INCOME TAX ACT, 1961

Section 147

Reassessment - Validity - AO made addition on complete new issue without making addition on issue forming basis of reopening of assessment -

AO reopened assessment on the ground that as a result of under invoicing there was escapement of income by sale of iron ore by assessee. However, AO chose to make addition on a completely new issue, i.e., depreciation on Mining Lease and licence without making addition on the issue of under invoicing. Assessee's case was that when the foundation based on which AO issued notice under section 148 became invalid, he could not assess any other subject-matter to tax independently which had no connection with the reasons recorded.Held: It is true that if the foundation goes, then structure cannot remain. Meaning thereby, if notice has no sufficient reason or is invalid, no proceedings can be initiated. But same can be checked at the initial stage by challenging notice. If notice is challenged and found to be valid, or where notice is not at all challenged, then in either case it cannot be said that notice is invalid. As such, if notice is valid, then foundation remains and proceedings on the basis of such notice can go on. Accordingly, once reassessment, the proceedings had been initiated on a valid notice, it becomes duty of AO to levy tax on entire income (including 'any other income') which might have escaped assessment and come to his notice during the course of proceedings initiated under section 147.

Followed:N. Govindaraju v. ITO (2015) 377 ITR 243 (Karn) : 2015 TaxPub(DT) 2918 (Karn-HC) (PBI - 2 page 199, relevant page 211).

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2011-12

INCOME TAX ACT, 1961

Section 263

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