RAMESH CHANDER SINGLA vs. C.I.T AND ORS.

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ITA/284/2005HC Punjab & HaryanaPHHC01078303200514 October 2010Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE AJAY KUMAR MITTAL5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeals. Regarding the first three issues, the Court held that the initiation of reassessment proceedings under Section 147 of the Income Tax Act, 1961, could not be challenged on the ground that the original assessment was not made under Section 143(3) of the Act, relying on its own judgment in Punjab Tractors Ltd. vs. Joint Commissioner of Income-tax (2002) 254 ITR 242 (P&H). This effectively addressed the assessee's contentions regarding the absence of new grounds, reasonable cause, and change of opinion, as the reassessment was based on a change in legal understanding due to High Court pronouncements. The Tribunal's reasoning that the High Court decisions brought to the AO's knowledge that income had escaped assessment was accepted. The Court also noted that a plea regarding reassessment proceedings being barred by limitation under Section 149 for assessment years 1994-95 to 1996-97 was not raised before the CIT(A) or the Tribunal and thus did not arise from the Tribunal's order, failing to qualify as a substantial question of law. No issue was expressly left undecided.

What were the facts?

The assessee, Shri Ramesh Chander Singla, a Development Officer of LIC, claimed deductions for incentive bonus and additional conveyance allowance. His return was processed under Section 143(1)(a) of the Income Tax Act, 1961, allowing these deductions. Subsequently, the Assessing Officer (AO) initiated reassessment proceedings under Section 147/148. This action was based on the Punjab and Haryana High Court's ruling in CIT vs. B.M. Parmar (1999) 235 ITR 679, which held that incentive bonus is taxable under the head 'salary' and not 'business income', and that additional conveyance allowance is deductible only to the extent certified by the DDO. The reassessment disallowed these claims. The CIT(A) and the Tribunal upheld the reassessment. The present appeal is before the High Court of Punjab and Haryana challenging the validity of these reassessment proceedings.

What were the issues?

1. Whether the initiation of reassessment proceedings under Section 147/148 of the Income Tax Act, 1961, in the absence of any new ground or reasonable cause, is legally sustainable? 2. Whether proceedings under Section 143(1)(a) of the Act are not assessment proceedings, making the initiation of reassessment legally sustainable? 3. Whether the initiation of reassessment proceedings under Section 147/148 of the Act on a mere change of opinion is legally sustainable? Assessee's contentions: The assessee argued that the reassessment proceedings were initiated without any new grounds or reasonable cause and on a mere change of opinion, making them unsustainable. The assessee also questioned the nature of proceedings under Section 143(1)(a) in relation to reassessment. Revenue's contentions: The revenue contended that the reassessment was valid as it was based on the binding decisions of the jurisdictional High Court, which revealed that income had escaped assessment. The revenue relied on Explanation 2(c)(i) to Section 147, stating that under-assessment constitutes escaped income. The revenue also argued, and the High Court agreed, that the original assessment not being under Section 143(3) did not invalidate the notice under Section 147, citing Punjab Tractors Ltd. vs. Joint Commissioner of Income-tax (2002) 254 ITR 242 (P&H).

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 143(1)(a),Section 143(3),Section 16(i),Section 149

AI-generated summary — verify with the full judgment below

of 2005

-1- *** IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH of 2005

Date of decision: 14.10.2010 Shri Ramesh Chander Singla ...Appellant Versus Commissioner of Income Tax (Appeals), Karnal and another ...Respondents CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY KUMAR MITTAL Present: Mr.Akshay Bhan, Advocate for the appellant.

Mr.Sanjiv Kaushik, Advocate for the respondents. **** ADARSH KUMAR GOEL, J (

Oral)

.

1.

This order will dispose of ITA Nos.284, 285, 286, 287 and 288 of 2005 as common question relating to the validity of re- assessment is involved.

2.

