M/S. LARK CHEMICALS LTD., MUMBAI V. THE C.I.T (APPEALS)-I, MUMBAI

ITA 2843/MUM/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7789 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 24-01-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 04-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PRAKASH JOTHWALI
• Keywords: Search and seizure; Period of limitation; Reassessment proceedings; Set aside
• Section: 40A(3); 143(3); 143(1); 147; 148; 263

Judgement Text

1 ITA NOS. 2840 TO 2843/MUM/2009 (ASST YEARS 1999-00 TO 2002-03) IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI MUMBAI MUMBAI MUMBAI G GG G BENCH BENCH BENCH BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE BEFORE BEFORE BEFORE SHRI D K AGRAWAL, JM & SHRI D K AGRAWAL, JM & SHRI D K AGRAWAL, JM & SHRI D K AGRAWAL, JM & SHRI R K PANDA, AM SHRI R K PANDA, AM SHRI R K PANDA, AM SHRI R K PANDA, AM ITA NO ITA NO ITA NO ITA NOS SS S. . . . 2840 TO 2843/MUM/2009 2840 TO 2843/MUM/2009 2840 TO 2843/MUM/2009 2840 TO 2843/MUM/2009 (ASST YEAR (ASST YEAR (ASST YEAR (ASST YEARS 1999 S 1999 S 1999 S 1999- -- -00 TO 2002 00 TO 2002 00 TO 2002 00 TO 2002- -- -03 0303 03) )) ) LARK CHEMICALS LTD 114 MARINE CHAMEBRS 11 NEW MARINE LINES MMBAI 400 020 VS THE COMMR OF INCOME TAX CITY -1 MUMBAI ( (( (APPELLANT APPELLANT APPELLANT APPELLANT) )) ) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO. A SSESSEE BY SHRI PRAKASH JOTHWALI REVENUE BY SHRI PAVAN VED/CIT-DR PER PER PER PER BENCH: BENCH: BENCH: BENCH: THE ABOVE 4 APPEALS FILED BY THE ASSESSEE ARE DIRE CTED AGAINST THE SEPARATE ORDERS DATED 31.3.2009 PASSED U/S 263 OF THE I T ACT BY THE CIT-I MUMBAI RELATING TO ASSESSMENT YEAR 1999-00 TO 2002 -03 RESPECTIVELY. SINCE IDENTICAL GROUNDS HAVE BEEN TAKEN IN ALL THESE APPE ALS; THEREFORE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CO MMON ORDER. ITA NO.2843/MUM/2009 ITA NO.2843/MUM/2009 ITA NO.2843/MUM/2009 ITA NO.2843/MUM/2009 (ASSESSMENT YEAR 2002 (ASSESSMENT YEAR 2002 (ASSESSMENT YEAR 2002 (ASSESSMENT YEAR 2002- -- -03) 03) 03) 03) 2 FACTS OF THE CASE, IN BRIEF, ARE THAT THE RETURN OF INCOME DECLARING A TOTAL INCOME OF RS.30,98,050/- WAS FILED BY THE ASSESSEE ON 17 TH OCT 2002 WHICH WAS PROCESSED U/S 143(1). SUBSEQUENTLY, ON THE BASIS OF INTIMATION RECEIVED FROM DIT(INVESTIGATION), THE ASSESSMENT WAS REOPENED BY ISSUING NOTICE U/S 148 OF THE I T ACT. THE REASONS ON WHICH THE CASE WAS REOPENE D ARE AS UNDER: 2 ITA NOS. 2840 TO 2843/MUM/2009 (ASST YEARS 1999-00 TO 2002-03) 1, IN THIS CASE AN INTIMATION HAS BEEN RECEIVED FRO M ADIT(INV) VIDE LETTER NO.ADDL. DIT(INV)/U/VIII/SURVEY/2005-06 DATED 28.2.2006 WHICH IS AS UNDER: THE ASSESSEE HAS PURCHASED IMPORTED GOODS CHEMICA LS