TMI Blog1976 (9) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... s of sugar held at its factories on the last day of the relevant previous year. The assessee who had adopted the mercantile system of accounting had made provision in its accounts for payment of such excise duty. The income-tax Officer had disallowed this claim for the assessment year 1960-61, but had allowed these two sums as expenditure for the assessment year 1961-62. In the appeal preferred by the assessee from the order of assessment for the year 1960-61, the Appellate Assistant Commissioner held that these two sums should be allowed as expenditure towards excise duty for the assessment year 1960-61, since it (the assessee), who was following the mercantile system of accounting, had made provision for payment of these two sums towards excise duty in its accounts in the relevant previous year. Consequent on the decision of the Appellate Assistant Commissioner, the Income-tax Officer modified the assessment for the year 1960-61 by allowing the expenditure of Rs. 8,67,995 in that year. Since the very same two amounts had been allowed as expenditure in the assessment for the year 1961-62 also, the Income-tax Officer initiated proceedings under section 147 of the Income-tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of assessment for the year 1960-61 was disposed of under section 31 of the Indian Income-tax Act, 1922 (hereinafter referred to as the "old Act"), and not under the provisions of the Act, Explanation 3 to sub-section (3) of section 153 of the Act could not be invoked to save the time-limit for reassessment. We shall first deal with the contention of Shri Gupta that there was no escapement of income from assessment for the year 1961-62 by reason of the Income-tax Officer wrongly allowing those two sums as expenditure towards excise duty for that year. According to Shri Gupta what section 147 contemplates is some item of income being left out altogether or being under-assessed and not some item of expenditure or some deduction being wrongly allowed in the original assessment order. Explanation 1 to section 147 of the Act reads : "Explanation 1.--For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely : (a) where income chargeable to tax has been under-assessed ; or (b) where such income has been assessed at too low a rate ; or (c) where such income has been made the subject of exce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (a) of Explanation 1 to section 148 of the Act. We are unable to accept the contention of Shri Gupta that there was no escapement of income chargeable to tax for the year 1961-62 which could form the foundation for reassessment for that year. We shall next deal with the contention of Shri Gupta that the reassessment for the year 1961-62 could not be said to be in consequence of or to give effect to any direction or finding of the Appellate Assistant Commissioner. No doubt, in Income-tax Officer v. Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC), the Supreme Court held that in deciding an appeal relating to one assessment year the appellate authority cannot give a direction or a finding that a particular income which was not chargeable to tax in that assessment year, was chargeable to tax in another assessment year. But the effect of this decision of the Supreme Court has been partly nullified by the amendment of section 153 of the Act by adding Explanation 2 to sub-section (3) of that section. The relevant portion of sub-section (3) of section 153, after such amendment, reads : "(3) The provisions of sub-sections (1) and (2) shall not apply to the following classes of asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "Mr. B. Sen, learned counsel for the department, contended that in view of section 150(1) of the 1961 Act it was open to the Income-tax Officer to issue the impugned notices. That section reads : ...... Quite clearly Mr. Sen's contention is unsustainable because the Appellate Assistant Commissioner's order was not passed under the 1961 Act. Therefore, the department cannot take any support from section 150(1) of the Act of 1961." At first sight, the above observations of the Supreme Court seem to support the contention of Shri Gupta, but on a careful reading of the decision of the Supreme Court, it appears to us that those observations must be understood with reference to the facts of that case and have no application to the present case. There, the Income-tax Officer had issued a notice under section 34(1)(b) of the old Act on November 7, 1958 (i.e., before the present Act came into force). But, in the present case, no notice under section 34(1)(b) of the old Act had been issued to the assessee prior to the coming into force of the present Act and a notice was issued to the assessee under section 148 of the Act. Clause (d) of sub-section (2) of section 297 of the Act, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Supreme Court in Seth Gujar Mal's case [1972] 84 ITR 261 (SC) while dealing with a case coming under sub-clause (i) of clause (d) of section 297(2) of the Act, cannot be understood as laying down that even in cases which come under sub-clause (ii) of clause (d) of section 297(2) of the Act, in order to make Explanation 2 to sub-section (3) of section 153 applicable, the order should have been in an appeal under section 150 of the present Act and not under section 30 of the old Act. The view that we have taken receives support from the decision of the Calcutta High Court in Income-tax Officer v. Eastern Coal Co. Ltd. [1975] 101 ITR 477(Cal). There, their Lordships, after referring to the decision of the Supreme Court in Seth Gujar Mal's case [1972] 84 ITR 261 (SC), observed at page 486 : "Therefore, we are of the opinion that the provision of section 150(1) of the Income-tax Act, 1961, would apply in respect of a notice issued under the 1961 Act even though the direction or the finding out of which this notice was issued was passed under the provisions of the Act of 1922." In view of the foregoing discussion, our answer to the question referred to us should be in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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