Delhi H.C : Whether, on the facts and in the circumstances of the case, the ITO was justified in the course of reassessment proceedings initiated under s. 147(a) for including the tax paid by the employer as part of the assessee’s income to revise also the rate of assessment on the footing that the assessee had not filed the declaration under s. 113(3) ?

Counsel Appeared

Mrinal Bharti, for the Assessee : Sanjiv Khanna with Ajay Jha, for the Revenue

JUDGMENT

ARIJIT PASAYAT, C.J. :

Pursuant to the direction given by this Court, the following question has been referred for the opinion of this Court under s. 256(2) of the IT Act, 1961 (in short, the “Act”), by the Income-tax Appellate Tribunal, Delhi Bench “A”, New Delhi (in short, “the Tribunal”) : “Whether, on the facts and in the circumstances of the case, the ITO was justified in the course of reassessment proceedings initiated under s. 147(a) for including the tax paid by the employer as part of the assessee’s income to revise also the rate of assessment on the footing that the assessee had not filed the declaration under s. 113(3) ?”

2. By a common statement of case, the Tribunal has referred the question for the opinion of this Court relating to several assessees. The factual position is similar in all the cases. The assessees were employees of the British Council during the asst. yrs. 1962-63 and 1963-64. While completing the original assessments, the ITO had not included the tax paid on their behalf by the employer in the total income. In order to bring such amount to tax by including it in the respective total incomes, notices were issued under s. 147 r/w s. 148 of the Act. At the time of completion of reassessments, it was noticed that in the original assessments tax was levied on the assessees at the rates applicable to their total income even though they were residents but not ordinarily residents and no declaration had been filed in terms of s. 113(3) of the Act. Accordingly, tax was levied at the rates applicable under s. 113(1) of the Act. Though the assessees did not challenge the reopening of the assessments, they questioned the legality to levy of tax under s. 113(1) of the Act. According to them, reassessment proceedings having been initiated on one ground, it was not open to the AO to take into consideration any other material even though it related to application of proper levy of tax. This plea was not accepted by the Appellate Assistant Commissioner (in short, “the AAC”), before whom the appeals had been filed. The matter was carried in further appeals before the Tribunal by the assessees. The Tribunal held that once the matter was before the AO on reopening, the entire gamut of assessment was available to be gone into. The assessees filed applications under s. 256(1) of the Act, which were rejected thereafter. On being moved, directions were given, as aforesaid, for referring a case.

3. We have heard learned counsel for the assessees and learned counsel for the Revenue. The primary stand of the assessees is that reopening having been done on one ground, it was not open to take into account another ground for the purpose of reassessment. Learned counsel for the Revenue, on the other hand, submitted that the course adopted by the AO is legal and proper. Once an assessment is reopened under s. 147(a) of the Act, the entire assessment was thrown upon.

4. A similar question was considered by the apex Court in ITO vs. Mewalal Dwarka Prasad (1989) 76 CTR (SC) 40 : (1989) 176 ITR 529 (SC) : TC 51R.758 and V. Jaganmohan Rao vs. CIT/CEPT (1970) 75 ITR 373 (SC) : TC 51R.313. It was inter alia, observed that once an assessment is reopened, the ITO proceeds de novo under relevant sections of the statute and proceeds to assess the assessee. Once valid proceedings are started under the relevant provisions, the ITO has not only the jurisdiction but also it is his duty to levy tax on the entire income that had escaped assessment during the year. That being the position, we answer the question referred in the affirmative, in favour of the Revenue and against the assessee.

This reference is accordingly disposed of.

[Citation : 249 ITR 311]