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21. A Division Bench of the Madras High Court in CIT v. Standard Motor Products of India Ltd. also considered the scope of "reassessment" under Section 147(a) of the Act. The Bench opined that once the assessment is reopened the ITO will not only have the jurisdiction but it would be his duty to determine the tax liability of an assessee and for that purpose he will necessarily have to take into account not only the escaped income in respect of which a notice under Section 147 had been issued but also the entire income that had escaped assessment during the year. The Bench went on to hold that the ITO had the power and jurisdiction to bring to charge items falling under Section 147(b) in a given case where reassessment proceedings have been validly started by issuance of a notice under Section 147(a) of the Act. It was held that once an assessment is reopened, the previous assessment is set aside and the whole assessment proceedings start afresh. The initial order of 'assessment stands automatically" cancelled.

27. In CIT v. Indian Rare Earth Ltd. 181 ITR 22. Full Bench of the Bombay High Court disagreeing with its earlier judgments in 107 ITR 760 [supra] observed that once valid proceedings under Section 147 are started, the assessing officer has the jurisdiction and duty to complete the entire assessment de-novo and in reassessment proceedings an assessee is entitled to make a claim for deduction even though such claim was not made during the course of the original assessment proceedings.

28. The question which fell for decision of the Supreme Court in Commissioner of Sales Tax v. H.M. Esufali KM. Abdulali (1973) 32 STC 77, was some what different. In that case, an assessment under the Madhya Pradesh General Sales Tax Act, 1958, was made on a dealer for a particular year. Later, on a surprise inspection of the dealers' account books, it was discovered that certain items of sales had escaped assessment. The assessing authority, thereupon, reopened the assessment and while making the reassessment did not confine its attention to the addition of just those suppressed items of sales which were actually brought to light during the subsequent inspection, but invoked his powers by assessing the entire turnover to the best of his judgment by including what he considered to be suppressed turnover. The estimated figure was larger than the aggregate of the amounts noted down in the surprise inspection report. The argument of the assessee that the assessing authority, while reopening the assessment for bringing to charge the escaped turnover, had no power to make a best judgment reassessment, based on his own estimate was repelled.

Section 34 in terms states that once the Income-tax Officer decides to reopen the assessment he could do so within the period prescribed by serving on the person liable to pay tax a notice containing all or any of the requirements which may be included in a notice under Section 22(2) and may proceed to assess or reassess such income, profits or gains. It is, therefore, manifest that once assessment is reopened by issuing a notice under Sub-section (2) of Section 22 the previous under-assessment is set aside and the whole assessment proceedings start afresh. When once valid proceedings are started under Section 34(1)(b) the Income-tax Officer had not only the jurisdiction but it was his duty to levy tax on the entire income that had escaped assessment during that year.

32. The High Courts which have taken the view that in the proceedings under Section 147 of the Act, the entire assessment is reopened, the original assessment "wiped of and assessee can put forward all pleas, even if rejected during the original proceedings, support their conclusions relying on the observation from Jaganmohan Rao's case to the effect that "the previous under assessment is set aside and whole assessment proceedings start afresh", while the High Courts taking the view that the reassessment is confined only to the escaped assessment and an assessee can put forward pleas only in respect thereof, rely upon the observations: