COMMISSIONER OF INCOME-TAX VS R. DURGAMBA, 2000 PTD-MADRAS-HIGH-COURT-INDIA 840 (1997)

Income-tax---

----Reassessment---Failure to disclose material facts necessary for assessment---Information that income had escaped assessment---Reassessment proceedings in respect of a particular item not mentioned in notice under S.148---Reassessment under S.147(b) cancelled in appeal---Reassessment proceedings under S.147(a) in respect of same item afresh----Not valid-- Indian Income Tax Act, 1961, Ss. 147 & 148.

Once a proceeding in respect of an item other than the one mentioned in the notice under section 148 of the Income Tax Act, 1961, has been taken into consideration and the same is subsequently not upheld in appeal, it is not possible to restart the proceedings in respect of the same item afresh.

Held, that, in the instant case, the Tribunal found that the Income tax Officer's action in reopening the assessment' under section 147(b) of the Act earlier was to withdraw the standard deduction of Rs.3,400 allowed by the Income-tax Officer ,in the original assessment on the basis that the remuneration received by the assessee from a company R was income under the head "Salary". While completing the reassessment on the basis of section 147(b) of the Act, the Income-tax Officer also included interest income of Rs.3,423 under section 214 and thus, in the reassessment under' section 147(6) made by the Income-tax Officer, the said income formed the subject-matter of assessment. The reassessment, however, was cancelled as without jurisdiction, Subsequent to this cancellation, the Income-tax Officer issued notice under section 147(a) for the purpose of including in the assessment the sum of Rs.3,423. It was also found that the Income-tax Officer in the reassessment under section 147(a) carried out another modification by treating the remuneration received by the assessee from company R and another company I totalling Rs.24,000 as the income of the assessee under the head "Other sources", instead of under the head "Salary" as originally treated. The Tribunal was justified in cancelling the reassessment.

Manoo Lal Kedarnath v. Union of India (1978) 114 ITR 884 (All.) fol.

C. V. Rajan for the Commissioner.

T.R. Senthil Kumar and B. Raviraja for the Assessee.

JUDGMENT

K. A. THANIKKACHALAM, J.----At the instance of the Department, the Tribunal referred the following question for the opinion of this Court under section 256(2) of the Income Tax Act, 1961:

"Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the Income-tax Officer had not validly assumed jurisdiction under section 147(a) of the Act?"

The Income-tax Officer had taken action under section 147(a) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") in order to bring to assessment a sum of Rs.3,423 granted to the assessee as interest under section 214 of the Act. The assessee has been granted this interest. For the assessment year 1973-74, the interest was allowed on November 21, 1974. This interest of Rs.3,423 was not returned by the assessee for the assessment year in question in the original assessment proceedings. After the original assessment proceedings were completed, but before action was initiated under section 147(a) giving rise to the appeal, the Income-tax Officer had taken action under section 147(b) and made an assessment on October 7, 1977. That assessment under section 147(b) was the subject-matter of appeal and, ultimately the Tribunal held that the reassessment was not made by the Income-tax Officer on a valid assumption of jurisdiction. The Tribunal found that the Income-tax Officer's action in reopening the assessment under section 147(b) of the Act earlier was to withdraw the standard deduction of Rs.3,400 allowed by the Income-tax Officer in the original assessment on the basis that the remuneration received by the assessee from V. Ramakrishnan Sons (Pvt.) Ltd. was income under the head "Salary" and the Income-tax Officer took action under section 147(b) for the purpose of modifying the earlier order of the Income-tax Officer but while completing the reassessment on the basis of section 147(b) of the Act, the Income-tax Officer also included interest income of Rs.3,423 under section 214 and that, in the reassessment under section 147(b) made by the Income-tax Officer, the said income formed the subject-matter of assessment. The reassessment, however, was cancelled as without jurisdiction. Subsequent to this cancellation, the Income-tax Officer has issued notice under section 147(a) for the purpose of including in the assessment the sum of Rs.3,423 and it is this assessment under section 147(a) that `was the subject-matter of appeal before the Tribunal. It was also found that the Income-tax Officer in the reassessment under section 147(a) carried out another modification by treating the remuneration received by the assessee from V. Ramakrishnan Sons (Pvt.) Ltd., and R. S. Industrial Corporation (Pvt.) Ltd., totalling Rs.24,000 as the income of the assessee under the head "Other sources", instead of under the head "Salary" as originally treated. By following the decision of the Allahabad High Court in the case of Manoo Lal Kedarnath v. Union of India (1978) 114 ITR 884, the Tribunal held that the order of the Appellate Assistant Commissioner cancelling the reassessment under section 147(a) as without valid jurisdiction was justified.

In the abovesaid decision, the Allahabad High Court held that once a proceeding in respect of an item other than the one mentioned in the notice under section 148 has been taken into consideration and the same is subsequently not upheld in appeal, it is not, possible to resort to the proceeding in respect of the same item afresh under section 147(b). Inasmuch as the order passed by the Tribunal is in accordance with the decision cited supra, we answer the question referred to us in the affirmative and against the Department. There will be no order as to costs.

M.B.A./3329/FCReference answered.