The Patiala Improvement Trust, Patiala V. ACIT, Patiala

ITA 1183/CHANDI/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80970 (ITAT-CHANDIGARH)
• Duration Of Justice: 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-10-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 24-12-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Assessee Lawyers: Y K SOOD
• Keywords: Reopening of assessment; Depreciation; Charitable institution; Opportunity of being heard; Retrospective amendment; Reasonable cause; Reassessment proceedings
• Section: 143(3); 12AA; 147; 148; 263; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO. 1183, 1184/CHD/2013 ASSESSMENT YEARS : 2006-07 & 2008-09 THE PATIALA IMPROVEMENT TRUST V A.C.I.T. CIRCLE CHHOTTI BARADARI PATIALA PATIALA AAAJI 0034 L (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI Y.K. SOOD RESPONDENT BY: SMT. JYOTI KUM ARI DATE OF HEARING 14.10.2014 DATE OF PRONOUNCEMENT 31.10 .2014 O R D E R PER T.R. SOOD, A.M THESE APPEALS ARE DIRECTED AGAINST THE ORDER OF LD CIT(A), PATIALA DATED 17.10.2013. ITA NO. 1183/CHD/2013 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING COMMON GROUNDS: 1. THAT THE ORDER OF THE CIT(A) IS BAD AGAINST THE PROVISIONS OF THE LAW AND DESERVES TO BE QUASHED. 2. THAT WHILE PASSING THE ORDER CIT(A) HAS FAILED T O APPRECIATE THAT THE ASSESSMENT ORDER AGAINST WHICH THE APPEAL HAD B EEN FILED HAS CEASED TO EXIST ON THE GROUNDS THAT THE ASSESSING O FFICER HAD PASSED A FRESH ASSESSMENT ORDER U/S 143(3) READ WITH SECTION 147. 3. THAT THE CIT WAS ALSO NOT JUSTIFIED IN GIVING AN Y FINDINGS IN HIS APPELLATE ORDER AGAINST THE ORDER OF ASSESSMENT WHI CH HAD CEASED TO EXIST. HIS FINDINGS ON ENHANCEMENT ARE THEREFORE NO T SUSTAINABLE. 4. THAT EVEN OTHERWISE CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE DISALLOWANCES OF RS. 5434000/- AND RS. 1000000/- MA DE BY THE ASSESSING OFFICER ON ACCOUNT OF EXPENDITURE INCURRE D FOR CONSTRUCTION OF MUNICIPAL BHAWAN AT CHANDIGARH AND OUT OF DEVELOPME NT EXPENSES RESPECTIVELY. 3 THIS APPEAL IS LATE BY ONE DAY AND THE ASSESSEE H AS MOVED AN APPLICATION FOR CONDONATION OF DELAY. THE LD. 2 COUNSEL FOR THE ASSESSEE REFERRED TO THE APPLICATIO N AND POINTED OUT THAT THE TRUST IS HEADED BY A CHAIRMAN APPOINTED BY THE GOVT OF PUNJAB BUT PRESENTLY DEPUTY COMMISSI ONER OF PATIALA IS ACTING AS CHAIRMAN OF THE TRUST. FILING OF APPEALS ETC. REQUIRE SANCTION OF THE SECRETARY, LOCAL BODIE S, PUNJAB. SANCTION COULD BE OBTAINED LATE BECAUSE OF THE PART TIME CHAIRMAN. DELAY WAS NOT INTENTIONAL AND THEREFORE H E PRAYED THAT SAME MAY BE CONDONED. 4 THE LD. DR FOR THE REVENUE OPPOSED THE SUBMISSION S. 5 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE ARE SA TISFIED THAT THE ASSESSEE HAS REASONABLE CAUSE FOR FILING O F THE APPEAL LATE AND THEREFORE DELAY IS CONDONED. 6 BRIEF FACTS OF THE CASE ARE THAT IN THIS CASE THE ASSESSEE FILED RETURN DECLARING NIL INCOME ON 21.10.2007. T HE ASSESSMENT WAS COMPLETED U/S 143(3) ON 28.12.2009 A T RS. 63,34,000/-. THE ASSESSEE FILED APPEAL AGAINST THIS ORDER BEFORE THE LD. CIT(A). IT SEEMS THAT THE LD. CIT(A) HAD ENHANCED THE INCOME OF THE ASSESSEE FOR WHICH PROPE R NOTICE WAS NOT GIVEN AND WHEN THE MATTER TRAVELED TO THE T RIBUNAL, THE TRIBUNAL CONSIDERED THE POWERS OF THE LD. CIT(A) AN D ULTIMATELY SET ASIDE THE ORDER OF THE LD. CIT(A) BACK TO HIS F ILE WITH A DIRECTION THAT HE SHOULD GIVE PROPER NOTICE AND AN OPPORTUNITY TO THE ASSESSEE BEFORE ENHANCEMENT. 7 IN THE MEANTIME THE ASSESSMENT WAS REOPENED AND ULTIMATELY THE REASSESSMENT WAS COMPLETED U/S 147 R .W.S. 143(3) WAS ON 18.3.2013. IN THIS ASSESSMENT ORDER IT WAS OBSERVED THAT THE TRUST HAS WRONGLY SOUGHT REGISTRA TION U/S 12AA AND THEREFORE THE ASSESSEE WAS NOT EXEMPT U/S 11 AND 3 ULTIMATELY WHOLE OF THE PROFIT OF THE ASSESSEE AMOU NTING TO RS. 6,69,31,452/- WAS ASSESSED TO TAX. 8 ON APPEAL BEFORE THE LD. CIT(A) THIS ORDER OF REASSESSMENT WAS CONFIRMED BY THE LD. CIT(A). AGAI NST THIS ORDER ALSO AN APPEAL WAS FILED BEFORE THE TRIBUNAL. THE TRIBUNAL CONSIDERED THE ISSUE IN DETAIL AND ANNULLE D THE REASSESSMENT PROCEEDINGS BY FOLLOWING THE DECISION OF HON'BLE HIGH COURT OF PUNJAB & HARYANA IN CASE OF CIT V. IM PROVEMENT TRUST, 308 ITR 361 WHEREIN IT WAS HELD THAT IMPROVE MENT TRUST CONSTITUTED UNDER PUNJAB TOWN IMPROVEMENT TRUST, 19 22 IS A CHARITABLE INSTITUTION. THE TRIBUNAL ALSO OBSERVED THAT IN VIEW OF THIS DECISION THE REGISTRATION HAS TO BE ALLOWED TO THE ASSESSEE TRUST TILL 31.3.2008 I.E. BEFORE THE AMEND MENT OF SECTION 2(15) OF FINANCE ACT, 2008. 