JUDGMENT
Thanikkachalam, J.
1. These three tax cases, relating to three different assessees are for the asst. yrs. 1973-74, 1973-74 and 1968-69, respectively. The Tribunal has referred the following common question for the opinion of this Court at the instance of the Department, under s. 256(1) of the IT Act, 1961 (hereinafter referred to as “the Act”).
“Whether the Tribunal is correct and justified in law in holding that the expression ‘an assessment to be made under s. 143(3), used in s. 144B, is confined only to the assessment to be made under s. 143 and does not cover reassessment to be made under s. 147 of the IT Act with the consequence that the procedure prescribed under s. 144B and extended time-limit provided in the Expln. to s. 153 is not available to reassessments to be made under s. 147 ?”
2. Tax Case No. 573 of 1983 relates to the asst. yr. 1973-74, in respect of which the previous year ended on 31st March, 1973. The assessee is a registered firm. For the assessment year under consideration, the original assessment was made on 23rd March, 1976, on a total income of Rs. 6,93,636. After completion of the original assessment, action under s. 147 was taken, because the income from Kandasamy Spinning Mills was not included in the original assessment, extra-shift allowance by way of depreciation on additions to plant and machinery was not restricted to the actual period of use and for diversion of substantial funds for non-business purposes no disallowance was made. For the notice issued under s. 148 on 17th February, 1978, the assessee filed a return on 17th March, 1978, declaring an income of Rs. 3,09,203. As the addition proposed exceeded Rs. 1 lakh, the ITO invoked s. 144B and called for the objections of the assessee and submitted them to the IAC and taking into account the directions given by the IAC, he completed the assessment on 29th June, 1979, on a total income of Rs. 14,01,770.
T.C. No. 574 of 1983 :
In this tax case, the original assessment was completed on 30th March, 1976, on a total income of Rs. 50,06,557 for the asst. yr. 1973-74, in respect of which, the previous year ended on 31st March, 1972. As there was an audit objection that excess development rebate and extra-shift allowance were allowed and omission to disallow difference in foreign exchange on capital account, notice under s. 148 was issued and the assessee filed a return with the income, as disclosed in the original return. Reassessment was made on a total income of Rs. 1,06,51,718 after securing the permission of the IAC under s. 144B on 29th August, 1979. The assessment order did not show the reasons for the variation in the assessment except that it was taken at Rs. 1,19,67,051 as per draft assessment order.
T.C. No. 575 of 1983 :
For the asst. yr. 1968-69, the original assessment was made on 20th January, 1970. Under s. 153(2) (a) the period of limitation for making reassessment under s. 147(a) is four years from the end of the assessment year in which notice under s. 148 was served. In this case, notice was served on 14th February, 1974, and, therefore, the reassessment had to be completed before 31st March, 1978. The ITO, however, made a draft assessment on 25th March, 1978 and the assessee sent his objections on 30th March, 1978, both of which were forwarded to the IAC under s. 144B, who gave his directions on 15th September, 1978, and the ITO made the assessment on 18th September, 1978.
On appeal in all these cases, the assessees contended before the CIT(A) that the assessment made was barred by limitation and, on the other hand, the Revenue contended that under s. 153(3), Expln. 1(iv), the period commencing from the date on which the ITO forwarded the draft order to the assessee and ending with the date, on which he received the directions of the IAC, under s. 144B, should be excluded in computing the period of limitation. However, the CIT held that the question of excluding that period would arise only if the procedure prescribed under s. 144B could apply and since that section, viz., s. 144B applies only to an assessment made under s. 143(3) and not to a reassessment under s. 147, the time taken to follow that procedure, could not be excluded in computing the period of limitation and that, therefore, the assessment made was barred by limitation in these cases.
On further appeal to the Tribunal, after hearing learned standing counsel and the advocates and chartered accountants, who joined as interveners, the Tribunal came to the conclusion that the view taken by the CIT(A) was unassailable. After tracing the history of s. 34 of the 1922 Act, giving due regard to the object of enacting s. 144B of the IT Act, 1961, and the need for associating a superior officer of considerable experience in making assessments in respect of additions exceeding a certain limit, the Tribunal came to the conclusion that the term “assessment” used in s. 144B is confined to assessments to be made originally under s. 143(3) of the Act and since the assessment to be made under s. 147 is different from the one to be made under s. 143(3), neither the procedure prescribed in s. 144B nor the extended time-limit associated therewith under s. 153(1) was applicable to an assessment to be made under s. 147. Therefore, it held that the extended time-limit provided for in the Expln. to s. 153 was not available to such a case, and that, therefore, the assessment made in respect of these assessees availing of the extended time-limit, was barred by limitation.
On a reference by the Department, the Tribunal has referred the common question of law, stated at the outset, for the opinion of this Court under s. 256(1) of the Act.