ETC., FROM THREE PARTIES VIZ I) CASIO PHARMA 2) M/S VISHN U PHARMA CHEM AND 3) M/S VARMA PHARMACEUTICALS. AFTER VERIFI CATION IT WAS FOUND THAT THESE PARTIES ARE BOGUS NON GENUI NE. THEREFORE, INCOME EARNED THROUGH THE TRANSACTIONS M ADE WITH THESE PARTIES IS ESCAPED FROM THE TOTAL INCOME. THE UNSECURED LOANS SHOWN IN THE BALANCE SHEET FOR AY 2002- 03 OF RS. 1.14 CRORES IN THE NAME OF ABOVE THREE PA RTIES. IT HAS TO BE TREATED AS NON-GENUINE. THUS THE INCOME DECL ARED UNDER GUISE OF UNSECURED LOAN HAS ESCAPED FROM THE TOTAL INCOME. THEREFORE, I HAVE REASON TO BELIEF THAT INCOME ESC APED FOR AY 2002-03. A NOTICE U/S 148 IS BEING ISSUED. 2.1 IN RESPONSE TO THE STATUTORY NOTICES ISSUED BY THE ASSESSING OFFICER, THE ASSESSEE APPEARED BEFORE HIM AND FILED VARIOUS DETA ILS FROM TIME TO TIME. AFTER SATISFYING HIMSELF, THE ASSESSING OFFICER ACCEPTED THE RETURN OF INCOME AND MADE ADDITION OF RS. 25,14,486/- U/S 40A(3) OF THE I T ACT ON ACCOUNT OF CASH PURCHASES MADE FROM M/S VERMA PHARMACEUTICALS AMOUN TING TO RS. 1,25,72,430/-. 3 THE CIT CALLED FOR THE RECORDS AND EXAMINED THE S AME. HE NOTICED THAT WHILE MAKING THE ADDITION, THE ASSESSING OFFICER HAS HELD THAT PURCHASES HAVE BEEN MADE FROM M/S VERMA PHARMACEUTICALS AND THE PA YMENTS HAVE BEEN MADE IN CASH AND NOT THROUGH ACCOUNT PAYEE CHEQUE, FOR W HICH HE DISALLOWED 20% OF THE ABOVE. BEFORE MAKING THIS ADDITION, THE ASSESS ING OFFICER, HOWEVER HELD THAT THE PURCHASER IS A NON-EXISTING PARTY AND THE PURCH ASE WHICH HAS BEEN SHOWN AS A SUNDRY CREDITOR HAS BEEN CONVERTED INTO UNSECURED LOAN. WHEN SUPPLIERS ARE FOUND TO BE NON-EXISTING PARTIES, PURCHASE ITSELF I S A DOUBTFUL ONE. THE ASSESSING 3 ITA NOS. 2840 TO 2843/MUM/2009 (ASST YEARS 1999-00 TO 2002-03) OFFICER OUGHT TO HAVE VERIFIED THE GENUINENESS OF T HE PURCHASES. ACCORDINGLY, HE HELD THAT THE ASSESSING OFFICER HAS FAILED TO INVES TIGATE THE FOLLOWING ISSUES: A) HUGE CURRENT LIABILITIES AND PROVISIONS B) DETAIL EXAMINATION OF COST OF GOODS SHOWN C) DECREASE IN SALES DURING THE YEAR COMPARED TO THE P REVIOUS YEAR D) OTHER ISSUES COULD HAVE BEEN INVESTIGATED WHEN THE CASE WAS REOPENED U/S 147 OF THE ACT E) ENTIRE UNSECURED LOAN F) CLOSING STOCK OF GOODS OUT OF VARIOUS CASH PURCHASE S G) FOREIGN TRAVEL WITH BUSINESS CONNECTION H) DETAILS OF DUTY CHARGEABLE AND PAID FOR GOODS PROCU RED FROM OUTSIDE THE COUNTRY. HE FURTHER HELD THAT SOME OF THE ISSUES HAVE NOT BE EN EXAMINED BY THE ASSESSING OFFICER, WHICH ARE AS UNDER: A) INTEREST CHARGED TO CUSTOMERS ARE NOT ACCOUNTED ON MERCANTILE BASIS AND THERE IS NO SCOPE TO ALLOW MIXED SYSTEM OF ACCOUNT. B) NON CONFIRMATION OF DEBT AND CREDIT BALANCE BY THE DEBTORS AND CREDITORS. 