MANOHAR MANAK ALLOYS P.LTD,MUMBAI vs. ACIT 4(2), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL "E" BENCH, MUMBAI SHRI M. BALAGANESH, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No. 1159/MUM/2022 (Assessment Year: 2017-18) Manohar Manak Alloys Pvt. Ltd., C/o. D.C. Bothra & Co. LLP (CA) [formerly known as D.C. Bothra & Co.], 297, Tardeo Road, Wille Mansion, 1st Floor, Opp. Bank of India, Nana Chowk, Mumbai - 400007 [PAN: AAACM2688K] …………… Appellant Pr.CIT (Central), Mumbai, Vs Room No. 1920, 19th Floor, Air India Building, Nariman Point, Mumbai - 400021 ……………… Respondent Appearances For the Appellant/Assessee : Shri Rajkumar Singh For the Respondent/Department : Shri A.B. Koli Date of conclusion of hearing : 29.09.2022 Date of pronouncement of order : 22.12.2022 O R D E R Per Rahul Chaudhary, Judicial Member: 1. By way of the present appeal the Appellant/Assessee has challenged the order, dated 25.03.2022, passed by the Ld. Principal Commissioner of Income Tax (Central), Mumbai - 2, [hereinafter referred to as ‗the PCIT‘] under Section 263 of the Income Tax Act, 1961 [hereinafter referred to as ‗the Act‘] pertaining to the Assessment Year 2017-18 whereby the PCIT had set aside the Assessment Order dated 30.12.2019 passed under Section 143(3) read with Section 147 of the Act holding the same to be erroneous in so far as prejudicial to the interest

ITA No. 1159/Mum/2022 Assessment Years: 2017-18 of the Revenue by invoking provisions of Section 263 read with Explanation 2 thereto.

―1. That on facts and circumstances of the case and in law the ld. Principal CIT (Central), Mumbai -2 has erred in passing the order U/s.263 setting aside the reassessment order passed by ld. A.O. 147 r.w.s.143(3) holding wrongly the said assessment order erroneous as well as prejudicial to the interest of revenue.

Further, vide letter dated 05.09.2022, additional ground was raised by the Appellant which reads as under:

―That on facts and circumstances of the case and in law order dated 25/03/2022 passed Under Section. 263 of the Income Tax Act, 1961 by ld. Principal CIT(Central), Mumbai – 2 being barred

ITA No. 1159/Mum/2022 Assessment Years: 2017-18 by limitation of time hence without jurisdiction and illegal therefore impugned order may be quashed.‖ 3. The relevant facts, in brief, are that the Appellant filed return of income for the Assessment Year 2017-18 on 20.09.2017 declaring income of INR 62,35,030/-. The aforesaid return was processed and intimation under Section 143(1) of the Act was issued on 21.09.2018. No regular assessment was framed on the Appellant as the case of the Appellant was not selected for scrutiny.

ITA No. 1159/Mum/2022 Assessment Years: 2017-18 M/s Swarup Group of Industries as Rs. 25,00,00,000/- and made a claim for recovery of Rs 32,65,61,644/- including interest for the period up to the date of filing of the suit. Furthermore, it was found that the Hon'ble Bombay High Court passed Decree favour you in Summary of 2014 the name of M/s. Manohar Manak Alloys Ltd. Swarup Group Industries vide order passed 30.09.2016. 4. The operating portion the decree passed reproduced herein below: "This court doth pass judgment the Plaintiff and against defendant under order XXXVII Rule of The Code Civil Procedure 1908 and this court doth order and decree that defendant pay the Plaintiff sum Rs 32,65,61,644/ (Rupees Thirty Two Crore Sixty Five Lakhs Sixty One Thousand Six Hundred and Forty Four Only) for debt and the sum Rs 13,15,47,945 (Rupees Thirteen Crore Fifteen Lakhs Forty Seven Thousand Nine Hundred and Forty Five and Twenty paise only for interest the rate 15% per annum the principal sum Rs. 25,00,00,000/- (Rupees Twenty Five Crore Only) from the date filing the suit ie, from 30 October 2013 till date hereof and sum Rs. 1,00,000/- (Rupees one lakh only) for cost of suit which the said Debt, interest and cost together aggregating the sum of Rs. 45,82,09,589 (Rupees Forty Five Crore Eighty Two Lakhs Nine Thousand Five Hundred Eighty Nine and Twenty Paisa only) and do pay further interest on sum of Rs 25,00,00,000/- (Rupees Twenty Five Crore Only) the rate 18% per annum from the next date hereof e. 1st October 2016 till payment.

