1. (1) to (8) [These paras are not reproduced here as they involve minor issues.] 9. In both these appeals filed by the revenue, grounds are common, hence they are disposed of together. Ground Nos. land 2 are regarding the interpretation of the judgment of the Hon'ble High Court in the Writ Petition filed by the assessee on the basis of the notice issued by the assessing officer to reopen the case under Section 147(a)of the IT Act, 1961.
10. The brief facts are that the original assessments for the assessment years 1968-69 and 1969-70 were completed on 5-1-1973.
Thereafter notices under Section 148 read with Section 147(a) of the IT Act, 1961 dated 12-3-1976 were issued and served on the assessee. These were challenged by the assessee through a writ petition under Article 226 of the Constitution of India before the Hon'ble High Court of Allahabad and its judgment in Renusagar Power Co. Ltd. (No. 1) v. ITO [1979] 117 ITR 719 and Renusagar Power Co. Ltd. (No. 2) v.ITO [1979] 117 ITR 733. There were 4 items of escapement on the basis of which notice under Section 147(a) was issued for assessment year 1968-69 which were as under:-(i) Transformer break-down expenses 27,480(ii) Deferred guarantee commission 3,68,595(iii) Start-up and commencing expenses 12,20,872(iv) Excess development rebate allowed 11. The Hon'ble High Court held that no material relevant to items at serial Nos. 1 and 2 had been kept back by the assessee during the original assessment proceedings and, therefore, escapement of income could not be attributed to nondisclosure. It was for the ITO to draw proper inference from the basic facts placed before him. Thus Section 147(a) could not be invoked in respect of these items. However, in respect of items at serial Nos. 3 and 4 it was found that the basis for reopening was there as the petitioner company had not disclosed fully and truly all the material facts.
For the reasons given above, the writ petition succeeds in part and is allowed. The ITO, A-Ward, Varanasi.is restrained from proceeding with the re-assessment of the petitioner company in respect of the assessment year 1968-69, on the grounds relating to (i) transformer break down expenses and (ii) deferred guarantee commission. Under the circumstances of the case, the parties shall bear their own costs.
13. The facts for assessment year 1969-70 were similar. There were 6 items of escapement in respect of which notice under Section 148/147(a) was issued which were as under:-(i) Deferred guarantee commission 9,21,298(ii) Start-up and commencing expenses 22,800(iii) Development rebate 62,25,460(iv) Exchange loss 1,14,366(v) Construction of brick kiln written off 15,745(vi) Training expenses 37,204 14. The Hon'ble High Court had held that escapement could not be said to be due to failure of the assessee to disclose in respect of item Nos. 1,4 and 5 and, therefore, the case for reopening under Section 147(a) was not made out. However, in respect of items at Serial Nos.
2,3 and 6 it was held that escapement was due to the nondisclosure of the material facts by the assessee and, therefore, Section 147(a) was applicable. The following directions were given by the Hon'ble High Court:- For the reasons given in this petition and Writ Petition No. 581 of 1976 Renusagar Power Co. Ltd. v. ITO [1979] 117 ITR 719(All), the writ petition is allowed in part and the is directed not to proceed with re-assessment of the petitioner company on the basis of the grounds relating to, (1) deferred guarantee commission, (2) exchange loss and (3) construction of brick kiln written off He will only be entitled to proceed with the assessment on the basis of the notice under Section 148 of the IT Act in respect of other items mentioned in the same. In the circumstances, we direct the parties to bear their owe costs.