3.1 THE CIT ACCORDINGLY WAS OF THE OPINION THAT PRI MA FACIE THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICI AL TO THE INTERESTS OF THE REVENUE. HE, THEREFORE, PROPOSED TO INVOKE PROVISIO NS OF SEC. 263 OF THE I T ACT AND VIDE HIS NOTICE DATED 17.3.2004 ASKED THE ASSE SSEE TO EXPLAIN AS TO WHY NECESSARY ORDER INCLUDING AN ORDER ENHANCING OR MO DIFYING THE ASSESSMENT OR CANCELLING THE ASSESSMENT ORDER AND DIRECTING FRESH ASSESSMENT SHOULD NOT BE PASSED. 4 THE ASSESSEE REPLIED TO THE NOTICE ISSUED BY THE CIT. RELYING ON A COUPLE OF DECISIONS, IT WAS SUBMITTED THAT THE ORDER PASSE D BY THE ASSESSING OFFICER IS 4 ITA NOS. 2840 TO 2843/MUM/2009 (ASST YEARS 1999-00 TO 2002-03) CORRECT AND THE SAME IS NEITHER ERRONEOUS NOR PREJ UDICIAL TO THE INTERESTS OF THE REVENUE. 5 HOWEVER, THE CIT WAS NOT CONVINCED WITH THE EXPLA NATIONS GIVEN BY THE ASSESSEE AND HELD THAT THE ORDER PASSED BY THE ASSE SSING OFFICER IS WITHOUT APPLICATION OF MIND, WITHOUT MAKING NECESSARY INQUI RIES OR VERIFICATION AND THE SAME DOES NOT CLEARLY SPELL OUT THE REASONS OF ACCE PTANCE OR REJECTIONS OF THE MATERIAL PLACED BY THE ASSESSEE, IF ANY, THEREFORE, THE SAME IS NOT JUST ERRONEOUS BUT ALSO PREJUDICIAL TO THE INTERESTS OF THE REVENU E. HE, ACCORDINGLY, SET ASIDE THE ORDER OF THE ASSESSING OFFICER AND DIRECTED THE ASS ESSING OFFICER TO DO THE ASSESSMENT DE-NOVO ON THE SAID ISSUE AFTER AFFORDIN G NECESSARY OPPORTUNITY TO THE ASSESSEE TO REPRESENT HIS CASE. 6 AGGRIEVED WITH SUCH ORDER OF THE CIT, THE ASSESSE E IS IN APPEAL HERE BEFORE US WITH THE FOLLOWING GROUNDS: I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD CIT(A) ERRED IN CONSIDERING THE ASSESSMENT ORDER DATED 28. 6.2006 AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE AND THUS ERRED IN SETTING ASIDE THE ORIGINAL ASSESSMENT U/S 263 OF THE I T ACT, 1961. THE ORDER OF THE CIT MAY BE QUASHED AND THAT OF THE ASSESSING OFFICER BE RESTORED. II) THE LD CIT OUGHT TO HAVE APPRECIATED THE FACT T HAT ALL THE DETAILS WERE PROPERLY EXAMINED BY THE ASSESSING OFFICER BEFORE PASSING THE ASSESSMENT ORDER AND HENCE THE SAID ORDER WAS NOT E RRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE: 7 THE LD COUNSEL FOR THE ASSESSEE REFERRING TO PAGE 9 OF THE PAPER BOOK DREW THE ATTENTION OF THE BENCH TO THE REASONS RECO RDED BY THE AO THAT THE 5 ITA NOS. 2840 TO 2843/MUM/2009 (ASST YEARS 1999-00 TO 2002-03) INCOME HAS ESCAPED ASSESSMENT. REFERRING TO THE REP LY GIVEN BY THE ASSESSEE ON VARIOUS DATES TO THE NOTICES ISSUED BY THE ASSESSIN G OFFICER, HE SUBMITTED THAT THE ASSESSING OFFICER, AFTER PROPER ENQUIRIES AND D UE APPLICATION OF MIND HAS ACCEPTED THE PURCHASES AS GENUINE AND ALSO ACCEPTED THE UNSECURED LOAN SHOWN IN THE BALANCE SHEET. HE SUBMITTED THAT WHEN