3. Before us, learned senior standing counsel for the Department, made the following submissions :
(i) The combined effect of the provisions of s. 148(1) read together with s. 143(3) of the Act is that even the assessment or reassessment to be made under s. 147(a), (b) falls within the purview of s. 144B.
(ii) Sub-s. (1) of s. 144B opens with a non obstante clause giving it overriding effect on any other provisions of the Act.
(iii) There is nothing in the context, which could reasonably justify placing a limited construction on the word “assessment” in s. 144B(1), as in s. 2(8) the term “assessment” includes “reassessment”.
(iv) The fiction created under s. 148(1) is to treat the notice as if it were issued under s. 139(2) and the applicability of other provisions of the IT Act has to be given full effect.
(v) Separate mention of the order under s. 147 in ss. 246 and 263, is only relevant for the purpose of these sections and the same cannot be carried further so as to affect the proper interpretation of s. 144B.
(vi) If at all there is any ambiguity in the construction of s. 144B, as not covering “reassessments”, the construction that makes the Act workable must be preferred and not the construction, which makes the Act nugatory.
(vii) By the use of the expression “so far as may be” in s. 148, not only the provisions of s. 139, but all the provisions of the Act have been made applicable, with the result, the notice issued under s. 139(2) must culminate in an assessment to be made under s. 143(3), there being no other section, under which an assessment could be made under the IT Act, 1961.
(viii) An assessment made under s. 34 of the 1922 Act is to be regarded as an assessment made under s. 23 of that Act. Then it follows that there was no distinction between an “assessment” and “reassessment” in the sense that one could not be regarded as distinct and separate from the other and both the expressions give the same meaning and legal implications.
4. On the other hand, learned counsel for the assessees submitted as under :
It is wrong to think that the language used in s. 34 of the old Act (1922 Act) and s. 147 of the new Act (1961 Act), is similar. While s. 34 of the 1922 Act uses the expression “proceed to assess or reassess such income”, s. 147 of the 1961 Act does not use the words “proceed to”. But s. 147 of the 1961 Act says “assess or reassess such income or recompute the loss ….” and by dropping the words “proceed to”, s. 147 can no more be said to be a procedural section, as it was interpreted under the old Act and s. 147 would be a charging section. According to learned counsel for the assessee, it is not necessary for the ITO to call in aid s. 143 to make an assessment under s. 147. They would then point out that s. 148 opens with the words “before making the assessment, reassessment or recomputation under s. 147, the ITO shall serve on the assessee a notice containing all or any of the requirements, which may be included in a notice under sub-s. (2) of s. 139, and the provisions of this Act shall, so far as may be, apply accordingly, as if the notice were a notice issued under that sub-section”, and the words “before making the assessment, reassessment or recomputation under s. 147”, also indicate the legislative intent that an assessment could be made under s. 147. From the fact that s. 30 of the 1922 Act provided for orders, which are appealable and therein there is no provision for an appeal against an assessment made under s. 34, but provided for an appeal against an assessment under s. 23, learned counsel submitted that s. 34 of the 1922 Act was not a charging section, but only a machinery section. He further submitted that since to all assessments initiated under s. 34, the provisions of s. 23 were made applicable, the assessment made under s. 34 was to be regarded as an assessment made under s. 23, and it was for that reason that no appeal against an order passed under s. 34 was provided for. But s. 246 of the 1961 Act made a departure, in that, it specifically provided for an appeal against an order made under s. 147, and that would mean that s. 147 is a section, under which assessments, reassessments or recomputation could be made and, therefore, unlike its predecessor section, viz., s. 34, it is a charging section. According to them, when s. 147 is a charging section, under which an assessment could be made and when no reference was made to s. 147 in s. 144B, it means that s. 144B is not made applicable to the assessments to be made under s. 147, irrespective of the fact whether it relates to assessments, or reassessments or recomputation. According to him, in addition to ss. 147 and 148, s. 150 has also provided for an assessment to be made, i.e., in pursuance of an order on appeal. In support of his argument, learned counsel invited our attention to the decision in CIT vs. Ganeshram Nayak (1981) 129 ITR 43 (Ori), to which we will advert a little later. Learned counsel submitted that s. 147 was never in contemplation for purposes of s. 144B and that would apply only to assessments made under s. 143(3) and not to reassessments and if s. 144B is held not to cover the assessments made under s. 147, the extended time-limit of six months is not available to the Department and, consequently, the assessments made now are beyond the prescribed time-limit under s. 147 and consequently, are barred by limitation. According to learned counsel, “regular assessment” as defined in s. 2(40) would mean the assessments made under s. 143 or 144 and in no sense of the term, regular assessment can refer to an assessment made under s. 147. According to him, if the assessments made under s. 143 are to be regarded as assessments made under s. 147, as is now contended by the Revenue, then, there is no need for enacting sub-s. (2) of s. 153 specifically mentioning therein the time-limits to be applicable for reassessments to be made under s. 147. According to him, this would show that the legislature never meant the assessment to be made under s. 143 to be equal to or the same as the assessment made under s. 147. They would further submit that the extension of the time-limit set out in Expln. 1 to s. 153 applies only to s. 153(1) and not to assessments to be made under s. 153(2), as according to him, if the assessment made under s. 147 is to be regarded as an assessment made under s. 143(3), the time-limit for making an assessment under s. 147 having already expired, that time-limit could not be extended again by the Explanation. For this purpose, protection is sought under s. 150(2) of the Act, which stipulated that the provisions of s. 150(1) shall not apply to any case, where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which, an assessment, reassessment or recomputation could not have been made at the time the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made, by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken. They would then submit that the procedure prescribed under s. 144B is to be followed only to an assessment to be made under s. 143(3) and not to reassessments to be made, applying the provisions of s. 147. According to learned counsel for the assessees, s. 34 of the 1922 Act and s. 147 of the 1961 Act are not in pari materia, that while the concept is retained in the latter Act, the machinery is provided in several sections, i.e., between ss. 147 to 153 thereof. According to them, while s. 34 is a procedural section, s. 147 is a charging section.
