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TMI Blog2006 (9) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... declaring a total income of Rs. 2,37,56,900. A revised return was filed on January 5, 2001, with a revised total income of Rs. 1,91,32,250 along with the audit report under section 44AB. The return was processed and accepted by the assessing authority under section 143(1) of the Act on January 31, 2002. Return of income was not taken up for scrutiny under section 143(3) of the Act. The date for completing the regular assessment under section 143(3) was, how ever, expired on March 31, 2003. 3. The petitioner was later served with a notice exhibit P3 dated March 28, 2005, under section 148 of the Act by the first respondent informing that he has reason to believe that income chargeable to tax for the assessment year 2000-01 has escaped assessment within the meaning of section 147 of the Act. The petitioner was, therefore, informed by the first respondent that he has proposed to reassess the income for the said assessment year and was, therefore, directed to submit a return in the prescribed form within thirty days from the date of the said notice. In response to the notice the petitioner filed its return the income as shown in the original return. The petitioner also sent a letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nate officers to drop the proceedings initiated under section 148 of the Income- tax Act and also the proceedings initiated, vide exhibits P7 and P8. The petitioner has also stated that the notices exhibits P7 and P8 issued under sections 143(2) and 142(1) are illegal and contrary to the guidelines issued by this court in Tolins Rubbers v. Asst. CIT [2004] 2 ITR 280. Reference was also made to the decision of the Gujarat High Court in Garden Finance Ltd. v. Asst. CIT [2004] 268 ITR 48. 6. The petitioner was then served with exhibit P 12 order dated November 18, 2005, stating that the assessing authority has corn with the guidelines prescribed in GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19 (SC) before issuing notices under sections 143(2) and 42(1) of the Act and, therefore, it is not open to the assessee to question he legality of section 147 proceedings before the Assessing Officer, that is, after the issuance of the statutory notices under sections 143(2) and 142(1); Various other objections raised by the petitioner were, therefore, rejected stating that the reason for reopening the assessment stated in exhibit P3 notice issued under section 148 is legal. The petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing authority after having chosen not to complete the regular assessment under section 143(3) cannot be permitted to make a further enquiry which would amount to virtually reopening of earlier assessment. Counsel submitted that no cogent reason have been stated for reopening the assessment, nor furnished any details in the notices under section 143(2). The assessing authority, according to counsel, cannot make a roving enquiry on the basis of notice issued under sections 143(2) and 142 without disclosing any reasons. Counsel submitted that by issuing a notice under sections 142 and 143(2) as well as section 148(1) the assessing authority cannot call for any details which are totally unconnected with the grounds shown for reopening the assessment under section 147. Counsel submitted that the details called for under sections 143(2) and 142 are totally unconnected with the grounds disclosed to the assessee under section 148 of the Act. Counsel placed considerable reliance on the decision of the apex court in GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19. Reliance was also placed on the decision of the apex court in CIT v. Sun Engineering Works P. Ltd. [1992] 198 ITR 297. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vexatious proceedings and is not a mantle of protection against the taxation of income found to have escaped assessment. Counsel submitted that in determining the question of escaped assessment the Assessing Officer has to satisfy that there were enough materials on the basis of which authority can reopen the case and the correctness or otherwise of the same has to be considered by the court. Counsel also placed reliance on the decisions in ITO v. Selected Dalurband Coal Co. P. Ltd. [1996] 217 ITR 597 (SC), and Praful Chunilal Patel v. M. J. Makwana, Asst. CIT [1999] 236 ITR 832 (Guj). Counsel submitted that exhibit P 12 is a preliminary order and, therefore, remedy open to the petitioner is not to invoke the extraordinary jurisdiction of this court under article 226 of the Constitution of India since the petitioner has got an alternate remedy under the Act. Counsel submitted, in any view of the matter, since the assessment order has been passed the petitioner has got a remedy of appeal before the authorities and this writ petition is not the proper remedy. Counsel also submitted that the provision in section 147 is a machinery provision. It is trite law that the provisions in a t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng under section 147 of the Act. 11. Section 148 deals with issue of notice where income has escaped assessment. It states that before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed. Sub-section (2) of section 148 states that the Assessing Officer shall before doing so record his reasons for issuing such notice. Recording of reasons before issuing a notice is a mandatory requirement. The Assessing Officer is also empowered under section 147 to assess 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 section 147. The Assessing Officer gets jurisdiction under section 148 to assess or reassess the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to consider an identical issue in Vipan Khanna v. CIT [2002] 255 ITR 220. That was a case where proceedings under section 147 were initiated. The question arose as to whether the Assessing Officer was justified in launching an inquiry into the issues which were not connected with the issue of depreciation. The court held that the assessee can claim credit in respect of items finally concluded in the original assessment and the letter dated July 30, 1998, issued by the Assessing Officer in so far as it relates to matters unconnected with the issue of depreciation and also the directions issued by the Deputy Commissioner under section 144A cannot be sustained. We are in agreement with the reasoning given in Vipan Khanna v. CIT [2002] 255 ITR 220. 14. The next question to be considered is whether the Assessing Officer by issuing exhibit P7 notice under section 143(2) of the Income-tax Act as well as exhibit P8 notice under section 142 of the Income-tax Act has embarked upon a roving enquiry on issues which are unconnected with the issue which forms the basis of proceedings initiated under section 147 of the Act, vide exhibits P5 and P6. It is trite law that general enquiry can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment proceedings wipes out the original assessment and reassessment is not only confined to "escaped assessment" or "underassessment", but to the entire assessment. As rightly opined by the Punjab and Haryana High Court in Vipan Khanna v. CIT [2002] 255 ITR 220, such an approach would be erroneous. We find, vide exhibits P7, P8 and P12, that the Assessing Officer is requiring the petitioner to furnish explanation on issues which are totally unconnected with the is of non-inclusion of excise duty (16 per cent.) in the valuation of closing stock for the assessment years 2000-01, 2001-02 and also for not adding back the bad debts on the basis of which proceedings were initiated under section 148. There is no allegation on the part of the Revenue of any escapement or underassessment of income with regard to issues raised in exhibit P8 either in the reason disclosed in exhibit P6 or the same came to his knowledge in the course of proceeding under section 147 of the Act. 15. The assessing authority has followed the provisions of sub-section (2) of section 148 only in respect of points referred to in exhibit P6 Sub-section (2) of section 148 was not followed in respect of the points ..... X X X X Extracts X X X X X X X X Extracts X X X X
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