15. The IAC (Assessment) proceeded with the assessments. During those proceedings he found that there were number of other items also in which according to him, income had escaped assessment but which had not been mentioned at the time of issue of notices under Section 148/147(a). He felt free to bring those items to tax, since there was no specific restraint in respect of those items in the order/judgment of the Hon'ble High Court, consequently he assessed those other items as well. In appeal the learned CIT (Appeals) discussing the judgment of the Hon' ble High Court in detail gave a finding and directed the IAC (Assessment) to delete of the additions where there was no omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. He had given this finding on the ground that the judgment of the Hon'ble High Court was binding on the department as the department had not preferred an appeal against the said decision. In the said decision the Hon'ble High Court while restraining the revenue from assessing certain items had given out the reasonings and the said reasonings were binding on both the parties. He further held that the alleged reasoning was that the department was not free on the basis of a notice under Section 147(a) to reopen and assess on certain items which had been disclosed fully and truly along with material facts necessary for the assessment by the assessee. The revenue, being aggrieved, has come up in appeal before the Tribunal.
16. The learned departmental representative has very vehemently argued out that the order of the learned CIT (Appeals) was not correct as once the assessment order was reopened, the ITO or the assessing officer was completely free to assess any item which had escaped taxation. For that he has relied on the decision of the Hon'ble Supreme Court in the case of V. Jaganmohan Rao v. CIT [1970] 75 ITR 373, in which their Lordships had held that once proceedings under Section 34 are validly initiated the jurisdiction of the ITO is not restricted to the portion of the income that escaped assessment. Section 34 in terms says that once the ITO 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 other requirements which may be included in a notice under Section 22(2) and may proceed to assess or re-assess such income, profits or gains. Therefore, 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. Once valid proceedings are started under Section 34(1)(b) the ITO, not only, had the jurisdiction but it was his duty to levy tax on the entire income that had escaped assessment during that year.
17. The learned departmental representative has further pointed out that this decision of the Hon'ble Supreme Court has been followed by the Madras High Court in the case of CIT v. Standard Motor Products of lndia Ltd. [1983] 142 ITR 877, in which the Hon'ble High Court had held that once an assessment is reopened, the initial order of assessment stands automatically cancelled and the order of reassessment takes place of the original order of assessment. It was further held that once an assessment is reopened, the ITO will not only have the jurisdiction but it will be his duty to determine the tax liability of the assessee and for the purpose he will necessarily have to take into account not only the escaped income in respect of which a notice under Section 147(a) or under Section 147(b), has been issued as this section does not in any manner fetter the power of the ITO to bring to charge items falling under Section 147(b) in a given case where assessment proceedings are validly started by the issue of a notice under Section 147(a).
It was held that it, therefore, follows that once re-assessment proceedings are validly initiated under Section 147(a) the ITO will have jurisdiction to assess the entire income in the hands of the assessee irrespective of the fact whether the items of income fall under Section 147(a) or under Section 147(b) of the Act even though the issue of a notice under Section 147(6) of the Act could be barred by the expiry of the period of limitation prescribed, therefore, under Section 149 of the Act.
18. The learned departmental representative has further relied on the decision of the Hon'ble Calcutta High Court in the case of CIT v.Ramsewak Paul [1977] 110ITR 527, in which it was held that once a re-assessment proceeding has started it is the duty of the ITO to levy tax on the entire income that has escaped assessment during that year.
The Hon'ble Calcutta High Court has also followed the Hon'ble Supreme Court's decision in V, Jaganmohan Rao's case (supra).
19. The learned departmental representative has further relied on the decision of the Hon'ble Supreme Court in the case of ITO v.Mewalal Dwarka Prasad[1989] 176 ITR 529, in which the Hon'ble Supreme Court had held that it was not for the High Court to examine the validity of the notice under Section 148 in regard to two of the items of cash credits, if it came to the conclusion that the notice was valid at least in respect of the remaining items. Whether the Income-tax Officer while making the re-assessment would take into account the other two items should have left to be considered by the Income-tax Officer in the fresh reassessment proceedings.
