Case: Commissioner of Income Tax Vs. Sun Engineering Works Private Limited

cannot make an order of reassessment 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 proceedings under this section merely by showing that other income which had been assessed originally was at too high a figure except in cases under section 152(2). The words such income in Section 147 clearly refer to the income which is chargeable to tax but has escaped assessment and the Income-tax Officers 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 cannot 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 relevant only in respect of the income which had not been brought to tax certain income which had escaped assessment because the controversy on reassessment is confined to matters which ar relevant only in respect of the income which had not been brought to tax during the course of the original assessment. A matter not agitated in the concluded original assessment proceedings also cannot be permitted to be agitated in the reassessment proceedings unless relatable to the times 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 an assessee to put forward claims for deduction of any expenditure in respect of that income or the non-taxability 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 convert 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 proceedings, unless relatable to escaped income, and reagitate the concluded matters. Even in cases where the claims of the assessee during the course of reassessment 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 that originally assessed. The income for purposes of reassessment cannot be reduced beyond the income originally assessed42. It would be seen that whereas in the case of Anglo-French Textile Company Limited case ( 1953 (23) ITR 82 : 1953 AIR(SC) 111) the question as to the rights of an assessee to claim redoing, revising or recomputing entire income during the reassessment proceedings was left open, that question did not come up for consideration in the case of H. R. Sri Ramulu ( 1973 (2) SCC 137 : 1973 SCC(Tax) 484 : 1973 (32) STC 77 ) or H. M. Esufali ( 1977 (107) ITR 760 (Bom)) or even in Jagan Mohan Rao case ( 1969 (2) SCC 389 : 1970 (75) ITR 373 ). Some of the High Courts, therefore, fell in error in reading those judgments, divorced from the context in which the precise questions came up for consideration in those cases, and to hold that the assessee could reagitate the concluded issues and claim relief in respect of items, finally concluded in the original assessment proceedings, during the reassessment proceedings, unconnected with the escapement of income. We cannot, therefore, approve the broad proposition laid down in that regard in Deputy Commissioner of Commercial Taxes v. Indian Refrigeration Industries P. Ltd. ( 1980 (46) STC 264 (Mad) , CIT v. Ramsevak Paul ( 1977 (110) ITR 527 (Cal)), CIT v. Assam Oil Co. Ltd. ( 1982 (133) ITR 204 (Cal), CIT v. Standard Motor Products of India Ltd. ( 1983 (142) ITR 877 (Mad), CIT v. Rangnath Bangur ( 1984 (149) ITR 487 (Raj)), State Bank of Hyderabad v. CIT ( 1988 (171) ITR 232 (AP)), CIT v. Indian Rare Earth Ltd ( 1990 (181) ITR 22 (Bom) (FB)) 43. Keeping in view the above principles, we may now turn our attention to the question formulated by the High Court as noticed in the earlier part of the judgment 44. The Tribunal rightly found that the loss which the assessee wanted to be set off against the escaped income could not be allowed to be so set off because in the original assessment proceedings, no set off was claimed or permitted and the original assessment had acquired finality when the appeal against the order of assessment failed before the Appellate Assistant Commissioner and the assessee took no further steps to agitate the issue. The Tribunal was also right in concluding that the item which the assessee wanted to be taken into account in the proceedings under section 147 of the Act were unconnected with the escapement of income. The High Court clearly fell in error in holding otherwise. Since the original assessment had been concluded finally against the assessee, it was not permissible for the assessee in the reassessment proceedings to seek a review/revision of the concluded assessment for the purpose of computation of the escaped income. The High Court clearly fell in error in permitting the assessee to reagitate, in reassessment proceedings under section 147(a) of the Act, the finally concluded assessment proceedings and to grant to him relief in respect of items not only earlier rejected, but also unconnected with the escapement of income by assuming as if the original assessment had not been concluded or was "still open"45. Therefore, our answer to the question formulated by the High Court and noticed in the earlier part of this judgment is that, in the reassessment proceedings, it is not open to an assessee to seek a review of the concluded item, unconnected with the escapement of income, for the purpose of computation of the escaped income