9 BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMI TTED THAT THE THERE CAN BE ONLY ONE ASSESSMENT AND ONCE THE REASSESSMENT ORDER WAS PASSED ORIGINAL ASSESSMENT O RDER CEASED TO EXIST. THEREFORE AFTER REASSESSMENT ORDER THE ORIGINAL ASSESSMENT ORDER WAS VOID-AB-INITIO AND CO NSEQUENTLY IMPUGNED ORDER IS ALSO NOT VALID AND FURTHER THIS T RIBUNAL SHALL HOLD THAT ORIGINAL ASSESSMENT DOES NOT EXIST IN THE EYES OF LAW. IN THIS CONNECTION HE REFERRED TO VARIOUS OBSERVATI ONS MADE IN THE COMMENTARY OF INCOME-TAX LAW BY CHATURVEDI AND PITHISARIA, 5 TH EDITION FROM PAGES 5074 TO 5076. HE ALSO RELIED ON THE FOLLOWING DECISIONS: SARAN ENGG COMPANY LTD. V CIT, 143 ITR 765 SHARDA TRADING COMPANY V CIT, 149 ITR 19 CIT V. KESAVA REDDIAR, 178 ITR 457 NAWAB MEER BARKAT ALI KHAN BAHADUR V. ITO, 172 ITR 13 CIT V. MYSORE IRON & STEEL LTD., 157 ITR 531 ITO & ANOTHER V. K.L. SRIHARI (HUF) K.L. NARYANA, 197 ITR 694 4 HE POINTED OUT THAT THE DECISION OF HON'BLE KARNATA KA HIGH COURT IN CASE OF 197 ITR 694 HAS BEEN CONFIRMED BY HON'BLE SUPREME COURT WHICH IS REPORTED AS ITO V. K.L SRIHA RI (HUF) AND OTHERS, 176 CTR 99 (250 ITR 193). 10 ON THE OTHER HAND, LD. D.R FOR THE REVENUE SUBMI TTED THAT WHEN INCOME WAS SOUGHT TO BE ENHANCED BY THE LD. CI T(A) AND ULTIMATELY APPEAL WAS FILED BY THE ASSESSEE BEFORE THE TRIBUNAL. VARIOUS SUBMISSIONS WERE MADE BEFORE THE TRIBUNAL AND AFTER CONSIDERING THE SAME THE TRIBUNAL IN ORDE R DATED 23.3.2011 IN ITA NO. 144/CHD/2011 IN CASE OF PATIAL A IMPROVEMENT TRUST V ACIT HELD THAT THE ISSUE REGARD ING ENHANCEMENT OF INCOME WAS DECIDED WITHOUT ISSUANCE OF A SHOW CAUSE NOTICE WHICH IS AGAINST THE PROVISIONS O F LAW. THEREFORE MATTER WAS RESTORED BACK TO THE FILE OF L D. CIT(A) WITH A DIRECTION TO FOLLOW THE PROVISIONS OF THE AC T AND ISSUE A SHOW CAUSE AGAINST SUCH ENHANCEMENT BY PROVIDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE AND THEN DECIDE THE ISSUE ON MERITS OF THE CASE. THE LD . CIT(A) HAS FOLLOWED THIS DIRECTION AND DECIDED THE ISSUES AFTE R PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. THE LD. CIT(A) WAS BOUND TO FOLLOW THE DIRECTION OF THE TRIBUNAL AND COULD NOT HAVE DEVIATED FROM SUCH DIRECTION, TH EREFORE ORDER PASSED BY THE LD. CIT(A) CANNOT BE CHALLENGED ON DIFFERENT ISSUES. IN THIS REGARD SHE RELIED ON THE DECISION OF HON'BLE HIGH COURT OF PUNJAB & HARYANA IN CASE OF B ALDEV SINGH GIANI V. CIT, 248 ITR 266 WHEREIN IT IS HELD THAT THE POWERS OF THE LD. CIT(A) WERE LIMITED TO THE ISSUE FOR WHICH THE TRIBUNAL HAD REMANDED THE MATTER. 5 11 SHE VEHEMENTLY ARGUED THAT THERE IS NO FORCE IN THE SUBMISSIONS THAT ONCE A REASSESSMENT HAS BEEN MADE THEN ORIGINAL ASSESSMENT ORDER WOULD CEASE TO EXIST. SH E REFERRED TO THE DECISION OF HON'BLE SUPREME COURT IN CASE OF CIT V. SUN ENGINEERING WORKS P. LTD, 198 ITR 297 WHEREIN IT WA S HELD THAT REASSESSMENT PROCEEDINGS IS ONLY CONFINED TO UNDER ASSESSMENT AND NOT TO ENTIRE ASSESSMENT. IN ANY CA SE REASSESSMENT PROCEEDINGS ARE FOR THE BENEFIT OF REV ENUE. THIS CONTENTION IS ALSO AGAINST THE SCHEME OF ACT WHICH PROVIDES ASSESSMENT OF INCOME. REASSESSMENT IS PROVIDED ONLY WHERE SOME INCOME HAS ESCAPED ASSESSMENT AND FURTHER IF REASSESSMENT IS HELD TO BE BAD BECAUSE OF ANY REASO N THEN IT CANNOT BE SAID THAT ORIGINAL ASSESSMENT WOULD ALSO CEASE TO EXIST. AT BEST IT CAN BE SAID THAT ORIGINAL ASSESS MENT GETS MERGED WITH REASSESSMENT PROCEEDINGS BUT THE DOCTRI NE OF MERGER IS APPLICABLE ONLY TO THE EXTENT TO WHICH ON E ORDER HAS MERGED WITH OTHER ORDER AND NOT TO ALL ISSUES DISCU SSED IN ONE ORDER. IN THIS REGARD SHE RELIED ON THE DECISION O F HON'BLE SUPREME COURT IN CASE OF CIT V. SHRI ARBUDA MILLS L TD. 231 ITR 50 AND CIT V. ALAGENDRAN FINANCE LTD. 293 ITR 1. 12 THE LD. CIT-DR FOR THE REVENUE ALSO POINTED OUT THAT DECISION OF HON'BLE SUPREME COURT IN CASE OF ITO AN D ANOTHER V K.L. SRIHARI (HUF) AND OTHERS (SUPRA) HAS BEEN IN TERPRETED BY HON'BLE CALCUTTA HIGH COURT IN CASE OF CIT V. KESHO RAM INDUSTRIES LTD. 271 ITR 353 WHEREIN IT WAS CLARIFIE D THAT THE DECISION OF SUN ENGINEERING (SUPRA) HAS NOT BEEN OV ERRULED. 13 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND DO NOT FIND ANY FORCE IN THE CONTENTIONS OF THE LD. COUNSEL FOR THE ASSESSEE. FIRST OF ALL WHEN ORIGINAL APPEAL WAS FILED BEFORE 6 THE TRIBUNAL AGAINST THE ORDER PASSED BY THE LD. CI T(A), THE MATTER WAS REMANDED BACK BY THE TRIBUNAL TO THE FIL E OF LD. CIT(A) WITH A DIRECTION TO GIVE PROPER OPPORTUNITY REGARDING THE ISSUE OF ENHANCEMENT BY ISSUING A SHOW CAUSE NOTICE AND THEN DECIDE THE ISSUE. IN THIS REGARD RELEVANT PORTION OF PARA 7 OF ITA NO. 144/CHD/2011 READS AS UNDER: 7. FURTHER, FROM THE PERUSAL OF THE RECORD, WE FIND THAT THE CIT(A) THOUGH HAD ISSUED A LETTER DATED 22.09.2010 TO THE ASSESSING OFFICER AND THE ASSESSING OFFICER WAS REQUIRED TO SEND HIS REPO RT BY 27.09.2010 TO THE OFFICE OF THE CIT(A) BUT NO SUCH REPORT WAS REC EIVED FROM THE ASSESSING OFFICER. FURTHER, THE OFFICE SUPDT. OF CI T(A) OFFICE ISSUED A LETTER DATED 18.11.2010 TO THE ASSESSEE TO GIVE A R EPLY BY 22.11.2010 WITH REGARD TO THE LETTER ISSUED TO THE ACIT DATED 22.09.2010. THE ASSESSEE SOUGHT TIME BUT NO REPLY WAS FILED BY THE ASSESSE NOR ANY REPORT WAS RECEIVED FROM THE ASSESSING OFFICER. THE CIT(A), HOWEVER, TALKS OF A REMAND REPORT DATED 30.09.2010 RECEIVED FROM THE ACIT IN WHICH IT WAS REPORTED THAT THE STATUS OF THE ASSESS EE HAD ATTAINED FINALITY BUT NO OTHER REPORT WAS SENT BY THE ASSESS ING OFFICER IN CONNECTION WITH THE