IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 616 OF 2008 ASSISTANT COMMISSIONER OF INCOME TAX, KOTTAYAM & ANR. ... Appellants VERSUS M/S TRAVANCORE CEMENTS LIMITED ... Respondent O R D E R respondent herein is company engaged in business of manufacture of cement and cement paints. In respect of Assessment Year 2000-2001, it filed its original return on 26.11.2000 declaring total income of Rs.2,37,56,900/-. Thereafter, however, revised return was filed on 05.01.2001 in which total income shown was Rs.1,91,32,250/-. This return was filed along with Audit Report under Section 44AB of Income Tax Act (hereinafter referred to as Act). said revised return was not taken up for scrutiny under section 143(3) of Act. date for completing regular assessment under Section 143(3) of Act expired on 31.03.2003. On that basis, revised return filed by respondent-assessee was accepted and Assessment Order passed as such under Section 143(1) of Act. On 28.03.2005, notice was issued by Additional Signature Not Verified Commissioner Digitally signed by ASHWANI KUMAR Date: 2015.12.09 of Income Tax under Section 147 read with 18:39:47 IST Reason: Section 148 of Act alleging therein that he had reasons C.A. No. 616/2008 1 to believe that income chargeable to tax for Assessment Year 2000-2001 had escaped assessment within meaning of Section 147 of Act. Thereafter vide communication dated 17.10.2005, respondent was provided with reasons which were recorded for reopening of case and same are as under: - Excise duty (16%) has not been included in valuation of closing stock Pursuant to aforesaid notice, Respondent filed return showing income as shown in return which was filed on 05.01.2001. This return was processed which prompted Assessing Officer to issue another communication dated 31.10.2005 and as per it, respondent was required to furnish following details: - 1. Proof of addition to fixed assets and proof of installation. 2. It is proposed to add back Rs.46,13,711/- being provision for shortage of income shell stock, as this is in nature of mere provision and was not ascertained in year end 31.3.2000. Objections, if any, may be filed. 3. Objections if any to inclusion of excise duty @ 16% in calculation of closing stock. 4. Break-up of interest paid. 5. Ledger with narration and supporting bills/vouchers regarding repairs to building and repairs to machinery. As can be seen from above, though in reasons to believe furnished earlier it was stated that income had escaped assessment only qua Item No. 3 mentioned above. However, by this notice, information regarding Item No. 4 and other items were also sought. C.A. No. 616/2008 2 assessee, on receipt of this letter, took position that it was not permissible for Assessing Officer to broaden scope of notice issued earlier by including other items as well in respect whereof income was allegedly escaped as per Assessing Officer. For this reason, respondent filed objections as aforesaid as well as reasons recorded earlier vide his letter dated 14.11.2005. After considering those objections, Assessing Officer rejected same by his orders dated 18.11.2005. After receiving aforesaid rejection order, respondent approached High Court by filing Writ Petition under Article 226 of Constitution with following prayers: - (i) call for records relating to Exhibit P12 and quash same by issue of writ of certiorari or such other appropriate writ, direction or order. (ii) stay further proceedings pursuant to Exhibit P12 until final disposal of this Writ Petition; and (iii) pass such other order as are deemed just and necessary in facts and circumstances of case. Interim relief prayed under Rule 150 of Rules of High Court of Kerala, 1971. For reasons stated in writ petition and in accompanying affidavit it is humbly prayed that this Hon'ble Court may be pleased to stay all other proceedings pursuant to Exhibit P12 pending final disposal of writ petition. We may mention that except Exhibit P12 which is mentioned in prayer clause, was order dated C.A. No. 616/2008 3 18.11.2005 by which objections of respondent to reasons recorded originally as well as in letter dated 14.11.2005 were rejected. High Court after hearing counsel for parties allowed Writ Petition primarily on ground that when reasons to believe contained in order dated 17.10.2005 pertained only to excise duty which had not been included in valuation of closing stock and assessment was sought to be reopened only in that behalf, it was not permissible for Assessing officer to include other items without following process of issuing