Madras H.C : the income chargeable to tax for the asst. yr. 1993-94 has escaped assessment within the meaning of s. 147 and that he proposed to reassess the income and recompute the loss

High Court Of Madras

Precot Mills Ltd. vs. CIT & ANR.

Sections 147, 148, 149(1)

Asst. Year 1993-94

P. Shanmugam, J.

Writ Petn. No. 4938 of 2000 & WMP No. 7527 of 2000

7th April, 2000

Counsel Appeared

R. Mahalingam, for the Petitioner : Mrs. Chitra Venkataraman, for the Respondents

JUDGMENT

P. Shanmugam, J. :

The petitioner challenges the notice issued under s. 148 of the IT Act, 1961. The petitioner had filed the return of income for the asst. yr. 1993-94 on 31st March, 1993. An assessment order under s. 143(3) of the IT Act, 1961, was issued. The claim towards expenses incurred on repairs/replacement was admitted in the said order. By the impugned notice, the petitioner was informed by the Jt. CIT that he has reason to believe that the income chargeable to tax for the asst. yr. 1993-94 has escaped assessment within the meaning of s. 147 and that he proposed to reassess the income and recompute the loss. The main submission of learned counsel for the petitioner is that the notice is barred by limitation and is one issued without jurisdiction. Sec. 147 of the IT Act provides for the reassessment of income escaping assessment. The proviso to s. 147 states that no action shall be taken after the expiry of four years from the end of the relevant assessment year. However, s. 147 begins with the words that the proceedings are initiated subject to the provisions of ss. 148 to 153. Sec. 148 provides the procedure for reassessment under s. 147. Sec. 149 deals with the time-limit for the notice under s. 148. Sec. 149(1) states that no notice under s. 148 shall be issued if four years have elapsed from the end of the relevant assessment year unless the case falls under sub-cl. (ii) or sub-cl. (iii). Sub-cl. (ii) states that no notice shall be issued under s. 147 if four years but not more than seven years have elapsed, unless the income chargeable to tax which has escaped assessment amounts to Rs. 50,000 or more for that year. Therefore, the four years prescribed under the proviso to s. 147 have to be read with s. 149 where the four years have been extended to seven years if the income chargeable that has escaped assessment is more than Rs. 50,000. The proviso to s. 147 does not refer to the amount of escaped assessment. The only difference is that the notice under s. 148, if issued within four years does not require any authority’s sanction. But the CIT’s sanction is required for notice issued after four years. The notice states that such sanction has been obtained. Therefore, the notice in reference to the petitioner’s case cannot be held to be beyond the period of limitation.

On the merits, it could be seen that the income escaping the assessment as a result of failure to examine the account books produced by the assessee would be sufficient justification in making the reassessment.

Explanation 2 to s. 147 makes it clear that where assessment has been made but income chargeable to tax has been underassessed or such income has been made the subject of excessive relief or excessive loss or depreciation allowance has been computed, it is deemed to be a case where income chargeable to tax has escaped assessment. Therefore, on the merits, I am not inclined to go into the question whether the petitioner’s expenditure is a revenue or a capital expenditure or it has escaped assessment chargeable to tax and it is underassessed, etc., since the petitioner will have ample opportunity to question the reassessment on the merits. I do not find any ground in the circumstances of the case to interfere with the impugned order. The judgment referred to by learned counsel for the petitioner in Fenner (India) Ltd. vs. Dy. CIT (1999) 155 CTR (Mad) 165 : (2000) 241 ITR 672 (Mad), found that there was no failure on the part of the assessee to disclose truly and fully in relation to the relevant account or the account of excess duty paid and, therefore, there was a jurisdictional error. The learned Judge did not go into Explns. 1 and 2 to s. 147 of the Act where it is seen that the production of account books from which material evidence could with due diligence have been discovered by an AO will not necessarily amount to disclosure and that under Expln. 2 where an assessment has been made, but income chargeable to tax has been underassessed, it is deemed to be a case of income chargeable to tax as escaped assessment. This aspect of the matter has not been considered by the learned Judge. Hence, the writ petition fails and it is accordingly dismissed. No costs. Consequently, WMP No. 7527 of 2000 is also dismissed.

[Citation : 273 ITR 347]

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