TMI Blog2021 (10) TMI 673X X X X Extracts X X X X X X X X Extracts X X X X ..... er powers u/s 263 of the Act only in respect of the original assessment order passed under section 143(3). As the original assessment order having been passed on 06-02-2014, the impugned order passed under section 263 of the Act is barred by limitation in view of section 263(2) of the Act. At this stage, we consider it our duty to deal with the submissions of learned departmental representative that the assessee did not represent its case before learned PCIT and did not raise the issue of limitation. On perusal of records, it is seen that learned PCIT issued the show cause notice under section 263 of the Act on 08-03- 2021 and passed the impugned order on 19-03-2021 with undue haste. In fact, the assessee has raised specific grounds before us, being grounds 8 and 9, to the effect that neither hearing notice was issued to the assessee nor any opportunity of being heard was provided. - Decided in favour of assessee. - I.T.A. No. 640/Mum/2021 - - - Dated:- 12-10-2021 - SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI RAJESH KUMAR (ACCOUNTANT MEMBER) Appellant by : S/Shri Salil Kapoor, Sumit Lalchandani Smt Ananya Kapoor, AR Respondent by : Smt. Sunita Billa, [CIT, (DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee preferred appeal before learned first appellate authority. However, presently we are not concerned with that. 4. In exercise of powers conferred under section 263 of the Act, learned PCIT called for the assessment records of the assessee for the impugned assessment year. After examining the record, 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 the revenue as the assessing officer while completing the assessment has not enquired into and examined the following issues:- (1) Non deduction of tax on payments made to contractors as well as professional fees aggregating to ₹ 2,56,529/-; (2) Cash deposit of ₹ 31,95,28,429/- made in savings bank account maintained at Bank of India, Mahalaxmi Branch, Mumbai. 5. Accordingly, he issued a notice under section 263 of the Act requiring the assessee to show cause as to why the assessment order should not be held as erroneous and prejudicial to the interest of revenue. In response to the said notice, assessee filed its objection vehemently opposing the initiation of proceedings under section 263 of the Act. Howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Engg. Construction Co. Ltd., [201 1] 330 ITR 568 (Mad.) 8. L.G.Electronics India (P.) Ltd. Vs. PCIT, [2016] 388 ITR 135 (All.) 9. Jindal Steel Power Ltd. Vs. PCIT, ITAT-New Delhi, dated 14.05.2020 10. Malabar Industrial Co. Ltd. Vs. CIT, [2000] 243 ITR 83 (SC) 11. CIT Vs. Gabriel India Ltd., [1993] 71 Taxmann 585 (Bom.) 12. PCIT Vs. Delhi Airport Metro Express Pvt. Ltd., DHC-dated 05.09.20 17 13. PCIT Vs. Medicare Ltd., DHC-dated 14.09.2017 14. ITO Vs. D.G.Housing Projects Ltd., [2012] 343 ITR 329 (Del.) 15. DIT Vs. Jyoti Foundation., [2013] 357 ITR 388 (Del.) 16. Shri Narayan Tatu Rane Vs. ITO, ITAT-New Delhi-dated 06.05.2016. Brahma Center Development P. Ltd. Vs. PCIT, ITAT-New Delhidated 18.12.2019. 7. The learned departmental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings 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, notwithstanding that such issue does not form part of reasons recorded for reopening of assessment. Thus, on a holistic reading of section 147 of the Act it becomes very much clear that along with escaped income for which the assessment was reopened, the assessing officer can assess other escaped income which subsequently comes to his notice in course of re-assessment proceedings. In the facts of the present case, undisputedly, the issues raised by learned PCIT neither were the subject matter of reopening as per reasons recorded, nor did such matter come to the notice of the assessing officer in course of re-assessment proceedings. 10. The reopening of assessment as contemplated under section 147 of the Act is for the specific purpose of assessing the escaped income. Therefore, in a reassessment proceeding, the assessing officer can only assess that income which has escape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment by reason of the omission or failure on the part of the assessee either to make a return under Section 139 for the relevant assessment year or to disclose fully and truly material facts necessary for the assessment for that year. Both the conditions must exist before an ITO can proceed to exercise jurisdiction under Section 147(a) of the Act. Under Section 147(b) the Incometax Officer also has the jurisdiction to initiate proceedings for reassessment where he has reason to believe, on the basis of information in his possession, that 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. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs would start afresh but the same would not mean that even when the subject matter of reassessment is distinct and different, the entire proceeding of assessment would be deemed to have been reopened. 