In EID Parry 216 ITR 489 (Mad)
it was held that if an assessment happens to be a
mistaken order, or an under-assessment the means available to the Assessing
Officer is either to make a reassessment
u/s 147 or to rectify the mistake u/s 154 While, it is correct, as held in the
above cases that the AO has to decide between the two and cannot begin both
proceedings at the same time, the principle of constructive res judicata made applicable by the
Madras High Court that the AO having started
rectification proceedings u/s 154 should stick to the same only and
cannot drop that and his
proceedings u/s 147 is not
acceptable. The fact that the AO invoked s. 154 and dropped it does not affect
the legitimacy of re-assessment u/s 147. The same principle was confirmed in
the CIT vs.
M/s India Sea Foods by Kerala High Court.
In the above case , it was argued that ITO can give up a
rectification proceedings initiated under Section 154 and then proceed to make
an income escaping assessment under Section 147 of the Income Tax Act for the
same assessment year. The IT department appealed to
Tribunal and The Tribunal based on decision of the Supreme court in ASST. COMMISSIONER OF INCOME TAX
VS. RAJESH JHAVERI STOCK BROKERS P. LTD.
reported in (2007) 291 ITR 500 held that an intimation under Section 143(1)(a)
itself is an assessment which could be revised through an income escaping
assessment under Section 147 of the Act.
Kerala High Court was of the view that Assessing
Officer himself realized the mistake of initiating rectification proceedings and
when he noticed that the correct recourse open to him under the Act is to make
an income escaping assessment, he is entirely free to do it and in our view,
there was nothing wrong in the Assessing Officer giving up rectification
proceedings and the ITO was initiating
an income escaping assessment by issuing notice under Section 148 within the
statutory period and hence , there is no wrong in doing the same.
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