ACIT vs. Major Deepak Mehta (Chattisgarh High Court)
December, 23rd 2011
S. 147: AO cannot assess other escaped income if reason for issue of s. 148 notice dropped
The AO reopened the assessment u/s 148 on the ground that certain income had escaped assessment. However, in the reassessment order, the AO did not assess the income which was referred to in the reasons but instead assessed other income which had escaped assessment. The Tribunal quashed the reassessment order on the ground that if the AO did not assess the income for which he had reopened the assessment, he had no jurisdiction to assess other escaped income. The Department challenged the Tribunals order by relying on Explanation 3 to s. 147 & Sun Engineering 198 ITR 297 (SC). HELD dismissing the appeal:
If the AO does not assess the income in respect of which the s. 148 notice was issued, it means there was no reason to believe that income had escaped assessment. If so, the AO has no jurisdiction to assess any other escaped income that comes to his notice during the reassessment proceedings. Though in Sun Engineering 198 ITR 297 (SC), it was held that the AO had jurisdiction to assess other income, it was not a case where the AO had not assessed the income in respect of which the s. 148 notice was issued. Explanation 3 to s. 147 also contemplates that the income in respect of which the s. 148 notice is issued is assessed (Jet Airways 331 ITR 236 (Bom) & Ranbaxy Lab 60 DTR 77 (Del) followed).