ITA No. 1159/Mum/2022 Assessment Years: 2017-18 offered for tax in AY. 2017-18. In view of the above discussion interest income amounting to Rs 34, 91, 61,644/- is required to be added as income of the assessee. However you have not disclosed any interest income in the return of income filed as well as before the AO during the scrutiny proceedings. The Assessing officer while completing assessment for the A.Y 2017-18, did not conduct any enquiry with regard to the above issue. 7. In view of the above, I am of prima facie view that the above assessment order u/s 143(3) r.w.s147 dated 30.12.2019, passed in your case is erroneous in so far as it is prejudicial to the interest of revenue, within the meaning of section 263 of the income tax act, 1961. Hence, it is proposed to make the revision of aforesaid order as per the powers entrusted in me under section 263 of the Income Tax Act, 1961.‖ 6. In response filed response dated 24.01.2022 and written submissions dated 24.02.2022. However, the PCIT was not convinced with the explanation/submission furnished by the Appellant. Therefore, vide order, dated 25.03.2022, passed under Section 263 of the Act, the order dated 30.12.2019 passed under Section 143(3) read with Section 147 of the Act was set aside by the PCIT leading to filing of the present appeal by the Appellant.

ITA No. 1159/Mum/2022 Assessment Years: 2017-18 additional ground raised by the Appellant can be adjudicated on the basis of admitted facts already on record and therefore, we admit the same in view of the judgment of the Hon‘ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. CIT: 229 ITR 383

- The intimation issued under Section 143(1) of the Act, dated 21.09.2018 constitutes an order subject to revisional jurisdiction of the PCIT under Section 263 of the Act. Reliance in this regard was placed on the judgment of Hon‘ble Bombay High Court in the case of CIT vs. Anderson Marine & Sons Pvt. Ltd. : 266 ITR 649 (Bom).

- The subject matter of reassessment proceedings was commission income earned by the Appellant in respect of accommodation entry for supply of scrap. The issue on the basis of revisional jurisdiction under Section 263 of the Act by the PCIT pertains to accrual of interest on passing of a decree in a summary suit for recovery of debt from Swarup Group of Industries, a proprietary concern. Only the issue raised during re-assessment proceedings stand merger with the assessment order on passing of the order under Section 143(3) read with Section 148 of the Act. Since the issue on which revisional order under Section 263 of the Act was passed were not the subject matter of re-assessment proceedings, the limitation would start running from the 6

ITA No. 1159/Mum/2022 Assessment Years: 2017-18 date of intimation under Section 143(1) of the Act and in that case the order, dated 25.03.2022 passed by the PCIT under Section 263 of the Act is barred by limitation. In order to support the above contentions the Learned Authorised Representative for Appellant relied upon the judgment of the Hon‘ble Madras High Court in the case of CIT vs. Chidambaram Construction Co. : (2004) 261 ITR 0754 (Mad HC) and the decision of the Mumbai Bench of the Tribunal in the case of Royal Western India Turf Club vs. Pr. CIT-8, Mumbai [ITA No. 640/Mum/2021, dated 12.10.2021]

