TMI Blog2006 (9) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... ion issued under sections 143(2) and 142(1) of the Income Act, 1961, without fail and also for other consequential reliefs. 2. The petitioner is a company owned by the State Government engaged in the business of manufacture of cement and cement paints at Kottayam and is an assessee under the Income-tax Act, 1961, on the files of the second respondent. In respect of the assessment year 2000-01, the petitioner filed its original return on November 28, 2000, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated under section 148 being contrary to the provisions of section 147 since there was no escapement of income. The petitioner has also pointed out that there is no escapement of income on account of the reason that the excise duty (16 per cent.) has not been included in valuation of closing stock. The petitioner also preferred a petition exhibit P11 under section 144A of the Act before the Additional Commissioner of Income-tax requesting to issue appropriate direction to the subordinate 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] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 147 the assessing authority cannot be permitted to make a roving enquiry Counsel submitted that the petitioner's return was accepted under section 143(1) (a) and the assessing authority was entitled to complete the regular assessment under section 143(3) on or before March 31, 2003, and in order to get over the period of limitation, the assessing authority has sought to invoke section 147 to make a detailed enquiry which is reflected in exhibits P7 and P8 notices. Counsel submitted that the assessing 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel submitted that the non-issuance of the notice, under section 143(2) does not in any way affect the power of the Assessing Officer to issue notice under section 148. Counsel submitted that non-existence of the original ground which led the officer to believe that income had escaped is not a bar to reassessment of escaped income and does not vitiate such reassessment. Counsel submitted that the statutory requirement of reasonable belief rooted in information in the possession of the officer is to safeguard the assessee from 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P2 intimation. Consequently, the assessing authority was entitled to complete the regular assessment under section 143(3) on or before March 31, 2003. The petitioner further submits that the assessing authority having chosen not to complete the regular assessment under section 143(3) cannot be permitted to verify all the statements under the guise of assessing escaped income. The petitioner submits that exhibits P7 and P8 requiring him to produce books of account and furnishing information on various points are not warranted in a proceeding 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen a notice under section 148 of the Income-tax Act is issued, the proper course of action for the assessee is to file a return and if he so desires, to seek reasons for issuing notice and the assessing authority is bound to furnish reasons within a reasonable time. So far as this case is concerned the assessee was not served with any notice under section 148 ; nor the Assessing Officer recorded reasons as provided under sub-section (2) of section 148 for the points highlighted in exhibits P7 and P8. 13. The Punjab and Haryana High Court had occasion 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 147 of the Act is confined only to such income which has escaped tax or has been underassessed and does not extend to revising, reopening or reconsidering the whole assessment or permitting the assessee to reagitate the questions which had been decided in the original assessment proceedings. The proceedings under exhibits P7 and P8, in our view, are totally unconnected and have no relation whatsoever the proceeding initiated as per exhibits P5 and P6. In V. Jaganmohan Rao v. CIT/EPT [1970] 75 ITR 373, the apex court has not, laid down the proposition that the reassessment 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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