LETTER OF ENHANCEMENT ISSUED BY CIT(A). THE CIT(A) THEREAFTER DECIDED THE ISSUE OF ENHANCEMENT OF INCO ME ON THE MERITS OF THE CASE, AS PER PARA 6.2 OF THE APPELLATE ORDER. W E FIND NO MERIT IN THE ORDER OF CIT(A) IN VIEW OF THE EXPLICIT PROVISIONS OF THE ACT UNDER WHICH IT HAS BEEN MANDATED THAT THE CIT(A) SHALL NOT ENHANCE AN ASSESSMENT UNLESS PROPER OPPORTUNITY OF SHOW CAUSING AGAINST S UCH ENHANCEMENT HAS BEEN PROVIDED TO THE ASSESSEE. IN THE INTEREST OF JUSTICE, WE DEEM IT FIT TO RESTORE THIS ISSUE BACK TO THE FILE OF THE C IT(A) TO FOLLOW THE PROVISIONS OF THE ACT AND SHOW CAUSE THE ASSESSEE A GAINST SUCH ENHANCEMENT BY PROVIDING A REASONABLE OPPORTUNITY O F HEARING TO THE ASSESSEE AND THEN DECIDE THE ISSUE ON THE MERITS OF THE CASE. THE GROUND NO. 1 & 2 RAISED BY THE ASSESSEE ARE THUS AL LOWED FOR STATISTICAL PURPOSES. THEREFORE IN VIEW OF THE ABOVE ORDER THE LD. CIT(A) COULD NOT HAVE POSSIBLY DECIDED ANY OTHER ISSUES AND COULD N OT HAVE TRAVELED BEYOND THE DIRECTIONS GIVEN BY THE TRIBUNA L. THE HON'BLE HIGH COURT OF PUNJAB & HARYANA IN CASE OF B ALDEV SINGH GIANI V CIT (SUPRA) HAS HELD AS UNDER: HELD, (I) THAT THE INITIATION OF REASSESSMENT PROC EEDINGS BY THE ASSESSING OFFICER AND THE DIRECTIONS GIVEN BY THE C OMMISSIONER OF INCOME-TAX (APPEALS)TO THE ASSESSING OFFICER TO CON TINUE WITH THE SAID PROCEEDINGS WERE VITIATED BY PATENT ERROR OF LAW AN D HENCE WERE LIABLE TO BE QUASHED. THE TRIBUNAL HAD RECORDED A FINDING THA T INITIATION OF REASSESSMENT PROCEEDINGS WAS CONTRARY TO SECTION 14 8(2) AND HAD DIRECTED THE COMMISSIONER OF INCOME-TAX (APPEALS) T O FIND OUT IF THE ASSESSING OFFICER HAD RECORDED ANY REASONS AND THE SAME WAS COMMUNICATED TO THE ASSESSEE. THAT ORDER OF THE TRI BUNAL ACQUIRED FINALITY BECAUSE THE SAME WAS NOT CHALLENGED EITHER BY REFERENCE OR OTHERWISE. THEREFORE, THE COMMISSIONER OF INCOME-TA X (APPEALS) AND THE ASSESSING OFFICER WERE BOUND TO CONFINE THEIR CONSI DERATION TO THE QUESTION AS TO WHETHER THE FILE AVAILABLE WITH THE DEPARTMENT CONTAINED REASONS RECORDED BY THE ASSESSING OFFICER AND SUCH REASONS WERE 7 COMMUNICATED TO THE PETITIONER. INSTEAD, THE COMMISSIONER OF INCOME-TAX (APPEALS) REMANDED THE MATTER TO THE ASSESSING OFFI CER WHO WROTE TO THE THEN ASSESSING OFFICER AND TRIED TO SHOW THAT THE R EASONS HAD BEEN RECORDED BY HIM BUT THE PAPERS CONTAINING THOSE REA SONS WERE NOT AVAILABLE. THE ASSESSING OFFICER WAS BOUND TO ACT W ITHIN THE FOUR CORNERS OF THE ORDER PASSED BY THE TRIBUNAL AND HE DID NOT HAVE THE JURISDICTION TO CREATE FRESH EVIDENCE ON THE ISSUE OF RECORDING OF REASONS AND COMMUNICATION THEREOF. THE ABOVE CLEARLY SHOW THAT POWERS OF LD. CIT(A) AR E CONFINED TO THE DIRECTIONS GIVEN BY THE TRIBUNAL. THEREFORE THE LD. CIT(A) COULD NOT HAVE TRAVELED BEYOND THE DIRECTION GIVEN BY THE TRIBUNAL AND COULD NOT HAVE POSSIBLY DECIDED TH E ISSUES RAISED BEFORE US IN GROUNDS NO. 1 & 2 AND IN ANY CA SE THESE ISSUES WERE NOT RAISED BEFORE THE LD. CIT(A). IT I S SETTLED LAW THAT WHATEVER HAVE ATTAINED FINALITY IN ONE PROCEED ING CANNOT BE REAGITATED AGAIN DURING SECOND ROUND. THEREFORE THE ISSUES RAISED IN GROUND NO. 1 & 2 REQUIRE TO BE DISMISSED AND ACCORDINGLY WE DISMISS THESE ISSUES. HOWEVER, IN T HE INTEREST OF JUSTICE, WE HAVE ALSO ADJUDICATED GROUNDS NO. 1 & 2 RAISED BEFORE US IN THE FOLLOWING PARAS. 14 THE HON'BLE SUPREME COURT IN CASE OF CIT V. SUN ENGINEERING WORKS P. LTD (SUPRA) HAD AN OCCASION TO DEAL WITH VARIOUS FACETS OF REASSESSMENT PROCEEDINGS. A QUES TION AROSE IN THAT CASE WHETHER DURING REASSESSMENT PROCEEDING S WHATEVER HAS ATTAINED FINALITY CAN ALSO BE CHALLENG ED BY THE ASSESSEE. THE HON'BLE SUPREME COURT OBSERVED THAT T HE ASSESSEE CANNOT CHALLENGE AN ITEM WHICH HAS ALREADY ATTAINED FINALITY PARTICULARLY BECAUSE REASSESSMENT PROCEEDI NGS ARE FOR THE BENEFIT OF THE REVENUE. THE HON'BLE SUPREME COU RT HAD FURTHER DISCUSSED THIS ISSUE AT PAGE 320 AND 321 IN CASE OF CIT V. SUN ENGINEERING WORKS P. LTD (SUPRA) WHICH ARE A S UNDER: AS A RESULT OF THE AFORESAID DISCUSSION, WE FIND T HAT, IN PROCEEDINGS UNDER SECTION 147 OF THE ACT, THE INCOME-TAX OFFICE R MAY BRING TO CHARGE ITEMS OF INCOME WHICH HAD ESCAPED ASSESSMENT OTHER THAN OR IN ADDITION 8 TO THAT ITEM OR ITEMS WHICH HAVE LED TO THE ISSUANC E OF THE NOTICE UNDER SECTION 148 AND WHERE REASSESSMENT IS MADE UNDER SE CTION 147 IN RESPECT OF INCOME WHICH HAS ESCAPED TAX, THE INCOME -TAX OFFICERS JURISDICTION IS CONFINED TO ONLY SUCH INCOME WHICH HAS ESCAPED TAX OR HAS BEEN UNDERASSESSMENT AND DOES NOT EXTEND TO REV ISING, REOPENING OR RECONSIDERING THE WHOLE ASSESSMENT OR PERMITTING THE ASSESSEE TO REAGITATE QUESTIONS WHICH HAD BEEN DECIDED IN THE O RIGINAL ASSESSMENT PROCEEDINGS. IT IS ONLY THE UNDERASSESSMENT WHICH I S SET ASIDE AND NOT THE ENTIRE ASSESSMENT WHEN REASSESSMENT PROCEEDINGS ARE INITIATED THE INCOME-TAX OFFICER CANNOT MAKE AN ORDER OR REASSESS MENT INCONSISTENT WITH THE ORIGINAL ORDER OF ASSESSMENT IN RESPECT OF MATTERS WHICH ARE NOT THE SUBJECT MATTER OF PROCEEDINGS UNDER SECTION 