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Judgment
A.K. Sikri, J.—The assessee herein had filed the return of income for the assessment year 2001-02 declaring a total income at Rs. 40,41,670. In this return, the assessee had claimed dividend income of Rs. 13,08,602 as exempt. The return was processed u/s 143(1) of the income tax Act, 1961 (hereinafter referred to as "the Act") and accepted as filed, vide orders dated February 14, 2003. The Assessing Officer (AO), after a few years, i.e., vide notice dated March 27, 2008, reopened the assessment u/s 147/148 of the Act inasmuch as he was of the view that on the aforesaid dividend income for which exemption was claimed by the assessee, proportionate expenses should have been disallowed u/s 14A of the Act. In the reassessment proceedings, the Assessing Officer, thus, disallowed the expenses to the extent of Rs. 27.36 lakhs.
The Commissioner of income tax (Appeals) has quashed the reassessment proceedings as invalid, inter alia, holding that the proviso to section 14A specifically bars any such reassessment u/s 147 prior to the assessment year 2002-03.
The aforesaid view of the Commissioner of income tax (Appeals) is upheld by the income tax Appellate Tribunal (in short "the Tribunal").
The proviso to section 14A reads as under :
Provided that nothing contained in this section shall empower the Assessing Officer either to reassess u/s 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee u/s 154 for any assessment year beginning on or before the April 1, 2001.
A bare perusal of the aforesaid provision clearly brings out the bar created by the said provision for reopening the assessment u/s 147 of the Act for any assessment year beginning on or before April 1, 2001.
While learned counsel for the Revenue could not dispute the aforesaid legal position contained in section 14A of the Act, she argues that since the original assessment in the instant case was done u/s 143(1) of the Act, it would not be treated as assessment having regard to the law laid down in the case of Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd., . Therefore, the second assessment made could not be treated as reassessment and when the matter is viewed from this angle, the proviso to section 14A would not be applicable.
We are not in a position to agree with the aforesaid submission. In the first instance, we may point out that the observations of the Supreme Court in the case of Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd., discussing the nature of assessment made u/s 143(1)(a) were in altogether another context. The court was discussing the scope of the expression "reason to believe" u/s 147 and the validity of the notice u/s 147 of the Act was being examined, viz., as to whether it would amount to change of opinion. In that scenario, the Supreme Court observed that since no mental exercise was done by the Assessing Officer in the original assessment proceedings, as the assessment was u/s 143(1)(a) of the Act, the question of change of opinion would not arise. Our observations would be the same qua another judgment of this court referred to by the learned counsel for the Revenue in the case of MTNL Vs. The Chairman, Central Board of Direct Taxes and Another, as in that case also the court was considering as to whether the ingredients of section 147 of the Act were fulfilled, where the validity of reassessment proceedings was in question.
The second and more important reason is that in the present case, the proviso has been added to section 14A by the Legislature categorically providing that the Assessing Officer is not empowered to do reassessment u/s 147 for assessment period beginning on or before April 1, 2001. In these circumstances, the court has to only examine as to whether the conditions stipulated in the proviso are fulfilled or not. When the matter is examined from this angle, it is clear that the conditions contained in proviso to section 14A of the Act are satisfied, inasmuch as :
(a) The reassessment proceedings were initiated pursuant to the notice issued u/s 147;
(b) The notice was based entirely on section 14A of the Act. The Assessing Officer wanted expenditure purportedly incurred in relation to income earned from the dividend to be disallowed; and
(c) The notice also related to the assessment year beginning on or before April 1, 2001.
In view of the above mandate of the Legislature, it was clearly not permissible for the Assessing Officer to issue such a notice. We, thus, do not find any infirmity of the order of the Tribunal. This appeal is accordingly dismissed.