Commissioner of Income Tax vs American President Lines Ltd.

T.D. Sugla, J.—This is an application u/s 256(2) of the Income Tax Act, 1961, by the Department. It is the case of the Department that the Tribunal ought to have referred the following question of law to this court :

"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law holding that the fresh claim of loss u/s 32(1) not made earlier by the assessee in the original assessment proceedings have to be considered in the reassessment proceedings with out examining the question whether such claim, if allowed, would result in no escapement of income in the original assessment ?"

The proceedings relate to assessment years 1968-69 and 1969-70. The assessments were originally completed computing the income, subject to tax in India under rule 10(ii) of the Income Tax Rules, 1962. Since, in the opinion of the Income Tax Officer, the assessee''s taxable income had escaped assessment, the assessments were reopened u/s 147(a). In the reassessment proceedings, the assessee inter alia, made a claim for loss u/s 32(1) of the Income Tax Act, 1961. This claim, it is an admitted position was not made by the assessee in the original assessment proceedings. The Income Tax Officer did not entertain the claim on the ground that such a claim was not made by the assessee in the original assessment proceedings. This order of the Income Tax Officer was confirmed by the Commissioner of Income Tax (Appeals). The Tribunal, however, following this court''s judgments in the case of New Kaiser-I-Hind Spg. and Wvg. Co. Ltd. Vs. Commissioner of Income Tax, Bombay City-III, , allowed the appeals holding that the assessee was entitled to claim loss u/s 32(1) for the first time during the reassessment proceedings.

It is reiterated by Shri Sonde, learned counsel for the assessee, that the issue herein is squarely covered by our court''s judgment in New Kaiser-I-Hind Spg. and Wvg. Co. Ltd. Vs. Commissioner of Income Tax, Bombay City-III, . In particular, he has placed reliance on the following observations from page 773 of the judgment :

"In view of the judgment of the Supreme Court in V. Jaganmohan Rao and Others Vs. Commissioner of Income Tax and Excess Profits Tax, Andhra Pradesh, , the view taken by this court in the case of Kevaldas Ranchhodddas Vs. Commissioner of Income Tax, , that recomputation could only take place u/s 34 with a view to garnering in the income escaping assessment under the first clause, and that it was clear from the provisions of the said section itself that it was not intended for the benefit of the assessee but only for the benefit of the revenue, is no longer good law."

He pointed out that a Full Bench of our court again construed the scope of reassessment u/s 147 of the Income Tax Act in the case of Commissioner of Income Tax Vs. Indian Rare Earth Ltd., . Though this point, it is stated, was not directly in issue, the court is stated to have held that what is true of an assessment must also be true of a reassessment because a reassessment is nothing but a fresh assessment. There cannot be any dispute that, if reassessment is a fresh assessment, the assessee would be entitled to make all claims which he had not made during the course of the original assessment proceedings.

Shri Jetley, learned counsel for the Revenue, on the other hand, stated that the issue herein was covered in favour of the Revenue by our court''s judgment in the case of Commissioner of Wealth-tax, Vidarbha Vs. Ballarpur Industries Ltd., . It is pointed out that, following the Kerala High Court decision in Commissioner of Wealth-tax Vs. C. Ravindran and Others, , wherein it was held that the nature of the jurisdiction to reassess being very limited there is nothing in the provisions of section 17(1) or in the scheme of the Act to enlarge the limited scope of the power and jurisdiction of the Wealth-tax Officer in reassessing to tax the escaped net wealth by allowing the assessee to seek a recomputation of net wealth and redoing of the assessment and allow a claim which the assessee failed to make at the time of the regular assessment, especially when the assessment of the assessee had become final.

In our judgment, the issue involved herein is to be taken as covered by the judgments of our court in New Kaiser-I-Hind Spg. and Wvg. Co. Ltd. Vs. Commissioner of Income Tax, Bombay City-III, and the Full Bench judgments in the case of Commissioner of Income Tax Vs. Indian Rare Earth Ltd., . The reason for this are more than one. In the case of New Kaiser-I-Hind Spg. and Wvg. Co. Ltd. Vs. Commissioner of Income Tax, Bombay City-III, , our court has specified held that in view of the Suspense Court decision in the case of V. Jaganmohan Rao and Others Vs. Commissioner of Income Tax and Excess Profits Tax, Andhra Pradesh, , our court''s earlier decision in the case of Kevaldas Ranchhodddas Vs. Commissioner of Income Tax, was no longer good law; whereas our court''s judgment in Commissioner of Wealth-tax, Vidarbha Vs. Ballarpur Industries Ltd., proceeds on the assumption that the earlier judgment of this court in Kevaldas Ranchhodddas Vs. Commissioner of Income Tax, was good law. Apart from that, the Full Bench of our High Court in the case of Commissioner of Income Tax Vs. Indian Rare Earth Ltd., , has observed as follows (at p. 29) :

"In the circumstances, it appears clear to us that once valid proceedings u/s 147 are stated, the Income Tax Officer has not only the jurisdiction but it is his duty to complete the whole assessment de novo. What is true of an assessment must also be true of a reassessment because a reassessment is nothing but a fresh assessment.

The Supreme Court in Income Tax Officer, Azamgarh and Another Vs. Mewalal Dwarka Prasad, , having approved the categorial observations of the Andhara Pradesh High Court in PULAVARTHI VISWANADHAM Vs. COMMISSIONER OF Income Tax, ANDHRA PRADESH., , it is not open to this court to examine the scope of a reassessment u/s 147 in the light of Shri Dalvi''s argument about possible anomalies."

Accordingly, we are of the view that the question is covered in favour of the assessee and no useful purpose will be served by directing the Tribunal to refer the question, as a question of law to this court.

Rule discharged. There will be no order as to costs.