N.K. Sud, J.
1. The petitioner is the proprietor of Khanna Engineers, Pathankot, and was assessed to income-tax within the jurisdiction of the Income-tax Officer, Pathankot (for short 'the ITO'). He filed his return of income for the assessment year 1992-93 on March 31, 1994, declaring a loss ofRs. 8,100. On the same day, this return was processed under Section 143(1)(a) of the Income-tax Act, 1961 (for short 'the Act'), wherein a minor adjustment of Rs. 104 was made and the loss was determined at Rs. 7,996. Later on, the Income-tax Officer noticed that in the statement of accounts filed with the return the petitioner had claimed depreciation on trucks at the rate of 50 per cent, against 40 per cent, admissible to him and that he had not included the income of Rs. 23, 391 from D. C. Khanna and Sons, Chamba, in the total income shown in the return. With a view to rectify these mistakes the Income-tax Officer issued a notice under Section 154/155 of the Act on May 1, 1995, requiring the petitioner to file objections, if any, to the proposed rectification of the aforesaid mistakes. In response to the said notice, the petitioner furnished replies dated May 11, 1995, and May 29, 1995, claiming that no rectification was called for. He claimed that the depreciation claimed in the return was Rs. 8,97,902 whereas the depreciation admissible to him even at the rate of 40 per cent. worked out to Rs. 8,98,321. For this purpose, a depreciation chart was enclosed with the reply. It was explained in the reply that there was one more truck owned by the petitioner on which depreciation had not been claimed in the return and it was because of this reason the claim of depreciation worked out to an amount higher than what was claimed in the return. Similarly, he explained that the income from D. C. Khanna and Sons, Chamba, had duly been accounted for in the returned income.
2. During the pendency of proceedings under Section 154/155 of the Act, the petitioner filed his return of income for the assessment year 1993-94 on March 31, 1995, declaring an income of Rs. 76,586. From the statement of accounts attached with the return it was evident that the depreciation on trucks had again been claimed at the rate of 50 per cent. The Income-tax Officer therefore, processed the return under Section 143(1)(a) of the Act on May 5, 1995, wherein he restricted the claim of depreciation to 40 per cent, and added the excess depreciation of Rs. 89,790 to the returned income by way of an adjustment. The requisite intimation was sent to the petitioner. The petitioner challenged the adjustment made by the Income-tax Officer under Section 143(1)(a) of the Act before the Commissioner of Income-tax (Appeals), Jammu, who by his order dated August 14, 1996, allowed the appeal and deleted the addition of Rs. 89,790 on the ground that such a disallowance did not fall within the ambit of prima facie adjustments permissible under Section 143(1)(a) of the Act.
3. In the above factual background, the Income-tax Officer chose not to proceed further with the proceedings under Section 154/155 of the Act initiated in respect of the assessment year, 1992-93. Instead, he initiated proceedings under Section 147 of the Act for assessing the income which had escaped assessment due to excessive claim of depreciation by issuing notices under Section 148 of the Act on December 31, 1996, for both the assessment years,viz., 1992-93 and 1993-94. Before initiating the above proceedings the following reasons were recorded as required under Sub-section (2) of Section 148 of the Act :
Assessment year 1992-93 :
December 31, 1996 : In this case the assessee claimed excessive depreciation at 50 per cent. whereas the assessee was entitled to depreciation at .40 per cent. under the Income-tax Rules. Hence, I have reasons to believe that having income chargeable to tax was escaped assessment for the assessment year 1992-93 ;
Accordingly, issue notice under Section 148 of the Income-tax Act, 1961, for the assessment year 1992-93.'
4. Identical reasons were recorded in respect of the assessment year 1993-94 as well.
5. In response to the aforesaid notices under Section 148 of the Act, the petitioner filed his returns of income on April 1, 1997, declaring the same income as had been shown in the returns originally filed for both the years. During the pendency of proceedings under Section 147, the jurisdiction of the case stood transferred to the Assistant Commissioner of Income-tax, Circle Pathan-kot. To finalise the assessments on the basis of proceedings initiated under Section 147 of the Act, the Assistant Commissioner issued notices under Sections 143(3) and 142(1) of the Act requiring the petitioner to produce the books of account and furnish the information specified in his letter dated July 30, 1998. Since this letter is in dispute the same is being reproduced as under for facility of reference :
'Office of the Assistant Commissioner of Income-tax,
Circle Pathankot,
Pathankot.