THE AS SESSING OFFICER AFTER DUE APPLICATION OF HIS MIND HAS TAKEN A PARTICULAR VIEW ; THEREFORE, MERELY BECAUSE THE CIT DOES NOT AGREE WITH THE VIEW TAKEN BY THE A SSESSING OFFICER, HE CANNOT INVOKE PROVISIONS OF SEC. 263 OF THE I T ACT. 7.1 REFERRING TO THE COPY OF THE ASSESSMENT ORDER, HE SUBMITTED THAT THE ASSESSING OFFICER IN THE BODY OF THE ASSESSMENT ORD ER HAS MENTIONED ABOUT THE INTIMATION SENT BY THE DIT(INVESTIGATION) ON THE BA SIS OF THE RAID CONDUCTED BY DRI AUTHORITIES. HE HAS ALSO MENTIONED IN PARA 4 O F THE ORDER THAT THE ASSESSEE HAS CONFESSED THAT CERTAIN IMPORTED GOODS SOLD BY THE ASSESSEE WERE BY PROCURING PURCHASE BILLS FROM THREE PARTIES VIZ CAS IO PHARMA, VISHNU PHARMACHEM AND VERMA PHARMACEUTICALS. HE SUBMITTED THAT AFTER RECEIVING THE REPLIES GIVEN BY THE ASSESSEE FROM TIME TO TIME , THE ASSESSING OFFICER HAS NOTED THAT THERE WAS NO PURCHASES DURING THE YEAR F ROM CASIO PHARMA AND VISHNU PHARMACHEM AND GOODS WORTH RS. 1,25,72,430/- HAD BEEN PURCHASED FROM VERMA PHARMACEUTICALS ON CASH FOR WHICH HE HAD INVOKED PROVISIONS OF SEC. 40A(3)AND MADE ADDITION OF RS. 25,14,486/- TO THE RETURNED INCOME OF RS. 30,98,050/-. SINCE THE ASSESSING OFFICER HAD MADE PROPER ENQUIRIES AND AFTER DUE APPLICATION OF MIND HAS PASSED THE ORDER; THER EFORE, THE SAME IS NOT ERRONEOUS AND THEREFORE, THE CIT IS NOT JUSTIFIED IN INVOKING PROVISIONS OF SEC. 6 ITA NOS. 2840 TO 2843/MUM/2009 (ASST YEARS 1999-00 TO 2002-03) 263 OF THE I T ACT. IN SUPPORT OF HIS CONTENTION, HE RELIED ON A COUPLE OF DECISIONS. 7.2 THE LD DR, ON THE OTHER HAND, WHILE SUPPORTING THE ORDER OF THE CIT, SUBMITTED THAT NOTICE U/S 148 WAS VERY SPECIFIC AN D THE ASSESSING OFFICER HAS NOT CONDUCTED PROPER ENQUIRIES; THEREFORE, THE ORDE R PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE LD DR HAS ALSO RELIED A COUPLE OF DECISIONS. 8 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE PARTIES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND TH E CIT AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSI DERED THE VARIOUS DECISIONS CITED BY BOTH THE PARTIES. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSING OFFICER, ON THE BASIS OF THE INTIMATION SENT BY DIT (INV), HAS REOPENED THE ASSESSMENT AND PASSED ORDER U/S 143(3)/147 DETERMIN ING THE TOTAL INCOME AT RS. 56,12,540/- AS AGAINST RS.30,98,050/- RETURNED BY THE ASSESSEE. THERE IS ALSO NO DISPUTE TO THE FACT THAT THE ASSESSING OFFICER, IN THE SAID ORDER HAS MADE ONLY ADDITION U/S 40A(3) ON ACCOUNT OF CASH PURCHASES F ROM M/S VERMA PHARMACEUTICALS FOR RS. 1,25,72,430/-. HE HAS ALSO NOTED THAT THERE IS NO PURCHASE FROM CASIO PHARMA AND VISHNU PHARMACHEM. ACCORDING TO THE CIT, THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS SIN CE HE HAS FAILED TO INVESTIGATE THE VARIOUS ISSUES, AS ENUMERATED IN THE NOTICE ISS UED BY HIM PROPOSING INITIATION OF PROCEEDINGS U/S 263. 