147 . AN ASSESSEE CANNOT RESIST VALIDLY INITIATED REASSESSMENT PROCEE DINGS UNDER THIS SECTION MERELY BY SHOWING THAT OTHER INCOME WHICH H AD BEEN ASSESSED ORIGINALLY WAS AT TOO HIGH A FIGURE EXCEPT INCASES UNDER SECTION 152(2), THE WORDS SUCH INCOME IN SECTION 147CLEARLY REFER TO THE INCOME WHICH IS CHARGEABLE TO TAX BUT HAS ESCAPED ASSESSMENT A ND THE INCOME-TAX OFFICER JURISDICTION UNDER THE SECTION IS CONFINED ONLY TO SUCH INCOME WHICH HAS ESCAPED ASSESSMENT. IT DOES NOT EXTEND TO RECONSIDERING GENERALLY THE CONCLUDED EARLIER ASSESSMENT. CLAIMS WHICH HAVE BEEN DISALLOWED IN THE ORIGINAL ASSESSMENT PROCEEDING CA NNOT BE PERMITTED TO BE REAGITATED ON THE ASSESSMENT BEING REOPENED FOR BRINGING TO TAX CERTAIN INCOME WHICH HAD ESCAPED ASSESSMENT BECAUSE THE CONTROVERSY ON REASSESSMENT IS CONFINED TO MATTERS WHICH ARE RE LEVANT ONLY IN RESPECT OF THE INCOME WHICH HAD NOT BEEN BROUGHT TO TAX DURING THE COURSE OF THE ORIGINAL ASSESSMENT. A MATTER NOT AGI TATED IN THE CONCLUDED ORIGINAL ASSESSMENT PROCEEDINGS ALSO CANNOT BE PERM ITTED TO BE AGITATED IN THE REASSESSMENT PROCEEDINGS UNLESS RELATABLE TO THE ITEM SOUGHT TO BE TAXED AS ESCAPED INCOME. INDEED, IN THE REASSE SSMENT PROCEEDINGS FOR BRINGING TO TAX ITEMS WHICH HAD ESCAPED ASSESSM ENT, IT WOULD BE OPEN TO AN ASSESSEE TO PUT FORWARD CLAIMS FOR DEDUC TION OF ANY EXPENDITURE IN RESPECT OF THAT INCOME OR THE NON TA XABILITY OF THE ITEMS AT ALL. KEEPING IN VIEW THE OBJECT AND PURPOSE OF THE PROCEEDINGS UNDER SECTION 147 OF THE ACT WHICH ARE FOR THE BENEFIT OF THE REVENUE AND NOT AN ASSESSEE, AN ASSESSEE CANNOT BE PERMITTED TO CON VERT THE REASSESSMENT PROCEEDINGS AS HIS APPEAL OR REVISION, IN DISGUISE, AND SEEK RELIEF IN RESPECT OF ITEMS EARLIER REJECTED OR CLAIM RELIEF IN RESPECT OF ITEMS NOT CLAIMED IN THE ORIGINAL ASSESSMENT PROCEE DINGS, UNLESS RELATABLE TO ESCAPED INCOME, AND REAGITATE THE CO NCLUDED MATTERS. EVEN IN CASES WHERE THE CLAIMS OF THE ASSESSEE DURI NG THE COURSE OF REASSESSMENT PROCEEDINGS RELATING TO THE ESCAPED AS SESSMENT ARE ACCEPTED, STILL THE ALLOWANCE OF SUCH CLAIMS HAS TO BE LIMITED TO THE EXTENT TO WHICH THEY REDUCE THE INCOME TO THAT ORIG INALLY ASSESSED. THE INCOME FOR PURPOSES OF REASSESSMENT CANNOT BE RED UCED BEYOND THE INCOME ORIGINALLY ASSESSED. ABOVE CLEARLY SHOW THAT REASSESSMENT PROCEEDINGS AR E BASICALLY MEANT TO ASSESS ONLY THOSE ITEMS OF INCOM E WHICH HAVE ESCAPED ASSESSMENT DURING ORIGINAL ASSESSMENT PROCEEDINGS. 15 NO DOUBT THAT NORMALLY WHENEVER AN REASSESSMENT IS MADE THEN ORIGINAL ASSESSMENT ORDER WOULD CEASE TO EXIST. SAME VIEW HAS BEEN EXPRESSED BY THE LD. AUTHORS IN THE COMMENTARY BY CHATURVEDI AND PITHISARIA OF INCOME-T AX, 5 TH EDITION AT PAGE 5074 TO 5076. FURTHER SAME VIEW HA S BEEN 9 TAKEN IN VARIOUS DECISIONS RELIED BY THE LD. COUNSE L FOR THE ASSESSEE BUT THE QUESTION IS WHY IT IS LIKE THAT. T HE ANSWER IS CLEARLY GIVEN IN THE COMMENTARY WHICH HAS BEEN RELI ED ON BY THE LD. COUNSEL FOR THE ASSESSEE. FOLLOWING PARA A T PAGE 5074 WILL MAKE IT CLEAR: UNDER THE SCHEME OF THE INCOME-TAX ACT, THERE CAN BE ONLY ONE ASSESSMENT AGAINST A PERSON IN ONE STATUS FOR ONE Y EAR. THERE CANNOT BE AN ASSESSMENT IN RELATION TO A PORTION OF THE IN COME RELATING TO ONE YEAR OF AN ASSESSEE AND FURTHER ASSESSMENT IN RELAT ION TO THE SAME PERSON IN RESPECT OF HIS SOME OTHER INCOME IN THAT YEAR. THEREFORE WHERE ONCE AN ASSESSMENT HAS ALREADY BEEN MADE AGAI NST A PERSON AND LATER ON IT IS FOUND THAT A CERTAIN INCOME WITH REG ARD TO THAT YEAR HAS ESCAPED ASSESSMENT, SUCH ESCAPED INCOME CAN BE BROU GHT TO TAX THROUGH THE REASSESSMENT PROCEEDINGS (CF N. KHADER SHERIFF SAHIB V CIT, (1978) 113 ITR 50 (MAD). ABOVE CLEARLY SHOW THAT THERE CAN BE ONLY ONE ASSES SMENT. THE REASON IS ONCE A PARTICULAR INCOME HAS BEEN ASS ESSED AND LATER ON IT IS FOUND THAT SOME ITEM OF INCOME HAS E SCAPED TAX THEN THE ASSESSING OFFICER HAS RIGHT TO ISSUE NOTIC E U/S 148 BECAUSE OF THE PROVISIONS OF SECTION 147 AND THEN B RING THAT PARTICULAR ITEM OF INCOME OR OTHER ITEM WHICH HAVE BEEN FOUND DURING SUCH REASSESSMENT PROCEEDINGS, TO TAX. BUT IN THE REASSESSMENT THE INCOME WHICH HAS ALREADY BEEN DETE RMINED OR ASSESSED IS ALSO ADDED TO SUCH INCOME. LET US S AY IF THE ASSESSEE FILES A RETURN FOR RS. 100/- TO WHICH AN A DDITION OF RS. 10/- IS MADE IN THE ORIGINAL ASSESSMENT THEN ASSESS ED INCOME WOULD BE RS. 110/-. LATER ON IF IT IS FOUND BY THE ASSESSING OFFICER THAT ANOTHER ITEM OF INCOME FOR RS. 20/- HA S ESCAPED ASSESSMENT THEN HE CAN ISSUE NOTICE U/S 148 AND BRI NG THIS RS. 20/- TO TAX BUT SUCH REASSESSMENT ORDER WOULD NORMA LLY READ AS UNDER: ORIGINAL ASSESSMENT ORDER RS. 110/- ADDITION ON ACCOUNT OF INCOME ESCAPED RS. 20/- TOTAL INCOME RS. 130/- 10 SINCE ABOVE ORDER INCLUDE BOTH TYPES OF INCOME AND THEREFORE THERE CAN BE ONLY ONE REASSESSMENT ORDER. OTHERWIS E ALSO THE TAX RATES IN INDIA ARE BASED ON VARIOUS SLABS AND S LABS CAN BE APPLIED ONLY IF ONE TOTAL INCOME IS AVAILABLE. ORIG INAL INCOME IN OUR EXAMPLE CANNOT BE ASSESSED AT RS. 120/- SEPARAT