It is generally seen in the reassessment proceedings under Income Tax law1 that the assessing officers tend to make inquiries and ask questions at the start of the reassessment proceedings which are totally unconnected to income that is believed to have escaped assessment in the reasons recorded for reassessment proceedings. In some of the cases it has been observed that where questionnaire being issued in the reassessment proceedings contains no question relating to the income believed to have escaped assessment in the reasons recorded and different questions totally unconnected to the reasons recorded are asked.
The fact is that existing provisions of law cannot be used and utilised as a mere cloak or pretence for making a roving or fishing inquiry or investigation in the course of reopened assessment. To say differently, the reassessment proceedings cannot be initiated for collateral purposes and with ulterior motive or for making fishing or roving investigations.
When an assessment stands finalised, the issues decided in the assessment proceedings attains finality and if not appealed against, and where at a later stage the same case is reopened on account of some new materials before the appropriate officer (AO) which have led the AO to have reason to believe that some part of income has escaped assessment, in such cases where AO starts the proceedings of reassessment and inquires about issues totally different from the reasons recorded for reassessment proceedings or makes general inquiries about the issues already decided, such action of AO would be considered as questioning the issues which have already attained finality in the original assessment proceedings and such an exercise will be termed as an abuse of the process of law.
Similarly if no assessment was framed at the original stage and only intimation was issued then after the prescribed time limit for issuing such notices the return filed by the assessee can be deemed to have been accepted by the department as final. Later on if reassessment proceedings or amendment are initiated in such cases then at the start of such proceedings general inquiries unconnected with the reasons recorded for initiation of reassessment proceedings would be opening of roving inquiry just in order to fetch some cause to reassess the income, obviously such an action exceeds the powers conferred on the assessing officer under the law.
However, the assessing officer is not debarred to bring to tax any other item of income which may have escaped assessment and which comes to his notice during the course of assessment proceedings if any. An assessing officer cannot be allowed to make fishing inquiries to probe if any other income had escaped assessment or not. Such inquiries can only be permitted if in the first instance some material comes to his notice to suggest that some other item of income may have escaped assessment or had been under assessed. In that event, he would be perfectly justified in requiring the assessee to furnish the requisite information on such other issues.
An assessing officer cannot embark upon fresh enquiries on the issues which are unconnected with the issues which were the basis of earlier2 proceedings. The finality of the return filed cannot be disturbed even in respect of issues on which there is no material on record suggesting any escaped income.3 Where reassessment proceedings are initiated, the proceedings are open only qua items of underassessment and that too on the basis of evidence.4 The finality of assessment proceedings on other issues remains undisturbed. And it makes no difference whether the assessment proceedings have become final on account of filing of return under the Income Tax Law.
In view of the courts' dictums, it is evident that an AO is not empowered to make fishing or roving inquiries on concluded matters unconnected with issue on the basis of which earlier proceedings had been finalised it.5 Thus, an assessing officer can bring to tax any other income that have escaped assessment in the reassessment proceedings except that where no reasons were recorded, or no new material evidence came into picture during the proceedings suggesting earlier completed for assessment of income, since in these cases the Assessing officer cannot embark upon fresh enquiries on the issue which are unconnected with the issue which were the basis of assessment proceedings under the law and for which there is nothing on record to suggest that there has been escapement of income.
(The writer is an advocate and is currently working as an associate with Azim-ud-Din Law Associates Karachi)
1. See the provisions of Section 122 of the Income Tax Ordinance, 2001.
2. In Vipin Khanna v. CIT (2002) 255 ITR 220 (2002)
3. Id. The court held that there is no gainsaying the fact that in proceedings u/s 147 of the Act, it is only the escaped income which has to be assessed or reassessed.
4. See Sun Engineering works Pvt Ltd v. CIT, 198 ITR 297.
5. See also Amrinder Singh Dhiman v. AO-269 ITR 378 (P&H) (2004).
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