Hon'ble Aditya Nath Mittal,J.
(Delivered by Hon'ble Aditya Nath Mittal, J.)
1. The following question of law has been referred to this Court for opinion:-
"Whether on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that any income had escaped assessment within the meaning of section 148 by the reason of allowance of relief under section 80I, even though the quantum of relief issued in the original assessment was fully covered by the relief as was undisputedly admissible to the assessee under section 80J?"
2. The assessee had claimed relief under Section 80-I for the assessment year 1981-82, which was allowed. Later on the assessments were reopened on the ground that the provisions of Section 80-I were not applicable and the income to that extent had escaped the assessment. The case was reopened under Section 147 of the Income Tax Act, 1961 and the assessee was allowed number of opportunities to furnish his detailed explanation. Since no reply was submitted by the assessee, the case was reopened and the notice under Section 148 was issued. The assessee in its reply dated 8.2.1986, submitted that deduction allowable under Section 80-J has been wrongly allowed under Section 80-I to him. The assessee further submitted that his claim under Section 80J has been mistaken by the Assessing Authority for claim under Section 80-I and claimed that proceedings under Section 148 may be dropped and the mistake be rectified under Section 154. The A.O. held as under:-
"The above claim of the assessee appears to be factually incorrect. In the original return the assessee had claimed deduction u/s 80I with a detailed working at Rs.3,29,201. The assessee has furnished the detailed working not only in the return but also in the Annexure enclosed alongwith the return. In the revised return also the assessee has claimed deduction u/s 80I in the return as well as in the Annexure but on a different figure. Here the assessee, again has given a detailed working and has claimed deduction u/s 80I at Rs.4,00,694. The assessee has nowhere claimed deduction under sec. 80J either in the returns of income or in the Annexures enclosed alongwith them. From the above it is clear that the assessee had never claimed deduction u/s 80J and he has claimed deduction u/s 80I only which was not admissible to him. The Deptt. has wrongly allowed deduction 80I as the same is not at all admissible. The assessee has also accepted that deduction u/s 80I is not admissible to him. Now the question arises whether deduction u/s 80J can be allowed to the assessee which has not been claimed by him either during the assessment proceedings or Appeal state. The assessee claimed only when a show cause notice was issued to him and notice u/s 148 was served on him. Since the assessee has not claimed the above deduction either in the original stage or in the appellate stage, to my mind the same is not admissible to him at this stage. Under the circumstances deduction wrongly allowed to him u/s 80I amounting to Rs.4,00,694/- is withdrawn and his request for allowing deduction u/s 80J is rejected."
3. The Commissioner of Income Tax (Appeals), Varanasi agreed with the findings of A.O. and held as under:-
"In my opinion, the claim of the assessee u/s 80-J of the I T Act can not be allowed in proceedings u/s 147 of the Act. Hon'ble Allahabad High Court in the case of S S L & Sons, Vs. CIT (92 ITR 453 (affirmed by Supreme Court in 169 ITR 510) have held that the entire assessment is not opened on re-assessment. A claim can not be agitated on the assessment being reopened for bringing to tax income which has escaped assessment. In other words the re-assessment proceedings are for bringing to tax what has escaped assessment. It does not allow the assessee to claim fresh reliefs and deductions. Admittedly the claim of the assessee u/s 80-J was not made before Assessing Officer. The claim was made u/s 80-I of the IT Act which is apparently not admissible to the assessee.
There is yet another difficulty in granting relief to the assessee. The facts already on records before the assessing officer are not sufficient to decide whether the relief u/s 80-J is admissible to the assessee or not. It will necessarily involve investigations in further facts. In this view of the matter the claim cannot be considered by the Appellate Authority also in view of the Supreme Court decision in the case of Additional CIT Vs. GURJARGRAVURES P. Ltd. 111 ITR 1."
4. The Income Tax Appellate Tribunal held that the claim of the assessee under Section 80-J has no legs to stand as the claim under Section 80-J becomes fresh claim. The proceedings initiated under Section 148 are for the interest of the revenue and not for the interest of the assessee. The order of CIT Appeals was confirmed.
5. We have heard Sri Shambhu Chopra appearing for the revenue and Sri S.K. Garg for the assessee.
6. Learned counsel for the assessee has submitted that when any assessment is reopened under Section 148 of the Income Tax Act, 1961, the A.O. can redetermine the income of the assessee and the assessee can claim such deductions which were not previously claimed. On the other hand, learned counsel for the revenue has argued that in view of the decision of Hon'ble the Supreme Court, the proceedings under Section 148 cannot be used to grant any benefit to the assessee.
7. Section 80-I provides for deduction in respect of profits and gains from industrial undertakings after certain date. This provision was inserted by the Finance Act, 1980 w.e.f. 1.4.1981. Originally, provision relating to priority industries was dealt with by Section 80-A which was inserted by the Finance Act, 1966 w.e.f. 1.4.1966. That section was also omitted and in its place Section 80-I was introduced by the Finance Act, 1967 w.e.f. 1.4.1968. Section 80-I was also omitted by the Finance Act, 1972 w.e.f. 1.4.1973. The assessee has also not disputed that claim of deduction under Section 80I was not admissible in the assessment year 1981-82. The only dispute is whether during the proceedings under Section 147, the claim under Section 80J can be made for the first time.
8. Section 80J which was also amended various times, has been finally omitted by the Finance (2) Act, 1996 with retrospective effect from 1.4.1989. It provided for deduction in respect of profits and gains from newly established industrial undertakings for ships or hotel business in certain cases. Under Section 80-I, the deduction in respect of profits and gains was allowable by 20% while deduction in respect of profits and gains from newly industrial undertakings was allowable by 7½%. The method of calculation for both the deductions was also different. Therefore, by no stretch of imagination it can be said that assessee had claimed deduction under Section 80-I instead of deduction under Section 80-J.
9. Learned counsel for the assessee has argued that if the quantum of deduction under Section 80-J exceeds the quantum of deduction claimed under Section 80-I, then he stands nowhere but if it is within the limits of deduction claimed under Section 80-J then the assessee should be provided with the relief under Section 80J. We are not concerned in this reference with the quantum of deduction but are mainly concerned with the question of law that whether in a proceedings under Section 148, the deduction under Section 80-J can be claimed for the first time.
10. Learned counsel for the assessee has relied upon Income Tax Officer and another Vs. K.L. Srihari (HUF) and others (2001) 250 ITR 193, Commissioner of Income Tax Vs. Mysore Iron and Steel Limited (1986) 157 ITR 531, Commissioner of Income Tax Vs. Mahalaxmi Sugar Mills Co. Ltd. (1986) 160 ITR 920 (SC), Additional Commissioner of Income Tax Vs. Sheetalaya (1979) 117 ITR 658, Commissioner of Income Tax Vs. Shree Bajrang Electric Steel Co.(P) Ltd. (1988) 174 ITR 672, State Bank of Hyderabad Vs. Commissioner of Income Tax (1988) 171 ITR 232 (Andhra Pradesh High Court), Sir Shadi Lal and sons Vs. Commissioner of Income Tax (1973) 92 ITR 453, Additional Commissioner of Income Tax Vs. Gurjargravures P. Ltd. (1978) 111 ITR 1 (SC), V. Jaganmohan Rao and others Vs. Commissioner of Income Tax and others (1970) 75 ITR 373, Commissioner of Income Tax Vs. Sun Engineering Works P. Ltd. (1992) 198 ITR 297, Income Tax Officer and another Vs. K.L. Srihari (1992) 197 ITR 694, Smt. Raj Rani Gulati Vs. Commissioner of Income Tax (Income Tax Appeal No.54 of 2007 decided by Lucknow Bench on 19.10.2011 and Commissioner of Income Tax Vs. J.H. Gotla (1985) 156 ITR 323 (SC).
11. Sri Shambhu Chopra appearing for revenue has relied upon CIT Vs. Sun Engineering Works P. Ltd. (1992) 198 ITR 297 and Chettinad Corporation P. Ltd. Vs. Commissioner of Income Tax (1993) 200 ITR 320.
12. We have considered the rival submissions made at the bar. At the outset, we would like to observe that the nature, quantum, procedure and the eligibility criteria to claim deductions under Section 80-I and 80-J, are totally different. It appears that the assessee had made an unsuccessful attempt to claim deductions under Section 80-I instead of deductions under Section 80-J.
13. In Income Tax Officer and another Vs. K.L. Srihari (HUF) and others (supra), Hon'ble the Apex Court was satisfied that the said assessment order makes a fresh assessment of the entire income of the respondent-assessee and the High Court was right in proceedings on the basis that the earlier assessment order had been effaced by the subsequent order, hence the question raised was left open and the SLP was dismissed.
14. In Commissioner of Income Tax Vs. Mysore Iron and Steel Limited (supra), the Karnataka High Court after considering the various judgments of Hon'ble the Apex Court has held as under:-
"It will be clear from these decisions that when a former assessment is reopened though it has become final, the assessing officer is required to assess the assessee on his total income or the turnover, as the case may be, and not merely on his escaped income. To put it in other words, once an assessment is reopened, the Income-tax Officer has not only the jurisdiction, but it is also his duty to determine the total taxable liability of the assessee. For the said purpose, he must take into account not only the escaped income in respect of which a notice under section 147 has been issued, but also the entire income of that year. The resulting position is that the order of reassessment so made will have to take the place of the original order of assessment. There can be no dichotomy of thought in this matter. That being the necessary consequence of reassessment, the period of limitation, in the present case, should be reckoned from the reassessment order dated March 15, 1973, and not from the earlier rectification order or the original assessment order."
15. In Commissioner of Income Tax Vs. Mahalaxmi Sugar Mills Co. Ltd. (supra), the issue was totally different in which it was held that agreement between India and Pakistan gives relief against double taxation and it does not have any effect on application of Indian Income Tax provisions for determining total world income of the assessee.
16. In Additional Commissioner of Income Tax Vs. Sheetalaya (supra) also the issue was entirely different regarding carry forward of losses in the initial assessment order and not making a claim for relief under Section 80-J.