5. In reply, learned senior standing counsel for the Department, contended that the assessment under s. 147 is an assessment to be made under s. 143(3), because the notice issued under s. 148 is to be regarded as a notice under s. 139(2) and all the provisions available to the ITO to make an assessment, are automatically made applicable to the notice issued under s. 148. Consequently, the assessment made under s. 147 is an assessment made under s. 143(3), According to him, if ss. 148, 150 and 153 have used the words “assessment” and “reassessment” that is only a facility of reference and cannot be the legislative intent.
6. We have heard learned senior standing counsel for the Department and learned counsel for the assessees at length.
7. The question that arises for consideration is, whether the meaning of the expression “in an assessment to be made under sub-s. (3) of s. 143” takes in a reassessment, i.e., in a case where the assessment made is a reassessment consequent to the issue of notice under s. 148 having reason to believe that income has escaped assessment, where the provisions of s. 144B would be applicable. If the provisions of s. 144B are applicable to reassessments, the further time-limit of six months would be available to the Revenue and if s. 144B is not applicable to the reassessments made under s. 147, then the time-limit for making reassessments would remain unextended.
8. Under s. 2(8) of the Act, unless the context otherwise requires, “assessment” includes “reassessment”. The Act uses the expression “regular assessment” in s. 2(40) meaning thereby assessments made under s. 143 or under s. 144. Sec. 34 of the 1922 Act is described as the predecessor section of s. 147 of the 1961 Act. At this stage, it is relevant to extract s. 34 of the 1922 Act and ss. 147 and 148 of the 1961 Act.
Indian Income-tax Act, 1922 :
“34. Income escaping assessment. – (1) …. (a) the ITO has reason to believe that by reason of the omission or failure on the part of an assessee to make a return of his income under s. 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year, income, profits or gains chargeable to income-tax have escaped assessment for that year, or have been under-assessed, or assessed at too low a rate, or have been made the subject of excessive relief under the Act, or excessive loss or depreciation allowance has been computed, or
(b) notwithstanding that there has been no omission or failure as mentioned in cl. (a) on the part of the assessee, the ITO has in consequence of information in his possession reason to believe that income, profits or gains chargeable to income-tax have escaped assessment for any year, or have been under-assessed, or assessed at too low a rate, or have been made the subject of excessive relief under this Act, or that excessive loss or depreciation allowance has been computed, he may in case falling under cl. (a) at any time and in cases falling under cl. (b) at any time within four years of the end of that year, serve on the assessee, or, if the assessee is a company, on the principal officer thereof, a notice containing all or any of the requirements which may be included in a notice under sub-s. (2) of s. 22 and may proceed to assess or reassess such income, profits or gains or recompute the loss or depreciation allowance; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section.” (provisos omitted)
Income-tax Act, 1961 :
“147. Income escaping assessment. – (1) If – (a) the ITO has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under s. 139 for any assessment year to the ITO 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 cl. (a) on the part of the assessee, the ITO 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 ss. 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 ss. 148 to 153 referred to as the relevant assessment year).
(Explanations 1 and 2 omitted).”
“148. Issue of notice where income has escaped assessment. – (1) Before making the assessment, reassessment or recomputation under s. 147, the ITO shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub-s. (2) of s. 139; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section.
(2) The ITO shall, before issuing any notice under this section, record his reasons for doing so.”
