JUDGMENT
Dwarka Prasad, J.
1. As identical questions of law have been referred to this court by the Income-tax Appellate Tribunal, Delhi Bench ‘B’, we heard the consolidated reference cases together and set out our answers to the questions referred to this court, in our orders dated December 19, 1983. We had then stated that we shall give our reasons for the answers to the three questions referred to us by the Income-tax Appellate Tribunal later on. We now proceed to give the reasons for the answers as contained in our orders dated December 19, 1983, and which are reproduced below :
“Our answer to the first question referred to this court is that the assesses is entitled to the benefit of concision or rebate under para, 6A of the Part B States (Taxation Concessions) Order, 1950, in the course of reassessments under Section 34 of the Indian Income-tax Act, 1922, in respect of the whole of the dividend income, including the actual dividend income received by him, irrespective of the fact that the question of allowing such concession or rebate in the computation of tax was not raised by the assessee in the original assessments. Thus, question No. 1 is answered in the affirmative.
Question No. 2 referred to this court by the Appellate Tribunal is also answered in the affirmative and we hold that the Tribunal was competent to consider the question about the application of proper rate of rebate in respect of dividend income arising out of Part B States relating to the assessment years in question.
As regards question No. 3, our answer is that the assessee was entitled to rebate on dividend income arising out of Part B States under Para 6A of the aforesaid concession order for the assessment years 1953-54 and 1954-55 at the rate of 20% and 10% respectively.”
2. The assessees in both the cases are individuate, deriving their income from dividends on shares in various companies, besides income from other personal business. The assessment years in question in the case of Rangnath Bangur are 1953-54, 1954-55 and 1955-56 corresponding to the previous years ending 3Ist day of March of the years 1953, 1954 and 1955 respectively. In the case of Purshottam Dass Bangur, the assessment years in question are 1953-54 and 1954-55 corresponding to the previous years ending Match 31, 1953 and March 31, 1954. The assessee held shares in various companies, most of which had their registered offices in the relevant years of assessment in the territories which were then known as “Part B States”. The ITO, while determining the total income of the assessee for the aforesaid assessment years, grossed up the dividend income and bifurcated it into two portions, one relating to Part A States and another relating to Pail B States while calculating the tax payable by the assessees. The assessees did not claim and the ITO did not allow them any rebate on such dividend income which was allowable under para. 6A of the Part B States (Taxation Concessions) Order, 1950 (hereinafter referred to as “the Concessions Order”). Against the original assessments made by the 110, the assessees filed appeals before the AAC, but even in those appeals, rebate allowable under Para. 6A of the Concessions Order was neither claimed nor allowed.
3. Subsequently, the ITO took action under Section 23-A of the Indian I.T. Act, 1922 (hereinafter referred to as “the Act”), against some of the companies in which the assessees hold shares, as a result of which undistributed profits of such companies were deemed to have been declared as dividends distributed to the shareholders of the companies, including the assessees as a consequence thereof. The original assessments of both the assessees, made under Section 23(3) of the Act, were reopened and proceedings under Section 34(1)(b) of the 1922 Act were taken to assess the deemed dividend income in the hands of the two assessees. The ITO revised the assessments of the assessees in respect of the assessment years referred to above and redetermined the total income of the assessees for the aforesaid assessment years, after including therein the deemed dividend income. But while calculating the tax in respect of these assessees, the ITO allowed rebate to the assessees under Para. 6A of the Concessions Order only in respect of the notional deemed dividend income allocated to Part B States. In these reassessment orders, the ITO did not allow the assessees rebate under Para. 6A of the Concessions Order in respect of the dividends actually declared and received by the assessees, which were already subjected to tax in the original assessment orders.
4. The assessees preferred appeals before the AAC in respect of the reassessment orders and sought to raise the question that rebate ought to have been allowed under Para. 6A of the Concessions Order not only on the deemed dividend income but also on the dividend income which had actually been received by the assessees. However, the AAC did not allow. the assessees to raise the aforesaid ground. Thereafter, the assessees filed appeals before the Income-tax Appellate Tribunal, Delhi Bench ‘ B ‘, Delhi (hereinafter called “the Tribunal”) who remanded the matters to the AAC with the direction to dispose of the appeals afresh after considering the specific grounds raised by the assessees before him.
5. In pursuance of the directions of the Tribunal, the AAC heard the appeals, of the assessees again and held that the notional dividend income which had been included in the revised assessment orders should be grossed up and tax should be calculated on the entire deemed dividend income at the concessional rate applicable to Part B States. The AAC, however, rejected the contention of the assessees that tax should also be calculated at the concessional rates applicable to Part B States, on the actual dividend income, which was received by them from the companies in. Part B States and which was included in the original assessment orders, on the ground that the original assessments made under Section 23(3) of the Act had become final and questions affecting these assessments could not be agitated by the assessees in appeals filed against the reassessment orders.
6. Thereafter the assessees again filed appeals before the Tribunal. While deciding the appeals preferred by the assessees, both the learned members of the Tribunal were in agreement on the question that the rebate Tinder para. 6A of the Concessions Order was allowable also on the actual dividend income as originally assessed besides the notional dividend income; brought to tax subsequently in thee reassessment proceedings. They, however, differed as to the assessment years and the rates at which the rebate was allowable. In the case of Rangnath Bangur, the difference of opinion between the Accountant Member and the Judicial Member also related to the question as to whether rebate could be allowed under para. 6A of the Concessions Order in respect of assessment year 1955-56 and if so, the rate applicable thereto. According to the Accountant Member the rebate was allowable on the dividend income of the assessees for all the three assessment years, namely, 1953-54, 1954-55 and 1955-56, at 40%, 20% and 10% respectively. However, the Judicial Member look the view that rebate was allowable for the years 1953-54 and 1954-55 at the rate of 20% and 10% only and that no rebate was allowable on the dividend income relating to the assessment year 1955-56. On account of the difference of opinion between the two learned Members of the Tribunal, the following three points were referred by them to the President, under Section 5-A(7) of the Act :
“1. Whether the assessee is entitled to rebate under para. 6A of Part B States (Taxation Concessions) Order, 1950, for the assessment year 1955-56 ? If yes, at what rate ?
2. Whether the assessee is entitled to rebate under sub-para. A of Para. 6 of the Concessions Order at the rate of 20% and 10% in the assessment years 1953-54 and 1954-55 respectively?
3. Whether the rebate allowable under the Concessions Order is to be recomputed in respect of deemed dividend income only or in respect of deemed dividend income as well as actual dividend income ? ”
7. In the case of Purshottam Dass Bangur, as the assessment relating to the year 1955-56 was not the subject-matter of these proceedings, only questions Nos. 2 and 3 mentioned above were referred by the two members of the Tribunal to the President.
8. Learned President concurred with the view taken by both the members in respect of the third point and directed that rebate was allowable under Para. 6A of the Concessions Order in respect of the entire dividend income, including the actual dividend income received by the assessees, although the same was not allowed in the original assessment orders passed under Section 23(3) of the Act. In respect of points Nos. 1 and 2, the learned President agreed with the accountant member that the assessee was entitled to rebate under Para. 6A of the Concessions Order for the assessment year 1955-56 at the rate of 10% and further that the assessee was entitled to rebate for the assessment years 1953-54 and 1954-55 at the rate of 40% and 20% respectively.
9. The Commissioner, Jaipur, requested the Tribunal, in the cases of both the assessees, to draw up a statement of case and refer to this court questions of law arising out of its order. The assessees raised objections to the reference of these questions proposed by the Commissioner and proposed other questions for being referred to the High Court. The Tribunal by its order dated May 23, 1970, in the case of Rangnath Bangur and November 28, 1970, in the case of Purshottam Dass Bangur, have referred the aforesaid three questions to this court for its opinion.
10. Before proceeding to give the reasons for our answer it would be proper to refer to the relevant provisions of Para. 6-A of the Concessions Order which runs as under :
“6A. Income, profits and gains chargeable to tax in the assessment years 1952-53, 1953-54 and 1954-55.–The income, profits and gains of any previous year which is a previous year for the assessment for the year ending on the 31st day of March, 1953, 1954 or 1955, shall be charged to tax at the Indian rates of tax, provided that from the tax so computed, there shall be allowed in each year, rebate at the percentage thereof, specified hereunder :
In respect of so much of the income, profits and gains as accrue or arise-
(a) in the States of Saurashtra, Madhya, Bharat or Rajasthan to any assessee, at the rate of 40%, 20% and 10% respectively, for the assessment for the year ending on the 31st day of March, 1953, 1954 and 1955 ;
(b) in the State of Mysore to an assessee not being a company, at the rate of 20%, 10% and nil respectively, for the assessment for the year, ending on the 31st day of March, 1953, 1954 and 1955 ;
(c) in the State of Hyderabad to an assessee being a company, 10%, nil and nil respectively for the assessment for the year ending on the 31st day of March, 1953, 1954 and 1955 :
Provided that where the total income of an assessee not being a company, includes any income chargeable under the head ‘Salaries’ as reduced by the deduction for earned income appropriate thereto, or any income chargeable under the head ‘Interest on securities’, or any income from dividends in respect of which, by virtue of Section 49B of the Act, he is deemed himself to have paid income-tax imposed by the Act, the income-tax payable by the assessee on that part of his total income which consists of such inclusions shall be an amount bearing to the total amount of income-tax payable according to the rates applicable to his total income in the immediately preceding financial year, the same proportion as the amount of such inclusions bears to his total income. And where the total income of an assesses, not being a company, includes any income chargeable under the head ‘Salaries’ on which super-tax has been or might have been deducted under the provisions of Sub-section (2) of Section 18 of the Indian Income-tax Act, the super-tax payable by the assessee on that portion of his total income which consists of such inclusion shall be an amount bearing to the total amount of super-tax payable according to the rates applicable to his total income in the immediately preceding financial year, the same proportion as the amount of such inclusion bears to his total income :
Provided further that the provisions of the second proviso to paragraph 6 of this Order shall apply to this paragraph as they apply to the said paragraph. ”
11. It cannot be disputed and Indeed it has not been disputed before us on behalf of the Revenue that the assessees were entitled to get benefit of the concession for rebate allowable under Para. 6A of the Concessions Order in respect of the income arising in the territories which were then comprised in Part B States, The Income-tax Authorities have themselves allowed rebate under Para. 6A of the Concessions Order to the assessees with regard to the deemed dividend income, which was assessed to tax as a result of the reassessment proceedings. The only question which now arises for consideration is as to whether the assessees should also have been allowed rebate, allowable under the Concessions Order, in respect of the entire actual dividend income, which was the subject-matter of the original assessment order passed under Section 23(3) of the Act The case of the Revenue is that the original assessment orders passed under Section 23(3) of the Act did not allow the benefit of the concession provided under para. 6-A of the Concessions Order in respect of a portion of the actual dividend income and as no objection was raised by the assessees at that time the benefit of the aforesaid concession was not allowed to them in respect of whole of the actual dividend income, either in the assessment proceedings or in the appeals before the AAC, and as such, the question should not have been allowed to be raised in the appeals preferred by the assessees against the reassessment orders, which brought to tax only the deemed dividend income. Thus, according to the Revenue, the original assessment orders had become final and were binding on both the parties and all questions, which could have been raised in connection with the original assessment proceedings, could no longer be raised by the assessees in the reassessment proceedings or in appeals preferred against the reassessment orders. According to Mr. Joshi, learned counsel appearing for the Revenue, the reassessment proceedings were taken solely for the benefit of the Revenue, with the purpose of bringing the deemed dividend income into the calculation of the total income of the assessee. Thus, the decision of the aforesaid question would depend upon the consideration as to whether the original assessment orders have become final and are binding upon the parties and what is the effect of reassessment proceedings under Section 34 of the Act upon them.