Dated : 30-7-1998
To :
Shri Vipan Khanna,
C/o. Pushap Palace,
Dhangu Road,
Pathankot.
Dear Sir,
Sub : Assessment years 1992-93 and 1993-94--Regarding.
In order to facilitate the finalisation of your abovesaid assessments, you are required to please furnish/produce the following details/information :
(i) Copies of tenders submitted and agreements made with the authorities concerned for carriage contract may please be furnished.
(ii) You have claimed carriage expenses. In this connection, you are requested to please furnish copy of agreements in case the carriage contract was given to sub-contractors by you.
(iii) Income and expenditure account relating to each truck may please be furnished.
(iv) Certificate from the banks for obtaining overdraft facility and payment of interest on loans along with nature of security offered for obtaining the loans may please be furnished.
(v) Details of right payable account may please be furnished.
(vi) If any new truck is purchased during the accounting period relevant to the assessment years under consideration, photostat copy of the assessment years under consideration, photostat copy of the purchase bill along with documentary evidence that the same had been used for business purposes may please be furnished.
2. Your case stands fixed for hearing on August 11, 1998, when you are requested to please produce complete account books together with the supporting vouchers, etc., relating to contract business and truck income. Notices under Sections 143(2) and 142 are enclosed herewith.
Yours faithfully,
(Sd.) Labh Singh,
Assistant Commissioner of Income-tax,
Circle Pathankot.'
6. The petitioner was of the view that the aforesaid letter requiring him to produce the books of account and furnish information on various points was not warranted in proceedings under Section 147 of the Act as the same were totally unrelated to the issue which was the basis for initiation of such proceedings. According to him, the reasons recorded by the Income-tax Officer clearly show that the only ground for initiating the proceedings under Section 147 of the Act was that depreciation on trucks had been allowed at the rate of 50 per cent. against the permissible rate of 40 per cent. and, therefore, he could not be required to furnish information on other issues which stood concluded by the assessments framed under Section 143(1)(a) of the Act on March 31, 1994, and May 5, 1995, for the assessment years 1992-93 and 1993-94 respectively. He, therefore, made an application under Section 144A of the Act before the Deputy Commissioner of Income-tax, Amritsar, requesting him to direct the Assistant Commissioner to confine his inquiry in proceedings under Section 147 of the Act to the issue of depreciation alone and treat the letter dated July 30, 1998, issued by him on other unrelated issues as redundant. For this purpose, the petitioner placed reliance on the decision of the apex court in the case of CIT v. Sun Engineering Works Pvt. Ltd. : [1992]198ITR297(SC) . The Deputy Commissioner of Income-tax vide his order dated October 26, 1998 (annexure P-7), rejected the assessee's contention on the ground that in view of the changes incorporated in Sections 143 and 147 of the Act by the Direct Tax Laws (Amendment) Act, 1987, the judgment of the Supreme Court in Sun Engineering Works Pvt. Ltd. : [1992]198ITR297(SC) was not applicable. On theother hand, he relied on another decision of the apex court in the case of V. Jaganmohan Rao v. CIT and EPT : [1970]75ITR373(SC) to hold that once an assessment was reopened by issue of a notice under Section 148 of the Act, the Income-tax Officer's jurisdiction was not restricted only to the portion of escaped income in respect of which the proceedings had been initiated but also to all other items of income which may have escaped assessment. It is against this order that the present writ petition has been filed.
