It is generally seen in the reassessment proceedings u/s 147
of Income Tax Act, 1961, the assessing officers tend to make inquiries and ask
questions even at the start of the
reassessment proceedings which are totally unconnected to income that is
believed to have escaped assessment in the reasons recorded for reassessment
proceedings.
I have seen some
cases where questionnaire being issued in the reassessment proceedings contain
no question relating to the income believed to have escaped assessment in the
reasons recorded but different questions
totally unconnected to the reasons recorded are being asked.
Section 148 of the Income Tax Act, 1961 cannot be used and
utilized as a mere cloak or petence for making a roving or fishing inquiry or
investigation in the cource of reopened
assessment. To say differently, the reassessment proceedings cannot be
initiated for collateral purposes and with ulterior motive or for making a
fishing or roving investigation.
When an assessment is finalized u/s 143(3) of Income Tax
Act, 1961 the issues decided in the assessment proceedings attains finality if
not appealed against, later on if the same case is reopened u/s 147 on coming
of some new material before the AO which led the AO to have reason to believe
that some part of income has escaped assessment, then in such case AO at the start of initiation of reassessment proceedings if
inquires about issues totally different from the reasons recorded for
reassessment proceedings or start making general inquiries about the issues
already decided in the original assessment proceedings instead of inquiring about the income which
believed to have escaped assessment then such action of AO would be considered
as questioning the issues which has already attained finality in the original
assessment proceedings u/s 143(3) and thereby would be exceeding the
jurisdiction u/s 147/148.
Similarly if no assessment is being framed u/s 143(3)
originally but only an intimation u/s 143(1) is being issued then after the
expiration of time limit for issuing the notice u/s 143(2) the return filed by
the assessee can be deemed to have been accepted by the Department as final. Later on if reassessment proceedings are initited
in such case then at the start of such
proceedings general inquiries
unconnected with the reasons recorded for initiation of reassessment
proceedings would be amounting to proceed u/s 143(2),(3)alone instead of section 147/148 and thereby
exceeding the jurisdiction to reassessment.
However, the assessing officer is not debarred to bring to
tax any other item of income which may have escaped assessment and which comes
to his notice during the cource of proceedings u/s 147 of the Act. However, for
this purpose, he cannot be allowed to make fishing inquiries to probe if any
other income had escaped assessment or not. Such inquiries can only be
permitted if in the first instance some material comes to his notice to suggest
that some other item of income may have escaped assessment or had been under
assessed. In that event, he would be perfectly justified in requiring the Assessee
to furnish the requisite information on such other issues as well.
In Vipin Khanna v. CIT (2002) 255 ITR 220 (P&H), The
court held that Assessing officer cannot embark upon fresh enquiries on the
issue which are unconnected with the issue which were the basis of proceedings
u/s 147. The finality of the return filed cannot be disturbed even in the
proceedings u/s 147 of the Act in respect of issues on which there is no
material on record suggesting any escapement of income. The court held that
there is no gainsaying the fact that in proceedings u/s 147 of the Act, it is
only the escaped income which has to be assessed or reassessed.
As per the law laid down by the apex court in the case
of Sun Engineering Works Pvt. Ltd.-[1992] 198 ITR 297, when proceedings u/s 147
of the Act are initiated, the proceedings are open only qua items of
underassessment. 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 notice u/s 143(2) of the Act within stipulated period.
The abovesaid judgement of Punjab & Haryana High Court pertains to assessment year 1992-93 and
the court had duly taken cognizance of amendments made in S. 147 with effect
from 01-04-1989. Thus, even after amendment w.e.f 01-04-1989, the law remains
that AO is not empowered to make fishing inquiries on concluded matters
unconnected with issue on the basis of which proceedings u/s 147 have been
initiated.
Similar view has also been upheld in Amrinder Singh Dhiman
v. AO-269 ITR 378 (P&H) (2004).
Thus to conclude assessing officer can bring to tax any other income that have escaped assessment in the reassessment proceedings but for which no reasons were recorded at the start of such proceedings, if some new material comes into picture during such proceedings suggesting escapement of income from assessment. However Assessing officer cannot embark upon fresh enquiries on the issue which are unconnected with the issue which were the basis of proceedings u/s 147 and for which there is nothing on record to suggest that there has been escapement of income.
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