Allahabad H.C : Whether, in the course of making reassessment after having validity initiated reassessment proceedings under s. 147(a) of the IT Act, 1961, in respect of certain items of escaped income, the ITO can also add/disallow in computing the total income of the assessee certain other items which were allowed by him at the time of framing original assessment under s. 143(3) of the IT Act, 1961 ?

High Court Of Allahabad

CIT vs. Omrao Industrial Corpn. (P) Ltd.

Sections 147(a)

M.C. Agarwal & S. Rafat Alam, JJ.

IT Ref. No. 1 of 1982

11th October, 1999

Counsel Appeared : Prakash Krishna, for the Revenue : None, for the AssesseeJUDGMENT

BY THE COURT :

The Tribunal, Allahabad, has under s. 256(1) of the IT Act, 1961, referred the following question for the opinion of this Court : “Whether, in the course of making reassessment after having validity initiated reassessment proceedings under s. 147(a) of the IT Act, 1961, in respect of certain items of escaped income, the ITO can also add/disallow in computing the total income of the assessee certain other items which were allowed by him at the time of framing original assessment under s. 143(3) of the IT Act, 1961 ?” We have heard Shri Prakash Krishna, learned counsel for the CIT. On one appeared on behalf of the respondent. The assessee’s assessment was reopened under s. 147(a) on the ground that the ammonia compressor on which depreciation had been allowed was not actually installed. While framing the assessment under s. 148, the AO, however, made several other disallowance from expenditure that was already allowed in the original assessment. This was contested by the assessee and the Tribunal observed as under : “But then while making the assessment the ITO almost made a review of the original assessment and started disallowing various amounts which, according to him, should not have been allowed by the ITO making the original assessment. It is not the case of the ITO that such allowances made on account of non-disclosure of any facts by the assessee. The disallowances were made by the subsequent officer only because he was of a different opinion.” The Tribunal held that in reassessment proceedings, this could not be doneAt the instance of the CIT, the aforesaid question that is stated to arise out of the Tribunal’s order dt. 2nd Jan., 1981, passed in IT Ref. Nos. 526, 686 and 687 and Cross-objections Nos. 121 and 122 of 1980 for the asst. yrs. 1965-66, 1966-67 and 1967-68 has been referred. We find that the scope of the powers of the ITO and making a reassessment under s. 147(a) has been settled by the Supreme Court in CIT vs. Sun Engineering Works P. Ltd. (1992) 107 CTR (SC) 209 : (1992) 198 ITR 297 (SC), TC 51R.314 where the Supreme Court held that though the ITO may bring to charge items of income which had escaped assessment other than or in addition to the items or items which have led to the issuance of the notice under s. 148, the ITO 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 s. 147 and a matter not agitated in the conclusion original assessment proceedings cannot be permitted to be agitated in such reassessment proceedings unless relatable to the item sought to be taxed as escaped by the Tribunal, the ITO could not add/disallow other items which were allowed by him in the original assessment merely by taking a different view. We, therefore, answer the aforesaid question in the negative, i.e., in favour of the respondent and against the Revenue.

[Citation : 246 ITR 346]

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