7. Shri Hemant Kumar, advocate, appearing on behalf of the petitioner, contended that the assessments for the assessment years 1992-93 and 1993-94 stood concluded on March 31, 1994 and May 5, 1995, respectively, when intimation under Section 143(1)(a) of the Act had been sent. He has conceded that the depreciation on trucks in the return had been claimed at the rate of 50 per cent. However, he has also pointed out that it had been explained to the Assessing Officer in response to his notice under Section 154/155 for the assessment year 1992-93 that the petitioner had omitted to claim depreciation on one truck and if the depreciation on all the trucks was computed even at the rate of 40 per cent. the petitioner would be entitled to deduction of a bigger amount than what had been claimed in the return. Similar explanation had also been furnished before the Commissioner of Income-tax (Appeals) during the course of the appellate proceedings for the assessment year 1993-94 wherein the petitioner had challenged the adjustment made under Section 143(1)(a) of the Act on this issue. According to learned counsel, the Assessing Officer was satisfied with this explanation as he had not taken any action under Section 154/155 for the assessment year 1992-93 nor had the Revenue preferred an appeal before the Tribunal against the order of the Commissioner of Income-tax (Appeals) for the assessment year 1993-94. He further contended that despite this factual background the Income-tax Officer initiated proceedings under Section 147 of the Act on the ground that the excessive depreciation at the rate of 50 per cent. had been claimed against the entitlement of 40 per cent. The petitioner, therefore, had challenged the very initiation of proceedings under Section 147 of the Act before the Assistant Commissioner and for this purpose a detailed letter dated July 13, 1998, was addressed to him. In this letter, the petitioner had placed reliance on some decisions of the Supreme Court and various High Courts to show that the proceedings had not been validly initiated. The grievance of the petitioner is that instead of dealing with the objections raised by him, the Assessing Officer issued the impugned letter dated July 30, 1998, requiring him to furnish explanations on issues which were totally unconnected with the issue of depreciation on the basis of which the proceedings had been initiated. This, according to the petitioner, is tantamount to a review of concluded matters which was not permissible under the law. For this purpose reliance was placed on the decision of the Supreme Court in the case of Sun Engineering Works Pvt. Ltd. : [1992]198ITR297(SC) . The petitioner claims that when he approached the Deputy Commissioner of Income-tax under Section 144A of the Act seeking direction to the Assessing Officer to confine the scope of his enquiry to the issue of depreciation and not to make fishing inquiries into concluded items unconnected with the escapement of income, the Deputy Commissioner wrongly rejected the same by his order dated October 26, 1998, by misapplying certain observations of the Supreme Court in the case of V. Jaganmohan Rao : [1970]75ITR373(SC) . It was argued that the Deputy Commissioner had failed to notice that the scope of these very observations had duly been explained by the Supreme Court itself in its subsequent judgment in Sun Engineering Works Pvt. Ltd.'s case : [1992]198ITR297(SC) .
8. Shri R. P. Sawhney, senior advocate, appearing on behalf of the respondents, supported the order dated October 26, 1998, on the ground that once proceedings under Section 147 of the Act are validly initiated, the jurisdiction of the Assessing Officer extends to assess or reassess not only the escaped income to which the proceedings related but also other items of income which may have escaped assessment and which come to the notice of the Assessing Officer during the course of such proceedings. According to him, the case law relied upon by the petitioner related to the law as it stood prior to amendment of Section 147 with effect from April 1/1989. He elaborated this argument by comparing the language of Section 147 before and after the amendment. The relevant provisions of Section 147 before the amendment read as under : 'If-
(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or
(b) notwithstanding that there has been no omission or failure as mentioned in Clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,he may, subject to the provisions of Sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).
Explanation 1.--For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely,--
(a) where income chargeable to tax has been underassessed ; or
(b) where such income has been assessed at too low a rate ; or
(c) where such income has been made the subject of excessive relief under this Act or under the Indian Income-tax Act, 1922 (11 of 1922) ; or
(d) where excessive loss or depreciation allowance has been computed. Explanation 2.--Production before the Assessing Officer of account books or other evidence from which material evidence could, with due diligence, have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of this section.'
9. However, after the amendments with effect from April 1, 1989, this section presently reads as under :
'If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the 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 the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in Sections 148 to 153 referred to as the relevant assessment year) :
Provided that where an assessment under Sub-section (3) of Section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under Sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. Explanation 1.--Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso.
Explanation 2.--For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely,--
(a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ;
(b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ;
(c) where an assessment has been made, but-
(i) income chargeable to tax has been underassessed ; or
(ii) such income has been assessed at too low a rate ; or
(iii) such income has been made the subject of excessive relief under this Act ; or
(iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed.'