notice under Section 148 of Act in that behalf as well. It is clear from question which was posed by High Court and answered by it, which is as under: - moot question is whether assessing authority without following procedure under sub-section (2) of Section 148 assess or reassess any income chargeable to tax which virtually has no connection with reasons already disclosed in notice issued under Section 148(2). It would be pertinent to mention at this stage that insofar as original notice dated 28.03.2005 proposing to reassess income for Assessment Year in question as well as communication dated 17.10.2005 furnishing reasons to believe is concerned, High Court did not find any infirmity therein and on contrary, specifically uphold validity thereof. C.A. No. 616/2008 4 It would also be relevant to mention at this stage that another Division Bench of Kerala High Court itself had doubted correctness of impugned judgment and referred matter to Full Bench and Full Bench of Kerala High Court in case of 'Commissioner of Income Tax v. Best Wood Industries and Saw Mills' [(2011) 331 ITR 63] had specifically over-ruled said judgment. It is held that provisions of Section 147 of Act enabled Assessing Officer to not only assess or re-assess such income which had escaped assessment and in respect of which notice under Section 147 was given, it also empowers Assessing Officer to assess/ re-assess any other income chargeable to tax which had escaped assessment and which comes to notice subsequently in course of proceedings under this Section. We are of opinion that impugned judgment is rightly set aside by Full Bench as is clear from plain language of Section 147: - 147.Income escaping assessment.-If Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in course of proceedings under this section, or recompute loss or depreciation allowance or any other allowance, as case may be, for assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as relevant assessment year); C.A. No. 616/2008 5 In fact there is no scope for controversy solved whatsoever after addition of Explanation 3 to Section 147 inserted by Finance (No. 2) Act, 2009 retrospectively w.e.f.01.04.1989. This explanation is to following effect: - Explanation 3. For purpose of assessment or reassessment under this section, Assessing Officer may assess or reassess income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in course of proceedings under this section, notwithstanding that reasons for such issue have not been included in reasons recorded under sub-section (2) of section 148. aforesaid Explanation clinches issue and makes position abundantly clear which was even otherwise obvious from plain reading of Section 147. We, thus, allow this appeal and set aside impugned judgment of High Court. Though, we have straightened position of law, during pendency of writ petition filed by respondent, High Court had permitted Assessing Officer to complete assessment. On that basis, Assessment Order was passed on 02.06.2006. only addition which is made pertains to shortage in lime shell stock amounting to Rs.46,13,711/-. Since writ petition of respondent itself was allowed, respondent assessee had no occasion to challenge this Assessment Order. It will be open now to respondent to challenge C.A. No. 616/2008 6 order by filing appeal before competent forum, if so advised. ......................, J. [ A.K. SIKRI ] ......................, J. [ ROHINTON FALI NARIMAN ] New Delhi; November 18, 2015. C.A. No. 616/2008 7 ITEM NO.105 COURT NO.12 SECTION IIIA S U P R E M E C O U R T O F I N D I RECORD OF PROCEEDINGS Civil Appeal No. 616/2008 ASSTT.COMMR.OF INCOME TAX,KOTTAYAM &ANR. Appellant(s) VERSUS M/S TRAVANCORE CEMENTS LIMITED Respondent(s) (With appln. (s) for substituted service) Date : 18/11/2015 This appeal was called on for hearing today. CORAM : HON'BLE MR. JUSTICE A.K. SIKRI HON'BLE MR. JUSTICE ROHINTON FALI NARIMAN For Appellant(s) Mr. Guru Krishna Kumar, Sr. Adv. Mr. Rupesh Kumar, Adv. Mr. K. L. Janjani, Adv. Ms. Shweta Garg, Adv. Mr. Jitin Singhal, Adv. Mr. Pratik Raoka, Adv. Ms. Anil Katiyar, Adv. Mr. B. V. Balaram Das, Adv. For Respondent(s) Mr. M. P. Vinod, Adv. Mr. Dileep Pillai, Adv. Mr. Ajay K. Jain, Adv. Mr. Atul Shankar Vinod, Adv. Mr. Vikash Pathak, Adv. UPON hearing counsel Court made following O R D E R appeal is allowed in terms of signed order. (Nidhi Ahuja) (Rajinder Kaur) COURT MASTER COURT MASTER [Signed order is placed on file.] C.A. No. 616/2008 8 Assistant Commissioner of Income-tax, Kottayam & Anr. v. M/s Travancore Cements Limited