COMMISSIONER OF INCOME-TAX VS N. KRISHNAN, 2000 PTD-KERALA-HIGH-COURT-INDIA 1237 (1996)

Income-tax---

----Reassessment---Assessment---Effect of reassessment---Entire order of assessment is not set aside ---I.T.O.'s jurisdiction is confined to income which has escaped tax or has been under-assessed---Indian Income Tax Act, 1961, S.147.

The Supreme Court has laid down in CIT v. Sun Engineering Works (P.) Ltd. (1992) IP8 ITR 297, that the Income-tax Officer's jurisdiction under section 147 of the Income Tax Act, 1961, is confined to such, income 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 the question which had been decided in the original assessment proceedings. It is further observed in the context that it is only the under-assessment that gets set aide and not the entire assessment when reassessment proceedings are initiated. The Supreme Court held that the words "such income" clearly mean income which is clearly chargeable to tax but has escaped assessment.

CIT v. Sun Engineering Works (P.) Ltd. (1992) 198 ITR 297 (SC) explained.

CIT v. Onkar Saran & Sons (1992) 195 ITR 1 (SC) and Jaganmohan Rap (V.) v. CITICEPT (1970) 75 ITR 373 (SC) ref.

P. K. R. Menon for the Commissioner.

C. Kochunni Nair for the Assessee.

JUDGMENT

V. V. KAMAT, J.---The following two questions expect our answer;

"(1) Whether; on the facts and in the circumstances of the case, the Tribunal is right in law in holding that once reassessment proceedings have resulted in reassessment of the income of the assessee, the original assessment order can no longer survive?

(2) Whether, on the facts and in the circumstances of the case and in the light of the observation of the Supreme Court in CIT v. Onkar Saran & Sons (1992) 195 ITR 1 (at page 8), 'it is only the determination of the correct total income for the assessment year in question that is being redone' and in the light of the first illustration (at page 8) resulting in the conclusion, 'that certainly cannot be the effect of the legal provisions', are not the order of the Tribunal and the decisions of .the Kerala and Bombay High Courts, relied on, against the decision of the Supreme Court in CIT v. Onkar Saran & Sons (1992) 195 ITR 1?"

The Income-tax Appellate Tribunal, with regard to the question as to whether the reassessment proceedings would wipe out the original assessment order, relied on the decision of the apex Court in CIT v. Onkar Saran & Sons (1992) 195 ITR 1 and reached the conclusion accordingly.

The Revenue has brought the above questions before us contending that the subsequent decision in CIT v. Sun Engineering Works (P.) Ltd. (1992) 198 ITR 297 (SC) of the apex Court, considering -the situation, reached the conclusion that the reassessment does not result in the wiping out of the original assessment. Learned senior tax counsel submits that the decision in CIT v. Sun Engineering Works (P.) Ltd. (1992) 198 ITR 297 (SC) being a later decision, should rule the situation. However, we will consider both the decisions.

Firstly, in CIT v. Sun Engineering Works (P.) Ltd. (1992) 198 ITR 297 . (SC), it is observed that in a proceedings under section 147 of the Act, items of income which had escaped assessment other than or in addition to the item or items which led to the issuance of a notice under section 148 and where reassessment made was under section 147 regarding escapement of tax, the Income-tax Officer's jurisdiction is confined only to such income 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 the question which had been decided in the original assessment proceedings. It is further observed in the context that it is only the under assessment that gets set aside and not the entire assessment when reassessment proceedings are initiated. It is further clarified that the officer 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 of the Act. The assessee also cannot resist reassessment proceedings validly initiated merely by showing that other income which had been assessed originally was too high. In this context, the apex Court has considered the importance of the words "such income" to meats clearly the income which is chargeable to tax but has escaped assessment. The Income-tax Officer's jurisdiction gets confined thereto only to such income. It certainly does not extend to situations that are concluded by the earlier assessment.

On reading even the earlier decision of the apex Court in Onkar Saran's case (1992) 195 ITR 1; especially the portion appearing at page 8 of the report which has been carved out in question No.2, it would have to be said that when the original assessment proceedings, have been finalised and reassessment proceedings have been initiated to assess escaped income, it is observed, it is only the determination of the correct total income for the assessment year in question that is being redone. In the process of reasoning, in the context, the apex Court has also referred to its earlier decision in V. Jaganmohan Rao v. CIT/CEPT (1970) 75 ITR 373. The apex Court has emphasised the purpose of reassessment proceedings. However, in the light of the subsequent decision, the questions get neatly answered.

For: the above reasons, we answer question No. 1 in negative, in favour of the Revenue and against the assessee. We answer question No. 2 in the affirmative, in favour of the Revenue and against the assessee.

A copy of this judgment under the seal of the Court and the signature of the Registrar shall be forwarded to the Income-tax Appellate Tribunal, Cochin Bench, as required by law.

M.B.A./3372/FC Order accordingly.