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]11. In view of the settled position of law, as noticed above, the Tribunal was right to opine that, in the present case, by the order dated December 12, 1962, the assessment proceedings had concluded and with the dismissal of the appeals against that order, the order of the ITO, dated December 12, 1962, had acquired finality. The High Court clearly fell in error in holding that in the assessment proceedings there had been no final determination of losses for the relevant year and to assume as if the loss return had not been finally disposed of or to be still open. The Income Tax Officer had disposed of the assessment proceedings, accepting the plea of the assessee that for the relevant year it had no income and that is why the proceedings were filed as No demand. The order of assessment had, thus, become final on the conclusion of the proceedings and dismissal of theAs a result of the aforesaid discussion, we find that in proceedings under section 147 of the Act, the Income Tax Officer may being to charge items of income which had escaped assessment other than or in addition to that item or times which have led to the issuance of the notice under Section 148 and where reassessment is made under Section 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 beenand does not extend to revising, reopening in or reconsidering the whole assessment or permitting the assessee the reagitate questions which had been decided in the original assessment proceedings. It is only the underassessment which is set aside and not the entire assessment when reassessment proceedings are initiated. TheOfficer cannot make an order of reassessment 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 proceedings under this section merely by showing that other income which had been assessed originally was at too high a figure except in cases under section 152(2). The words such income in Section 147 clearly refer to the income which is chargeable to tax but has escaped assessment and theOfficers 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 cannot 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 relevant only in respect of the income which had not been brought to tax certain income which had escaped assessment because the controversy on reassessment is confined to matters which ar relevant only in respect of the income which had not been brought to tax during the course of the original assessment. A matter not agitated in the concluded original assessment proceedings also cannot be permitted to be agitated in the reassessment proceedings unless relatable to the times 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 an assessee to put forward claims for deduction of any expenditure in respect of that income or theof 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 convert 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 proceedings, unless relatable to escaped income, and reagitate the concluded matters. Even in cases where the claims of the assessee during the course of reassessment 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 that originally assessed. The income for purposes of reassessment cannot be reduced beyond the income originally assessed42. It would be seen that whereas in the case ofTextile Company Limited case ( 1953 (23) ITR 82 : 1953 AIR(SC) 111) the question as to the rights of an assessee to claim redoing, revising or recomputing entire income during the reassessment proceedings was left open, that question did not come up for consideration in the case of H. R. Sri Ramulu ( 1973 (2) SCC 137 : 1973 SCC(Tax) 484 : 1973 (32) STC 77 ) or H. M. Esufali ( 1977 (107) ITR 760 (Bom)) or even in Jagan Mohan Rao case ( 1969 (2) SCC 389 : 1970 (75) ITR 373 ). Some of the High Courts, therefore, fell in error in reading those judgments, divorced from the context in which the precise questions came up for consideration in those cases, and to hold that the assessee could reagitate the concluded issues and claim relief in respect of items, finally concluded in the original assessment proceedings, during the reassessment proceedings, unconnected with the escapement of income. We cannot, therefore, approve the broad proposition laid down in that regard in Deputy Commissioner of Commercial Taxes v. Indian Refrigeration Industries P. Ltd. ( 1980 (46) STC 264 (Mad) , CIT v. Ramsevak Paul ( 1977 (110) ITR 527 (Cal)), CIT v. Assam Oil Co. Ltd. ( 1982 (133) ITR 204 (Cal), CIT v. Standard Motor Products of India Ltd. ( 1983 (142) ITR 877 (Mad), CIT v. Rangnath Bangur ( 1984 (149) ITR 487 (Raj)), State Bank of Hyderabad v. CIT ( 1988 (171) ITR 232 (AP)), CIT v. Indian Rare Earth Ltd ( 1990 (181) ITR 22 (Bom) The Tribunal rightly found that the loss which the assessee wanted to be set off against the escaped income could not be allowed to be so set off because in the original assessment proceedings, no set off was claimed or permitted and the original assessment had acquired finality when the appeal against the order of assessment failed before the Appellate Assistant Commissioner and the assessee took no further steps to agitate the issue. The Tribunal was also right in concluding that the item which the assessee wanted to be taken into account in the proceedings under section 147 of the Act were unconnected with the escapement of income. The High Court clearly fell in error in holding otherwise. Since the original assessment had been concluded finally against the assessee, it was not permissible for the assessee in the reassessment proceedings to seek a review/revision of the concluded assessment for the purpose of computation of the escaped income. The High Court clearly fell in error in permitting the assessee to reagitate, in reassessment proceedings under section 147(a) of the Act, the finally concluded assessment proceedings and to grant to him relief in respect of items not only earlier rejected, but also unconnected with the escapement of income by assuming as if the original assessment had not been concluded or was "still open"45. Therefore, our answer to the question formulated by the High Court and noticed in the earlier part of this judgment is that, in the reassessment proceedings, it is not open to an assessee to seek a review of the concluded item, unconnected with the escapement of income, for the purpose of computation of the escaped income