7 ITA NOS. 2840 TO 2843/MUM/2009 (ASST YEARS 1999-00 TO 2002-03) 8.1 IT IS THE SUBMISSION OF THE LD COUNSEL FOR THE ASSESSEE THAT ON THE BASIS OF THE NOTICE ISSUED BY THE ASSESSING OFFICER, THE ASS ESSEE APPEARED BEFORE HIM FROM TIME TO TIME AND FURNISHED VARIOUS DETAILS. TH E ASSESSING OFFICER AFTER DUE APPLICATION OF HIS MIND HAS PASSED THE ORDER; THE REFORE, THE SAME IS NOT ERRONEOUS. 8.2 IT IS THE SETTLED PROPOSITION OF LAW THAT FOR I NVOKING PROVISIONS OF SEC. 263, THE TWIN CONDITIONS NAMELY I) THE ORDER MUST BE ERR ONEOUS AND (B) THE ORDER MUST BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE , MUST BE FULFILLED. IN THE INSTANT CASE, WE FIND, ON THE BASIS OF THE INTIMATI ON RECEIVED FROM DIT(INV), THE ASSESSING OFFICER ISSUED NOTICES U/S 148 AND COMPL ETED THE ASSESSMENT U/S 143(3)/147. WE FIND FROM THE COPY OF THE ASSESSMEN T ORDER THAT THE ASSESSING OFFICER, AFTER MENTIONING THAT THE INTIMATION SEN T BY THE DIT(INV) ON THE BASIS OF RAID CONDUCTED BY DRI AUTHORITIES, HAD CALLED FOR DETAILS OF PURCHASES MADE AND ALSO UNSECURED LOANS AS ON 31.3.2002 IN THE C ASE OF THREE PARTIED MENTIONED THEREIN. WE FIND FROM THE PAPER BOOK FI LED BY THE ASSESSEE THAT THE ASSESSEE HAS COMPLIED WITH VARIOUS STATUTORY NOTICE S ISSUED BY THE ASSESSING OFFICER AND FURNISHED DETAILS FROM TIME TO TIME. TH EREFORE, THE ORDER PASSED BY THE ASSESSING OFFICER, IN OUR OPINION CANNOT BE CAL LED AS ERRONEOUS. IT IS THE SETTLED PROPOSITION OF LAW THAT WHEN THE ASSESSING OFFICER HAS TAKEN ONE OF THE POSSIBLE VIEWS AND THE CIT DOES NOT AGREE WITH SUCH VIEW, NO PROCEEDINGS U/S 263 CAN BE INITIATED. IN THE INSTANT CASE, IT MAY B E PREJUDICIAL TO THE INTERESTS OF THE REVENUE BECAUSE THE ASSESSING OFFICER HAS NOT MADE THE ADDITION WHICH, IN THE OPINION OF THE CIT SHOULD HAVE BEEN ADDED TO TH E TOTAL INCOME OF THE ASSESSEE I.E. THE ENTIRE PURCHASES MADE FROM THE TH REE PARTIES MENTIONED IN THE 8 ITA NOS. 2840 TO 2843/MUM/2009 (ASST YEARS 1999-00 TO 2002-03) NOTICE AND ALSO UNSECURED LOANS. HOWEVER, THE SAM E PER SE CANNOT BE THE BASIS FOR INVOKING PROCEEDINGS U/S 263. AS MENTIONED EARL IER, UNLESS THE TWIN CONDITIONS I.E. (A) THE ORDER MUST BE ERRONEOUS AN D (B) THE ORDER MUST BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE, MUST B E SATISFIED, FOR ATTRACTING THE PROVISIONS OF SEC. 263 OF THE I T ACT. IF ONE IS P RESENT AND THE OTHER ONE IS ABSENT THEN PROVISIONS OF SEC. 263 CANNOT BE INVOKE D. SINCE WE HAVE ALREADY HELD THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS NOT ERRONEOUS; THEREFORE, THE ORDER PASSED BY THE CIT U/S 263 OF THE ACT, IN OUR OPINION IS NOT IN ACCORDANCE WITH LAW AND THEREFORE, THE SAME HAS TO BE SET ASIDE. 