20. On the other hand, the learned counsel for the respondent has pointed out that all the decisions relied on by the learned departmental representative except of Hon'ble Madras High Court whereof cases needs knowledge under Section 147(6) was issued and thus the period of limitation was not involved in those cases. He has pointed out that in this case there is a decision of Hon'ble Allahabad High Court between the parties for this very assessment year on this very issue and thus the parties, i.e., tlieassesseeandtherevenuebothwereboundbythatdecision.lt is not a question of a ratio of a decision which has to be looked into in this case but the entire decision of the Hon'ble Court which was between the parties which has to be taken into consideration in this case. To elucidate his point he has relied on the decision of the Hon'ble Allahabad High Court in the case of Manoo Lal Kedarnath v. Union of India [1978] 114 ITR 884 at page 888. The Hon'ble Court had mentioned that the settled rule of law is that a judicial determination which has become final between the parties is binding provided it is made by an authority having jurisdiction. It will have legal' efficacy till set aside an appeal or by any superior authority. He has further relied on the decision of the Hon'ble Supreme Court in the case of CIT v. Rao Thakur Narayan Singh [1965] 56 ITR 234, in which it was held that as the order of the Appellate Tribunal became final, the finding of the Tribunal, even though by mistake, could not be challenged by the revenue as the same had become final between the parties. It was further held that it was never the intention of the Legislature by amending Section 34(1) in 1948 to enable the ITO to reopen final decisions made against the revenue in respect of questions that directly arose for decision in earlier proceedings. If that were not the legal position it would result in placing an unrestricted power of reviewinthehandsof the ITO to go behind the findings given by a hierarchy of Tribunals and even those of the High Courts and the Supreme Court with his changing moods.
21. The learned counsel has further relied on the decision of the Hon'ble Kerala High Court in the case of Rajeshwari Export House v.ITAT [1988] 171 ITR 519/37 Taxman 136 in which the Hon 'ble High Court had held that even a High Court cannot, in exercise of its jurisdiction Under Section. 226 and 227 of the Constitution, give directions to the Appellate Tribunal as and when it takes a different view on the question of law earlier decided on reference made to it, to ignore the decision inter panes and dispose of the appeal in accordance with the later view, contrary to Section 260(1) of the I.T. Act, 1961.
22. We have heard the parties at length and also carefully perused the entire facts on record. In this case certain facts are admitted. The assessee was once assessed for the assessment years 1968-69 and 1969-70 on 5-1-1973. Notices under Section 148 read with Section 147(a) were issued on 12-3-1976. Four specific amounts were mentioned in the notice for the assessment year 1968-69 and six were mentioned in the notice for assessment year 1969-70. The assessee had gone in writ before the Hon'ble High Court and in which the Hon'ble Court had specifically restrained the revenue from assessing the assessee on two items for assessment year 1968-69 and for 3 items in the assessment year 1969-70.
The only dispute raised by the revenue is that once the case is reopened under Section 147(a) the entire assessment is re-assessment reopened and there are no fetters on the ITO while reframing the assessment regarding the items which has escaped assessment. On the other hand, the learned counsel for the respondent had stressed that it is only those items for which the assessee had not fully and truly disclosed the entire particulars which can be brought to tax and not other cases. The basic points which has been stressed, is that it is the point of limitation which comes in the way in bringing other items which are covered under Section 147(6) specially when the assessment is reopened under Section 147(a). The limitation prescribed for items under Section 147(b) is 4 years while for items under section I47(a) is 8 years. All the decisions relied upon by the learned departmental representative pertain to reopening of cases on the basis of notices issued under Section 34(6) where the question of limitation is not involved except the case of only Madras High Court in which the Hon'ble Madras High Court had held that even in cases under Section 147(6) can be brought to tax where the assessment had been reopened under Section 147(a). A little careful scrutiny of the decisions relied upon will show that the point of limitation has not been approved by the Hon'ble Supreme Court in the case of Mewalal Dwarka Prasad (supra). The Hon'ble Court, although setting aside the direction of the Hon'ble High Court had held that the power under Clause (b) of Section 147 could be called in aid where the limitation has not expired, as the notice under Clause (b) had to be issued within a period of 4 years. In the instant case in the notice beyond time provided in law and thus the alleged cash credits could not have been brought to tax if there is a finding that the assessee had disclosed fully and truly all material facts necessary for assessment for that year. In this case too, the learned CIT(Appeals) has given a direction to the Inspecting Assistant Commissioner of Income-tax (Assessment) to delete all the additions where there was no omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. This very direction itself shows that it was in conformity with the view expressed by the Hon'ble Supreme Court in Mewalal Dwarka Prasad's case (supra). The learned counsel for the respondent has pointed out that there are plethora of judgments on the point that after 4 years only those items can be included in the re-assessment reopened under Section 147(a) in which there was non-disclosure of the facts fully and truly. Some of them are mentioned :- 1. New Kaiser-1-Hind Spg. & Wvg. Co. Ltd. v. CIT [1977] 107 ITR 760 (Bom.), 7.1. B.M. World Trade Corporation v. N.D. Bhatt, IAC [1982] 138 ITR 742/9 Taxman 82 (Bom.).