10. According to learned counsel, under the unamended provision, the Assessing Officer could assess or reassess only 'such income' which according to him had escaped assessment on the basis of which the proceedings had been initiated. However, after the amendment he has been empowered not only to assess such income but 'also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the proceedings under this section'. Thus, according to him this material change in the language of Section 147 of the Act entitles the Assessing Officer to make the entire assessment afresh.
11. We have heard learned counsel for the parties and perused the records. We may mention that the initiation of proceedings under Section 147 of the Act has not been challenged in this writ petition. However, in the replication to the written statement the petitioner has raised this point and had also reiterated it during the course of arguments. The petitioner claims that the only ground on which the proceedings under Section 147 had been initiated was that the depreciation of trucks had been claimed at the rate of 50 per cent. against the admissible rate of 40 per cent. However, according to the petitioner, even if the depreciation was to be calculated at the rate of 40 per cent., the depreciation admissible to him would be higher than what has been claimed in the return because he was entitled to depreciation on another truck owned by him on which he had omitted to claim the depreciation. We are unable to accept this contention. From the facts already noticed it is absolutely clear that the petitioner has claimed depreciation in the returns at the rate of 50 per cent. and he has nowhere disputed the fact that the admissible rate of depreciation to him was 40 per cent. This fact alone was sufficient for the Income-tax Officer to initiate proceedings under Section 147 of the Act as has been done in the present case. It is interesting to note that on the one hand the petitioner maintains that he is entitled to higher depreciation yet on the other hand while filing the returns in response to the notices under Section 148 of the Act, he has once again claimed the same amount of depreciation as claimed in the original return. Even otherwise the petitioner could not possibly be allowed to make a fresh claim of depreciation in the proceedings under Section 147 of the Act as has been held by the Supreme Court in the case of Sun Engineering Works (P.) ltd.'s case : [1992]198ITR297(SC) . Thus, no fault can be found in the action of the Income-tax Officer in initiating proceedings under Section 147 of the Act.The next question for our consideration is whether after initiating the proceedings under Section 147 of the Act on the ground that the petitioner had claimed depreciation at a higher rate, the Assessing Officer would be justified in launching inquiry into the issues which were not connected with the claim of the depreciation. During the course of arguments, the petitioner has time and again emphasised that the original assessments for the assessment years 1992-93 and 1993-94 had been framed under Section 143(1)(a) of the Act on March 31, 1994 and May 5, 1994, respectively. At the outset we may mention that under the new procedure of assessment introduced with effect from April 1, 1989, the processing of a return under Section 143(1)(a) of the Act cannot be equated with framing of an assessment. Prior to the amendment, the Assessing Officer could frame an assessment under Section 143(1) of the Act without requiring the presence of the assessee. Alternatively, he could issue a notice under Sub-section (2) of Section 143 of the Act and require the assessee to produce his books of account and other evidence in support of the return filed by him and thereafter frame an assessment under Sub-section (3) of Section 143 of the Act. Therefore, it was necessary that an assessment order either under Sub-section (1) or under Sub-section (3) of Section 143 of the Act had to be passed. However, after the amendment made with effect from April 1, 1989, the position has materially changed. Now the Assessing Officer initially processes the return under Section 143(1)(a) of the Act and determines the amount payable or refundable on that basis. It is not necessary for him to frame an assessment in each and every case. However, in case he chooses to verify the return and frame an assessment, he has to issue a notice under Sub-section (2) of Section 143 and require the assessee to produce his books of account and other material in support of the return. Thereafter he can make an assessment under Sub-section (3) of Section 143 of the Act. Another important change incorporated in Sub-section (2) of Section 143 of the Act is that the notice under this sub-section cannot be served on an assessee after the expiry of 12 months from the end of the month in which the return is furnished. Therefore, in a case where a return is filed and is processed under Section 143(1)(a) of the Act and no notice under Sub-section (2) of Section 143 of the Act thereafter is served on the assessee within the stipulated period of 12 months, the assessment proceedings under Section 143 come to an end and the matter becomes final. Thus, although technically no assessment is framed in such a case, yet the proceedings for assessment stand terminated. The Central Board of Direct Taxes vide its Circular No. 549, dated October 31, 1989 : [1990]182ITR1(Mad) , has explained the new procedure of assessment in paras. 5.12 and 5.13 as under (page 24) :
'5.12 Since, under the provisions of Sub-section (1) of the new Section 143, an assessment is not to be made now, the provisions of Sub-sections (2) and (3) have also been recast and are entirely different from the old provi-sions. A notice under Sub-section (2) which will be issued only in cases picked up for scrutiny, is now issued only to ensure that the assessee has not understated his income or has not computed excessive loss or has not underpaid the tax in any manner while furnishing his return of income. This means that, under the new provisions, in an assessment order passed under Section 143(3) in a scrutiny case, neither the income can be assessed at a figure lower than the returned income, nor loss can be assessed at a figure higher than the returned loss, nor a further refund can be given except what was due on the basis of the returned income, and which would have already been allowed under the provisions of Section 143(1)(a)(ii).
