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.- 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. Thus, even after amendment, 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 reassessment 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.
Amit Bajaj Advocate
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