8.3 SO FAR AS THE OTHER ISSUES IN THE ORDER U/S 263 ARE CONCERNED, IN OUR OPINION THE CIT CANNOT INITIATE PROCEEDINGS U/S 263 IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS ALAGEND RAN FINANCE LTD REPORTED IN 293 ITR 1 (SC) AND THE DECISION OF THE HONBLE BOM BAY HIGH COURT IN THE CASE OF ASHOK BUILDCON LTD VS ACIT REPORTED IN 325 ITR 574 (BOM). 8.4 WE FIND. IN THE CASE ALAGENDRAN FINANCE LTD (SU PRA) THE ASSESSMENT FOR THE AYS 1994-95, 1995-96 AND 1996-97 WERE COMPLETED IN 1997 AND 1998. IN THE ORDERS OF ASSESSMENT, THE ASSESSEES CLAIM RELA TING TO LEASE EQUALISATION FUND WAS ACCEPTED. THEREAFTER, ORDERS OF REASSESSM ENT WERE INITIATED IN RESPECT OF THREE OTHER ITEMS BUT NOT THE ITEM RELATING TO LEASE EQUALISATION FUND AND REASSESSMENT WERE MADE. THEREAFTER, THE COMMISSIONE R BY AN ORDER DATED 29.3.2004, INITIATED REVISION PROCEEDINGS ONLY IN R ELATION TO THE ITEM LEASE EQUALISATION FUND. THE TRIBUNAL HELD THAT THE REV ISION PROCEEDINGS WERE BARRED BY LIMITATION AS THEY WERE INITIATED MORE THAN FOUR YEARS AFTER THE ORIGINAL 9 ITA NOS. 2840 TO 2843/MUM/2009 (ASST YEARS 1999-00 TO 2002-03) ASSESSMENT, WHICH WAS UPHELD BY THE HONBLE HIGH CO URT. ON FURTHER APPEAL, THE HONBLE SUPREME COURT HAS HELD AS UNDER: ( SHORT NOTE) AFFIRMING THE DECISION OF THE HIGH COURT, THAT THE COMMISSIONER HAD SOUGHT TO REVISE ONLY THAT PART OF THE ORDER OF ASSESSMENT WHICH RELATED TO LEASE EQUALISATION FUND; BUT THE PROCEEDINGS FOR REASSESS MENT HAD NOTHING TO DO WITH THAT ITEM OF INCOME. THE DOCTRINE OF MERGER DI D NOT APPLY IN A CASE OF THIS NATURE; THE PERIOD OF LIMITATION COMMENCED FRO M THE DATES OF THE ORIGINAL ASSESSMENTS AND NOT FROM THE REASSESSMENTS SINCE TH E LATTER HAD NOT HAD ANYTHING TO DO WITH THE LEASE EQUALISATION FUND. TH IS WAS NOT A CASE WHERE THE SUBJECT-MATTER OF REASSESSMENT AND THE SUBJECT MATTER OF THE ASSESSMENT WERE THE SAME. {CIT VS SHRI ARBUDA MILLS LTD 231 ITR 50 (SC) RELIE D ON CWT VS A KTHANGA PILLAI 252 ITR 260 (MAD) APPROVED. } THERE MAY NOT BE ANY DOUBT OR DISPUTE THAT ONCE AN ORDER OF ASSESSMENT IS REOPENED, THE PREVIOUS UNDER ASSESSMENT WILL BE HEL D TO BE SET ASIDE AND THE WHOLE PROCEEDINGS WOULD START AFRESH, BUT THAT WOUL D NOT MEAN THAT EVEN WHEN THE SUBJECT MATTER OR REASS3SSMENT IS DISTINCT AND DIFFERENT, THE ENTIRE PROCEEDINGS WOULD BE DEEMED TO HAVE BEEN REOPENED. EXPLANATION (C) APPENDED TO SUB-SECT (1) OF SEC 263 OF THE I T ACT, 1961 WHICH DEALS WITH THE POWER OF THE COMMISSIONER IN R EVISION, IS CLEAR AND UNAMBIGUOUS, AS IN TERMS THEREOF THE DOCTRINE OF ME RGER APPLIES ONLY IN RESPECT OF SUCH ITEMS WHICH WERE THE SUBJECT MATTER OF APPEAL AND NOT IN RESPECT OF THOSE WERE NOT. DECISION OF THE MADRAS HIGH COURT AFFIRMED. 