5.13 A proviso to Sub-section (2) provides that a notice under the subsection can be served on the assessee only during the financial year in which the return is furnished or within six months from the end of the month in which the return is furnished, whichever is later. This means that the Department must serve the said notice on the assessee within this period, if a case is picked up for scrutiny. It follows that if an assessee, after furnishing the return of income does not receive a notice under Section 143(2) from the Department within the aforesaid period, he can take it that the return filed by him has become final and no scrutiny proceedings are to be started in respect of that return.'
12. Thus, it is evident that the Board itself concedes that if the assessee after furnishing the return of income does not receive a notice under Section 143(2) of the Act within the stipulated period he can take it that the return filed by him has become final and no scrutiny proceedings are to be started in respect of that return. Here it needs to be clarified that in the Board's circular (see : [1990]182ITR1(Mad) ) the stipulated period has been referred to as six months as it was the period specified originally when the new provision was introduced with effect from April 1, 1989. However, vide amendment made by the Finance (No. 2) Act, 1991, this period was enhanced to twelve months with effect from October 1, 1991. In the present case it is an admitted position that no notice under Section 143(2) of the Act had been served to the petitioner within the stipulated period and as such his return had become final.
13. In the background of this settled position we may now examine the validity of the letter dated July 30, 1998 (annexure P-5), issued by the Assistant Commissioner which has been upheld by the Deputy Commissioner vide his order dated October 26, 1998 (annexure P-7). There can be no dispute about the argument advanced on behalf of the Revenue that in view of the amendment made in Section 147 of the Act with effect from April 1, 1989, the Assessing Officer could not only assess or reassess the escaped income in respect of which proceedings under Section 147 have been initiated but also any other income chargeable to tax which may have escaped assessment and which comes to hisknowledge subsequently in the course of such proceedings. This proposition is not even disputed by learned counsel for the petitioner. However, what is disputed is the action of the Assessing Officer in embarking upon fresh inquiries on issues which are unconnected with the issue which forms the basis of proceedings under Section 147 of the Act. From the letter dated July 30, 1998, it is evident that the Assessing Officer was seeking general information on other issues merely to verify the return. As already observed such general inquiry could only be made by issuing a notice under Sub-section (2) of Section 143 within the stipulated period which in the present case had already expired. Admittedly, it is not the case of the Revenue that during the course of proceedings under Section 147 of the Act it had come across any material relating to the items mentioned in the impugned letter dated July 30, 1998, suggesting escapement of income under any of those heads. In this view of the matter, the petitioner would be justified in claiming that the letter dated July 30, 1998, issued by the Assistant Commissioner is tantamount to making fishing inquiries on concluded matters unconnected with the issue on the basis of which proceedings under Section 147 had been initiated. This indeed is not permissible under the law. The petitioner has rightly relied on the decision of the Supreme Court in the case of Sun Engineering Works Pvt. Ltd. : [1992]198ITR297(SC) to contend that the jurisdiction of the Income-tax Officer in proceedings under Section 147 of the Act is confined only to such income which has escaped tax or has been underassessed and does not extend to revising, reopening or reconsidering the whole assessment. In the present case, the impugned letter dated July 30, 1998, requiring the petitioner to furnish information on issues in respect of which there is no allegation of any escapement or underassessment of income either in the reasons recorded or during the course of proceedings under Section 147 of the Act is tantamount to reviewing the whole assessment. This could not be done. The returns filed in response to notices under Section 148 of the Act were the same as filed originally. The Assessing Officer had the option to issue a notice under Section 143(2) of the Act requiring the assessee to produce evidence in support of the returns if he considered it necessary to ensure that the assessee had not understated the income or had not computed excessive loss or had not underpaid the tax in any manner. Such a notice could be issued only within twelve months from the end of the month in which the respective returns had been filed originally. Admittedly, no such notice