12. Section 23(3) of the Act authorises the ITO to assess the total income of the assessee and to determine the amount of tax payable by him on the basis of such assessment. Section 34(1) authorises the ITO to issue a notice to the assessee containing all or any of the requirements, which may be included in a notice under Sub-section (2) of Section 22, and thereafter to proceed to assess or reassess such income, profits and gains of the assessee. Thus, as a result of the reassessment proceedings under Section 34, the ITO has to assessor reassess the total income of the assessee, as directed by Section 23(3), and determine or redetermine the sum payable by him as tax, on the basis of such assessment or reassessment. Under the provisions of the Indian I.T. Act, 1922, the total income of the assessee is one and the tax levied is also one.
13. In United Commercial Bank Ltd. v. CIT [1957] 32 ITR 688 (SC), their Lordships of the Supreme Court quoted with approval the following observations of Viscount Dunedin in Salisbury House Estate Ltd. v. Fry [1930] 15 TC 266 at p. 306:
“Now, the cardinal consideration in my judgment is that the income-tax is only one tax, a tax on the income of the person whom it is sought to assess, and that the different Schedules are modes in which the statute directs this to be levied.”
14. In United Commercial Bank Ltd.’s case [1957] 32 ITR 688 (SC), their Lordships of the Supreme Court observed that there are no separate taxes leviable under the various Schedules of the I.T. Act, but only one tax could be levied under the Act.
15. In order to arrive at the total income on which tax is to be charged, the various sources of “income, profits and gains” have to be looked into, so as to find out under what head it appropriately and specifically falls and then a computation is to be made under the section which covers that particular head of income. Thus, on a true construction of the various sections of the Act, the income of the assessee is one and various Sections 7 to 12 are modes in which the statute directs that income-tax is levied and these sections are mutually exclusive. Various heads of income, profits and gains specifically cover the income arising from different sources. The total income of the assessee is arrived at by adding the income under the various heads. If, as a result of the reassessment proceedings, a new total income of the assessee is arrived at by inclusion of income which had escaped assessment, then after a fresh determination of the total income of the assessee as a result of the reassessment proceedings, in a similar manner the amount payable by the assessee as tax wilt have to be determined afresh in respect of the newly determined total income. Thus, the amount payable by the assessee as tax on the earlier occasion in the original assessment proceedings will be substituted and the ITO will be required to redetermine the amount of tax with reference to the total income determined as a result of the reassessment proceedings. Thus, the determination of the tax payable by the assessee as a result of the original assessment proceedings has to be totally ignored, while determining the amount of tax payable by the assessee on the basis of the total income arrived at as a result of the reassessment proceedings. The original assessment order stands superseded and the entire assessment proceedings start afresh. In that event, as the sum payable as tax is required to be determined afresh, the ITO should allow such rebate to the assessee as is permissible under Para. 6A of the Concessions Order. The assessee is also entitled to draw the attention of the ITO, or, on appeal, the attention of the AAC to the error which has crept in by not allowing the assessee the rebate, to which he was lawfully entitled under the provisions of Para. 6A of the Concessions Order. The finality of the assessment order passed as a result of the original assessment proceedings is wiped out, when the entire matter relating to determination of the total income and the tax payable in respect thereof by the assessee is reopened as a result of the reassessment proceedings under Section 34. The assessee cannot be estopped from claiming rebate in the course of reassessment proceedings or in the appeal against the reassessment order, merely on the ground that no such objection was raised by the assessee in the original assessment proceedings or in the appeal filed therefrom. We would, however, like to point out that if a question is expressly raised in the original assessment proceedings and is decided against the assessee or a ground is raised in the appeals against the original assessment order and the same is repelled by the AAC or by the Income-tax Appellate Tribunal in appeals against the original assessment order, then such a question cannot ordinarily be allowed to be raised again in the course of reassessment proceedings or in the appeals arising therefrom. But if no such question was raised in the original assessment proceedings or in the appeal or further appeal filed against the original assessment order, then there could be no prohibition against the assessee raising such a question relating to computation of the amount of tax payable by him, at the lime of reassessment or in the appeals against the reassessment order before the AAC or the Appellate Tribunal.
16. In V. Jaganmohan Rao v. CIT/CEPT [1970] 75 ITR 373 (SC), their Lordships of the Supreme Court, while dealing with the scope and effect of the reassessment proceedings, observed as under (p. 380) :
“Once proceedings under Section 34 are taken to be validly initiated with regard to two-thirds share of the income, the jurisdiction of the Income-tax Officer cannot be confined only to that portion of the income. Section 34 in terms states that once the Income-tax Officer 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 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 underassessment is set aside and the whole assessment proceedings start afresh. When once valid proceedings are started under Section 34(1)(b), the Income-tax Officer had not only the jurisdiction but it was his duty to levy tax on the entire income that had escaped assessment during that year”.
17. The same principle was reiterated by their Lordships of the Supreme Court in CST v. H. M. Esufali H. M. Ahdulali [1.973] 32 STC 77 (SC), that when a reassessment takes place, the earlier assessment is completely reopened and a fresh assessment takes place. Their Lordships observed as under in the aforesaid case (p. 85):
“What is true of the assessment must also be true of reassessment, because reassessment is nothing but afresh assessment. When reassessment is made under Section 19, the former assessment is completely reopened and in its place fresh assessment is made. While reassessing a dealer, the assessing authority does not merely assess him on the escaped turnover but it assesses him on his total estimated turnover”.
18. We may also refer to the decision of their Lordships of the Supreme Court in Deputy Commissioner of Commercial Taxes v. If. R. Sri Ramulu [1977] 39 STC 177 (SC), wherein it was observed as under (p. 180):
“Once an assessment is reopened, the initial order for assessment ceases to be operative. The effect of reopening the assessment is to vacate or set aside the initial order for assessment and to substitute in its place the order made on reassessment. The initial order for reassessment cannot be said to survive, even partially, although the justification for reassessment arises because of turnover escaping assessment in a limited field or only with respect to a part of the matter covered by the initial assessment order. The result of reopening the assessment is that a fresh order for reassessment would hum to be made including for those matters in respect of which there is no allegation of the turnover escaping assessment “.