17. In Commissioner of Income Tax Vs. Shree Bajrang Electric Steel Co.(P) Ltd. (supra), (Calcutta High Court), the original assessment was completed on March 22, 1974, but the Tribunal directed the I.T.O. to allow deductions under Sections 80-I and 80-J of the Income Tax Act on the basis of the assessee's claim for such deductions in the course of reassessment proceedings. The Calcutta High Court held that in the course of reassessment made pursuant to the direction of the Tribunal, the assessee is entitled to claim all the benefits that are available to it, even if the assessee did not claim such benefit at the time of original assessment.
18. The law laid down in State Bank of Hyderabad Vs. Commissioner of Income Tax (supra) (Andhra Pradesh High Court) has been specifically disapproved by Hon'ble the Apex Court in Commissioner of Income Tax Vs. Sun Engineering Works P. Ltd. (supra).
19. The decision of this Court in Sir Shadi Lal and sons Vs. Commissioner of Income Tax (supra) has been impliedly approved by Hon'ble the Supreme Court in Commissioner of Income Tax Vs. Sun Engineering Works P. Ltd. The Chettinad Corporation P. Ltd. Vs. Commissioner of Income Tax (supra) has also been impliedly approved by Hon'ble the Supreme Court in Sun Engineering case.
20. The legal position regarding the present issue has been set at rest by Hon'ble the Supreme Court in Commissioner of Income Tax Vs. Sun Engineering Works P. Ltd. (supra), which is as under:-
"As a result of the aforesaid discussion, we find that, in proceedings under section 147 of the Act, the Income-tax Officer may bring to charge items of income which had escaped assessment other than or in addition to that item or items which have led to the issuance of the notice under section 148 and where reassessment is made under section 147 in respect of income which has escaped tax, the Income-tax Officer's jurisdiction is confined to only such income which has escaped tax or has been underassessed and does not extend to revising, reopening or reconsidering the whole assessment or permitting the assessee to reagitate questions which had been decided in the original assessment proceedings. It is only the underassessment which is set aside and not the entire assessment when reassessment proceedings are initiated. The Income-tax Officer cannot make an order of reassessment inconsistent with the original order of assessment in respect of matters which are not the subject matter of proceedings under section 147. An assessee cannot resist validly initiated reassessment proceedings under this section merely by showing that other income which had been assessed originally was at too high a figure except in cases under section 152(2). The words " such income " in section 147 clearly refer to the income which is chargeable to tax but has " escaped assessment " and the Income-tax Officer's jurisdiction under the section is confined only to such income which has escaped assessment. It does not extend to reconsidering generally the concluded earlier assessment. Claims which have been disallowed in the original assessment proceeding cannot be permitted to be reagitated on the assessment being reopened for bringing to tax certain income which had escaped assessment because the controversy on reassessment is confined to matters which are relevant only in respect of the income which had not been brought to tax during the course of the original assessment. A matter not agitated in the concluded original assessment proceedings also cannot be permitted to be agitated in the reassessment proceedings unless relatable to the item sought to be taxed as " escaped income ". Indeed, in the reassessment proceedings for bringing to tax items which had escaped assessment, it would be open to an assessee to put forward claims for deduction of any expenditure in respect of that income or the non-taxability of the items at all. Keeping in view the object and purpose of the proceedings under section 147 of the Act which are for the benefit of the Revenue and not an assessee, an assessee cannot be permitted to convert the reassessment proceedings as his appeal or revision, in disguise, and seek relief in respect of items earlier rejected or claim relief in respect of items not claimed in the original assessment proceedings, unless relatable to escaped income ", and reagitate the concluded matters. Even in cases where the claims of the assessee during the course of reassessment proceedings relating to the escaped assessment are accepted, still the allowance of such claims has to be limited to the extent to which they reduce the income to that originally assessed. The income for purposes of " reassessment " cannot be reduced beyond the income originally assessed."
21. In view of the above, there remains no doubt regarding the legal position that where reassessment is made under Section 147 and issuance of notice under Section 148, the Income Tax Officer's jurisdiction is confined to only such income which has escaped tax or has been under assessed and does not extend to revising, reopening or reconsidering the whole assessment and the assessee cannot be permitted to agitate questions which have been decided in original assessment proceedings. The reassessment has to be made only with regard to the subject matter of proceedings under Section 147. A matter not agitated in the concluded original assessment proceedings also cannot be permitted to be agitated in the reassessment proceedings.
22. In the present case the assessee had not claimed deductions under Section 80-J of the Income Tax Act in the original assessment and the reassessment proceedings were regarding wrongful deductions under Section 80-I hence in the reassessment proceedings the assessee was not entitled to claim deductions under Section 80-J of the Income Tax Act. It is also relevant to mention that the assessee had not claimed the deductions under Section 80-J either in the original stage or in the appellate stage.
23. In view of the above, we do not find any illegality in the order of the ITAT and the question of law is decided against the assessee and in favour of revenue. The reference is answered accordingly.
Order Date :- 16.10.2012 Kpy