8. Sunrolling Mills (P.) Ltd. v. ITO [1986] 160 ITR 412/27 Taxman 594 (CaL).
23. In these appeals there is one special thing which completely supports the decision arrived at by the learned CIT(Appeals) and that is the decision of the Hone'ble High Court in assessee's own case in a writ filed by the assessee in Renusagar Power Co. Ltd. (No.l)'s case (supra) and Renusagar Power Co. Ltd.(No. 2)'s case (supra). The Hon'ble Court had very clearly and specifically held that it is only those items for which there was no true and full disclosure before the ITO which can be brought to tax and the proceedings of reopening the assessment can be taken under Section 147(a) and following that reasoning it restrained the revenue for two items for the assessment year 1968-69 and for threeitems for assessment years 1969-70 out of the items mentioned in the notice under Section 147(a). It is not a ratio of the decision which has to be followed and even the very Hon'ble High Court has no jurisdiction to issue directions to the contrary than what has become final in a decision between the parties. The Hon'ble Supreme Court in the case of Rao Thakur Narayan Singh (supra) has already held that it is not the intention of the Legislature by amending Section 34(1) in 1948 to enable the ITO to reopen final decisions made against the revenue in respect of questions if that directly arose for decision in earlier proceedings. If that were not the legal position, it would result in placing an unrestricted power of review in the hands of the ITO to go behind the findings given by a hierarchy of Tribunals and even those of the High Courtand the Supreme Court with his changing moods. In fact, in the present case, the revenue bringing certain other items to taxation amounted to vertual content of the Hon'ble High Court by defying the clear order and the instructions of the Court. The very fact that the revenue is further insisting on this Tribunal to justify the said action of the ITO is nothing but a sad commentary on the department. In fact, it was the learned CIT (Appeals) who had correctly andrightly appreciated the letter and spirit of the order of the Hon'ble High Court between the parties for these very assessment years and on this very issue. We have absolutely no hesitation in holding that the order of the CIT(Appeals) was not only correct but, in fact, worth commenting. If the revenue is allowed so much unfettered power in reopened cases, then the whole hierarchy of the Tribunals and the system of judiciary will come to a chaos which in our humble opinion has never been the intention even of the Legislature or the framers of law.
24. The Hon 'ble Court very clearly for both the years had held that the ITO will only be entitled to proceed with the assessment on the basis of the notice under Section 148 of the IT Act in respect of other items mentioned in the same. Once the instructions were clear as to for what the revenue was restrained and for what the revenue was directed to bring to tax, in our humble opinion, there was no more power left to the revenue/assessing officer to bring certain other items to tax. In fact, the Hon'ble Supreme Court in the case of Rao Thakur Narayan Singh (supra) had gone to the extent that even if an order had been passed against revenue by the Tribunal, by mistake and it has become final by not going in appeal. The revenue/ assessing officer was bound to follow that order irrespective of the mistake committed by the Tribunal. It is the principle of finality which has to be respected. With all these facts and observations, we are of the opinion that the order of the learned CIT(Appeals) was perfectly correct and justified and in fact, the order of the assessing officer almost bordered at the stage of contempt of Hon'ble High Court. The issues are, therefore, decided accordingly.