TMI Blog1976 (4) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... 1959-60 and 1960-61. The assessee is a public company. The assessment for 1959-60 was made on May 27, 1960, determining the total income at Rs. 15,03,585. This included income from the business determined at Rs. 14,43,495. Though there is no specific discussion in the assessment order about the admissibility of wealth-tax as a deduction in arriving at the business income, the figures found in the assessment order itself clearly showed that the income from the business was arrived at after deducting the wealth-tax paid by the assessee. The assessment was reopened under section 147(b) and by an order dated November 23, 1962, passed under section 143(3) read with section 147 the total income was determined at Rs. 15,04,680 and income from the business was determined at Rs. 15,44,590. Though income was incurred on account of certain additions the deduction of wealth-tax for the computation of the income made by the Income-tax Officer by his original order remained untouched by this revised order. The assessment for 1960-61 was made under section 23(3) on March 16, 1961. The total income was determined at Rs. 14,43,297 inclusive of income from business of Rs. 1,32,660. The order of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls together and disposed of them by a common order. One of the contentions put forward before the Tribunal was that there was no mistake apparent from the records which could be rectified by the Income-tax Officer under section 154. Another objection raised was that the proceedings under section 154 were barred by limitation. The Tribunal rejected these contentions and dismissed the appeals. It is thereafter, at the instance of the assessee, the above two questions have been referred to this hon'ble court for its opinion. As far as the first question is concerned, we are clearly of the opinion that the answer to the said question must be in the affirmative. Section 154 of the Act enables the Income-tax Officer to rectify any mistake apparent from the record. In this case, as we already pointed out, the Income-tax Officer had deducted the wealth-tax paid by the assessee from the business income for computing the assessable income from the business. The decision of this court referred to above, viz., Kumbakonam Electric Supply Corporation Ltd. v. Commissioner of Income-tax [1963] 50 ITR 809 (Mad) held that wealth-tax paid by a company under the provisions of the Wealth-tax Act, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt order by which the assessment was reopened under section 147(b) of the Income-tax Act. That order was dated November 23, 1962, and if the contention of the learned counsel for the revenue is correct on this point, certainly the notice under section 154 dated February 16, 1965, will be well within the period of four years from the date of November 23, 1962. On the other hand, the argument advanced on behalf of the assessee is that the error had crept into the order dated May 27, 1960, itself, and notwithstanding the subsequent reopening of the assessment, that error remained untouched and, therefore, that error cannot be said to have crept into the order dated November 23, 1962, so as to enable the Income-tax Officer to compute the period of limitation from that date and that the period of limitation should be computed only from the date of the original order, viz., May 27, 1960. This was sought to be countered by the learned counsel for the revenue by putting forward the argument that once the Income-tax Officer took proceedings under section 147 and passed a fresh order of reassessment the original order has ceased to have an independent existence and it had merged in the subse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period prescribed under section 154(7) has to be computed from October 16, 1969, and if it is so done the notice dated April 14, 1971, was within four years. The reasoning advanced on behalf of the revenue in that case was that the original assessment order had merged in the order passed under section 148 by the Income-tax Officer, and, therefore, the limitation should be counted from the date of the later order. The Bench of the Allahabad High Court rejected this contention. The Bench said: " An order under section 148 is a separate order dealing with an item of income which had escaped assessment. The original assessment order does not merge into an order passed under section 148. Where reassessment is made under section 148 (corresponding to section 34 of the Indian Income-tax Act, 1922) the Income-tax Officer's jurisdiction is confined to the income which had escaped assessment and does not extend to revising, reopening and reconsidering the whole assessment. See Kashi Nath Bagla v. Commissioner of Income-tax [1950] 4 ITC 472 (All) and Kevaldas Ranchhodas v. Commissioner of Income-tax [1968] 68 ITR 842 (Bom). Likewise, in proceedings under section 34 the assessee cannot reag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5, purporting to rectify the original order of assessment by reducing the rebate and enhancing the super-tax. The assessee-company filed a petition under article 226 of the Constitution of India before this court to quash the order of rectification. The court held that the Income-tax Officer had acted in excess of jurisdiction and the original order of assessment sought to be rectified did not subsist on the date when proceedings were initiated under section 35, for the order was cancelled and set aside by the officer himself, and hence there was no order which could form the subject-matter of proceeding under section 35. The Bench observed: " It seems to us to he obvious that in the present case the Income-tax Officer acted in excess of his jurisdiction in passing the order of rectification under section 35 of the Act. The order sought to be rectified dated 29th March, 1957, did not subsist on the date when proceedings were initiated under section 35. That order was cancelled and set aside by the Income-tax Officer himself in the purported exercise of his jurisdiction under section 34. As stated already, there was an appeal from that order to the Appellate Assistant Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome. Section 34 in terms states that once the Income-tax Officer decides to reopen the assessment he could do so within the period prescribed by serving on the person liable to pay tax a notice containing all or any of the requirements which may be included in a notice under section 22(2) and may proceed to assess or reassess such income, profits or gains. It is, therefore, manifest that once assessment is reopened by issuing a notice under sub-section (2) of section 22 the previous order of assessment is set aside and the whole assessment proceedings start afresh." The above observations were made in the context of the extent of the jurisdiction of the Income-tax Officer under section 34 and the Supreme Court was not considering a question whether after a reassessment has been made under section 34 the original order has ceased to exist for all purposes or not. Consequently, we are unable to hold that the observation of the Supreme Court in the decisions referred to above are of any avail to the revenue in the present case. As stated in the judgment of the Allahabad High Court referred to above by proceedings under section 148 the original assessment order does not merge int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horities prescribed under the Act. Consequently, it cannot be held that once proceedings are initiated under section 147 of the Income-tax Act, 1961, the entire order of assessment originally passed by the Income-tax Officer ceased to exist and the only order that remains in force is the order passed by the Income-tax Officer under section 148, for instance, with reference to the proceedings by way of appeal already initiated by the assessee, the original order of assessment is in existence and can be dealt with by the appellate authorities constituted under the Act. Therefore, we are unable to subscribe to the general and the wide proposition put forward by the learned counsel for the revenue that once the Income-tax Officer reopens the assessment under section 147 and passes an order under section 148 that puts an end to the original order of assessment completely and it totally replaces that order in all respects. If so, we are of the opinion-if we may say so with respect-that the decision of the Allahabad High Court which is directly in point is correct and following that judgment we hold that the proceedings of the Income-tax Officer initiated under section 154 with regard to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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