Law:

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Section 147 of the Income-tax Act, 1961 - Income escaping assessment - Non-disclosure of primary facts - Assessment year 2000-01 - Whether by virtue of clause (b) of Explanation 2 to section 147, if Assessing Officer, in course of scrutiny of return, finds that assessee has understated income or has claimed excessive loss, deduction, allowance or other reliefs in return, he is free to initiate proceedings for income escaping assessment under section 147, no matter assessment based on original return is not completed either through proceedings under section 143(1)(a) or through regular assessment under section 143(3) - Held, yes - Whether, income escaping assessment can be made after assessment or without assessment - Held, yes FACTS During the relevant assessment year, the assessee had received an amount of Rs. 3.9 crores under restrictive covenant from a Japanese company which took over the business of an Indian company of which the assessee was the managing director. The assessee initially treated the receipt from the foreign company as his income and paid advance tax and self-assessed tax on such income. However, while filing return for the relevant assessment year, the assessee claimed refund of the tax paid on the receipt from the foreign company. The Assessing Officer, while scrutinizing the return, noticed an anomalous situation whereby the assessee, who initially conceded income by paying advance tax, had claimed exemption on the same while filing return. The Assessing Officer issued an intimation under section 143(1)(a) and thereafter, he reopened the assessment and completed income escaping assessment under section 147 including the amount received from the foreign company as income. On appeal, the assessee challenged the jurisdiction of the Assessing Officer to make income escaping assessment under section 147 on the ground that the proceeding stated to have been completed by the Assessing Officer under section 143(1)(a) was not served on him. The Tribunal held that since the assessee had a claim for refund, the Assessing Officer was bound to issue an intimation under section 143(1)(ii) which was not done and further, since there was no processing of…

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