ELY AND ESCAPED INCOME IN REASSESSMENT ORDER AT RS. 20/- SE PARATELY BECAUSE THEN DIFFERENT SLABS OF RATE CANNOT BE APPL IED. THIS EXPLAINS THE REASON THAT THERE CAN BE ONLY ONE ASSE SSMENT. NOW THE QUESTION ARISE THAT IF BECAUSE OF ANY TECHN ICAL REASON OR JURISDICTIONAL DEFECTS IF THE REASSESSMENT HAS B EEN SET ASIDE BY A SUPERIOR AUTHORITY SAY BY THE TRIBUNAL THEN CA N WE SAY THAT ORIGINAL ASSESSMENT WOULD CEASE TO EXIST. THE ANSWER IS CLEARLY NO. THEREFORE IN ABOVE EXAMPLE IF THE RE ASSESSMENT ORDER IS DECLARED INVALID BECAUSE NOTICE IS ISSUED BEYOND LIMITATION OR SAME IS ISSUED WITHOUT RECORDING REAS ONS OR SAME HAS BEEN ISSUED WITHOUT VALID REASONS THEN WHAT WOU LD BE THE EFFECT OF SUCH ORDER. THE EFFECT WOULD BE THAT IT WOULD CANCEL THE REASSESSMENT OF THE ITEM OF INCOME WHICH HAS BE EN BROUGHT TO ASSESSMENT BY WAY OF REASSESSMENT ORDER I.E. IN OUR EXAMPLE ITEM OF INCOME OF RS. 20/- WHICH HAS ORIGIN ALLY ESCAPED ASSESSMENT. BUT BY SUCH AN ORDER OF ANNULME NT OF REASSESSMENT THE INCOME ORIGINALLY ASSESSED IN OUR EXAMPLE AT RS. 110/- CANNOT BE THROWN OUT OF WINDOW. 16 SIMILAR SITUATION AROSE IN ANOTHER CASE BEFOR E THE HON'BLE SUPREME COURT IN CASE OF CIT V. SHELLY PRODUCTS AN D ANOTHER, 261 ITR 361. IN THAT CASE PARTICULAR ASSESSMENT WA S HELD TO BE TIME BARRED AND THEREFORE ASSESSEE CLAIMED REFUN D OF THE WHOLE OF TAXES. ULTIMATELY THE MATTER TRAVELED TO THE HON'BLE 11 SUPREME COURT AND THE HON'BLE SUPREME COURT OBSERVE D AS UNDER: SECTION 4 OF THE IT ACT, 1961 CREATES THE CHARGE A ND PROVIDES INTERPRETED ALIA FOR PAYMENT OF TAX IN ADVANCE AND DEDUCTION OF TAX AT SOURCE. THE ACT PROVIDES FOR THE MANNER IN WHIC H ADVANCE TAX IS TO BE PAID AND PENALIZES AN ASSESSEE WHO MAKES D EFAULT OR DELAYS PAYMENT THEREOF. SIMILARLY DEDUCTION OF TAX AT SOURCE IS ALSO PROVIDED FOR IN THE ACT AND FAILURE TO COMPLY WITH THE PROVISIONS ATTRACTS THE PENAL PROVISIONS AGAINST TH E PERSON RESPONSIBLE FOR MAKING THE PAYMENT. IT IS, THEREFO RE QUITE APPARENT THAT THE ACT ITSELF PROVIDES FOR PAYMENT O F TAX IN THIS MANNER BY THE ASSESSEE. THE ACT ALSO ENJOINS UPON THE ASSESSEE THE DUTY TO FILE A RETURN OF INCOME DISCLOSING HIS TRUE INCOME. ON THE BASIS OF THE INCOME DISCLOSED, THE ASSESSEE IS REQUIRED TO MAKE A SELF ASSESSMENT AND TO COMPUTE THE TAX PAYME NT ON SUCH INCOME AND TO PAY THE SAME IN THE MANNER PROVIDED B Y THE ACT. THUS THE FILING OF THE RETURN AND THE PAYMENT OF TA X THEREON COMPUTED AT THE PRESCRIBED RATES AMOUNT TO AN ADMIS SION OF TAX LIABILITY WHICH THE ASSESSEE ADMITS TO HAVE INCURRE D IN ACCORDANCE WITH THE PROVISIONS OF THE FINANCE ACT AND THE IT A CT. BOTH THE QUANTUM OF TAX PAYMENT AND ITS MADE OF RECOVERY ARE AUTHORIZED BY LAW. THE LIABILITY TO PAY INCOME TAX CHARGEABLE U/S 4 OF THE ACT DOES NOT DEPEND ON THE ASSESSMENT BEING MADE. AS SOON AS THE FINANCE ACT PRESCRIBES THE RATE OR RATES FOR AN Y ASSESSMENT YEAR, THE LIABILITY TO PAY THE TAX ARISES. THE ASS ESSEE IS HIMSELF REQUIRED TO COMPUTE HIS TOTAL INCOME AND THE INCOME TAX THEREON WHICH INVOLVES A PROCESS OF SELF ASSESSMENT. SINCE ALL THIS IS DONE UNDER THE AUTHORITY OF LAW, ARTICLE 265 OF THE CONSTITUTION OF INDIA IS NOT VIOLATED: BOTH THE LEVY AND COLLECTIO N OF TAX ARE IN ACCORDANCE WITH LAW. FAILURE OR INABILITY TO FRAME ANOTHER ASSESSMENT AF TER THE EARLIER ASSESSMENT I SET ASIDE OR NULLIFIED IN APPR OPRIATE PROCEEDINGS DOES NOT ENTITLE THE ASSESSEE TO CLAIM REFUND OF ADVANCE TAX AND TAX PAID ON SELF-ASSESSMENT, BECAUS E TO THAT EXTENT THE ASSESSEE HAS ADMITTED HIS LIABILITY TO PAY TAX IN ACCORDANCE WITH LAW. IF THE ASSESSING AUTHORITY O N AN EARLIER ASSESSMENT MADE BEING SET ASIDE OR NULLIFIED IN APP ROPRIATE PROCEEDINGS, CANNOT MAKE A FRESH ASSESSMENT, IT AMO UNTS TO DEEMED ACCEPTANCE OF THE RETURN OF INCOME FURNISHE D BY THE ASSESSEE. IN SUCH A CASE THE ASSESSING AUTHORITY I S DENUDED OF ITS AUTHORITY TO VERIFY THE CORRECTNESS AND COMPLET ENESS OF THE RETURN, WHICH AUTHORITY IT HAS WHILE FRAMING A REG ULAR ASSESSMENT. THE ASSESSING AUTHORITY MUST ACCEPT THE RETURN AS F URNISHED AND CANNOT IN ANY EVENT RAISE A DEMAND FOR PAYMENT OF F URTHER TAXES. ACCEPTING THE INCOME AS DISCLOSED IN THE RETURN FUR NISHED BY THE ASSESSEE, IT MUST REFUND TO THE ASSESSEE ANY TAX PA ID BY THE ASSESSEE IN EXCESS OF THE LIABILITY INCURRED BY HIM ON THE BASIS OF THE INCOME DISCLOSED. EVEN IF THE TAX PAID IS FOUND TO BE LESS THAN THAT PAYABLE, NO FURTHER DEMAND CAN BE MADE FO R RECOVERY OF THE BALANCE SINCE THE FRESH ASSESSMENT IS BARRED . ANY RETENTION OF THE BALANCE MAY OFFEND ARTICLE 265. HOWEVER, FAILURE OR INABILITY OF THE REVENUE TO FRA ME A FRESH ASSESSMENT SHOULD NOT PLACE THE ASSESSEE IN A MORE DISALLOWANCE- ADVANTAGEOUS POSITION THAN HE WOULD HAVE BEEN IN IF A FRESH ASSESSMENT WERE MADE. IN A CASE WHERE THE ASSESSEE CHOOSES TO DEPOSIT, BY WAY OF ABUNDANT CAUTION, ADVANCE TAX OR TAX ON SELF ASSESSMENT WHICH IS IN EXCESS OF HIS LIABILITY ON T HE BASIS OF THE RETURN FURNISHED OR IF THERE IS AN ARITHMETICAL ERR OR OR INACCURACY, IT IS OPEN TO THE