ITA No. 1159/Mum/2022 Assessment Years: 2017-18

ITA No. 1159/Mum/2022 Assessment Years: 2017-18 provision regarding procedure of self assessment. The Assessing Officer has to scrutinize the return as filed by the assessee and send intimation with regard to deficit tax or interest or for refund, as the case may be. The first proviso to sub-section (1) postulates that even the acknowledgement of the return shall be deemed to be an intimation for the purposes of that provision where either no sum is payable by the assessee or no refund is due to him. The second proviso mandates that no intimation under the said sub-section shall be sent after the expiry of one year from the end of the financial year in which the return is made. The scheme of this provision is that the return as filed by the assessee should be accepted at its face value being self-assessment. However, the said sub-section is without prejudice to the provisions of sub-section (2). Sub-section (2) of section 143 provides that on furnishing of the return, if the Assessing Officer has reason to believe that any claim of loss, exemption, deduction, allowance or relief made in the return is inadmissible, he can serve notice on the assessee specifying such claim of loss, exemption, allowance or relief, and require the assessee on the specified date to produce or cause to be produced any evidence or particulars specified therein or on which the assessee may rely in support of such claim. However, this power by virtue of the proviso to sub-section (2) is required to be exercised within 12 months from the end of the month in which the return is furnished. If the Assessing Officer invokes that power, then on further inquiry as referred to in sub-section (3), he would make an order in writing allowing or rejecting the claim or claims specified in the notice given to the assessee and make an assessment determining the total income or loss accordingly, and determine the sum payable by the assessee on the basis of such assessment. Indeed, the order passed under sub-section (3) of section 143 is ‗regular assessment‘ within the meaning of section 2(40) of the Act which defines ‗regular assessment‘ as meaning the assessment made under sub-section (3) of section 143 or section 144. Section 2(40) which defines ‗regular assessment‘, was amended by the Finance Act, 1990, with effect from April 1, 1989, which corresponds to the amendment effected in section 143(1) of the Act. In other words, the procedure for assessment has been simplified so as to dispense with a regular assessment order to be passed by the Assessing Officer in every case. The question is,

ITA No. 1159/Mum/2022 Assessment Years: 2017-18 whether acceptance or acknowledgement of the return filed by the assessee and intimation sent for the purpose of section 143(1) is an assessment ? The answer, in our opinion, is in the affirmative. It is nevertheless ‗assessment‘. Assessment has been defined in section 2(8) as ‗assessment includes reassessment‘. Section 143, as a whole, is a provision regarding assessment. The modalities and procedure for assessment have been provided for in sub- section (1), which is different from the procedure under sub- section (2) read with sub-section (3) of the same provision. In both cases, it is a proceeding under the Act and the assessment accepted or made by the Revenue, as the case may be. In the latter case, i.e., section 143(3), an order is passed; whereas in the former case, that is, section 143(1), it is an intimation or acknowledgement. Nevertheless, the intimation sent by the Assessing Officer, in law, will have to be understood as having the force of an order on self- assessment. Only this construction would be purposive construction. If the argument of the assessee was to be accepted that there is no order passed by the Assessing Officer, that would mean that there has been no assessment on the return filed by the assessee. Such construction would militate against the interest of the assessee. The construction put by us is reinforced by the legal fiction provided in the amended provision, which postulates that ‗intimation‘ shall be deemed to be notice of demand issued under section 156 and all the provisions of the Act shall apply accordingly. On a plain reading of section 156 of the Act, notice of demand is served upon the assessee when any tax, interest, penalty, fine or other sum is payable in consequence of any order passed under the Act. To put it differently, issuance of notice of demand [read intimation under section 143(1) of the Act], presupposes that it is in consequence of an order having been passed under the Act. In that sense ‗intimation‘ under section 143(1) would partake of the colour of an order passed under the Act. Understood thus, interference under section 263 of the Act by the Commissioner even against an intimation referable to section 143(1) is open. We are persuaded to take this view because if the Legislature had intended to exclude the jurisdiction of the Commissioner in respect of proceeding under section 143(1) of the Act, which is also an assessment and, therefore, in the nature of an order, it would have expressly made provision in that behalf,

ITA No. 1159/Mum/2022 Assessment Years: 2017-18 just as it has amended section 154 of the Act by the Finance Act, 1999, in respect of the provision for ‗rectification of mistake‘ as a consequential amendment made to envelop the amended section 143(1) of the Act. It will be useful to advert to section 142 of the Act which enables the Assessing Officer to make inquiry before assessment, after the return of income under section 139 of the Act is filed by the assessee. Section 142 precedes section 143 and is not restricted only to the assessment order to be passed within the meaning of section 143(3) of the Act. In other words, on the filing of the return under section 139, if the Assessing Officer has reason to believe that an in-appropriate claim has been made by the assessee in the return, before sending the intimation under section 143(1) he can make such inquiry and if he is satisfied in that inquiry about the inappropriate claim of the assessee, he can proceed in terms of sub-section (2) and sub-section (3) of section 143. This appears to be the scheme regarding the procedure of assessment of the return filed by the assessee. Accordingly, as already observed by us earlier, in both situations, it is the decision of the Assessing Officer whether to send intimation or to proceed under sub-section (2) of section 143. That is surely a process of taking a decision in the matter. Sending the intimation being a decision of acceptance of self-assessment is, therefore, in the nature of the order passed by the Assessing Officer for the purpose of section 263 of the Act. In the other situation, the action culminates with the order in writing under section 143(3) of the Act, which is indubitably amenable to section 263 of the Act.

