Case Law Details
RELEVANT PARAGRAPH
23. In assessment years 1995-96 and 1996-97, the only identical reason recorded by the Assessing Officer for reopening the assessment, with variation in the amounts involved, is that the interest income under section 244 A has escaped assessment and to reassess the same under section 147 of the Act notice under section 148 of the Act was issued.
While completing the assessment under section 143(3) read with section 148 the Assessing Officer applied a higher rate of tax, i.e. @ 55%, applicable to foreign companies on the business income instead of the tax rate applicable to domestic companies, against the rate applied in the original assessment.
24. It means that in assessment years 1995-96 and 1996-97, the Assessing Officer reopened the amounts under section 147/148 to bring to tax interest income which was not fully disclosed by the assessee. Undisputedly, the issue of application of higher tax rate applicable to foreign companies as against the lower tax rate applied originally by the Assessing Officer was not at all a reason for reopening the assessment under section 147/148.
25. Now, the question required to be decided by us is whether in such circumstances the Assessing Officer was justified in making the impugned additions by applying a higher rate of tax to the business of the assessee while framing the reassessment under section 147/148 of Income-tax Act. 26. In an unreported case decided by IT AT, Camp Meerut, New Delhi Benches in the case of ACIT vs. M/s. Barnala Steel lnd. Ltd., ITA No. 814 / Del (M)/2004 assessment year 1999-2000 dated 27.10.2005 wherein the Tribunal held as under :
“4. From a perusal of the above reasons recorded by the A.O., it is amply clear that the findings of the learned CIT (A) are well reasoned when he observed that o reason has been recorded by the Learned ACIT with regard to the payment of commission. This being so, the Learned CIT (A) has rightly arrived at the conclusion that the reopening was not correct as far as regarding the issue of commission paid, this issue having not been covered by the reasons recorded. There was no information in the possession of the A.O. with regard to the escaped income qua this issue. As such, the order of the Learned CIT (A) regarding holding the reopening to be bad, is upheld.”
27. In Travancore Cement Ltd. vs. ACIT 305 ITR 170 (Kerala), their Lordships by following the decision of Apex Court in the case of CIT vs. Sun Engineering Works (P) Ltd. 198 ITR 297 (SC) wherein the Apex Court held that no addition could legally be made on the point other than for which the case had been reopened, held, allowing the petition, (i) that it was clear that the reasons stated were under sub-section (2) of section 148 only. The reasons were (i) non-inclusion of excise duty (16 per cent.) in the valuation of closing stock for the assessment years 2000-01 and 2001-02, and (ii) not adding back the bad debts. The reasons recorded for reopening the case of the petitioner were unconnected with the reasons stated in the notice issued under section 142. Therefore, the assessing authority had no jurisdiction to proceed with the items covered in the notices issued under sections 143(2) and 142.
28. In the case of Vipin Khanna vs. CIT reported in 255 ITR 220 (P&H), their Lordships at page 221 held as under :
“According to the law laid down by the Supreme Court in CIT vs. Sun Engineering Works P. Ltd. (1992) 198 ITR 297, when proceedings u/s 147 of the Act are initiated, the proceedings are opened only qua items of under assessments. The finality of assessment proceedings on other issues remains undisturbed. It makes no difference whether the assessment proceedings have become final on account of framing of an assessment u/s 143(3) of the Act or on account of non issue of a notice u/s 143(2) of the Act within the stipulated period. The amendments made in section 143 and 147 of the Act w.e.f. April 1, 1989 do not in any manner negate this proposition of law an enunciated by the Supreme Court in the case of CIT v. Sun Engineering Works Pvt. Ltd. (1992) 198 ITR 297.”
29. In Amrinder Singh Dhiman vs. ITO 269 ITR 379 (P&H), their Lordships held that the assessment reopened for claim under section 80HHC the department could not seek information in respect of various other issues for which notice under section 148 had been issued.
30. From the ratio of the decisions (supra), it is clear that the department in assessment years 1995-96 and 1996-97 could not have made any addition by applying higher rate of tax to the business income of the assessee against the tax rate applied in the original assessment because no such reason for reopening the assessment was recorded in the notices issued under section 148 of Income-tax Act. Hence, respectfully following the decision (supra) it is held that the reopening of the assessments by the Assessing Officer for assessment years 1995-96 and 1996-97 was invalid and consequently the impugned addition by application of higher rate of tax, as applicable to foreign companies, could be made while framing the reassessment under section 147/148 of Income-tax Act. We order accordingly. In view of the reasons recorded herein above, the order of CIT (Appeals) in this regard are upheld.
