TMI Blog2021 (7) TMI 1200X X X X Extracts X X X X X X X X Extracts X X X X ..... to proceeding under section 263 of the Act. If, at all, any order of the subordinate authority which could have been considered as erroneous and prejudicial to the interest of revenue in allowing assessee s claim of deduction under section 80IA of the Act, either due to lack of enquiry or otherwise, is the original assessment order passed under section 143(3) r.w.s. 144C of the Act and not the re-assessment order. Therefore, the period of limitation prescribed under section 263(2) of the Act would run from the original assessment order. Being conscious of the fact that the original assessment order could not be revised under section 263 of the Act due to bar of limitation, as provided under sub section (2) of section 263 of the Act, learned PCIT, as it appears, has proceeded to revise the assessment order passed under section 143(3) r.w.s. 147 of the Act to get over the hurdle of limitation. This, in our view, is impermissible. Thus we hold that the impugned order of learned PCIT revising the order passed under section 143(3) r.w.s. 147 of the Act is unsustainable. Accordingly, we quash it. - Decided in favour of assessee. - I.T.A. No.1307/Mum/2020 - - - Dated:- 29-7-2021 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er examining the records, he was of the view that the assessment order passed under section 143(3) r.w.s. 147 of the Act is erroneous and prejudicial to the interest of revenue, as, the assessing officer had not examined and disallowed the excess deduction claimed by the assessee under section 80IA of the Act. According to learned PCIT, while completing the original assessment, deduction under section 80IA of the Act was allowed in respect of units and not undertaking. He observed, form 10CCB furnished by the assessee for claiming deduction under section 80IA of the Act does not reveal whether the assessee has maintained separate profit loss account and balance-sheet for individual units. According to learned PCIT, while completing the assessment under section 143(3) r.w.s. 147 of the Act, the assessing officer neither enquired into nor examined the availability of deduction under section 80IA of the Act in respect of the units, as per form 10CCB. After issuing a show cause notice to the assessee and considering assessee s submissions, learned PCIT, ultimately, held that the assessment order passed under section 143(3) r.w.s. 147 of the Act is erroneous and prejudicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue relating to deduction claimed under section 80IA of the Act. He submitted, if at all, learned PCIT could have exercised powers under section 263 of the Act in respect of the original assessment order, as, the issue relating to claim of deduction under section 80IA of the Act is a subject matter of that proceeding. However, he submitted, the period of limitation for revising the original assessment order has already expired. In support of such contention, he relied upon the following decisions:- 1. CIT vs Alagendran Finance Ltd 293 ITR 1 (SC) 2. soka Buildcon Ltd vs ACIT 325 ITR 574 (Bom) 3. CIT vs ICICI Bank Ltd 343 ITR 74 (Bom) 4. M/s Janata Industries vs PCIT ITA No.4025 4026/Mum/2017 dt 23- 05-2018 5. Strongly relying upon the observations of learned PCIT, the learned departmental representative submitted, the order passed under section 263 of the Act is not barred by limitation as it is very much clear that learned PCIT has revised the assessment order passed under section 143(3) r.w.s. 147 of the Act. He submitted, the re-assessment order, since, was passed on 11-12-2017 during the financial year 2017-18, the order passed under section 263 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dice caused to the revenue, due to an erroneous order, such order has to be the original assessment order and not the re-assessment order. Further, he submitted, the decisions relied upon by the learned departmental representative are not at all applicable to the issue at hand. 7. We have considered rival submissions in the light of decisions relied upon and perused materials on record. Before we proceed to deal with the substantive issue raised by the assessee, it is necessary to put on record the following dates and events in chronological order: Date Event 01-10-2010 Original return filed by the assessee 30-03-2012 Revised return filed by the assessee 26-03-2014 Draft assessment order passed by the assessing officer under section 143(3) r.w.s. 144C(1) of the Act 24-12-2014 Directions issued by DRP 30-01-2015 Final assessment order passed u/s 143(3) r.w.s. 144C(13) 11-12-2017 Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing the amount of ₹ 68,62,780/-, i.e. the income which has escaped assessment as per the reasons recorded. Neither the reasons recorded for reopening the assessment nor any other material on record demonstrate that the issue relating to the claim of deduction under section 80IA of the Act was ever a subject matter of dispute in the re-assessment proceedings either at the time of initiation of proceedings under section 147 of the Act or in course of the reassessment proceedings. 11. A reading of section 147 of the Act makes it clear that the assessing office, in course of proceedings under the said provision can not only assess / re-assess the escaped income based on which the assessment was reopened, but can also assess any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of proceedings under the aforesaid provision. Explanation 3 to section 147 of the Act further clarifies the substantive provision by saying that the assessing officer may assess or re-assess the income in respect of any issue which has escaped assessment and such issue comes to his notice subsequently in the course of proceedings under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is not in the nature of an enabling provision. Rather, it restricts powers of the assessing officer in assessing or re-assessing escapement of income, as, it excludes such incomes which are subject matter of any appeal, reference or revision. Thus, in our considered view, the third Proviso to section 147 of the Act does not enlarge the scope of section 147 of the Act for enabling the assessing officer to assess any income which is not the subject matter of reopening of assessment as per reasons recorded or which subsequently did not come to the notice of the assessing officer in course of reassessment proceedings. Thus, the attempt of learned PCIT to get over the decision of Hon ble Supreme Court in case of CIT vs Alagendra Finance Ltd (supra) and the decision of Hon ble jurisdictional High Court in soka Buildcon Ltd vs ACIT (supra) by referring to the third proviso to section 147 of the Act must fail. 14. Rather, the third Proviso to section 147 of the Act would be an obstacle before the assessing officer in dealing with the issue of deduction claimed under section 80IA of the Act, as, it is a subject matter of appeal pending before the Tribunal. At this stage, we must d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at income chargeable to tax has been either under- assessed or has been assessed at too low a rate or has been made the subject of excessive relief under the Act or excessive loss or depreciation allowance has been computed. In either case whether the Income-tax Officer invokes his jurisdiction under Clause (a) or Clause (b) or both, the proceedings for bringing to tax an 'escaped assessment' can only commence by issuance of a notice under Section 148 of the Act within the time prescribed under the Act. Thus, under Section 147, the assessing officer has been vested with the power to assess or reassess 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. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 148 of the Act) the previous under assessment is set aside and the ITO has the jurisdiction and duty to levy tax on the entire income that had escaped assessment during the previous yearThe judgment in Jaganmohan Rao's case, 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 judgment in Jaganmohan Rao's case, as if laying down that reassessment wipes out the original assessment and that reassessment is not only confined to escaped assessment or under assessment bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 13. It may be of some interest to notice that a similar contention raised at the instance of an assessee was rejected by a 3-Judge Bench of this Court in Commissioner of Income-Tax v. Shri Arbuda Mills Ltd. [231 ITR 50]. This Court took note of the amendment made in Section 263 of the Act by the Finance Act, 1989 with retrospective effect from June 1, 1988, inserting Explanation (c) to Sub-section (1) of Section 263 of the Act stating: The consequence of the said amendment made with retrospective effect is that the powers under section 263 of the Commissioner shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in an appeal. Accordingly, even in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion 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 being not the subject of the reassessment proceedings, the period of limitation provided for under Sub-section (2) of Section 263 of the Act would begin to run from the date of the order of assessment and not from the order of reassessment. The revisional jurisdiction having, thus, been invoked by the Commissioner of Income Tax beyond the period of limitation, it was wholly without jurisdiction rendering the entire proceeding a nullity. 16. Following the aforesaid decision of the Hon ble Supreme Court, the Hon ble jurisdictional High Court in case of soka Buildcon Ltd vs ACIT (supra), has held, as under:- 7) Section 263 empowers the Commissioner to call for and examine the record of any proceedings under the Act and to pass such orders as the circumstances of the case justify, including an order enhancing, modifying or cancelling the assessment and directing a fresh assessment, if he considers that an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and doubtful debts; and (iii) excess depreciation on gas cylinders and goods containers. Though the return of income in respect of the Lease Equalisation Fund was not the subject matter of the reassessment proceedings, the Commissioner of Income Tax invoked his revisional jurisdiction under Section 263 and by his order came to the conclusion that the assessee had not furnished complete details and the order of the Assessing Officer was prejudicial to the interest of the Revenue. The Tribunal held that the order which was passed under Section 263 on 29 March 2004 was barred by limitation. The Supreme Court held that the Commissioner of Income Tax, while exercising his jurisdiction under Section 263 found that only that part of the order of assessment which related to the lease equalisation fund was prejudicial to the interests of the Revenue. But the proceedings for reassessment had nothing to do with the said head of income. The Supreme Court clearly held that the doctrine of merger was not attracted to a case of that nature. The Supreme Court followed its earlier judgment in C.I.T. V/s. Sun Engineering Co. Pvt. Ltd.2 and held that the Tribunal had found that all the subse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of Section 148. The substantive part of Section 147 empowers the Assessing Officer to assess or reassess the income chargeable to tax which has escaped assessment and any other income which comes to his notice subsequently in the course of proceedings under the Section. The effect of Explanation 3 is to empower the Assessing Officer to assess or reassess the income in respect of any issue which comes to the notice in the course of the proceedings under the section, though the reasons which were recorded in the notice under Section 148(2) did not contain reference to that issue. 10) The submission which has been urged on behalf of the Revenue is that when several issues are dealt with in the original order of assessment and only one or more of them are dealt with in the order of reassessment passed after the assessment has been reopened, the remaining issues must be deemed to have been dealt with in the order of reassessment. Hence, it has been urged that the omission of the Assessing Officer, while making an order of reassessment to deal with those issues under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the section. There is nothing on the record of the present case to indicate that there was any other income which had come to the notice of the Assessing Officer as having escaped assessment in the course of the proceedings under Section 147 and when he passed the order of reassessment. The Commissioner, when he exercised his jurisdiction under Section 263, in the facts of the present case, was under a bar of limitation since limitation would begin to run from the date on which the original order of assessment was passed. We must however clarify that the bar of limitation in this case arises because the revisional jurisdiction under Section 263 is sought to be exercised in respect of issues which did not form the subject matter of the reassessment proceedings under Section 143(3) read with 147. In respect of those issues, limitation would commence with reference to the original order of assessment. If the exercise of the revisional jurisdiction under Section 263 was to be in respect of issues which formed the subject matter of the reassessment, after the original ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case. 19. In any case of the matter, in our considered opinion, the ratio laid down by the Hon ble Supreme Court in case of CIT vs Alagendran Finance Ltd (supra) and the Hon ble jurisdictional High Court in the case of Ashoka Buildcon vs CIT (supra) clinches the issue in favour of the assessee. Further, a reading of the original assessment order would reveal that the issue relating to deduction claimed under section 80IA was a subject matter therein. In fact, the draft assessment order passed by the assessing officer on the issue of deduction claimed under section 80IA of the Act was disputed before learned DRP and after passing of the final assessment order, the issue relating to claim of deduction under section 80IA of the Act is now pending in appeal before the Tribunal. Therefore, any attempt by the assessing officer to deal with such issue in re-assessment proceedings would have amounted to review of the original assessment order, which is impermissible. Thus, in the aforesaid scenario, the assessment order passed under section 143(3) r.w.s. 147 of the Act cannot be considered as erroneous and prejudicial to the interest of revenue to subject it to proceeding under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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