ASSESSEE TO CLAIM REFUND OF THE E XCESS TAX PAID IN THE COURSE OF THE ASSESSMENT PROCEEDINGS . HE CAN CERTAINLY MAKE SUCH A CLAIM BEFORE THE CONCERNED AUTHORITY CALCULA TING THE REFUND. SIMILARLY IF THE ASSESSEE HAS, BY MISTAKE OR INADVE RTENCE OR ON 12 ACCOUNT OF IGNORANCE, INCLUDED IN HIS INCOME ANY AM OUNT WHICH IS EXEMPTED FROM PAYMENT OF INCOME TAX, OR IS NOT INCO ME WITHIN THE CONTEMPLATION OF LAW, HE MAY LIKEWISE BRING THIS TO THE NOTICE OF THE ASSESSING AUTHORITY WHICH, IF SATISFIED, MAY GR ANT HIM RELIEF AND REFUND THE TAX PAID IN EXCESS, IF ANY. SUCH MA TTERS CAN BE BROUGHT TO THE NOTICE OF THE CONCERNED AUTHORITY IN A CASE WHERE A REFUND IS DUE AND PAYABLE, AND THE AUTHORITY CONCER NED ON BEING SATISFIED, SHALL GRANT APPROPRIATE RELIEF. IN CAS ES GOVERNED BY SECTION 240 OF THE ACT, AN OBLIGATION IS CAST UPON THE REVENUE TO REFUND THE AMOUNT TO THE ASSESSEE WITHOUT HAVING T O MAKE ANY CLAIM IN THAT BEHALF. IN APPROPRIATE CASES, THERE FORE IT IS OPEN TO THE ASSESSEE TO BRING THE FACTS TO THE NOTICE OF TH E CONCERNED AUTHORITY ON THE BASIS OF THE RETURN FURNISHED, WHI CH MAY HAVE A BEARING ON THE QUANTUM OF REFUND. AND THE CONCERNE D AUTHORITY FOR THE LIMITED PURPOSE OF CALCULATING THE AMOUNT OF RE FUND U/S 240, MAY TAKE ALL SUCH FACTS INTO CONSIDERATION AND CALC ULATE THE AMOUNT TO BE REFUNDED. SINCE THIS IS THE POSITION U/S 240 EVEN BEFORE PROV ISO (B) WAS ADDED, PROVISO (B) ADDED W.E.F. APRIL 1, 1989, IS ONLY DECLARATORY AND IS RETROSPECTIVE. THEREFORE ULTIMATELY IT WAS HELD THAT WHATEVER IS A LREADY ADMITTED BY THE ASSESSEE, SAME HAS TO BE HONOURED BY THE ASSESSEE. SIMILAR EFFECT WOULD BE THERE IN REASSES SMENT PROCEEDINGS AND IF REASSESSMENT IS HELD NOT TO BE V ALID BY TRIBUNAL OR A COURT OF LAW THEN THAT ACTION DOES NO T LEAD TO THE CONCLUSION THAT ORIGINAL ASSESSMENT IS NOT VALID. HOWEVER, THE ASSESSEE WOULD HAVE A RIGHT TO CHALLENGE THE ADDITI ON MADE UNDER ORIGINAL ASSESSMENT. THIS CLEARLY MEANS THAT IF REASSESSMENT IS HELD TO BE INVALID, THE ASSESSEE WO ULD REVERT BACK TO THE SITUATION WHERE HE ORIGINALLY STOOD I.E . ORIGINAL ASSESSMENT WOULD REVIVE. IN FACT HON'BLE ANDHRA PR ADESH HIGH COURT IN CASE OF NAWAB MIR BARKAT ALI KHAN BAHADUR V. ITO, 172 ITR 13 HAS OBSERVED AT PAGE 16 AS UNDER: IT IS TRUE THAT ONCE REASSESSMENT PROCEEDINGS ARE VALIDLY INITIATED, THE REASSESSMENT PROCEEDINGS ARE NOT CON FINED TO THE ITEMS MENTIONED IN THE NOTICE ISSUED U/S 148. IT I S ALSO TRUE THAT ASSESSMENT OR REASSESSMENT UNDER THIS SECTION IS MA DE AS IF IT WERE MADE FOR THE FIRST TIME IN THE RELEVANT ASSESS MENT YEAR AND TAX IS CHARGED AT THE RATE APPLICABLE TO THE RELEVA NT ASSESSMENT YEAR AND TAX IS CHARGED AT THE RATE APPLICABLE TO THE RELEVANT ASSESSMENT YEAR SUBJECT TO CERTAIN RESTRICTIONS ON E OF THEM BEING THAT ON SUCH REASSESSMENT THE ASSESSABLE INCOME SHO ULD NOT FALL BELOW THE INCOME ORIGINALLY ASSESSED IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. BUT IT DOES NOT FOLLOW FROM THIS THAT ONCE A NOTICE U/S 148 IS GIVEN, THE ORDER OF THE OR IGINAL ASSESSMENT BECOMES VOID AB INITIO OR NON EST. THE ORIGINAL ASSESSMENT ORDER REMAINS GOOD, VALID AND EFFECTIVE TILL IT IS SUBSTITUTED BY THE REASSESSMENT ORDER. THE SITUATI ON IS AKIN 13 TO WHAT HAPPENS IN THE CASE OF SUBSTITUTION OF A SE CTION IN AN ENACTMENT. HIGHLIGHTED PORTION CLEARLY SHOW THAT IT IS A CASE OF SUBSTITUTION AND IF SUBSTITUTE I.E. REASSESSMENT ITSELF FAILS TH EN ORIGINAL ASSESSMENT WOULD AUTOMATICALLY WOULD STAND AS VALID ASSESSMENT. 17 THE LD. COUNSEL FOR THE ASSESSEE HAD ALSO REFERR ED TO THE DECISION OF HON'BLE SUPREME COURT IN CASE OF ITO V. K.L. SRIHARI (HUF)(SUPRA). WE HAVE PERUSED THE JUDGMENT RENDERED BY HON'BLE KARNATAKA HIGH COURT REPORTED AS ITO V. K.L. SRIHARI (HUF), 197 ITR 694 WHEREIN IT WAS HELD THAT EFFECT OF THE REOPENING OF ASSESSMENT WOULD BE THAT ORIGINAL ASSESSMENT GETS TOTALLY EFFACED. THIS JUDGMENT WAS LATER ON CONFIRMED BY THE HON'BLE SUPREME COURT REPORTED AT ITO AND ANOT HER V. K.L. SRIHARI (HUF), AND OTHERS, 250 ITR 193. NOW THE QUESTION IS WHETHER THIS JUDGMENT WOULD OVERRULE THE JUDGMEN T OF SUN ENGINEERING (SUPRA). THIS ISSUE ALSO CAME UP BEFORE THE HON'BLE CALCUTTA HIGH COURT IN CASE OF CIT V. KESHO RAM INDUSTRIES LTD (SUPRA). THE HON'BLE CALCUTTA HIGH COURT MADE FOLLOWING OBSERVATIONS AT PAGE 359 AND 360: HAVING REGARD LD. COUNSEL FOR THE RESPECTIVE PARTI ES, WE ARE RESPECTFULLY OF THE VIEW THAT IN K.L. SRIHARI (HUF) (2001)250 ITR 193, THE HON'BLE SUPREME COURT DID NOT CONSIDER IT NECESSARY TO GO INTO THE VIEWS EXPRESSED BY DIFFERENT BENCHES OF THE HON'BLE SUPREME COURT ON THE SCOPE AND EFFECT OF REOPENING OF AN ASSESSMENT U/S 147 OF THE INCOME-TAX ACT. WE, RESP ECTFULLY ARE, THEREFORE OF THE VIEW THAT THE JUDGMENT OF HON'BLE SUPREME COURT IN SUN ENGINEERING WORKS P LTD. (1992) 198 ITR 297 HAS NEITHER BEEN DISSENTED FROM NOR OVERRULED. NO DOUBT AS CONTENDED BY MR. KHAITAN, THE JUDGMENT IN SUN ENGINEERING WORKS P LTD. IS A TWO JUDGE BENCH JUDGM ENT. BY THE SAID JUDGMENT, THE THREE JUDGE BENCH