had been served on the petitioner within the stipulated period and, therefore, it has to be held that the Assessing Officer had not found it necessary to require the petitioner to produce any evidence in support of the returns. Thus, the returns filed by the petitioner had become final. This finality could not be disturbed even in proceedings under Section 147 of the Act in respect of issues on which there is no material on record suggesting any escapement of income. In the present case except for the excessive claim of depreciation there is no material to suggest anyunderassessment or escapement of income under any other item. There is no gainsaying the fact that in proceedings under Section 147 of the Act it is only the escaped income which has to be assessed or reassessed. Thus, we are of the considered view that as per the law laid down by the apex court in the case of Sun Engineering Works Pvt. Ltd. : [1992]198ITR297(SC) , when proceedings under Section 147 of the Act are initiated, the proceedings are open only qua items of underassessment. The finality of the assessment proceedings on other issues remains undisturbed. According to us it makes no difference whether the assessment proceedings have become final on account of framing of an assessment under Section 143(3) of the Act or on account of non-issue of a notice under Section 143(2) of the Act within the stipulated period. The amendments made in Sections 143 and 147 of the Act with effect from April 1, 1989, do not in any manner negate this proposition of law as enunciated by the Supreme Court in the case of Sun Engineering Works Pvt. Ltd. : [1992]198ITR297(SC) .
14. We may also mention that the interpretation placed on the observations of the Supreme Court of V. Jaganmohan Rao's case : [1970]75ITR373(SC) by the Deputy Commissioner in his order dated October 26, 1998, is not correct. He was not correct in holding that once valid proceedings under Section 147 are started the whole assessment proceedings start afresh. This has been explained by the apex court itself in Sun Engineering Works Pvt. Ltd.'s case : [1992]198ITR297(SC) , of the report as under :
'The principle laid down by this court in V. 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 underassessment is set aside and the Income-tax Officer has the jurisdiction and duty to levy tax on the entire income that had escaped assessment during the previous year. What is set aside is, thus, only the previous underassessment and not the original assessment proceedings. An order made in relation to the escaped turnover does not affect the operative force of the original assessment, particularly, if it has acquired finality, and the original order retains both its character and identity. It is only in cases of 'underassessment' based on Clauses (a) to (d) of Explanation 1 to Section 147, that the assessment of tax due has to be recomputed on the entire taxable income. The judgment in V, Jaganmohan Rao's case : [1970]75ITR373(SC) , 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 haveescaped 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 V. Jaganmohan Rao's case : [1970]75ITR373(SC) , as laying down that reassessment wipes out the original assessment and that reassessment is not only confined to 'escaped assessment' or 'underassessment' but to the entire assessment for the year and starts the assessment proceedings de novo giving the right to an assessee to reagitate matters which he had lost during the original assessment proceedings, 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 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 reasonings.'
15. In view of the above discussion, we are satisfied that the letter dated July 30, 1998, issued by the Assessing Officer in so far as it relates to matters unconnected with the issue of depreciation as also the directions issued by the Deputy Commissioner under Section 144A of the Act dated October 26, 1998, cannot be sustained. The same are hereby vacated. The Assessing Officer will now proceed with the assessment under Section 147 of the Act in accordance with law. For the sake of clarification, we may repeat that nothing observed by us in this case would debar the Assessing Officer to bring to tax any other item of income which may have escaped assessment and which comes to his notice during the course of the proceedings under Section 147 of the Act. However, for this purpose, he cannot be allowed to make fishing inquiries to probe if any other income had escaped assessment or not. Such inquiries can only be permitted if in the first instance some material comes to his notice to suggest that some other item of income may have escaped assessment or had been underassessed. In that event, he would be perfectly justified in requiring the petitioner to furnish the requisite information on such other issue as well.
16. The writ petition is, therefore, allowed in the above terms. However, in the circumstances of the case, there will be no order as to costs.