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As the Tribunal has proceeded to decide the matter on the solitary ground referred to above, it is not necessary for us to examine any other contention. On the other hand, we would think it appropriate while setting aside the impugned decision, to remit the case to the Tribunal to decide the same in accordance with law on merit.‖ (Emphasis Supplied)

ITA No. 1159/Mum/2022 Assessment Years: 2017-18 143(1) of the Act constitutes an order which can be subjected to revision under Section 263 of the Act.

ITA No. 1159/Mum/2022 Assessment Years: 2017-18 on 29.03.2004, order under Section 263 of the Act was passed taking a view that part of the assessment order relating lease equalization fund was prejudicial to the interest of the Revenue. The Hon‘ble Supreme Court decided the issue in favour of the assessee holding that since the power of revision was exercised in respect of an issue that was not subject matter of reassessment, the period of limitation began to run from the date on which the original assessment order was passed and not from the date of reassessment order. The relevant extract of the above judgment of the Hon‘ble Supreme Court reads as under:

―9. We may at this juncture also notice the decision of this Court in Hind Wire Industries Ltd.'s case (supra) wherein the decision of this Court in V. Jaganmohan Rao v. CIT/CEPT [1970] 75 ITR 373 interpreting the provisions of section 34 of the Act was reproduced which reads as under: "'Section 34 in terms states that once the Income-tax Officer decides to reopen the assessment, he could do so within the period prescribed by serving on the person liable to pay tax a notice containing all or any of the requirements which may be included in a notice under section 22(2) and may proceed to assess or reassess such income, profits or gains. It is, therefore, manifest that once assessment is reopened by issuing a notice under sub-section (2) of section 22, the previous underassessment is set aside and the whole assessment proceedings start afresh. When once valid proceedings are started under section 34(1)(b), the Income-tax Officer had not only the jurisdiction, but it was his duty to levy tax on the entire income that had escaped assessment during that year'." (p. 643) 10. There may not be any doubt or dispute that once an order of assessment is reopened, the previous underassessment will be held to be set aside and the whole proceedings would start afresh but the same would not mean that even when the subject-matter of reassessment is distinct

ITA No. 1159/Mum/2022 Assessment Years: 2017-18 and different, the entire proceeding of assessment would be deemed to have been reopened. 11. In Sun Engg. Works (P.) Ltd.'s case (supra) also, V. Jaganmohan Rao's case (supra) was noticed stating: "The principle laid down by this Court in Jaganmohan Rao's case, therefore, is only to the extent that once an assessment is validly reopened by issuance of a notice under section 22(2) of the 1922 Act (corresponding to section 148 of the Act) the previous under assessment is set aside and the ITO has the jurisdiction and duty to levy tax on the entire income that had escaped assessment during the previous year. . . The judgment in V. Jaganmohan Rao's case, therefore, cannot be read to imply as laying down that in the reassessment proceedings validly initiated, the assessee can seek reopening of the whole assessment and claim credit in respect of items finally concluded in the original assessment. The assessee cannot claim recomputation of the income or redoing of an assessment and be allowed a claim which he either failed to make or which was otherwise rejected at the time of original assessment which has since acquired finality. Of course, in the reassessment proceedings, it is open to an assessee to show that the income alleged to have escaped assessment has in truth and in fact not escaped assessment but that the same had been shown under some inappropriate head in the original return, but to read the judgment in Jaganmohan Rao's case, as [if] laying down that reassessment wipes out the original assessment and that reassessment is not only confined to 'escaped assessment' or 'under assessment' but to the entire assessment for the year and starts the assessment proceeding de novo giving the right to an assessee to reagitate matters which he had lost during the original assessment proceeding, which had acquired finality, is not only erroneous but also against the phraseology of section 147 of the Act and the object of reassessment proceedings. Such an interpretation would be reading that judgment totally out of context in which the questions arose for decision in that case. It is neither desirable nor permissible to pick out a word or a sentence from the judgment of this Court, divorced from the context of the question under consideration and treat it to be the complete 'law' declared by this Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this Court. A decision of

