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| DATE: | December 22, 2011 (Date of publication) |
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| Click here to download the judgement (deepak_mehta_147_reopening.pdf) |
S. 147: AO cannot assess other “escaped income” if reason for issue of s. 148 notice dropped
The AO reopened the assessment u/s 148 on the ground that certain income had escaped assessment. However, in the reassessment order, the AO did not assess the income which was referred to in the reasons but instead assessed other income which had escaped assessment. The Tribunal quashed the reassessment order on the ground that if the AO did not assess the income for which he had reopened the assessment, he had no jurisdiction to assess other escaped income. The Department challenged the Tribunal’s order by relying on Explanation 3 to s. 147 & Sun Engineering 198 ITR 297 (SC). HELD dismissing the appeal:
If the AO does not assess the income in respect of which the s. 148 notice was issued, it means there was no ‘reason to believe’ that income had escaped assessment. If so, the AO has no jurisdiction to assess any other escaped income that comes to his notice during the reassessment proceedings. Though in Sun Engineering 198 ITR 297 (SC), it was held that the AO had jurisdiction to assess other income, it was not a case where the AO had not assessed the income in respect of which the s. 148 notice was issued. Explanation 3 to s. 147 also contemplates that the income in respect of which the s. 148 notice is issued is assessed (Jet Airways 331 ITR 236 (Bom) & Ranbaxy Lab 60 DTR 77 (Del) followed).
Seemingly, in the SC case relied on by the Revenue, besides the certain ‘other income’ , the ‘escaped income’ in respect of which the Notice was issued itself came to be assessed. Be that as it were, one’s reaction /point of doubt is this: Could that fact alone be regarded as a validly distinguishing ground for not accepting the Revenue’s plea in the case before the Chattisgarh HC placing reliance on the SC ruling as a ‘precedent’!
To add (by way of suggestions):
S 147 deals with ITO’s power to ” ‘assess’ or ‘reassess’ “. As such, it is a closely knit provision, covering two different situations, including an ‘assessment’ for the first time. Hence, for a proper understanding and interpretation, of not only sections 147 and 148, but also of the entire scheme of things, it requires a close and mindful reading/in-depth study. Further, in one’s perception, for a harmonious interpretation, it is imperative to keep in view/take into due consideration also the implications of / principle underlying section 152 (2); which, though not directly related, is an integral part of the same scheme of provisions embodied in Chapter XIV.