S. 147 r.w. S. 158BC — If Assessing Officer makes any additions in block assessment proceedings, then he cannot include said income either on substantive or protective basis for initiating re-assessment proceedings.

M. P. Ramachandran v. Dy. CIT

A.Y. : 1997-98. Dated : 14-5-2009

S. 147 r.w. S. 158BC — If Assessing Officer makes any
additions in block assessment proceedings, then he cannot include said income
either on substantive or protective basis for initiating re-assessment
proceedings.

For the relevant assessment year, certain addition on
account of disallowance of advertisement expenditure made by the Assessing
Officer in block assessment proceedings was deleted by the CIT(A). In the
meantime the Assessing Officer re-opened the assessment. He held that since
substantive addition relating to the advertisement expenses made in the block
assessment was deleted by the first Appellate Authority and the appeal was yet
to be decided by the Tribunal, addition in the present assessment order was
also called for on protective basis. The CIT(A) upheld the assessment order on
the question of legality of the initiation of reassessment proceedings. On
merits, the CIT(A) reduced a part of addition made towards the advertisement
expenses.

The Tribunal held that the impugned amount did not qualify
for consideration in the reassessment. The Tribunal noted as under :

(2) Since the very foundation of S. 147 is to charge to
tax some income which has escaped assessment, it is sine qua non that
the income now sought to be taxed should be one which earlier escaped
assessment while determining the taxable income of the assessee. Once the
said income has been put to tax in the hands of the assessee, either under
the regular assessment or in the block assessment, the basic requisite
condition of the income ‘escaping assessment’ will become wanting.

(3) In this case, having made an addition in the block
assessment, the Assessing Officer was not justified in forming the belief
either on substantive or protective basis, that the same income has escaped
assessment in the instant year. Therefore, the initiation of reassessment
proceedings on this count could not be upheld.