ITA No. 1159/Mum/2022 Assessment Years: 2017-18 this Court takes its colour from the questions involved in the case in which it is rendered and while applying the decision to a later case, the Courts must carefully try to ascertain the true principle laid down by the decision of this Court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this Court, to support their reasoning. . . ." (p. 319) It was furthermore held: "As a result of the aforesaid discussion, we find that in proceedings under section 147 of the Act, the Income-tax Officer may bring to charge items of income which had escaped assessment other than or in addition to that item or items which have led to the issuance of notice under section 148 and where reassessment is made under section 147 in respect of income which has escaped tax, the Income-tax Officer's jurisdiction is confined to only such income which has escaped tax or has been under-assessed and does not extend to revising, reopening or reconsidering the whole assessment or permitting the assessee to reagitate questions which had been decided in the original assessment proceedings. It is only the underassessment which is set aside and not the entire assessment when reassessment proceedings are initiated. The Income-tax Officer cannot make an order of reassessment inconsistent with the original order of assessment in respect of matters which are not the subject-matter of proceedings under section 14. . . ." (p. 320) 12. We may at this juncture also take note of the fact that even the Tribunal found that all the subsequent events were in respect of the matters other than the allowance of 'lease equalization fund'. The said finding of fact is binding on us. Doctrine of merger, therefore, in the fact situation obtaining herein cannot be said to have any application whatsoever. It is not a case where the subject-matter of reassessment and subject-matter of assessment were the same. They were not.

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ITA No. 1159/Mum/2022 Assessment Years: 2017-18 Income-tax exercising its revisional jurisdiction reopened the order of assessment only in relation to lease equalization fund which being not the subject of the reassessment proceedings, the period of limitation provided for under sub- section (2) of section 263 of the Act would begin to run from the date of the order of assessment and not from the order of reassessment. The revisional jurisdiction having, thus, been invoked by the Commissioner of Income-tax beyond the period of limitation, it was wholly without jurisdiction rendering the entire proceeding a nullity.‖ (Emphasis Supplied) 18. The law as propounded by the Hon‘ble Supreme Court in the above judgment was considered by the Hon‘ble Bombay High Court in the case of Ashoka Buildcon Ltd. vs. CIT (supra). While deciding the issue of limitation in favour of the assessee, the Hon‘ble Bombay High Court held as under: 325 ITR 574 (Bom)

―7. Section 263 empowers the Commissioner to call for and examine the record of any proceedings under the Act and to pass such orders as the circumstances of the case justify, including an order enhancing, modifying or cancelling the assessment and directing a fresh assessment, if he considers that any order passed by the Assessing Officer is erroneous insofar as it is prejudicial to the interest of the revenue. Sub- section (2) of section 263 stipulates that no order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. That period of two years from the end of the financial year in which the original order of assessment dated 27-12-2006 was passed, has expired on 31-3-2009. Hence the exercise of the revisional jurisdiction in respect of the original order of reassessment is barred by limitation. This is sought to be obviated by the Commissioner of Income- tax by seeking to revise, under section 263, the order dated 27-12-2007. The order dated 27-12-2007 was passed after the assessment was reopened on the ground of an escapement of income under section 147 and an order of reassessment was passed by which the claim under section 16

ITA No. 1159/Mum/2022 Assessment Years: 2017-18 72A came to be disallowed. The submission that has been urged on behalf of the assessee is that, since the assessment was opened and an order of reassessment was passed only one issue namely, the claim under section 72A, when the Commissioner as a Revisional Authority under section 263 seeks to exercise his jurisdiction on matters which did not form the subject of the order of reassessment, the period of limitation would begin to run from the original order of assessment. This submission which has been urged on behalf of the assessee would have to be accepted in view of the judgment of the Supreme Court in Alagendran Finance Ltd.'s case (supra). The issue which arose before the Supreme Court was whether, for the purpose of computing the period of limitation envisaged under sub-section (1) of section 263, the date of the order of assessment or of the order of reassessment is to be taken into consideration. In that case, the assessee filed its return for assessment years 1994-95, 1995-96 and 1996-97 and the assessments were completed on 27-2-1997, 12-5-1997 and 30-3-1998. In the orders of assessment, the return of the assessee under the head of "Lease Equalisation Fund" were accepted. Proceedings for reassessment were initiated by the Assessing Officer and orders of reassessment were passed in respect of the following items namely : (i) expenses claimed for share issue; (ii) bad and doubtful debts; and (iii) excess depreciation on gas cylinders and goods containers. Though the return of income in respect of the "Lease Equalisation Fund" was not the subject-matter of the reassessment proceedings, the Commissioner of Income-tax invoked his revisional jurisdiction under section 263 and by his order came to the conclusion that the assessee had not furnished complete details and the order of the Assessing Officer was prejudicial to the interest of the revenue. The Tribunal held that the order which was passed under section 263 on 29-3-2004 was barred by limitation. The Supreme Court held that the Commissioner of Income-tax, while exercising his jurisdiction under section 263 found that only that part of the order of assessment which related to the lease equalisation fund was prejudicial to the interests of the revenue. But the proceedings for reassessment had nothing to do with the said 17