19. In the aforesaid cases, their Lordships of the Supreme Court drew attention to the procedure prescribed for making a reassessment. The assessing authority has to give a notice to the assessee calling upon him to produce his books of accounts and other documents. On receiving such a notice, the assessee may appear before the assessing authority and prefer his objections and produce such evidence as he may think necessary. Thus, the procedure for making reassessment is much the same as for making an assessment at the initial stage. It was also observed by their Lordships of the Supreme Court that the procedure laid down for making a reassessment was not a mere empty formality but was incorporated to provide the assessee a proper opportunity of hearing. It cannot be disputed in the face of the aforesaid decisions of their Lordships of the Supreme Court that once a reassessment proceeding is initiated, the original order of assessment is set aside or ceases to be operative. The finality of such an assessment order is wiped out and a fresh order of assessment would take the place of and completely substitute the initial order of assessment. It is, therefore, clear that when reassessment proceedings are taken, the former assessment is completely wiped out, the entire assessment is reopened and the total income of the assessee is determined afresh. The new order passed on reassessment completely replaces or substitutes the original order of assessment. Once an assessment is reopened by issuing a notice under Sub-section (2) of Section 22 of the 1922 Act, the previous assessment is set aside and the entire assessment proceedings start afresh. As after initiation of the proceedings for reassessment under Section 34(1) of the 1922 Act, the earlier assessment is set aside and a recomputation of the total income of the assessee has to be made in the course of reassessment proceedings, then necessarily the amount of tax payable by the assessee has also to be computed afresh.
20. The view that we are inclined to take was also taken by a Full Bench of the Andhra Pradesh High Court in CWT v. Subakaran Gangabhishan [1980] 121 ITR 69. Following the decisions of their Lordships of the Supreme Court in V. Jaganmohan Rao’s case [1970] 75 ITR 373 (SC), H. M. Esufali’s case [1973] 32 STC 77 (SC) and H. R. Sri Ramulu’s case [1977] 39 STC 177 (SC), the Andhra Pradesh. High Court held as under (p. 78):
“From the aforesaid decisions, it is clear that reassessment wipes out the original assessment and the reassessment must be in respect of not only the items that escaped assessment but the entire assessment for the year. The assessing authority, whether under the I.T. Act or under the Sales Tax Act, has a statutory duty and obligation, apart from having jurisdiction, to include all items that escaped assessment notwithstanding the fact that he had mentioned in the notice only some and complete the assessment as if the reassessment proceedings are de novo and afresh.”
21. The Andhra Pradesh High Court approved its earlier decisions in Pulavarthi Viswanadham v. CIT [1963] 50 ITR 463 (AP) and Anne Nagendram and Bomma Reddi Venkayya & Co. v. CIT [1967] 66 ITR 46 (AP) and CIT v. Jeskaran Bhuvalka [1970] 76 ITR 128 (AP). The Full Bench of the Andhra Pradesh High Court dissented from the view taken by the Bombay High Court in New Kaiser-I-Hind Spg. and Wvg. Co. Ltd. v. CIT [1977] 107 ITR 760 (Bom) and the decision of the Madras High Court in Veerappa Chettiar v. CIT [1973] 116 ITR (Mad) and held that the Bombay and Madras High Courts while deciding the aforesaid cases did not properly appreciate the I rue effect and import of the observations of their Lordships of the Supreme Court in Jaganmohan Rao’s case [1970] 75 ITR 373 (SC) and as explained in the subsequent decisions in H. M. Esufali’s case [1973] 32 STC 77 (SC) and H.R. Sri Ramulu’s case [1977] 39 STC 1 77 (SC). In Sun Engineering Works (P.) Ltd. v. CIT [1978] 111 ITR 166 (Cal), the facts were like this. The assessee had submitted its returns for two assessment years showing losses. The ITO held that the returns for both the 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 as a result of which sums of Rs. 27,000 and 9,000 became assessable for the two assessment years. The ITO reopened the assessments for the two years under Section 147(a) of the 1961 Act. The assessee contended that the losses of those years should be computed in the reassessment proceedings, but the Tribunal held that the losses could not be considered. On these facts, the Calcutta High Court held that in order to determine the income that had escaped assessment, the ITO could not wholly ignore the losses which were suffered by the assessee in the years in question. It was observed that in the assessment proceedings under Section 34, the income which had escaped assessment could not be computed in isolation and the total income of the assessee had to be determined afresh. Their Lordships of the Calcutta High Court observed in the aforesaid case that in Jaganmohan Rao’s case [1970] 75 ITR 373 (SC), the Supreme Court has used very wide language in describing the scope of reassessment proceedings and that if by reason of reopening, the previous underassessment was set aside and the whole assessment proceedings started afresh, there is no reason why the admitted loss left undetermined should not be recomputed.