In ITA No.284 of 2005, the assessee has raised following questions of law:- “i) Whether in the facts and circumstances of the present case the action of the authorities below in initiating proceedings under section 147/148 of the Act in the absence of any new ground or reasonable cause, is legally sustainable in the eyes of law? ii) Whether in the facts and circumstances of the present case the action of the authorities below in of 2005

-2- *** holding proceedings under section 143(1)(a) of the Act not to be assessment proceeding is legally sustainable in the eyes of law? iii) Whether in the facts and circumstances of the present case the action of the authorities below in initiating reassessment proceedings under section 147/148 of the Act on mere change of opinion, is legally sustainable in the eyes of law?” 3. head of 'business' income, proceedings for re-assessment were initiated. The re-assessment was upheld by the CIT(A) and the Tribunal. The Tribunal observed:- “2.10 Now we proceed to decide the next issue as to whether in the existing facts and circumstances of the cases of the assessee, the reopening of the assessments by the Assessing Officer under section 147/148 of the Act and passing an order under section 143(3) of the Act is valid or not. In the instant cases, the assessment for the relevant assessment year was reopened by the Assessing Officer under section 143(1) (a) admitting the claim of the assessee in respect of incentive bonus and of 2005

-3- *** additional conveyance allowance. Later on, after reopening the assessment, the Assessing Officer disallowed the claim of rebate from incentive bonus and additional conveyance allowance in excess of the certified amount by the DDO of LIC of India, by placing reliance on the decisions of the jurisdictional High Court of Punjab and Haryana delivered in the cases of CIT V. B.M. Parmar reported in 235 ITR 679; in the case of CIT V. H.S.Sandhu reported in 237 ITR 167 and in the case of CIT V. Chaman Lal Chandok reported in 241 ITR 442.

2.

11 Upon reading of section 147 of the Act, we find that in view of the explanation 2(c)(i) wherein it has been clearly mentioned that where the income chargeable to tax has been under-assessed, it will be deemed to be a case where income chargeable to tax has escaped assessment. In the instant cases, this fact that income chargeable to tax has escaped assessment, came to the knowledge of the Assessing Officer when the jurisdictional High Court of Punjab and Haryana in the cases (supra) held that the incentive bonus is assessable under the head 'salary' and not under the head 'profits and gains of business or profession' and therefore, deduction under section 16(i) of the Act is admissible under the head 'salary' and no separate deduction on account of expenditure is permissible and that deduction claimed by the Development Officer of LIC of India in respect of the additional conveyance allowance is only allowable to the assessee to the extent of the amount certified, to have been incurred by the Development Officer in discharge of his duties, by the DDO of LIC of India. These decisions of the jurisdictional High Court of Punjab and Haryana were binding on the Assessing Officer and were the law for the Assessing Officer of 2005

-4- *** working under the jurisdiction of Punjab and Haryana. It was this knowledge and information which lead to the formation of the belief of the Assessing Officer that the income of the assessee has been under-assessed and so as per explanation 2(c)(i) of section 147 of the Act, the income of the assessee has escaped assessment and hence we are of the opinion that as per provisions of section 147/148 of the Act, the assessment reopened by the Assessing Officer and the additions made by framing the assessment under section 147 read with section 143 (3) was valid and legal as it was based on the decisions (supra) of the jurisdictional High Court of Punjab and Haryana on the basis of which the claim already allowed by the Assessing Officer under section 143(1)(a) of the Act was required to be disallowed by the Assessing Officer by reopening the assessment under section 147 and passing an order under section 147 read with section 143 (3) of the Act.”

4.

We have heard learned counsel for the parties.

5.

Learned counsel for the assessee is unable to dispute that in view of the judgment of this Court in Punjab Tractors Ltd. Vs. Joint Commissioner of Income-tax (2002) 254 ITR 242 (P&H) issuance of notice under Section 147 of the Income Tax Act, 1961 could not be challenged on the ground that the original assessment was not made under Section 143(3) of the Act. Questions raised have thus to be decided against the assessee.

6.

Further question raised in respect of assessment years 1994-95 to 1996-97 is that proceedings for re-assessment were barred by limitation under Section 149 of the Act. We find that of 2005

-5- *** neither before the CIT(A) nor before the Tribunal this plea was urged. The question raised does not arise from the order of the Tribunal. The same cannot be held to be a substantial question of law.

7.

Accordingly, these appeals are dismissed.

(Adarsh Kumar Goel)

Judge October 14,2010 (Ajay Kumar Mittal) Pka

Judge

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