11. In Sun Engineering Works P. Ltd (supra) also, V. Jaganmohan Rao (supra) was noticed stating: The principle laid down by this Court in Jaganmohan Rao's case, therefore, is only to the extent that once an assessment is validly reopened by issuance of a notice under Section 22(2) of the 1922 Act (corresponding to Section 148 of the Act) the previous under assessment is set aside and the ITO has the 13 ITA 1307/Mum/2020 jurisdiction and duty to levy tax on the entire income that had escaped assessment during the previous year The 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessed and does not extend to revising, reopening or reconsidering the whole assessment or permitting the assessee to reagitate questions which had been decided in the original assessment proceedings. It is only the under- assessment which is set aside and not the entire assessment when reassessment proceedings are initiated. The Income Tax Officer cannot make an order of reassessment inconsistent with the original order of assessment in respect of matters which are not the subject-matter of proceedings under Section 147 12. We 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee who has failed to file an appeal against the original order of assessment cannot utilise the reassessment proceedings as an occasion for seeking revision or review of what had been assessed earlier. He may only question the extent of the reassessment in so far as the escaped assessment is concerned. The Revenue is similarly bound The same principle was reiterated by a Division Bench of the Calcutta High Court in Commissioner of Income-Tax v. Kanubhai Engineers (P.) Ltd. [241 ITR 665]. 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 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 ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment is to be taken into consideration. In that case, the assessee filed its return for assessment years 1994-95, 1995-96 and 1996-97 and the assessments were completed on 27 February 1997, 12 May 1997 and 30 March 1998. In the orders of assessment, the return of the assessee under the head of Lease Equalisation Fund were accepted. Proceedings for reassessment were initiated by the Assessing Officer and orders of reassessment were passed in respect of the following items namely (i) expenses claimed for share issue; (ii) bad 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the Section. Explanation 3 which has been inserted by the Finance Act (No.2) of 2009 with retrospective effect from 1 April, 1989 provides that for the purpose of assessment or reassessment under the Section, the Assessing Officer may assess or reassess the income in respect of any issue which has escaped assessment and such issue comes to his notice subsequently, in the course of the proceedings under the Section, notwithstanding 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 18 ITA 1307/Mum/2020 recorded in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The submission of the Revenue is that by not passing an order of reassessment in respect of other independent issues, the order of the Assessing Officer can be construed to be erroneous and to be prejudicial to the interest of the Revenue within the meaning of Section 263. The submission cannot be accepted in the facts of the present case. The substantive part of Section 147 as well as Explanation 3 enables the Assessing Officer to assess or reassess income chargeable to tax which he has reason to believe had escaped assessment and other income which has escaped assessment and which comes to his notice subsequently in the course of the 19 ITA 1307/Mum/2020 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 263 of the Act is barred by limitation in view of section 263(2) of the Act. At this stage, we consider it our duty to deal with the submissions of learned departmental representative that the assessee did not represent its case before learned PCIT and did not raise the issue of limitation. On perusal of records, it is seen that learned PCIT issued the show cause notice under section 263 of the Act on 08-03- 2021 and passed the impugned order on 19-03-2021 with undue haste. In fact, the assessee has raised specific grounds before us, being grounds 8 and 9, to the effect that neither hearing notice was issued to the assessee nor any opportunity of being heard was provided. Thus, we do not find merit in the submissions of learned departmental representative. 13. Since we have held that the impugned order passed under section 263 of the Act is barred by limitation, the consequence would be, it has to be declared as invalid and the assessment order has to be restored. Accordingly, we do so. 14. In view of our decision above, various other grounds raised by the assessee having become academic, are not adjudicated. 15. In the result, appeal is allowed, as indicated above. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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