22. The same view was again reiterated by their Lordships of the Calcutta High Court in CIT v. Assam Oil Co. Ltd. [1982] 133 ITR 204 (Cal), and it was observed as under in that case (p. 220):
“It appears to us that in view of the scheme of the I.T. Act, once a reopening is made, the entire assessment is set aside and the income which has escaped assessment, even though there is nothing to show the escapement of assessment, it should be examined and even in a case where the assessee is entitled to any deduction which was not granted in the original assessment, the assessee would be so granted the deduction. ”
23. The Madras High Court has also take” the same view in CIT v. Standard Motor Products of India Ltd. [1983] 142 ITR 877 (Mad) and CIT v. B. Nagi Reddi [1983] 144 ITR 62 (Mad). It was held by their Lordships of the Madras High Court in the aforesaid cases that the earlier decision of that court in Veerappa Chetiar v. CIT [1973] 91 ITR 116 (Mad) was no longer good Jaw as it would not stand consistently with the decision of the Supreme Court in V. Jaganmohan Rao’s case [1970] 75 ITR 373 (SC). In Standard Motor Products of India Ltd.’s case [1983] 142 ITR 877 (Mad), their Lordships of the Madras High Court observed as under (p. 885):
” From a combined reading of Sections 147, 148 and 139(2) of the Act, the following position emerges. The provisions of the Act should he applied as if the notice were a notice issued under Section 139(2) of the Act. Section 147 of course is subject to Sections 148 to 153 of the Act. The effect would then be that, when once a notice is issued on the above lines under Section 148 of the Act, the assessee would be called upon to file a fresh return as if it was a return that would have to be filed in response to a notice under Section 139(2) of the Act. That, in turn, would mean that the assessee would be under an obligation to disclose his total income. It would not be open to him to omit any part of his income except under peril of being made subject to the penal provisions of the Act for failure to furnish a full and true disclosure of his income. It would certainly not be open to the assessee to contend that he needs only to file a return of such portion of income which was not included in the original return. In other words, once an assessment is reopened, the initial order of assessment stands automatically cancelled. The order of reassessment will have to take the place of the original order of assessment. The initial order of assessment cannot be said to be operative even for a limited purpose or with respect to items which had been covered by the initial order of assessment. To express differently, once an assessment is reopened, the ITO will not only have the jurisdiction but it will also be his duty to determine the taxable liability of an assessee and for the said purpose he will have necessarily to 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 that had escaped assessment during that year, ”
24. In B. Nagi Reddi’s case [1983] 144 ITR 62 (Mad), the earlier decision in Standard Motor Products of India’s case [1983] 142 ITR 877 (Mad) was followed.
25. The Madras High Court expressed the same view in a sales tax case, Deputy Commissioner (C.T.) v. Indian Refrigeration Industries Private Limited [1980] 46 STC 264 (Mad). Rama Prasad Rao, the then Chief Justice, hearing the matter on a difference of opinion between two judges of the Madras High Court, held that when the assessing officer proceeds to make a reassessment, he does so for the. purpose of redetermining the annual taxable turnover as a whole. The reassessment order thus reflects the assessable turnover in its entirety and the original order of assessment is virtually set aside. By reassessing the assesses, the taxing officer is bound to determine the taxable turnover for the assessment year in question as a whole, as there can be only one assessment and in a case where there has been a reopening of an original assessment, the reassessment order can be said to be, the only assessment order and the assessee has a right to challenge that order in all respects in an appeal preferred against it. Thus, when a former assessment is reopened though it has become final, the assessing authority cannot be said to be merely assessing the assessee on the escaped turnover, but it assesses him on his total estimated turnover.
26. The decisions of the Bombay High Court in CIT v. A.D. Shroff [1951] 31 ITR 284 (Bom) and Kevaldas Ranchhoddas v. CIT [1968] 68 ITR 842 (Bom), were given before the judgment of their Lordships of the Supreme Court in V. Jaganmohan Rao’s case [1970] 75 ITR 373 (SC). As the aforesaid two decisions of the Bombay High Court are inconsistent with the decisions of their Lordships of the Supreme Court in V. Jaganmohan Rao’s case [1970] 75 ITR 373 (SC), IL M. Esufali’s case [1973] 32 STC 77 (SC) and H.R. Sri Ramulu’s case [1977] 39 STC 177 (SC), they can no longer be treated as good law.
27. In a subsequent case, New Kaiser-I-Hind Spg. & Wvg. Co.’s case [1977] 107 ITR 760 (Bom), their Lordships of the Bombay High Court agreed with the view taken by the Madras High Court in Veerappa Chettiar’s case [1973] 91 ITR 116 (Mad), and did not agree with the view taken by the Andhra Pradesh High Court in Pulavarthi Viswanadham’s case [1963] 50 ITR 463 (AP). However, as observed by the Full Bench of the Andhra Pradesh High Court in Subakaran Gangabhishan’s case [1980] 121 ITR 69 (AP), their Lordships of the Bombay High Court in New Kaiser-I-Hind Spg. & Wvg. Co.’s case [1977] 107 ITR 760 (Bom), did not appreciate the true effect and import of the wide observations made by their Lordships of the Supreme Court in V. Jaganmohan Rao’s case [1970] 75 ITR 373 (SC), regarding the scope and effect of the proceedings for reassessment. However, their Lordships of the Bombay High Court in New Kaiser-I-Hind Spg. & Wvg. Co.’s case [1977] 107 ITR 760 (Bom), definitely expressed the view that their earlier decision in Kevaldas Ranchhoddas’s case [1968] 68 ITR 842, was no longer good law in view of the decision of their Lordships of the Supreme Court in V. Jaganmohan Rao’s case [1970] 75 ITR 373 (SC). The Kerala High Court in CIT v. C. Ravindran [1977] 107 ITR 547 (Ker), simply followed the decision of the Bombay High Court in Kevaldas Ranchhoddas’s case [1968] 68 ITR 842 (Bom), and the decision of the Allahabad High Court in Sir Shadi Lal and Sons v. CIT [1973] 92 ITR 453 (All). However, as observed above, the Bombay High Court itself in New Kaiser-I-Hind Spg. 6- Wvg. Co.’s case [1977] 107 ITR 760 (Bom), has held that the decision in Kevaldas Ranchhoddas’s case [1968] 68 ITR 842 (Bom), was no longer good law. It appears that the decisions of their Lordships of the Supreme Court in V, Jaganmohan Rao’s [1970] 75 ITR 373 (SC), H. M. Esufali’s [1973] 32 STC 77 (SC) and H. R. Sri Ramulu’s case [1977] 39 STC 177 (SC), were not cited before their Lordships of the Kerala High Court, probably as the decision was rendered ex pane on account of the fact that nobody appeared for the assessee.
