, ore recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter 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: .. .. .. Explanation 2._ For the purposes of this section, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee was entitled to 10% depreciation allowance on the factory building and, therefore, it was observed that it had to be granted to him if it was held that the rectification application was made within time. 10.2 In this backdrop, the Supreme Court considered the expression from the date of order sought to be amended in Sub-section (7) of Section 154, as it stood then and observed that it is obvious that the word order has not been qualified in any way and it does not necessarily mean the original order. It can be any order including the amended or rectified order. 10.3 The Supreme Court considered several judgments to which we would make a brief reference in the subsequent paragraphs of this judgment. At this stage, we would like to reproduce the concluding paragraph in Hind Wire Industries Limited (supra) which reads thus: In view of these authorities taking the view that the word any in the expression order sought to be amended would mean even the rectified order, we are satisfied that the High Court was wrong in setting aside the decision of the Tribunal Shri G.Viswanatha Iyer, learned senior counsel cited before us the decisions of the Calcutta, Gujarat, Madra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii) excess depreciation on gas cylinders and goods containers. Although the assessees return in respect of lease equalization was not the subject matter of the reassessment proceedings, the Commissioner of Income Tax purported to invoke his revisional jurisdiction in terms of Section 263 of the Act and by an order dated 29-03-2004 held that the Orders of the Assessing Officer were prejudicial to the interest of Revenue as the lease rentals had not been properly brought to tax. Having so observed, all the three assessments were reopened under Section 263 of the Act and the Assessing Officer was directed to check and assess the lease rentals from Lease Equalization Fund, if any, and to bring it to tax for all the above three years. 11.2 The Assistant Commissioner, accordingly, carried out the reassessment proceedings only in respect of income on equalization reserve holding that the deduction made from the gross lease rent is only a provisional and not an actual expenditure, and therefore, the same was to be disallowed and added to the income returned. The Income Tax Appellate Tribunal found favour with the contention of the assessee that the said purported proceedings under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may at this juncture also take note of the fact that even the Tribunal found that all the subsequent events were in respect of the matters other than the allowance of 'lease equalization fund'. The said finding of fact is binding on us. Doctrine of merger, therefore, in the fact situation obtaining herein cannot be said to have any application whatsoever. It is not a case where the subject matter of reassessment and subject matter of assessment were the same. They were not. (emphasis supplied) 11.5 The Supreme Court, then proceeded to consider the judgment of Madras High Court in Commissioner of Wealth-Tax Vs. A.K.Thanga Pillai (252 ITR 260) and the judgment of the Supreme Court in Commissioner of Income Tax Vs. Shri Abuda Mills Ltd.,( 231 ITR 50) and in concluding paragraph 15 of the judgment (in M/s.Alagendran Finance Ltd.) observed thus:- 15. We, therefore, are clearly of the opinion that keeping in view the facts and circumstances of this case and, in particular, having regard to the fact that the Commissioner of Income Tax exercising its revisional jurisdiction reopened the order of assessment only in relation to lease equalization fund which b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC 1604) the Supreme Court considered the similar expression in Rule 38 of the Mysore Sales Tax Act and while dealing with the point, as raised in the instant writ petition, in paragraph 9 of the judgment observed thus:- The other attack that the rectification order is beyond the point of time provided in Rule 38 of the Mysore Sales Tax Rules is also without substance. What was sought to be rectified was the assessment order rectified as a consequence of this Courts decision in Yaddalams case (AIR 1965 SC 1510). After such rectification the original assessment order was no longer in force and that was not the order sought to be rectified. It is admitted that all the rectification orders would be within time calculated from the original rectification order. Rule 38 itself speaks of any order and there is no doubt that the rectified order is also any order which can be rectified under Rule.38 (emphasis supplied) 14. The decision of the Supreme Court in International Cotton Corporation(supra) was endorsed by the Supreme Court in Deputy Commissioner of Commercial Taxes Vs. H.R.Sri Ramulu(AIR 1977 SC 870) in the following terms:- The reason for that is that once an assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... H.M.Abdulali(AIR 1973 SC 2266) the Supreme Court dealt with reassessment made under Section 19 of the Madhya Pradesh Central Sales Tax Act, 1958 and held that when reassessment is made, the former assessment is completely reopened and in its place fresh assessment is made. While considering the said decision, the Supreme Court dealt with the expression date on which the order was passed, which is similar to the expression, as aforementioned, in Sub-section (7) of Section 154 of the Act and observed that relevant provision did not qualify the word order and hence period of 4 years has to be calculated from the date of rectification order. For taking such view, the Supreme Court referred to its earlier judgment in International Cotton Corporation (supra) in which the Supreme Court had observed that what is true of the assessment must also be true of reassessment because reassessment is nothing but a fresh assessment. When reassessment is made under Section 19 (of the Madhya Pradesh Central Sales Tax Act, 1958), the former assessment is completely reopened and in its place fresh assessment is made. While assessing a dealer, the assessing authority does not merely assess him on the es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eassess the escaped income of an assessee. The use of the expression assess or reassess such income or recompute the loss or depreciation allowance in Section 147 after the conditions for reassessment are satisfied, is only relatable to the preceding expression in Clauses (a) and (b) viz. escaped assessment . The term escaped assessment includes both non-assessment as well as under assessment . Income is said to have escaped assessment within the meaning of this section when it has not been charged in the hands of an assessee in the relevant year of assessment. The expression assess refers to a situation where the assessment of the assessee for a particular year is, for the first time, made by resorting to the provisions of Section 147 because the assessment had not been made in the regular manner under the Act. The expression reassess refers to a situation where an assessment has already been made but the Income-tax Officer has, on the basis of information in his possession, reason to believe that there has been under assessment on account of the existence of any of the grounds contemplated by the provisions of Section 147(b) read with the Explanation (I) thereto. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment order had been rectified and it was sought to make a further rectification of that order, the period of limitation for making such further rectification would commence not from the date of original assessment but from the date of earlier rectification order. The observations made by the Supreme Court in the concluding paragraph are relevant. Paragraph 9 of the judgment reads thus:- 9. We do not find any merit in the submission made on behalf of the Department that the order passed on 18-1-1980 should be understood as an order discharging the notice issued under S. 21 of the Act and not an order of reassessment as such. This is obvious from the language of S. 21 itself. Section 21 authorises the assessing authority to make an order of assessment or reassessment. It says that if the assessing authority has reason to believe that the whole or any part of the turnover of a dealer, for any, assessment year or part thereof, has escaped assessment to tax or has been under assessed or has been assessed to tax at a rate lower than that at which it is assessable under the Act, or any deductions or exemptions have been wrongly allowed in respect thereof, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the position of Law settled by the Supreme Court, the effect of reopening the assessment under section 148 would be to vacate or set aside the initial order for assessment under Section 143(3) and to substitute in its place the order made under Section 147 of the Act. Therefore, the initial order for reassessment would not survive even partially, although the justification for reassessment arises in a limited field or only with respect to a part of matter covered by the initial assessment order. In other words, once a notice under Section 148 of the Act is issued for the purpose of making re-assessment, the earlier proceedings get reopened and where the re-assessment under Section 147 is done, the initial order of assessment under Section 143 (3) ceases to be operative. Thus, the result of reopening the assessment under Section 148 is that a fresh order for reassessment would have to be made including for those matters in respect of which there is no allegation of turnover escaping the assessment. Apart from that, in the present case, the notice under Section 154 clearly states that the order under Section 147 of the Act made on 19-03-2010 requires amendment as there is a mistake ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised a question whether the issues, which are highly debatable could be the subject matter of the proceedings under Section 154 of the Act. He submitted that the jurisdiction under Section 154 of the Act is extremely narrow and restrictive and could be exercised only to rectify any mistake apparent from the record and obvious and patent mistake and not something which could be established by long drawn process and reasoning on points on which there may be conceivably two opinions. On the other hand, the learned counsel for the Revenue submitted that the question as raised by the petitioners cannot be entertained in a writ jurisdiction under Article 226 of the Constitution of India unless the action complained of is without jurisdiction. 23. The notice under Section 154 of the Act was issued on 31-08-2012 by the 1st respondent. The petitioners responded to it by an exhaustive reply submitted by them on 17-09-2012. In the reply, they raised all questions including the questions raised before us. It is apparent from the dates that the reply was submitted by the petitioners within the time stipulated in the notice dated 31-08-2012, and within less than three days therefrom the insta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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