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TMI Blog2022 (6) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the fact that the sole issue for reassessment, as per the reason to believe, was the information gathered during the course of search proceedings in the case of Bhoomi Group of Companies and the survey on the Assessee u/s. 133A, whereas the issue of expenditure claimed by the assessee in the profit and loss account was neither the subject matter of reason to believe nor the reassessment order. Hence, Ld. Principal CIT failed to appreciate that re-assessment order is neither erroneous nor prejudicial to the interest of revenue in order to invoke revisionary jurisdiction u/s. 263 of the Act. 3. That on the facts & circumstances of the case, N.A. the impugned order passed by the Ld. Principal CIT u/s. 263 is time barred as per the ratio laid down by the Hon'ble Apex Court in Alagendram Finance Limited [(2007) 293 ITR 1} in so far as the issue of claim of expenditure in the impugned order is not the subject matter of reason to believe for re-assessment proceeding, as such, the order u/s. 263 is bad-in-law and liable to be quashed. 4. Without prejudice to the above, in the facts N.A. and circumstances of the case and in law, the Ld. Principal CIT has erred in not stating in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 10160 of 2009 dated 23.04.2010 and we also find support of the decision of the Hon'ble ITAT in the case of Royal Western India Turf Club Vs. PCIT (2021) 10 TMI 673 dated 12.10.2021. The relevant finding is hereby reproduced as under:- "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 Rs. 2,56,529/-; (2) Cash deposit of Rs. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0] 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 05.09.2017 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 Delhi dated 18.12.2019. 7. The learned departmental representative submitted, before the revisionary authority the assessee had made no representation in support of its claim. She submitted, the issue of limitation was never raised before the revisionary authority during the proceedings under section 263 of the Act. Further, she submitted, since learned PCIT has set aside the assessment order with a direction to make de novo assessment, no prejudice has been caused to the assessee. 8. We have considered rival submissions in the light of decisions relied upon and perused materials on record. Undisputedly, the original assessment in case of the assessee was completed under section 143(3) of the Act on 06-02-2014. Subsequently, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts 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 reassessment 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 escaped assessment. The income which is subject matter of assessment in the original assessment proceedings or which was in the domain of the assessing officer in course of original assessment proceedings certainly cannot be considered in the re-assessment proceedings. In our view, if at all, any order which can be considered to be erroneous and prejudicial to the interest of revenue for non consideration of the issues raised by learned PCIT, certainly, it has to be the original assessment order passed under section 143(3) of the Act and not the re-assessment order passed under section 143(3) r.w.s. 147 of the Act. Therefore, learned PCIT could have exercised her powers under section 263 of the Act only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssive 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. 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 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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" but to the entire assessment for the year and starts the assessment proceeding de novo giving the right to an assessee to reagitate matters which he had lost during the original ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id 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 respect of the aforesaid three items, the powers of the Commissioner under section 263 shall extend and shall be deemed always to have extended to them because the same had not been considered and decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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." 11. Following the aforesaid decision of the Hon'ble Supreme Court, the Hon'ble jurisdictional High Court in case of Asoka 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 any order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the Revenue. Sub-section (2) of Section 263 stipulates that no order shall be made under sub-section (1) after the expir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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. and held that the Tribunal had found that all the subsequent events were in respect of matters other than the lease equalisation fund. In other words, this was not a case where the subject matter of the assessment and the reassessment was the same. The Supreme Court then held as follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Section 143 (3) read with 147 constitutes an error which can be revised in exercise of the jurisdiction under Section 263. The submission cannot be accepted either as a matter of first principle, based on a plain reading of the provisions of Sections 147 and 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 assessment was reopened, the commencement of limitation would be with reference to the order of reassessment. The present case does not fall in that category. 11) Counsel appearing on behalf of the Revenue relied upon the judgment of the Supreme Court in Income Tax Off ..... X X X X Extracts X X X X X X X X Extracts X X X X
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