Income‑tax‑‑‑

‑‑‑‑Revision‑‑‑Reassessment‑‑‑Scope of reassessment‑‑‑Original assessment‑‑ Reopening of assessment is only as regards income escaping assessment‑‑ Original assessment under S.143(3) remains even after reassessment in respect of matters which had been decided in original assessment ‑‑‑CIT can revise original assessment order if it was erroneous and prejudicial to Revenue even after reassessment‑‑‑Indian Income Tax Act, 1961, Ss. 143, 147 & 263.

In proceedings under section 147 of the Income Tax Act, 1961, the Income‑tax Officer may bring to charge‑ items of income which had escaped assessment other than or in addition to that item or items which have led to the issuance of the notice under' section 148. Where reassessment is made under section 147 in respect of income which has escaped assessment, the Income‑tax Officer's jurisdiction is confined to only such income which has escaped assessment or has been underassessed and does not extend to revising, reopening or reconsidering the whole assessment or permitting the assessee to 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. When the assessment is reopened the original assessment under section 143('3) remains and it could not be said that the original assessment is non est on account of the reopening of the assessment.

When the original assessment remains the Commissioner of Income- tax had every right to revise the order if it was erroneous and prejudicial to the interests of the Revenue.

The original assessment was made on November 18, 1985, and the revised assessment under section 147 was made on January 8, 1987 and the Commissioner of Income‑tax revised the original assessment order under section 263 on March 8, 1988, directing the Income‑tax Officer to charge interest under section 215 of the Income‑tax Act. The assessee contended that as the original assessment order had merged with the reassessment order, the Commissioner of Income‑tax could not revise the original assessment order under section 263. On a reference:

Held, that the Commissioner of Income‑tax could revise the original assessment order under section 263.

CIT v. Ahmedabad Manufacturing. and Calico Printing Co. Ltd. (1981) 128 ITR 671 (Guj.); CIT v. Sun Engineering Works (P.) Ltd.(1992) 198 ITR 297 (SC); Hiralal v. CIT (1980) 121 ITR 89 (Raj.) and Sharda Trading Co. v. CIT (1984) 149 ITR 19 (Delhi) ref.

JUDGMENT

The Tribunal has referred the following questions for our opinion, on an application of the Revenue under section 256(2) of the Income Tax Act, 1961:‑‑

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that once a. reassessment proceeding is initiated, the original assessment ceases to exist and cannot be revised by the Commissioner?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in cancelling the order under section 263 passed by the Commissioner?"

The assessment year involved in this case is 1983‑84. The original assessment order as completed on November 18, 1985, and thereafter there was a reassessment under section 147 read with section 148 of the Income- tax Act.

On scrutiny of the assessment records the Commissioner found that the assessment order is erroneous and prejudicial to the interests of the Revenue, as the Income‑tax Officer has not charged the interest under section 215 of the Act.

The show‑cause notice was issued to the assessee under section 263 of the Income Tax Act, 1961. In response to the show‑cause notice the assessee submits that as there teas a reassessment under section 147(a) read with section 148, the original order merges with the reassessment order and, therefore, the Commissioner of Income‑tax cannot revise the original assessment passed on November 18, 1985, as the original assessment order was non‑est when the notice under section 263 issued. The Commissioner of Income‑tax did not accept the argument put forward by, the assessee. According to him, not charging interest under section 215 was not the subject‑matter of the reassessment. It was the subject‑matter of the original assessment, dated November 18, 1985. Therefore, to that extent, the Commissioner can revise the original assessment order and he directed the Assessing Officer to modify the tax liability of the assessee by charging interest under section 215 of the Act of 1961. That order was challenged before the Tribunal. The Tribunal considered the decisions of the various High Courts, i.e. the Gujarat High Court in the case of CIT v. Ahmedabad Manufacturing & Calico Printing Co. Ltd. (1981) 128 ITR 671 and the decision of the Delhi High Court in Sharda Trading Co. v. CIT (1984) 149 ITR 19, wherein those High Courts held that once there is reassessment made in pursuance of proceedings under sections 147/148 then on reassessment the entire original assessment is set aside and the original order of assessment becomes non‑est. Therefore, the Commissioner of Income‑tax has no jurisdiction to revise the assessment order which is non‑est.

The admitted facts are that the original assessment order was passed on November 18, 1985, the revised assessment under section 147 read with section 148 was passed on January 8, 1987, and the Commissioner of Income‑tax has revised the order under section 263 on March 8, 1988. If we, go by the ratio of the aforesaid decisions then the Commissioner of Income- tax has no right to revise the order which is non‑est.

Learned counsel for the Revenue brought to our notice the decision of the Supreme Court in the case of CIT v. Sun Engineering Works (P.) Ltd. (1992) 198 ITR 297, wherein the issue was considered that after the original assessment order under section 143(3.) if that assessment order was reopened under section 147 whether the entire order goes or the original order survives. At 'page 311, their Lordships have referred to the question considered by the Rajasthan High Court in Hiralal v. CIT (1980) 121 ITR 89 ‑‑‑ whether on the facts and circumstances of this case, the Tribunal was right in holding that the Income‑tax Officer's jurisdiction under section 147 of the Income Tax Act, 1961, was confined to the assessment of such income as it had escaped assessment and did not extend to revising or reopening the whole original assessment. The question was answered by the Rajasthan High Court in the affirmative and it was held that the jurisdiction of the Income‑tax Officer under section 147 of the Act was confined to the assessment of such income as it had escaped assessment and did not extend to revise or reopening the whole assessment. At page 320, their Lordships observed as under:‑‑

"As a result of the aforesaid discussion, we find that, in proceedings under section 147 of the Act, the Income‑tax Officer may bring to charge items of income which had escaped assessment other than or in addition to that item or items 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 Officer's jurisdiction is confined to only 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 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."

Their Lordships held that the Income‑tax Officer's jurisdiction is confined to only such income which has escaped tax or has been under assessed and does not extend to revising, reopening or considering the whole assessment. Therefore, it is only for the income escaped and not the entire assessment when reassessment proceedings are initiated.

Their Lordships further observed at page 322 that 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 right in concluding that the items 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.

In view of the observations of their Lordships in case of reassessment, the assessment can be reopened but the original assessment under section 143(3) remains and it cannot be said that the original assessment is non‑est on account of the reopening of the assessment under section 147 read with section 148 of the Act. When the original assessment under section 143(3) remains the Commissioner 6f Income‑tax has every right to revise that order if it is erroneous and prejudicial to the interests of the Revenue.

In view of these facts, we answer the question in the negative, i.e. in favour of the Revenue and against assessee. As on the merits the order of the Tribunal has not been questioned whether the Income‑tax Officer should charge the interest under section 215 of the Act or not, and no question has been referred we have no comments.

The reference application is accordingly disposed of.

M.B.A./641/FC

Order accordingly.