ITA No. 1159/Mum/2022 Assessment Years: 2017-18 head of income. The Supreme Court clearly held that the doctrine of merger was not attracted to a case of that nature. The Supreme Court followed its earlier judgment in CIT v. Sun Engg. Co. (P.) Ltd. [1992] 198 ITR 297 and held that the Tribunal had found that all the subsequent events were in respect of matters other than the lease equalisation fund. In other words, this was not a case where the subject-matter of the assessment and the reassessment was the same. The Supreme Court then held as follows :— "We, therefore, are clearly of the opinion that keeping in view the facts and circumstances of this case and, in particular, having regard to the fact that the Commissioner of Income-tax exercising his revisional jurisdiction reopened the order of assessment only in relation to lease equalisation fund which being not the subject of reassessment proceedings, the period of limitation provided for under sub-section (2) of section 263 of the Act would begin to run from the date of the order of assessment and not from the order of reassessment. The revisional jurisdiction having, thus been invoked by the Commissioner of Income-tax beyond the period of limitation, it was wholly without jurisdiction rendering the entire proceeding a nullity." 8. Where an assessment has been reopened under section 147 in relation to a particular ground or in relation to certain specified grounds and, subsequent to the passing of the order of reassessment, the jurisdiction under section 263 is sought to be exercised with reference to issues which do not form the subject of the reopening of the assessment or the order of reassessment, the period of limitation provided for in sub-section (2) of section 263 would commence from the date of the order of assessment and not from the date on which the order reopening the reassessment has been passed. 9. Section 147 empowers the Assessing Officer, if he has reason to believe that any income chargeable to tax has escaped assessment for any assessment year to assess or reassess the said income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the section. Explanation 3 which has been

ITA No. 1159/Mum/2022 Assessment Years: 2017-18 inserted by the Finance (No. 2) Act of 2009 with retrospective effect from 1-4-1989 provides that for the purpose of assessment or reassessment under the section, the Assessing Officer may assess or reassess the income in respect of any issue which has escaped assessment and such issue comes to his notice subsequently, in the course of the proceedings under the section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148. The substantive part of section 147 empowers the Assessing Officer to assess or reassess the income chargeable to tax which has escaped assessment and any other income which comes to his notice subsequently in the course of proceedings under the section. The effect of Explanation 3 is to empower the Assessing Officer to assess or reassess the income in respect of any issue which comes to the notice in the course of the proceedings under the section, though the reasons which were recorded in the notice under section 148(2) did not contain reference to that issue. 10. The submission which has been urged on behalf of the revenue is that when several issues are dealt with in the original order of assessment and only one or more of them are dealt with in the order of reassessment passed after the assessment has been reopened, the remaining issues must be deemed to have been dealt with in the order of reassessment. Hence, it has been urged that the omission of the Assessing Officer, while making an order of reassessment to deal with those issues under section 143(3) read with section 147 constitutes an error which can be revised in exercise of the jurisdiction under section 263. The submission cannot be accepted either as a matter of first principle, based on a plain reading of the provisions of sections 147 and 263, nor is it sustainable in view of the law laid down by the Supreme Court. The Supreme Court has now clearly held in the decision in Alagendran Finance that the doctrine of merger does not apply where the subject-matter of reassessment and of the original order of assessment is not one and the same. In other words, where the assessment is sought to be reopened only one or more specific grounds and