9. Under s. 34 of the 1922 Act, the ITO should serve a notice on the assessee, which may contain all or any of the requirements, as may be included in a notice under s. 22(2) and then proceed to assess such income and the provisions of that Act shall, so far as may be, apply accordingly as if the notice were a notice issued under the sub-section. Sec. 30 of the 1922 Act did not provide for an appeal against an assessment made under s. 34. That would mean that the assessment made as a consequence of initiation of proceedings under s. 34 is not to be regarded as an assessment made under that section, but to be regarded as an assessment made under s. 23. It was for this reason that s. 30 provides for an appeal against an assessment made under s. 23, by making it clear that the assessment made under s. 34 is to be regarded only as an assessment made under s. 23. For the same reason, s. 34(3) also providing for limitation, uses the expression “assessment” or “reassessment” falling under cl. (c) of sub-s. (1) of that section, to exclude the limitation applicable generally to all assessments. Sec. 34 provided that the ITO may serve on the assessee a notice, after he has determined to reopen the assessment under s. 34 containing all or any of the requirements, which may be included in the notice under sub-s. (2) of s. 22 and may proceed to assess or reassess such income. It means that s. 34 is a procedural section, enabling or empowering the ITO to initiate the reopening of the assessment. Once the ITO reopens an assessment, he may have to follow the same procedure, which he followed to make the original assessment to complete the reassessment. For that purpose, he may have to give notice to the assessee to produce books, lead evidence and then he should make the assessment. Against that assessment, an appeal is provided for. It is for that reason, the other provisions of the Act were made applicable, so far as they are applicable to assessments made under s. 23(3). A similar expression has been used in s. 148 of the 1961 Act. Here also, the subsequent sub-section shows that the assessment must be made under s. 143(3). As against the assessment made under s. 147, there is a provision for appeal. Unlike s. 30 of the 1922 Act, s. 246(1) (e) of the 1961 Act provides that an appeal can be preferred against an order of reassessment or recomputation under s. 147 or s. 150 to the AAC. This is in addition to an appeal provided against an order of assessment made by the ITO under s. 143(3) or s. 144. Thus, the 1961 Act provides for an appeal both against the order of assessment under s. 143(3) as well as against an order of reassessment under s. 147.
10. According to the assessee, if the assessment made under s. 147 is, as contended by the Revenue, to be regarded as an assessment under s. 143(3), the same procedure obtained in the 1922 Act, would have been retained and continued in the 1961 Act and there was no reason to provide for an appeal against an assessment made under s. 147. Therefore, the intention of the legislature was that an assessment made under s. 143(3) and a reassessment made under s. 147 are different and are not to be regarded as one and the same.
Sec. 34 of the 1922 Act was a machinery section and not a charging section. For this finding, support was drawn from some of the decisions, to which we will advert a little later. One view was that a portion of s. 34, which deals with the issue of notice and s. 148, are machinery sections, while the other portion of s. 34 and ss. 147 to 153, of the two enactments, respectively are charging sections. That portion of s. 34, which deals with the power of assessment now embodied in s. 147 of the 1961 Act, could be regarded as a charging section. Sec. 147 says that if the conditions stipulated in cls. (a) and (b) are satisfied, the ITO may assess or reassess the escaped assessment, or recompute the loss, as the case may be. It was pointed out that the words “proceed to assess” used in s. 34 of the 1922 Act are significantly omitted in the 1961 Act. Since it charges the income that had escaped the assessment, it can also be said as a charging section. The procedural part of it is found to be embodied in the other sections. In s. 147, the words “proceed to” before the words “assess or reassess such income” were dropped. Sec. 147 confers upon the ITO the power to assess or reassess the escaped income and sets out the procedure to be followed to bring to tax such escaped income, in the other sections. Sec. 148, which deals with notice to be issued where the income had escaped assessment, opens with the words “before making the assessment, reassessment or recomputation under s. 147”, and indicates the under s. 147, it is possible to make an assessment, i.e., in case the income had escaped assessment or a reassessment in a case where the income had been under-assessed or assessed at too low a rate or where such income had been made the subject of excessive relief under the Act or where excessive loss or depreciation allowance has been computed. If an assessment or reassessment or recomputation under s. 147 is not contemplated, s. 148 would not have opened with the words “before making the assessment, reassessment or recomputation under s. 147”. On the basis of the use of the expression under s. 147, the Tribunal came to the conclusion that it is a strong positive indication to come to the conclusion that s. 147 is a section, under which an assessment, reassessment or recomputation could be made and that the assessment is a separate assessment from the one made under s. 143(3).
Sec. 2(8) of the 1961 Act defines “assessment” as including “reassessment”. If this definition is taken into consideration for interpreting s. 144B, then that section would be read as “notwithstanding anything contained in this Act, where, an assessment or reassessment is to be made under sub-s. (3) of s. 143”, which would mean that the assessment, reassessment or both is to be made under s. 143(3). It can be seen that reassessment could be made only under s. 147 and it cannot be made under s. 143(3). It was pointed out by the Tribunal that from the scheme of the Act (1961 Act) that it is permissible for the ITO to make an assessment under s. 147 de hors s. 143(3), but making use of the powers and procedures prescribed in s. 143(3). Sec. 148 requires that notice should be served on the assessee containing all or any of the requirements, which may be included in the notice under sub-s. (2) of s. 139 and the provisions of this Act shall, so far as may be, apply accordingly, as if the notice were a notice issued under that sub-section. After the issue of notice under s. 139(2), the ITO would press into service the procedural sections, like ss. 142 and 143 and then compute the income to be reassessed and levy tax thereon. Sec. 143(3) enables the ITO to make an assessment of the total income or the loss of the assessee and determine the sum payable by or refundable to an assessee on the basis of such assessment. Sub-s. (3) of s. 143 contains two parts. One part is the power to make assessment of the total income or loss of the assessee. The other part is, to determine the sum payable by an assessee or refundable to an assessee on the basis of such assessment. Under the first part, the ITO can act under s. 147 by following the procedure laid down in the subsequent sections and also the procedure laid down in ss. 142 and 143, which is to collect evidence and give the assessee an opportunity of being heard. Similarly, for the other part, i.e., determination of the sum payable by the assessee, the ITO can fall back upon sub-s. (3) of s. 143. It means, the ITO is only making use of the powers provided for in sub-s. (3) of s. 143, Sec. 148 enables the ITO to do so by providing that “and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section”. This would not lead to the conclusion that the assessment made as a consequence of issuing notice under s. 148, is an assessment under s. 143(3), merely because the procedures provided for in s. 143(3) are followed.
11. Sec. 153 of the 1961 Act provides for the time-limit for completing the assessments and reassessments. Sub-s. (1) of s. 153 opens with the words “no order of assessment shall be made under s. 143 or under s. 144 at any time after” and prescribes the time-limit thereafter. Sub-s. (2) of s. 153 provides for the time limit for making assessment, reassessment or recomputation under s. 147. According to the Tribunal, this would show again that Parliament maintained the difference to be maintained between the assessments to be made under ss. 143 and 144 and the assessments to be made under s. 147. Sec. 246 provided for an appeal against an order made under s. 147, unlike s. 30 of the 1922 Act, which did not provide for an appeal against an order of assessment made under s. 34, because under the 1922 Act, an assessment made under s. 34 is regarded as an assessment made under s. 23. For this reason, the Tribunal posed a question that if the assessment made under ss. 143(3) and 147 are regarded as one and the same, there is no reason to repeat that a separate provision has been made making an order under s. 147 an appealable one. For this reason also, the Tribunal came to the conclusion that an assessment made under s. 147 is a different assessment from the assessment made under s. 143(3). Therefore, the Tribunal was of the opinion that s. 144B, when it uses the expression “in an assessment to be made under sub-s. (3) of s. 143”, it only refers to an assessment made originally and not to an assessment made under s. 147. Accordingly, the Tribunal concluded that since it is possible to make an assessment under s. 147, which is definitely contemplated in the definition of “assessment” in s. 2(8) of the 1961 Act. “reassessment” cannot be imported or substituted in s. 144B.
12. It was also pointed out that s. 144B would go to show that it is only to assessments to be made under s. 143(3), i.e., the original assessment made by way of providing a protection to the assessees where the income is likely to vary, so that high-pitch assessments are not made and the assessees are not harassed. This protection and guidance is not necessary while making a reassessment under s. 147, since sufficient safeguards had already been provided for. In such circumstances, the Tribunal considered that the legislature would not have thought fit to provide one more safeguard even to assessments under s. 147, as otherwise it would be superfluous.
Sec. 2(40) defines “regular assessment”. Regular assessment has been defined to mean an assessment made under s. 143 or 144. In s. 144B; for the word “assessment”, the legislature could have used the word “regular assessment”. If the legislature had used the expression “regular assessment”, it would have meant an assessment made under s. 143 or 144. The assessments made under s. 144 are definitely beyond the jurisdiction of the IAC. Therefore, the expression “assessment” has been used. It means, for an assessment to be made under s. 144, whatever may be the variation in income, the procedure prescribed under s. 144B, cannot be made applicable. But, in case s. 144B is applied, the IAC has to give an opportunity to the assessee to explain the variation and since the assessment is made for the assessee’s non-co-operation, the legislature thought that no opportunity need be given to the assessee, who is not co-operating with the Department or complying with the notices issued. Therefore, regular assessment has been defined to mean only the assessments to be made under ss. 143 and 144 and does not include an assessment made under s. 147. Therefore, “regular assessment” does not include an “assessment made under s. 147”.
13. Now, coming to the rulings cited by learned senior standing counsel for the Department and learned counsel for the assessees, learned senior standing counsel for the Department, cited the following decisions :
(i) In Jai Kishan Srivastava vs. ITO (1960) 40 ITR 222 (All) (FB) : TC 51R. 2062, it has been held that in respect of proceedings for assessment or reassessment under s. 34(1A) of the IT Act (1922), the procedure laid down in s. 23 as well as the provisions of ss. 31,33,37 and 66 were applicable, that a proceeding for assessment or reassessment of income, profits or gains under s. 34(1A) was, therefore, governed in the matter of procedure and in the matter of appeals and references to the High Court by the same provisions which governed a proceedings for assessment or reassessment under s. 34(1) and s. 34(1A) was not discriminatory as compared with s. 34(1) and did not offend Art. 14 of the Constitution of India.
(ii) In M. R. Jayaram vs. CIT (1984) 147 ITR 807 (Mad) : TC 33R. 735, this Court has held that merely because there was no mention in s. 187 of reassessment proceedings on a firm under s. 147, it will not disentitle the ITO from applying s. 187 even to reassessment proceedings, Sec. 147 is only an enabling provision giving the additional power to make an assessment of income which was not brought to his notice in the original assessment. Hence, it was not necessary to refer specifically to s. 147 wherever it is intended to cover not merely the original assessment proceedings, but also reassessment proceedings. Sec. 187 is wide enough in its scope to take in not only the original assessment under s. 143, but also reassessment proceedings against a firm under s. 147 and the same consequences which flow following the original assessment of the firm will flow following the reassessment of the firm.
(iii) In CIT vs. Usha Aggarwal , the Punjab & Haryana High Court had held that there is a clear distinction between an assessment under s. 143 of the IT Act, 1961, and an assessment under s. 147 r/w s. 148 of the Act. The assessment under s. 147 does not depend upon the authority of s. 143 for its completion. Sec. 147 itself authorises the ITO to assess/reassess or recompute the loss or the depreciation allowance, as s. 143(3) enables the ITO to make the assessment. The authority in s. 147 to make the assessment is quite independent of the authority to make the assessment under s. 143. The assessment under s. 147 is thus a species different from the assessment under s. 143(3) and both have, therefore, been treated differently in the Act. It has further been held in that decision that a reference to the provisions of s. 144B showed that they specifically mentioned s. 143(3) and not s. 147. The intention of the legislature must be construed thereby to exclude s. 147 from its applicability. Therefore, the provisions contained in s. 144B did not apply to assessments under s. 147 r/w s. 148.
(iv) In CIT vs. Simson & Mc Conechy Ltd. (1989) 177 ITR 526 (Mad) : TC 51R. 540, this Court has held that though under s. 2(8) of the IT Act, 1961, assessment includes reassessment, that definition would apply unless the context otherwise requires and the provisions made under s. 153(1) and (2) of the Act maintaining a clear-cut distinction between the respective cases contemplated by them show that the expression “assessment” in s. 153(1) of the Act cannot be understood as including a reassessment as defined in s. 2(8) of the Act. The opening words of s. 153(1) cannot be construed as including an order of reassessment as contemplated under s. 147(a) or 147(b) of the Act, with reference to which a separate and independent provision has been made under s. 153(2) of the Act. The power to assess or reassess such income or recompute the loss or depreciation allowance, as the case may be, for the assessment year concerned conferred by s. 147 of the Act, cannot be interpreted to mean an assessment under s. 143 or s. 144. In making an assessment under s. 147, the other provisions of the Act are made applicable, but it is not possible to infer from this that where an assessment or revised assessment is made under s. 147 of the Act, it is one falling under s. 143 or s. 144 of the Act. Accordingly, in a case where a notice under s. 148 has been issued, the limitation as provided under s. 153(2) would apply.
(v) In CIT vs. V. D. Saraf (HUF) (1994) 207 ITR 217 (Bom) : TC 51R. 548, it has been held by the Bombay High Court that considering the predominantly beneficial purpose behind inserting s. 144B in the IT Act, 1961, the legislative intent behind excluding from the operation of these provisions, the assessment made in proceedings initiated under s. 147 cannot be visualised. Sec. 147 does not create any charge. It is essentially a machinery provision under which income can be assessed or reassessed subject to the provisions of ss. 148 to 153. The phraseology of s. 144B makes it absolutely clear that there is an obligation to forward a draft assessment order, wherein making an assessment under s. 143(3), the ITO proposes to make variations exceeding certain limits prejudicial to the assessee in the income or loss returned by him. Sec. 144B provides to the assessee a forum in the nature of a mini appeal against such proposed assessment. Therefore, in truth and substance, s. 144B though inserted as an independent section, is in the nature of a proviso to s. 143(3) and should be read as such.
(vi) In CIT vs. Supreme Constructions Co. , the Andhra Pradesh High Court has held that a perusal of ss. 2(8), 139, 144B, 147 and 153 of the IT Act, 1961, makes it clear that whenever a notice is issued under s. 148 by the AO, the provisions of the Act, so far as may be, would come into play as if the notice was issued under s. 139(2). Whenever a notice is issued under s. 139(2), an enquiry is held under s. 142 and an assessment is made under s. 143. In assessments made under s. 143, it is specifically laid down by s. 144B that the draft assessment procedure should be followed. Thus, the procedure laid down by s. 144B is part of the procedure contemplated under s. 143(3). A reading of s. 144B, at first sight, may give the impression that assessment or reassessment proceedings under s. 147 are outside its purview since it mentions only s. 143(3). Such a construction ignores the specific language employed in s. 148 under which the assessing authority gets power to issue notice for reopening the assessments under s. 147. Sec. 148 lays down that the provisions of the Act shall, so far as may be, apply to a reassessment made under s. 147. The phrase “so far as may be” implies that if there is anything inconsistent in the statutory provisions that come into play pursuant to a notice under s. 139(2), to the extent of that inconsistency resort cannot be made to any other section of the Act. The expression “so far as may be”, has always been construed to mean that those provisions may be generally followed to the extent possible. Sec. 144B not being inconsistent with s. 148, that procedure has to be followed in an assessment or reassessment under s. 147. The opening words of Expln. 1 to s. 153 “in computing the period of limitation for purposes of this section ….” refer to assessments and reassessments under sub-ss. (1) and (2) of s. 153. Moreover, under s. 147, assessment can be made, for the first time also, in cases where no return was filed and no assessment had been made earlier and information had reached the assessing authority that income assessable to tax had escaped assessment. Without reference to s. 143(3), reassessment cannot be made under s. 147 and, by virtue of the specific language employed in s. 148, there is no embargo on the assessing authority to invoke the provisions of s. 144B introduced for the protection of the assessee by providing for a pre-assessment notice.
14. On the other hand, learned counsel for the assessees, placed reliance on the following decisions :
(i) In Gates Foam & Rubber Co. vs. CIT , the Kerala High Court has held that reassessments made after resort to the provisions in s. 147 of the IT Act, 1961, are not assessments under s. 143. If this be so, such assessments are not “regular assessments”, because the definition of “regular assessment” in s. 2(40) specifically states that “regular assessments” are those made under s. 143 or s. 144. So, the expression “regular assessment” in s. 273 can mean only assessments under s. 143 or s. 144 and s. 273 (penalty proceedings), cannot apply to reassessment under s. 147.
(ii) The Orissa High Court in CIT vs. Ganeshram Nayak (supra), has held that a deeming provision is incorporated in s. 148 to make the assessment machinery applicable to proceedings taken pursuant to action under s. 147 of the Act. Under s. 246, which provides for appeals, a distinction has, however, been maintained. Clause (c) relates to assessments under ss. 143 and 144, while cl. (e) relates to assessment or reassessment under s. 147 of the Act. If the statute contemplated that the assessment proceeding after action was taken under s. 147 of the Act was also an assessment under s. 143 or s. 144, as the case may be, there was no necessity for providing a separate clause in s. 246 of the Act.
(iii) In Orient Trading Co. vs. CIT (1985) 152 ITR 26 (Guj) : TC 51R. 1802, the Gujarat High Court has held that the only power which the ITO derives under s. 147 of the IT Act, 1961, is to assess or reassess the income chargeable to tax which has escaped assessment. The section does not empower the ITO to reopen the entire assessment already made by him under s. 143 and to reassess or recompute the income which was the subject matter of the assessment made by him. The notice under s. 148 is deemed to be a notice under s. 139(2) only for the limited purpose of taking the aid of the relevant provisions of the Act for making an assessment. The legislature instead of repeating or re-enacting the same provisions which deal with assessment for the purpose of assessment or reassessment of income escaping assessment, has, for the sake of convenience, laid down that the relevant provisions of the Act shall apply as if the notice under s. 148 were a notice under s. 139(2). This is a well-known legislative device which is adopted to avoid repetition of identical provisions. The assessment made under s. 143 does not depend upon the validity or otherwise of the proceedings under s. 147. The assessment, which is described as an original assessment made under s. 143 stands on its own and even if the proceedings under s. 147 are validly initiated, it does not get obliterated or wiped off. The scheme of the Act clearly indicates that the assessment order made under s. 143 and the reassessment order made under s. 147 are distinct and independent of each other. Sec. 246 of the Act, which deals with appealable orders specifically makes an order under s. 143(3) and an order made under s. 147 appealable. The order under s. 143(3) is made appealable under cl. (c) while the order under s. 147 is made appealable under cl. (e) of sub-s. (1) of s. 246. Sec. 152 contemplates an appeal under ss. 246 to 248 or revision under s. 264 against the original assessment order even when an assessment is reopened in the circumstances falling under cl. (b) of s. 147. Hence, mere initiation of proceedings under s. 147 and s. 148 would not take away the jurisdiction of the CIT to revise an assessment order.
(iv) In CIT vs. Padma Timber Depot , the Andhra Pradesh High Court held that the expression “regular assessment” has been defined in s. 2(40) as an assessment made under s. 143 or. 144. The definition contained in s. 2 prevails unless the context requires otherwise. Only orders passed by the ITO under ss. 143 and 144 could be considered as regular assessments within the meaning of s. 2(40) of the Act and it is not possible to expand the scope of the expression “regular assessment” to include other orders. In that case, the assessee did not file a return under s. 139(1) nor was any notice issued to it under s. 139(2). The return could not, therefore, be regarded as one filed under s. 139(2). The return under s. 139(4) for the asst. yr. 1976-77 could be filed by the assessee under sub-cl. (iii) of cl. (b) without two years from the end of the assessment year, that is to say, on or before 31st March, 1979. The assessee filed the return on 1st June, 1979, so that it could not be regarded as one filed under s. 139(4). A return filed by an assessee after the expiry of the time-limit specified in s. 139 is non est in law and it is not open to the Revenue to take note of such a return and proceed to make an assessment. It was for this reason that the ITO took proceedings under s. 148 and regularised the assessment proceedings. As the assessment was made under s. 143(3) r/w s. 147, it was not a “regular assessment” and the levy of interest under ss. 139(8) and 217 was not valid.
(v) The Bombay High Court in Ritz Ltd. vs. CIT (1995) 216 ITR 138 (Bom) : TC 51R. 2098, has held that s. 2 of the IT Act, 1961, which contains the definitions of various expressions, says that the meaning of words defined therein shall be applicable “unless the context otherwise requires”. Hence, the meaning of expressions given in the definition may be departed from, if the context so requires. No individual word can be considered in isolation – its meaning has to be determined by other words in the section in which it occurs. Though the expression “assessment” has been defined to include “reassessment”, assessment and reassessment connote two different subject-matters, which have been dealt with separately in the Act for various purposes, e.g., initiation of proceedings, time-limit for issue of notice, time-limit for completion of assessment, appeals, etc. The language of s. 153, which prescribes-time limits for completion of assessments and reassessments, is clear and unambiguous. It prescribes different time-limits for each of them. Sub-s. (1) prescribes the time-limit for completion of assessments under s. 143(3) and s. 144 of the Act, whereas sub-s. (2) prescribes the time-limit for completion of assessments or reassessments under s. 147. That being so, the orders of assessment or reassessment under s. 147 would obviously be governed by the period of limitation prescribed by sub-s. (2) of s. 153. The contention that the limitation prescribed under s. 153(1) will apply to “reassessment” also, because assessment includes reassessment, is not sustainable.
(vi) In Modi Industries Ltd. vs. CIT , the Supreme Court has held that it must be presumed that the legislature was aware of the wide interpretation of the word “assessment” given under the IT Act. “Assessment” has been given an inclusive meaning in sub-s. (8) of s. 2. It includes reassessment. “Regular assessment” has been defined in s. 2(40) to mean the assessment made under s. 143 or s. 144. In the context of ss. 140A, 141 and 141A, “regular assessment” could only mean the original assessment made under s. 143 or s. 144. Having regard to the scheme of the Act and the use of the phrase “regular assessment” in various sections. of the Act, in s. 214 “regular assessment” has been used in no other sense than the first order of assessment passed under s. 143 or s. 144. If any consequential order has to be passed by the ITO to give effect to an order passed by the higher authority, that consequential order cannot be treated as “regular assessment” nor can the date of the consequential order be treated as the date of the regular assessment.
15. In view of the foregoing discussions made in the light of various judicial pronouncements made by the various High Courts and also by the Supreme Court in the case of Modi Industries Ltd. vs. CIT (supra), we are of the opinion that the Tribunal was correct in stating that the expression “assessment under s. 143(3)” does not cover “reassessment” and this expression is confined only to the assessments to be made originally and, therefore, the procedure prescribed under s. 144B is not available to reassessments to be made under s. 147. Consequently, the extended time-limit provided for in Expln. 1 to s. 153 is not available to the Department. Unless the extended time-limit is available, the assessment cannot be saved from the bar of limitation. On the facts of these cases, we are also of the opinion that the Tribunal is correct in holding that the reassessments made are time-barred, as s. 144B is not applicable to the facts of the this case. Accordingly, we hold that the common order passed by the Tribunal in dismissing the appeals filed by the Department in the case of all the assessees herein is in order. In that view of the matter, we answer the common question referred to us in the case of each of the assessees in the affirmative and against the Department. No costs.