8.5 WE FIND, THE HONLBLE JURISDICTIONAL HIGH COUR T IN THE CASE OF ASHOK BUILDCON LTD (SUPRA) FOLLOWING THE DECISION OF THE HONLBLE SUPREME COURT IN THE CASE OF ALAGENDRAN FINANCE LTD (SUPRA) HELD THAT W HERE AN ASSESSMENT HAS BEEN REOPENED U/S 147 OF THE I T ACT, 1961 IN RELATION T O A PARTICULAR GROUND OR IN RELATION TO CERTAIN SPECIFIED GROUNDS AND, SUBSEQUE NT TO THE PASSING OF THE ORDER OF REASSESSMENT, JURISDICTION U/S 263 IS SOUGHT TO BE EXERCISED WITH REFERENCE TO ISSUES WHICH DID NOT FORM THE SUBJECT OF THE REOPEN ING OF THE ASSESSMENT OR THE ORDER OF REASSESSMENT, THE PERIOD OF LIMITATION PR OVIDED FOR IN SUB-SEC. (2) OF SEC. 263 WOULD COMMENCE FROM THE DATE OF THE ORDER OF ASSESSMENT AND NOT 10 ITA NOS. 2840 TO 2843/MUM/2009 (ASST YEARS 1999-00 TO 2002-03) FROM THE DATE ON WHICH THE ORDER REOPENING THE REAS SESSMENT HAD BEEN PASSED. IN RESPECT OF ISSUES WHICH DID NOT FORM THE SUBJECT MATTER OF THE REASSESSMENT PROCEEDINGS U/S 143(3) R.W.S 147 LIMITATION WOULD C OMMENCE WITH REFERENCE TO THE ORIGINAL ORDER OF ASSESSMENT. 8.6 SINCE IN THE INSTANT CASE RETURN WAS PROCESSED U/S 143(1) AND HE NOTICE U/S 148 WAS ISSUED FOR ADDING UNACCOUNTED BOGUS PUR CHASES AND UNSECURED LOANS, THEREFORE, IN THE LIGHT OF THE RATIO OF THE DECISIONS CITED ABOVE, THE LD CIT CANNOT INITIATE PROCEEDINGS U/S 263 ON OTHER ISSUES OTHER THAN THE ITEMS COVERED IN THE ORDER PASSED U/S 143(3)/147. 8.7 IN THIS VIEW OF THE MATTER, WE SET ASIDE THE O RDER OF THE CIT AND THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. ITA NO. 2840 TO 2842/MUM/2009 (AYS 1999 ITA NO. 2840 TO 2842/MUM/2009 (AYS 1999 ITA NO. 2840 TO 2842/MUM/2009 (AYS 1999 ITA NO. 2840 TO 2842/MUM/2009 (AYS 1999- -- -00 00 00 00 TO TO TO TO 2001 2001 2001 2001- -- -02) 02) 02) 02) 9 AFTER HEARING BOTH THE PARTIES, WE FIND THE GROUN DS RAISED BY THE ASSESSEE IN THE ABOVE APPEALS ARE IDENTICAL TO THE GROUNDS R AISED IN ITA NO.2843/MUM/2009. WE HAVE ALREADY DISCUSSED THE IS SUE AND THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. FOLLOWING THE SAME RATIO, WE ALLOWED THE GROUNDS RAISED BY THE ASSESSEE IN THESE THREE APPEA LS ALSO. 11 ITA NOS. 2840 TO 2843/MUM/2009 (ASST YEARS 1999-00 TO 2002-03) 10 IN THE RESULT, ALL THE FOUR APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON THE 31 ST DAY OF MAR 2011. SD/- SD/- ( (( ( D K AGRAWAL D K AGRAWAL D K AGRAWAL D K AGRAWAL ) )) ) JUDICIAL MEMBER ( (( ( R K PANDA R K PANDA R K PANDA R K PANDA ) )) ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED: 31 ST MAR 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI