Radhaswami Salt Works vs. ACIT (Gujarat High Court)

(i) From the above, it can be seen that the assessee had in return itself offered the receipt to tax as capital gain. In the context of the assessee’s further expectation that the same may not be taxed at all, issue was examined by the Assessing Officer. Thus, on the question of taxability of such receipt, there was a scrutiny by the Assessing Officer. May be at that time, the Assessing Officer had not noticed that the Collector had passed an order on 20.12.2008 terminating the lease. The reference to the order was very much in the document in the nature of panchnama dated 13.05.2009. According to the assessee, this was the date on which his right to use the land got extinguished. If the Assessing Officer held a different belief or desire to inquire into the effect of the order of the Collector, he could and should have done so during the course of assessment.

(ii) Yet another reason on which we cannot permit reopening on the grounds stated in the reasons is that the assessee carried the issue in appeal before the Appellate Commissioner and canvassed that to tax the income as capital gain was wrong. The Commissioner having dismissed the appeal, the issue is pending before the Tribunal in assessee’s appeal. Section 147 of the Act as is well known, empowers the Assessing Officer to reopen the assessment, subject to certain conditions. 3rd proviso to section 147 however provides that the Assessing Officer may assess or reassess such income other than the income involving the matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. When the subject matter viz. the receipt of transfer of rights in land and the income relatable to such matter was the subject matter of appeal and thereafter second appeal, the principle of merger would apply. There cannot be two separate considerations to the same subject matter relatable to the income. One by the appellate authority or forum and another by the Assessing Officer in fresh assessment. Had material particulars concerning the income been withheld by the assessee, issue perhaps would stand on a different footing. Since such facts are not presented before us, we would not comment any further in this respect.

(iii) Appeal against an order of assessment at the hands by the assessee would lie before the Commissioner (Appeals) in terms of section 246A of the Act. Section 250 of the Act lays down procedure in such appeal. Section 251 concerns the power of the Commissioner in such appellate proceedings. As per subsection (1) of section 251, while disposing of the appeal, the Commissioner would have powers to confirm, reduce, enhance or annul the assessment. Thus, while disposing of an appeal filed by an assessee against the order of assessment, the Commissioner after following the requirement of hearing provided in subsection (2) of section 251 may even enhance the assessment. The question of correct taxability of the receipt by the assessee was thus at large before the Commissioner (Appeals) and now is open before the Tribunal. At that stage, it would not be open for the Assessing Officer to reopen the assessment on this matter which is a subject matter of the appeals. Our attention is drawn to a judgment of Division Bench of this Court in case of National Dairy Development Board v. Deputy Commissioner of Income Tax Anand Circle, dated 24.03.2011 passed in Special Civil Application No.14449 of 2010.

“14. Moreover, insofar as the second ground for reopening of assessment is concerned, it may be noted that the second proviso to section 147 of the Act expressly provides that the Assessing Officer may assess or reassess such income, other than the income involving matters which are subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Thus by virtue of the second proviso to section 147 of the Act, income involving matters which are subject matters of any appeal, reference or revision has expressly been taken out of the purview of the said section. In the circumstances, insofar as the income stated to have escaped assessment under the second ground is concerned, the same having been subject matter of appeal would not fall within the ambit of section 147 of the Act and as such the Assessing Officer lacks jurisdiction to reopen the assessment on the said ground.”