JUDGMENT IN V. JAGANMOHAN RAOS CASE (1970) 75 ITR 373 (S.C) HAS NOT BE3EN AN D COULD NOT HAVE BEEN OVERRULED. AS NOTICED SUPRA, THE HON'BLE SUPREME COURT IN SUN ENGINEERING WORKS P LTD. HAS EXPLAINED THE PRINCIPLE LAID DOWN IN V. JAGANMOHAN RAOS CASE (1970) 75 ITR 373 (S.C). THE RATIO OF HE JUDGMENT IN SUN ENGINEERING WORKS P LTD. IS TO BE FOUND IN THE FOLLOWING PASSAGE FROM THE SAID JUDGME NT (PAGE 320): AS A RESULT OF THE AFORESAID DISCUSSION, WE FIND T HAT, IN PROCEEDINGS U/S 147 OF THE ACT THE ITO MAY BRING TO CHARGE 14 ITEMS OF INCOME WHICH HAD ESCAPED ASSESSMENT OTHER THAN OR IN ADDITION TO THAT ITEM OR ITEMS WHICH HAVE LED TO THE ISSUANCE OF THE NOTICE U/S 148 AND WHERE REASSESSME NT IS MADE U/S 147 IN RESPECT OF INCOME WHICH HAS ESCAPE D TAX, THE ITOS JURISDICTION IS CONFINED TO ONLY SUCH INC OME WHICH HAS ESCAPED TAX OR HAS BEEN UNDER ASSESSED AND DOES NOT EXTEND TO REVISING, REOPENING OR RECONSIDERING THE WHOLE ASSESSMENT OR PERMITTING THE ASSESSEE TO REAGITATE QUESTIONS WHICH HAD BEEN DECIDED IN THE ORIGINAL ASSESSMENT PROCEEDINGS. IT IS ONLY THE UNDER ASSES SMENT WHICH IS SET ASIDE AND NOT THE ENTIRE ASSESSMENT WH EN REASSESSMENT PROCEEDINGS ARE INITIATED. THE ITO CA NNOT MAKE AN ORDER OF REASSESSMENT INCONSISTENT WITH TH E ORIGINAL ORDER OF ASSESSMENT IN RESPECT OF MATTERS WHICH ARE NOT THE SUBJECT MATTER OF PROCEEDINGS U/S 147. AN ASSESSEE CANNOT RESIST VALIDLY INITIATED REASSESSMENT PROCEE DINGS UNDER THIS SECTION MERELY BY SHOWING THAT OTHER INC OME WHICH HAD BEEN ASSESSED ORIGINALLY WAS AT TOO HIGH A FIGURE EXCEPT IN CASES U/S 152(2). THE WORDS SUCH INCOME IN SECTION 147 CLEARLY REFER TO THE INCOME WHICH IS CH ARGEABLE TO TAX BUT HAS ESCAPED ASSESSMENT AND THE ITOS JURISDICTION UNDER THE SECTION IS CONFINED ONLY TO SUCH INCOME WHICH HAS ESCAPED ASSESSMENT. IT DOES NOT EX TEND TO RECONSIDERING GENERALLY THE CONCLUDED EARLIER ASSES SMENT. CLAIMS WHICH HAVE BEEN DISALLOWED IN THE ORIGINAL ASSESSMENT PROCEEDING CANNOT BE PERMITTED TO BE REA GITATED ON THE ASSESSMENT BEING REOPENED FOR BRINGING TO TA X CERTAIN INCOME WHICH HAD ESCAPED ASSESSMENT BECAUSE THE CONTROVERSY ON REASSESSMENT IS CONFINED TO MATTE RS WHICH ARE RELEVANT ONLY IN RESPECT OF THE INCOME WHICH H AD NOT BEEN BROUGHT TO TAX DURING THE COURSE OF THE ORIGI NAL ASSESSMENT. A MATER NOT AGITATED IN THE CONCLUDED O RIGINAL ASSESSMENT PROCEEDINGS ALSO CANNOT BE PERMITTED TO BE AGITATED IN THE REASSESSMENT PROCEEDINGS UNLESS RE LATABLE TO THE ITEM SOUGHT TO BE TAXED AS ESCAPED INCOME. INDEED, IN THE REASSESSMENT PROCEEDINGS FOR BRINGING TO TAX ITEMS WHICH HAD ESCAPED ASSESSMENT, IT WOULD BE OPEN TO A N ASSESSEE TO PUT FORWARD CLAIMS FOR DEDUCTION OF ANY EXPENDITURE IN RESPECT OF THAT INCOME OR THE NON T AXABILITY OF THE ITEMS AT ALL. KEEPING IN VIEW THE OBJECT AN D PURPOSE OF THE PROCEEDINGS U/S 147 OF THE ACT WHICH ARE FOR THE BENEFIT OF THE REVENUE AND NOT AN ASSESSEE, AN ASSE SSEE CANNOT BE PERMITTED TO CONVERT THE REASSESSMENT PROCEEDINGS AS HIS APPEAL OR REVISION, IN DISGUISE, AND SEEK RELIEF IN RESPECT OF ITEMS EARLIER REJECTED OR CLA IM RELIEF IN RESPECT OF ITEMS NOT CLAIMED IN THE ORIGINAL ASSES SMENT PROCEEDINGS, UNLESS RELATABLE TO ESCAPED INCOME. AND REAGITATE THE CONCLUDED MATTERS. EVEN IN CASES WHE RE THE CLAIMS OF THE ASSESSEE DURING THE COURSE OF REASSE SSMENT PROCEEDINGS RELATING TO THE ESCAPED ASSESSMENT ARE ACCEPTED, STILL THE ALLOWANCE OF SUCH CLAIMS HAS TO BE LIMITED TO THE EXTENT TO WHICH THEY REDUCE THE INCOME TO TH AT ORIGINALLY ASSESSED. THE INCOME FOR PURPOSES OF REASSESSMENT CANNOT BE REDUCED BEYOND THE INCOME ORIGINALLY ASSESSEE. IN SUCH VIEW OF THE MATTER, WE ACCEPT THE CONTENTIO NS OF MR. MALLICK, LD. SENIOR COUNSEL FOR THE REVENUE THAT QU ESTION NO. 2 IS COVERED BY THE JUDGMENT OF THE HON'BLE SUPREME COUR T IN SUN ENGINEERING WORKS P. LTD. 198 ITR 297. THE CONTENT IONS OF MR. J.P. KHAITAN, LD. COUNSEL FOR THE ASSESSEE HAVE AC CORDINGLY TO BE REJECTED. THEREFORE IT IS VERY CLEAR THAT THE JUDGMENT IN CAS E OF ITO AND ANOTHER V. K.L. SRIHARI (HUF) AND OTHERS (SUPRA) DI D NOT 15 CONSIDER IT NECESSARY TO GO INTO THE VIEWS EXPRESSE D BY VARIOUS BENCHES OF HON'BLE SUPREME COURT. THE HON'BLE CALC UTTA HIGH COURT HAS CLEARLY SHOWN THE DISTINCTION BETWEEN TH E DECISION IN CASE OF SUN ENGINEERING (SUPRA) AND ITO AND ANOT HER V. K.L. SRIHARI (HUF) AND OTHERS (SUPRA) AND POINTED OUT TH AT HOW THE VIEWS EXPRESSED IN CASE OF SUN ENGINEERING (SUPRA) STILL HOLDS THE FIELD. 