28. It appears rather unfortunate that their Lordships of the Bombay High Court followed the earlier decisions in Kevaldas Ranchhoddas’s case [1968] 68 ITR 842 (Bom) and Ravindran’s case [1977] 107 ITR 547 (Ker), in CWT v. Ballarpur Industries Ltd. [1979] 118 ITR 711 (Bom). As pointed out earlier, Ravindran’s case [1977] 107 ITR 547 (Ker), has merely followed the decision of the Bombay High Court in Kevaldas Ranchhoddas’s case [1968] 68 ITR 842 (Bom), and that decision has been held not to be good law by their Lordships of the Bombay High Court themselves in New Kaiser-I-Hind Spg. & Wvg. Co.’s case [1977] 107 ITR 760 (Bom).
29. The Allahabad High Court in Sir Shadi Lal & Sons’ case [1973] 92 ITR 453 (All), expressed the view that on reassessment the entire assessment is not opened and that the controversy on reassessment is confined to matters which are relevant in respect of the income which had not been brought to tax during the course of the original assessment. It may be observed with great respect that the decision of the Allahabad High Court in Sir Shadi Lal & Sons’ case [1973] 92 ITR 453 (All), is inconsistent with the decisions of their Lordships of the Supreme Court in V. Jaganmohan Rao’s case [1970] 75 ITR 373 (SC), H. R. Sri Ramulu’s case [1977] 39 STC 177 (SC) and H. M. Esufali’s case [1973] 32 STC 77 (SC), and cannot be regarded as laying down good law. It may also be pointed out that a divergent view was subsequently expressed by their Lordships of the Allahabad High Court in E. Hill & Co. (Pot.) Ltd. v. CIT [1980] 122 ITR 630 (All), wherein, following the decision of their Lordships of the Supreme Court in V. Jaganmohan Rao’s case [1970] 75 ITR 373, it was held that once an assessment is reopened, the entire assessment was at large. But the earlier decision of that court in Sir Shadi Lal & Sons’ case [1973] 92 ITR 453 (All), does not appear to have been cited before their Lordships of the Allahabad High Court in the last mentioned case, E. Hill & Co. (Pvt.) Ltd. [1980] 122 ITR 630.
30. Lastly, we may refer to a decision of a Bench of this court in Hiralal v. CAT [1980] 121 ITR 89 (Raj). It appears that the decision of their Lordships of the Supreme Court in H. M. Esufali’s case [1973] 32 STC 77 (SC) and H. R. Sri Ramulu’s case [1977] 39 STC 177 (SC), were not brought to the notice of the Bench deciding that case. As held by their Lordships of the Supreme Court in the aforesaid decisions, the provisions of Section 147 of the 1961 Act, which corresponds to Section 34 of the 1922 Act, could not have a limited scope, confined only to the escaped income. Thus, reassessment proceeding’s cannot be confined only to such income which has escaped assessment, but the entire assessment proceedings are set at large and are reopened and the earlier order of assessment is set aside or wiped out and substituted by the order passed upon reassessment. Once the reassessment proceedings are initiated, the assessing authority has to redetermine afresh the total income of the assessee as also the total sum payable by him as tax under the Act. We may not be understood as holding that the questions which were expressly raised and decided during the assessment proceedings or in the appeals from the original assessment order can be reagitated either in the reassessment proceedings or in the appeals taken from the reassessment order. So far as the matters raised and decided in the assessment proceedings or in the appeals against the original assessment order are concerned, they should be considered to have been finally decided between the parties and cannot be reagitated merely because the assessment has been reopened, but questions which were not raised at the time of original assessment proceedings or in the appeals therefrom can undoubtedly be raised during the reassessment proceedings or in the appeals filed against the reassessment order.
31. In the present case, the assessee is entitled to the benefit of concession or rebate under Para. 6A of the Part B States (Taxation Concessions) Order, 1950, in the course of reassessment proceedings under Section 34 of the Indian I.T. Act, 1922, in respect of the whole of the dividend income including the entire actual dividend income received by the assessee, as also in respect of the deemed dividend income irrespective of the fact that the question of allowing such concession or rebate in the computation of the amount of tax was not raised by the assessee at the time when the original assessment order was passed or in the appeal therefrom. In our view, the ITO was competent at the time of passing the reassessment order to consider the question of allowing rebate as also about the application of the proper rate of rebate in respect of the dividend income arising to the, assessee from Part B States during the assessment years in question. The Appellate Tribunal, while hearing an appeal against the reassessment order, was likewise competent to consider the aforesaid questions in the same manner as the said question could have been considered by the ITO at the time of passing the original assessment order. On account of the aforesaid reasons, we have answered the first two questions referred to this court in the affirmative and in favour of the assessee.
32. The actual dividend income received by the assessees was the subject-matter of the original assessment proceedings and at that time the benefit of the concession allowable under Para. 6A of the Concessions Order was not allowed to the assessees in respect of the entire dividend income. However, as a consequence of the reassessment proceedings, the original assessment orders were set aside and wiped out and the total dividend income of the assessees was computed afresh. It was then incumbent upon the ITO to compute the amount of tax payable by the assessees on the total income determined afresh as a result of the reassessment proceedings, as it is not disputed by the Revenue that the assessees were lawfully entitled to the benefit of the provisions of Para. 6A of the Concessions Order in. respect of their entire dividend income. As a matter of fact, the benefit of the concession or rebate admissible under Para. 6A of the Concessions Order has actually been allowed to the assessees in respect of the deemed dividend income at the time of reassessment. We see no reason as to why the assesses should not be allowed the same concession or rebate under Para. 6A of the Concessions Order in respect of the entire actual dividend income, at the time of calculating the amount of tax payable by the assessees as a result of the reassessment proceedings. It appears to us rather incongruous or incoherent that the benefit of the very same concession or rebate admissible under Para, 6A of the Concessions Order has been allowed to the assessees in respect of their deemed dividend income during the assessment years in question, but the same benefit is denied to them in respect of their entire actual dividend income during the very same year, on a very technical plea that the ITO had failed to provide the requisite relief to the assessee on the earlier occasion at the time of passing the original assessment orders and the same has become final. As we have pointed out above, the reassessment proceedings have set at large the computation of total income as well as the determination of the amount of tax payable by the assessees and the amount of tax payable by them has to be computed on the total income of the assessees determined afresh as a result of the reassessment proceedings.
33. Now, the next question which arises for determination is as to for which of the three years under appeal the assessees are entitled to the benefit of the rebate allowable under the provisions of Para. 6A of the Concessions Order and the rate at which such rebate is admissible to them.
34. Section 2(3)(a) of the Finance Act of each of the years 1952, 1953, 1954 and 1955 provided that in case the total income of an assesses included income from dividends, in respect of which the assesses himself would be deemed to have paid income-tax imposed under the Act by virtue of the provisions of Section 49B of the 1922 Act, such assessee shall be deemed to have paid income-tax on that part of the total income at a rate applicable to the total income of the assessee in the immediately preceding financial year. Thus, in respect of the dividend income or deemed dividend income, included in the total income of the previous year relatable to the assessment year 1955-56, the rate of tax prescribed by the Finance Act of 1954 would be applicable. Similarly for the assessment years 1953-54 and 1954-55, so far as the dividend income is concerned, the rates fixed by the Finance Acts of 1952 and 1953 respectively would be applicable.
35. In Para, 3(iii) of the Concessions Order, the expression “Indian rate of tax” has been defined as the rate determined by dividing the amount of income-tax and super-tax payable in the taxable territories on the total income for the year in question, in accordance with the rates prescribed by the relevant Finance Act by the amount of such total income. While the expression ” State rate of tax ” has been defined as the rate determined by dividing the amount of income-tax and super-tax payable on the total income of the assessee according to the rate of tax in force in the State immediately before the appointed day by the amount of such total income. According to Para. 6A, in the State of Rajasthan, the rate of tax applicable to income, profits and gains of any previous year relatable to the assessment years ending on March 31, 1953, 1954 and 1955 shall be charged after allowing rebate at the rate of 40%, 20% and 10% respectively of the Indian rates of tax.
36. It may be pointed out that after the country attained independence, the provisions of the Indian I.T. Act, 1922, were made applicable to those territories, which were formerly constituted of princely States, as a result of federal financial integration. In some of the Indian States, either there was no income-tax levied at all or even if income-tax was charged from the subjects, then the rate of tax was much lower than that prevailing in the territories which were previously known as “British India.” At the time of federal financial integration, it was considered proper to grant some relief to the residents of the former Indian States for a period of five years and concessional rates, of tax were prescribed for five years beginning from April 1, 1950, so as to gradually bring the rate of tax chargeable in those territories at par with the Indian rates of tax. The obvious object of the concession provided by the Taxation Laws (Extension to Merged States and Amendment) Act of 1949 and by the Part B States (Taxation Concessions) Order, 1950, was to provide rebate to the assesses of the former Indian States, in order to avoid hardship and anomalies and to remove difficulties that may arise on account of the extension of the Indian I.T. Act to the merged territories or Part B States.
37. The concession consisted mainly of :
(a) providing a lower rate of tax,
(b) non-application of certain provisions of the Indian Income-tax Act, 1922, in such areas ; and
(c) exemption from charging of tax of certain classes of income, which would otherwise have been taxable.
According to the provisions of the Concessions Order, income, profits and gains of arty previous year of an assessee ending after March 31, 1949, which have not been assessed to tax under the State law would be subjected to tax under the Indian I.T, Act, at a concessional rate. Paras. 5 and 6 of the Concessions Order cover the first two assessment years after integration, namely, 1950-51 and 1951-52. Para. 6A covers the period of the three subsequent assessment years, namely, 1952-53, 1953-54 and 1954-55, and it provides that rebate shall be allowed during the aforesaid three assessment years at the rate of 40%, 20% and 10% respectively of the Indian rates of tax. Thus, in the assessment year 1952-53, the income, profits and gains accruing or arising in the territories comprised within the State of Rajasthan were chargeable to tax at the Indian rates of tax, subject to rebate being allowed at the rate of 40% thereof. In the following previous year corresponding to the assessment year 1953-54, the income, profits and gains accruing or arising to an assessee in the State of Rajasthan, were chargeable to tax at the Indian rate of tax, but rebate at the rate of 20% thereof would be allowed to the assessee. In the same way, in respect of the assessment year 1954-55, the Indian rate of tax was to be applicable, but rebate at 10% was to be allowed. Thus, so far as the rate prescribed in the enacting part of Para. 6A is concerned, it does not present any difficulty in the matter of interpretation.
However, a proviso was subsequently inserted in Para. 6A of the Concessions Order by the notification dated May 13, 1953, so as to incorporate the provisions of Section 2(3)(a) of the Indian Finance Acts of 1952, 1953 and 1954. In accordance with the aforesaid proviso, any income chargeable under the head “Dividends” in respect of which, by virtue of Section 49B of the Act, the assessee is deemed himself to have paid income-tax imposed by the Act, the income-tax payable by the assessee on that part of his total income, which includes the dividend income, shall be an amount bearing to the total amount of income-tax payable according to the rates applicable to his total income in the immediately preceding financial year, the same proportion as the amount of such inclusion bears to his total income. The proviso not only applies to dividend income but also applies to income chargeable under the head ” Salaries ” and ” Interest on securities “.
38. The main part of Para. 6A makes it amply clear that the rebate specified therein would be applicable to income, profits and gains of any previous year which is a previous year for the assessment years ending on March 31, 1953, 1954 and 1955. Thus, the benefit of the rebate allowable under Para. 6A cannot be made applicable to income of the previous year relatable to the assessment year 1955-56 ending on March 31, 1956. The concession was explicitly granted in respect of a period of five years beginning from the assessment year 1950-51 and the said concession could not be extended beyond a period of five years so as to be made available during the assessment year 1955-56. In our view, the proviso merely makes the rate of tax prescribed by the Finance Act of the earlier year applicable for computation of the amount of tax for the dividend income, because the rate of tax for the relevant assessment year could only become known on the coming into force of the new Finance Act pertaining to that assessment year.
39. It may be pointed out that according to the scheme of the Finance Acts at the relevant times, income from business, property and other sources were charged to tax at the rate prescribed by the Finance Act of that year, while salaries, interest on securities and dividends were taxed at the rate prescribed in the Finance Act of the preceding year. As tax was deducted at source in respect of salaries, interest on securities and dividends at the time of accrual of such income, the tax could only be charged at the rate prescribed by the Finance Act of the preceding year for the simple reason that the rate of tax applicable to the assessment year in question would only be known on the coming into force of the new Finance Act for that year. It may be that the tax may be charged on dividend income at a rate prescribed by the Finance Act of the previous year, but that would not make the benefit of the provisions of the concession or rebate allowable under Para. 6A to be applicable to dividend income assessable in the assessment year 1955-56. It is undoubtedly true that the dividend income assessable in the assessment year 1952-53 would be charged to tax. at the rate prescribed in the Finance Act of 1951 and similarly the dividend income assessable, in the assessment year 1953-54 would be subject to tax at the rate prescribed by the Finance Act of 1952. Likewise dividend income assessable in the assessment year 1954-55 would be charged to tax at the rate prescribed by the Finance Act of 1953. Thus, the rate of the previous year is made applicable so far as the dividend income assessable in the next following assessment year is concerned. To our mind, the proviso merely explains the mechanism how the concession is to be worked out in respect of the dividend income or income, from salaries or from interest on securities. The concession could not be availed of by the assessee for a period of more than five years in all and although in the first two years no tax was to be charged, yet the assessee could get the benefit of the concession during the next three years only on the dividend income or on the deemed dividend income.
40. It was argued before us that it was the consistent practice of the Revenue to allow the concession in respect of the dividend income included in the total income assessed in the assessment years 1953-54, 1954-55 and 1955-56 at the rate of 40%, 20% and 10% respectively and that similar benefit has been allowed to the assesses in respect of their deemed dividend income which has now been included in the reassessment orders. Whether it is the consistent practice of the Revenue to allow rebate to the assessee in respect of the assessment year 1955-56 in respect of the dividend income or not, we are of the view that the provisions of Para. 6-A of the Concessions Order do not support such an interpretation. In our view, the correct position of law would be that rebate of 40% should be allowed in respect of dividend income assessed to tax in the assessment year 1952-53 while the rebate of 20% and 10% respectively should be allowed on dividend income assessed to tax in the assessment years 1953-54 and 1954-55. Of course, the rate of tax applicable to the dividend income and deemed dividend income during the aforesaid three years would be the rate prescribed by the Finance Acts of the years 1951, 1952 and 1953, respectively. The mere fact that dividend income accuring to the assessees in the taxable territories in the previous year relatable to the assessment year 1955-56 is chargeable to tax at the rate prescribed by the Finance Act of 1954, does not make the provisions of Para. 6A of the Concessions Order applicable to such dividend income. In our view, the concession or rebate allowed by the main Para. 6A is applicable to the three assessment years specifically referred to therein as ending on 31st day of March of the years 1953, 1954 and 1955 and Clause (a) makes it clear that the rebate at the rate of 40% was applicable to the income, profits and gains accruing or arising in the State of Rajasthan to the assessee for the assessment year ending on March 31, 1953, which refers to the previous year relatable to the assessment year 1952-53. The proviso, as mentioned above, merely makes the provisions of Section 2(3)(a) of the Finance Act applicable in the calculation of rebate or concession relating to dividend income or deemed dividend income. The President of the Appellate Tribunal has referred in his order to the fact that rebate was neither claimed by the assessees nor allowed in respect of the income from dividends for the assessment year 1952-53. However, the mere fact that, the assessees failed to claim rebate or concession under Para. 6A, in respect of dividend income assessed to tax in the assessment year 1952-53, would not entitle the assessees to avail of the benefit of the concession provided in Para. 6A of the Concessions Order in respect of the dividend income assessed in the assessment year 1955-56. As we have held above that the total income of the assesses for any assessment year would be one irrespective of the fact that a portion of such income is derived from dividends, the concessional rate of tax is permissible under Para. 6A, in respect of the total income of the assessees, irrespective of the source of such income, whether the income is derived from business, property or other sources, such as salaries or dividends. The benefit of the concession allowable under Para, 6A of the Concessions Order can only be availed of in respect of the total income of the assessee for five consecutive years beginning from the assessment year 1950-51. We are unable to agree with the majority of the members of the Tribunal that the effect of the first proviso to Para. 6A of the Concessions Order is to vary or modify the substantive enactment, so far as the income from dividends, salaries or interest on securities is concerned. Even without the proviso, the rate prescribed by the Finance Act of the previous year would have been applicable to the dividend income by virtue of the provisions of Section 2(3)(a) of the relevant Finance Act; but the very same provisions have been added to Para, 6A, in the form of a proviso and the same would make no difference to the interpretation of the main enacting part of Para. 6A of the Concessions Order, because of the simple reason that the proviso merely points out the rate at which the tax was to be calculated in respect of that part of the total income which was derived from dividends and it was made clear that the rate prescribed by the Finance Act of the earlier year would govern the calculation of tax in respect of that part of the total income of the assessee which was derived from dividends. There is no doubt that the proviso has been added to Para. 6A as a matter of abundant caution and is clarificatory in nature.
41. However, we are unable to agree with the view taken by the majority of the members of the Tribunal that any inference can be drawn from the main enacting part of Para. 6A or from a reading of the whole Para. 6A, along with the proviso thereto that the benefit of the concession allowable under Para. 6A of the Concessions Order could be made applicable i.e. income assessable in the assessment year beyond 1954-55. We are, therefore, of the view that the assessee is entitled to rebate on dividend income arising out of Part B States under Para. 6A of the Concessions Order for the assessment years 1952-53, 1953-54 and 1954-55 at the rate of 40%, 20% and 10% respectively and the concession allowable under Para. 6A cannot be availed of in respect of the assessment year 1955-56, even though such income may be derived from dividends.
