TMI Blog1993 (5) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... astic India Ltd. The carry-forward of the losses of earlier years was also disallowed, inter alia, on the ground that the provisions of section 79 of the Act are attracted. The said additions and dis-allowances were challenged in appeal before the Commissioner (Appeals). The Commissioner (Appeals) deleted the addition of legal expenses of ₹ 1,500 and also directed the ITO to allow the carry-forward of losses of the previous years. But meanwhile before the disposal of the appeal reassessment proceedings were initiated by issue of notice under section 148, read with section 147(a) of the Act for the said assessment year on the ground that the income chargeable to tax for the said year had escaped assessment within the meaning of section 147(a). In pursuance of said notice, the assessee filed a return disclosing therein the total income at ₹ 40,620. The reassessment was completed under section 143(3), read with section 148 and the taxable income was computed at ₹ 41,392 as against the return income of ₹ 40,620. The revenue was aggrieved by the order of the Commissioner (Appeals) on the appeal from the original assessment. According to the revenue, the origin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulted in a receipt by the assessee of a sum of ₹ 1,09,618 as lease income of the mill. Reassessment under section 34 of the Indian Income-tax Act, 1922 [corresponding to section 147(a) of the 1961 Act] was initiated. The same was impugned as invalid on the ground that at the time the original assessment order was passed, the ITO who had legitimately assessed one- third share of the income which was due to be assessed according to the judgment of the Madras High Court and that there was, therefore, escape only to the extent of two-third share of the income. So, the assessee did not challenge the factum of escapement as a whole but only in part. In that context, the Supreme Court held that once reassessment proceedings were validly initiated with regard to two-third share of the income, the ITO would not be confined only to that portion of the income but would extend to the entire escaped income and set aside the under-assessment previously made. All observations that appear in the said judgment have to be construed not as widely as has been done by the various High Courts. Its implication is limited within this parameter of the facts of the case. It only means that once the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d turnover does not affect the operative force of the original assessment, particularly if it has acquired finality, and the original order retains both its character and identity. It is only is cases of 'under-assessment' based on clauses ( a) to (d) of Explanation 1 to section 147, that the assessment of tax due has to be recomputed on the entire taxable income. The judgment in V. Jaganmohan Rao's case (supra), therefore, cannot be read to imply as laying down that, in the reassessment proceedings validly initiated, the assessee can seek reopening of the whole assessment and claim credit in respect of items finally concluded in the original assessment. The assessee cannot claim recomputation of the income or redoing of an assessment and be allowed a claim which he either failed to make or which was otherwise rejected at the time of original assessment which has since acquired finality. Of course, in the reassessment proceedings, it is open to an assessee to show that the income alleged to have escaped assessment has in truth and in fact not escaped assessment but that the same had been shown under some inappropriate head in the original return, but to read the judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be permitted to be reagitated on the assessment being reopened for bringing to tax certain income which had escaped assessment because the controversy on reassessment is confined to matters which are relevant only in respect of the income which had not been brought to tax during the course of the original assessment. A matter not agitated in the concluded original assessment proceedings also cannot be permitted to be agitated in the reassessment proceedings unless relatable to the item sought to be taxed as 'escaped income'. Indeed, in the reassessment proceedings for bringing to tax items which had escaped assessment, it would be open to an assessee to put forward claims for deduction of any expenditure in respect of that income of the non-taxability of the items at all. Keeping in view the object and purpose of the proceedings under section 147 of the Act which are for the benefit of the revenue and not an assessee, an assessee cannot be permitted to convert the reassessment proceedings as his appeal or revision, in disguise, and seek relief in respect of items earlier rejected or claim relief in respect of items not claimed in the original assessment proceedings, unless ..... X X X X Extracts X X X X X X X X Extracts X X X X
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