18 ABOVE ISSUE CAN ALSO BE EXAMINED FROM ANOTHER AN GLE BY REFERRING O THE DOCTRINE OF MERGER. NORMALLY DOCTR INE OF MERGER STATES THAT WHEN AN ORDER IS PASSED BY A HIGHER AUT HORITY THEN ORDER PASSED BY THE LOWER AUTHORITIES STANDS MERGED WITH THE ORDER OF HIGHER AUTHORITIES BUT THIS IS NOT UNIVERS AL PRINCIPLE FOR EVERY SITUATION. THIS BECOMES CLEAR FROM THE DECIS ION IN CASE OF CIT V. SHRI ARBUDA MILLS LTD, 231 ITR 50. IN TH AT CASE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT AND NET BUSINESS LOSS WAS COMPUTED AT RS. 3,61,086/- AND TH E INCOME UNDER THE HEAD CAPITAL GAIN WAS DETERMINED AT RS. 38874/-. THE ITO MADE CERTAIN DISALLOWANCES AND WHILE COMPUT ING THE LOSS AND INCOME AS ABOVE BUT HAD ACCEPTED THE FOLLO WING THREE CLAIMS: (I) DEDUCTION OF A SUM OF RS. 23,82,621/- BY WAY OF PROVISIONS FOR GRATUITY; (II DEPRECIATION ON RS. 4,21,000 WHICH WAS PAID BY THE ASSESSEE TO UNITED TEXTILE INDUSTRIES AS CONSIDERAT ION FOR TRANSFER OF INSTALLED PROPERTY OF RS. 17,480 SPINDLES AND 40 0 LOOMS OF OLD MANEK CHOWK MILLS; (III) LOSS ON ACCOUNT OF DIFFERENCE IN EXCHANGE RAT E WHICH WAS REFERABLE O THE PURCHASE OF MACHINERY, ETC. AS REVE NUE EXPENDITURE. THE ASSESSEE FILED AN APPEAL IN RESPECT OF ITEM FO R WHICH THE ADDITIONS WERE MADE. LATER ON AN ORDER U/S 263 WAS PASSED IN RESPECT OF ALLOWANCE OF ABOVE THREE ITEMS. THEREFO RE THE QUESTION AROSE BEFORE THE HON'BLE SUPREME COURT WHE THER 16 THESE THREE ITEMS MERGED WITH THE APPELLATE ORDER. THE HON'BLE SUPREME COURT OBSERVED AS UNDER: WE MAY REFER TO THE AMENDMENT MADE IN SECTION 263 OF THE IT ACT BY THE FINANCE ACT, 1989 WITH RETROSPECTIVE EFFECT FROM JUNE 1, 1988. THE RELEVANT PART THEREOF FOR THE PRESENT CA SE IS AS UNDER: EXPLANATION FOR THE REMOVAL OF DOUBTS, IT IS HER EBY DECLARED THAT , FOR THE PURPOSES OF THIS SUB-SECTIO N- (C) WHERE ANY ORDER REFERRED TO IN THIS SUB-SECTION AND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJEC T MATTER OF ANY APPEAL FILED ON OR BEFORE OR AFTER JUNE 1,1988 THE POWERS OF THE COMMISSIONER UNDER THIS SUB-SECTION SHALL EXTEN D AND SHALL BE DEEMED ALWAYS TO HAVE EXTENDED TO SUCH MATTERS AS H AD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL THE CONSEQUENCE OF THE SAID AMENDMENT MADE WITH RETROSPECTIVE EFFECT IS THAT THE POWERS U/S 263 OF THE COMMISSIONER SHALL EXTEND AND SHALL BE DEEMED ALWAY S TO HAVE EXTENDED TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN AN APPEAL. ACCORDINGLY EVEN IN RESPECT OF THE A FORESAID THREE ITEMS, THE POWERS OF THE COMMISSIONER U/S 263 SHALL EXTEND AND SHALL BE DEEMED ALWAYS TO HAVE EXTENDED TO THEM BEC AUSE THE SAME HAD NOT BEEN CONSIDERED AND DECIDED IN THE APP EAL FILED BY THE ASSESSEE. THIS IS SUFFICIENT TO ANSWER THE QUE STION WHICH HAS BEEN REFERRED. THUS FROM ABOVE IT BECOMES CLEAR THAT DOCTRINE OF M ERGER HAS LIMITED APPLICATION AND WOULD NOT LEAD TO THE CONCL USION THAT EVERY ITEM IN ONE ORDER WOULD GET MERGED IN ANOTHER ORDER IF THE SAME IS APPEALED OR OTHER ORDER IS PASSED IN AC CORDANCE WITH LAW. THEREFORE CLEARLY WHATEVER INCOME IS ASS ESSED U/S 143(3) WILL STAND AND WOULD NOT GET MERGED IN THE REASSESSMENT ORDER PASSED U/S 147 IF THE LATTER REA SSESSMENT ORDER IS ANNULLED BECAUSE OF SOME REASON. SAME PRI NCIPLE OF DOCTRINE OF MERGER WAS LAID DOWN BY THE HON'BLE SUP REME COURT IN CASE OF CIT V. ALAGENDRAN FINANCE LTD. (SUPRA). 19 IF THE CONTENTION OF THE ASSESSEE IS ACCEPTED TH EN IT WOULD LEAD TO TOTALLY UNDESIRED WILD RESULTS. FOR EXAMPLE IF THE ASSESSEE FILES RETURN DECLARING INCOME OF RS. 1 CRO RE AND AN ADDITION OF RS. 25 LAKHS IS MADE THEN THE ASSESSED INCOME WOULD BE RS. 1.25 CRORES U/S 143(3). LET US SAY LA TER ON AN ITEM OF INCOME IS FOUND TO HAVE ESCAPED FOR RS. 10 LAKHS AND 17 NOTICE IS ISSUED U/S 148 TO BRING SUCH ITEM OF ESCA PED INCOME INTO TAX AND IN REASSESSMENT ORDER INCOME IS ASSESS ED AT RS. 1.35 CRORE. LET US FURTHER SAY THAT SUCH REASSESSM ENT IS FOUND WITHOUT JURISDICTION LATER ON IN APPEAL PROCEEDINGS BECAUSE OF NON RECORDING OF REASONS OR THE ISSUE IS TIME BARRE D AND SUCH REASSESSMENT IS ANNULLED. THEN IF IT IS HELD THAT SINCE REASSESSMENT ORDER HAS EFFACED, THE ORIGINAL ORDER, THEN THE RESULT WOULD BE THAT THE ASSESSEE WOULD NOT BE LIAB LE TO PAY THE TAX ON ADMITTED INCOME OF RS. 1 CRORE AS WELL A S THE ADDITION MADE ON RS. 25 LAKHS. THIS IS TOTALLY AGAI NST THE SCHEME OF THE ACT AS WELL AS PRINCIPLE LAID IN THE CASE OF CIT V. SHELLY PRODUCTS (SUPRA). NO DOUBT WE AGREE TO THE E XTENT THAT THE ASSESSEE HAS RIGHT TO CHALLENGE THE ADDITION OF RS. 25 LAKHS. BUT IF THE INTERPRETATION MADE BY THE LD. C OUNSEL FOR THE ASSESSEE IS ACCEPTED, IT WOULD LEAD TO UNDESIRED WI LD RESULTS WHICH ARE TOTALLY AGAINST THE SCHEME OF ACT AND THE REFORE SAME CANNOT BE ACCEPTED. 20 THEREFORE IN VIEW OF ABOVE DISCUSSION, WE HOLD THAT WHERE REASSESSMENT ORDER IS ANNULLED LATER ON THEN ORIGIN AL ASSESSMENT ORDER WOULD AUTOMATICALLY GET RESTORED. ACCORDINGLY WE DISMISS GROUNDS NO. 2 & 3 OF ASSESSE ES APPEALS. 21 GROUND NO. 4 THE LD. COUNSEL FOR THE ASSESSEE HAS NOT UTTERED A SINGLE SENTENCE IN RESPECT OF THIS GROUN D, THEREFORE WE ARE CONSTRAINT TO CONFIRM THE FINDINGS OF LD. CI T(A) WHICH HAS BEEN RECORDED IN PARA 5 OF THE IMPUGNED ORDER. 22 ITA NO. 1184/CHD/2013 THE ISSUES INVOLVED IN THIS APPEAL ARE IDENTICALLY SAME AND THEREFORE FOLLOWING OUR ABOVE ORDER, THOSE ISSUES ARE ALSO DECIDED AGAINST THE AS SESSEE. 18 23 IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.10.2014 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 31.10.2014 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR