Reassessment : Power and scope : S. 147 of Income-tax Act, 1961 : A.Ys. 1994-95 and 1995-96 : If the AO does not assess the income, which he had reason to believe had escaped assessment, then the reassessment order will be invalid.

[CIT v. M/s. Jet Airways
(I) Ltd. (Bom.), ITA No. 1714 of 2009 dated 12-4-2010]

In an appeal by the Revenue
the following question was raised before the Bombay High Court :

“Where upon the issuance of
a notice u/s.148 of the Income-tax Act, 1961 r/w. S. 147, the Assessing Officer
does not assess or, as the case may be, reassess the income which he has reason
to believe had escaped assessment and which formed the basis of the notice
u/s.148, is it open to the Assessing Officer to assess or reassess independently
any other income, which does not form the subject matter of the notice ?”

The High Court upheld the
decision of the Tribunal and held as under :

“(i) S. 147 has the effect
that the Assessing Officer has to assess or reassess the income (such income)
which escaped assessment and which was the basis of the formation of belief
and if he does so, he can also assess or reassess any other income which has
escaped assessment and which comes to his notice during the course of the
proceedings. However, if after issuing a notice u/s.148, he accepts the
contention of the assessee and holds that the income in respect of which he
has initially formed has reason to believe had escaped assessment, has as a
matter of fact not escaped assessment, it is not open to him independently to
assess some other income. If he intends to do so, a fresh notice u/s.148 would
be necessary, the legality of which would be tested in the event of a
challenge by the assessee.

(ii) We have approached
the issue of interpretation that has arisen for decision in these appeals,
both as a matter of first principle, based on the language used in S. 147(1)
and on the basis of the precedent on the subject. We agree with the submission
which has been urged on behalf of the assessee that S. 147(1) as it stands
postulates that upon the formation of a reason to believe that income
chargeable to tax has escaped assessment for any assessment year, the AO may
assess or reassess such income ‘and also’ any other income chargeable to tax
which comes to his notice subsequently during the proceedings as having
escaped assessment. The words ‘and also’ are used in a cumulative and
conjunctive sense. To read these words as being in the alternative would be to
rewrite the language used by the Parliament.

(iii) In that view of the
matter and for the reasons that we have indicated, we do not regard the
decision of the Tribunal in the present case as being in error. The question
of law shall accordingly stand answered against the Revenue and in favour of
the assessee.”