The Hindu : Business : Endless assessment is not authorised

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Monday, Oct 18, 2004

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Business

Endless assessment is not authorised

QUESTION: Assessing officers do not issue notice under Section 143(2) for scrutiny of accounts within the year of filing return, but issue notice under Sec. 148 as a matter of course after this date. Is this warranted? Is it open to the assessing officer to raise matters other than the subject matter for which re-assessment notice under Sec. 148 was issued?

ANSWER: There is a feeling among tax officers that the shorter period of four-year time limit is available for the issue of notice under Sec. 148, wherever there has been an omission to issue notice under Sec. 143(2) within the period specified for the purpose. Such an inference is not correct as pointed out by the reader.

In Vipan Khanna v CIT (2002) 255 ITR 220 (P&H), the High Court with reference to the Board Circular and precedents pointed out that Sec. 147 is not an extension of the right under Sec. 143(2).

As otherwise, there could have been no purpose in laying down a time limit of one year for issue of notice under Sec. 143(2). Where sufficient information is available in the original return and its enclosures with the assessee taking the view that a certain receipt is not taxable or a certain expenditure is deductible, it is not always open to the assessing officer to invoke Sec. 147 merely on the basis of information already available in the records. Wherever there is a prima facie case for verification on the basis of the materials available in the return, the assessing officer is certainly expected under the law to scan through the return and decide whether the case deserves scrutiny or not.

If he chooses not to subject the return to scrutiny, there must be some reason to justify reopening of the assessment with reference to further information suggesting that the facts stated in the return are not correct.

It is true that, under the present system of choice of cases for scrutiny under random basis, the chances of dealing with tax evasion or avoidance, which can be otherwise inferred by scanning the return, are lost.

If random scrutiny involves a practice of not looking into the return, even where the information available in the return and its enclosures by way of accounts, audit reports and qualifications in audit report cry for verification and if such returns are not immediately spotted and action taken, it may not be spotted even within four year time limit, since spotting them after the initial period of one year is more by chance, so that there is loss of revenue and detriment to public interest. If the present system absolves the assessing officers even from looking at the return for judging, whether a check is necessary, it admits open leakage of revenue.

It is time that the Income-tax Department reconsiders the system instead of persisting with it. With every passing year, the time bar of four/six years means possible action under Sec. 148 would also lapse.

As for the other issue raised by the reader, it is settled law that where the assessing officer validly issues notice under Sec. 148, his jurisdiction is not limited to the ground for which it is reopened. The entire assessment is before him as decided by the Supreme Court in CIT v Sun Engineering Works P. Ltd. (1992) 198 ITR 297 (SC). But at the same time, if there had been an original assessment in which the matter has been considered in detail and a conclusion had been arrived at or where an issue had become subject matter already under appeal, there cannot be reconsideration of the same.

S. Rajaratnam

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