Law: Income Tax Act, 1961

Section: 147

[Indian Income Tax Act, 1961]....... Section 147-Reassessment-Assessee submitting return showing loss--Return filed as being beyond time- Reassessment proceedings in respect of escaped income arising in such year- Whether loss initially returned by assessee can be ignored-Held no Once proceedings are validly initiated under Section 34 of the Indian Income tax Act, 1922, the jurisdiction of the Income Tax Officer cannot be confined only to that portion of the income with regard to which the reassessment proceedings were started. Section 34, in terms, states that once the Income Tax Officer decides to reopen the assessment he could do so within the prescribed period 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 under-assessment is set aside and the whole assessment proceedings start afresh Even where an assessment has been completed and a subsequent reassessment has to be made with regard to a particular item, the previous assessment cannot be wholly ignored. In order to determine the rate at which the escaped income has to be assessed, the Income Tax Officer has to take into consideration the earlier assessment and determine the rate for the escaped item on that basis. The assessee submitted its returns for the assessment years 1960-61 and 1961-62 snowing losses. The Income Tax Officer held that the returns for both assessment years had been submitted beyond time and proceedings for both these years were filed. Subsequently, the assessee filed a disclosure petition in respect of some hundi loans. A settlement was arrived at between the assessee and the revenue and as a result a sum of Rs. 27,000 became assessable for the assessment year 1960-61 and a sum of Rs. 9,000 for the assessment year 1961-6). The Income Tax Officer reopened the assessment for the two years under Section 14/(1). The assessee contended that the losses of those years should be determined in…

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