ITA No. 1159/Mum/2022 Assessment Years: 2017-18 the reassessment is confined to one or more of those grounds, the original order of assessment would continue to hold the field, save and except for those grounds on which a reassessment has been made under section 143(3) read with section 147. Consequently, an appeal by the assessee on those grounds on which the original order of assessment was passed and which do not form the subject of reassessment would continue to subsist and would not abate. The order of assessment cannot be regarded as being subsumed within the order of reassessment in respect of those items which do not form part of the order of reassessment. Where a reassessment has been made pursuant to a notice under section 148, the order of reassessment prevails in respect of those items which form part of reassessment. On items which do not form part of the reassessment, the original assessment continues to hold the field. When the Assessing Officer reopens an assessment on a particular issue, it is open to him to make a reassessment on that issue as well as in respect of other issues which subsequently come to his notice during the course of the proceedings under section 147. The submission of the revenue is that by not passing an order of reassessment in respect of other independent issues, the order of the Assessing Officer can be construed to be erroneous and to be prejudicial to the interest of the revenue within the meaning of section 263. The submission cannot be accepted in the facts of the present case. The substantive part of section 147 as well as Explanation 3 enables the Assessing Officer to assess or reassess income chargeable to tax which he has reason to believe had escaped assessment and other income which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the section. There is nothing on the record of the present case to indicate that there was any other income which had come to the notice of the Assessing Officer as having escaped assessment in the course of the proceedings under section 147 and when he passed the order of reassessment. The Commissioner, when he exercised his jurisdiction under section 263, in the facts of the present case, was under a bar of limitation since limitation would begin to run from the date on which the 20

ITA No. 1159/Mum/2022 Assessment Years: 2017-18 original order of assessment was passed. We must however clarify that the bar of limitation in this case arises because the revisional jurisdiction under section 263 is sought to be exercised in respect of issues which did not form the subject- matter of the reassessment proceedings under section 143(3) read with section 147. In respect of those issues, limitation would commence with reference to the original order of assessment. If the exercise of the revisional jurisdiction under section 263 was to be in respect of issues which formed the subject-matter of the reassessment, after the original assessment was reopened, the commencement of limitation would be with reference to the order of reassessment. The present case does not fall in that category.‖ (Emphasis Supplied) 19. In the present case, the return of the Appellant was processed under Section 143(1) of the Act on 21.09.2018. As per the judgment of Hon‘ble Bombay High Court in the case of Anderson Marine & Sons Pvt. Ltd. (supra), the same constitutes order which can be subjected to revision under Section 263 of the Act. The subject matter of re-assessment proceedings was the commission income earned by the Appellant by providing accommodation entries. The order under Section 143(3) read with Section 147 of the Act was passed on 30.12.2019. The aforesaid order was set aside by the PCIT under Section 263 of the Act on the ground that the Assessing Officer had failed to conduct enquiry in relation to interest income accruing/arising to the Appellant pursuant to a decree having been passed by the Hon‘ble High Court in favour of the Appellant in a suit for recovery of loans and advances given by the Appellant to Swarup Group of Industries. The issue on which revisional powers have been exercised under Section 263 of the Act was not the subject matter of reassessment proceedings culminating into passing of the order dated 30.12.2019. Thus,

ITA No. 1159/Mum/2022 Assessment Years: 2017-18 in view of the above judgments of the Hon‘ble Supreme Court and the Hon‘ble High Court as well the factual matrix of the instant case, we hold that period of limitation as prescribed in Section 263(2) of the Act started running from the date on which intimation under Section 143(1) of the Act was issued (i.e. 21.09.2018). Our view draws strength from the judgment of the Hon‘ble Bombay High Court in the case of CIT Vs Lark Chemicals Limited: [2014] 368 ITR 655 (Bombay).

Order pronounced on 22.12.2022.

Sd/- Sd/- (M. Balaganesh) (Rahul Chaudhary) Accountant Member Judicial Member म ुंबई Mumbai; दिन ुंक Dated : 22.12.2022 Alindra, PS

ITA No. 1159/Mum/2022 Assessment Years: 2017-18 आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त(अपील) / The CIT(A)- 4. आयकर आय क्त / CIT 5. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file.

आिेश न स र/ BY ORDER, सत्य दपि प्रदि //True Copy// उप/सह यक पुंजीक र /(Dy./Asstt. Registrar) आयकर अपीलीय अदिकरण, म ुंबई / ITAT, Mumbai