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TMI Blog2013 (2) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... where notice for reopening has been issued beyond a period of four years, the assessment would continue even though on all the grounds on which the additions are being made, there was no failure on the part of the assessee to disclose true and full material facts. In such a situation an important requirement of failure on part of the assessee to disclose truly and fully all material facts would be totally circumvented. As already noted, except for the Punjab and Haryana High Court in case of Majinder Singh Kang v. Commissioner of Income-Tax and anr (2012 (6) TMI 616 - PUNJAB AND HARYANA HIGH COURT) all courts have uniformly taken a view that Explanation 3 to Section 147 of the Act does not change the situation insofar as the present controversy is concerned. Leading decision of Bombay High Court in case of CIT. v. Jet Airways (I) Ltd. [ 2010 (4) TMI 431 - HIGH COURT OF BOMBAY] has been followed by different High Courts wherin the High Court, in its elaborate decision considering the statutory provisions, different judicial pronouncements and the explanatory memorandum for introduction of Explanation 3 to Section 147 ruled in favour of the assessee. Punjab and Haryana High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of IPCA Laboratory Ltd., 266 ITR 530. The CBDT, New Delhi also vide its letter No. D.O. No. 275/50/2004-IT (B) dated 6-7-2004 issued directions to reopen cases, wherein deduction u/s.80HHC has been claimed even if there is a loss from the export business. 3. In view of the above, I have reason to believe that income chargeable to tax has escaped the assessment to the extent of Rs. 1,82,746/-. Accordingly, issue notice u/s.148 of the I.T. Act, 1961." 3. The Assessing Officer framed fresh assessment on 17.03.2005 assessing total income at Rs. 1,00,60,240/-. In the process he made following additions: 1 On a/c of unexplained Cash Credit u/s 68 of the IT Act Rs. 26,57,500/- 2 On account of 25% of unverifiable purchases Rs. 47,25,387/- 3 On account of 20% out of expenses of Rs. 24,94,608/- 4. Significantly, in such assessment, the Assessing Officer did not disturb the deduction of Rs. 1,82,746/-, previously claimed by the assessee under Section 80HHC of the Act, and granted in the original assessment order. 5. The assessee carried such order in appeal before the Commissioner (Appeals). The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on also was made in the impugned order about that income. Thus we find that the income in respect of which reassessment notice was issued by the Learned Assessing officer was not found by him as income escaped from assessment. Therefore, in view of the above settled position of law the order under appeal is without jurisdiction and bad in law. We therefore, cancel the re-assessment order under appeal and allow this ground of appeal of the assessee." 7. In view of the above admitted facts, the following substantial question of law arises which we frame for the purpose of deciding these appeals: "Whether the Income-tax Appellate Tribunal was right in law in coming to the conclusion that when on the ground on which the reopening of assessment is based, no additions are made by the Assessing Officer in the order of assessment, he cannot make additions on some other grounds which did not form part of the reasons recorded by him." 8. This being a question of considerable importance and one which is likely to arise in number of cases, we had requested learned counsel, Mr. Bandish Soparkar to assist us in addition to learned counsel, already appearing for the parties. He had been kin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other hand, learned counsel, Mr. Soparkar drew our attention to the statutory provisions contained in Section 147 of the Act, as amended w.e.f. 01.04.1989, and the explanatory memorandum clarifying the background in which Explanation 3 to Section 147 of the Act was enacted. He submitted that Section 147 of the Act, prior to introduction of Explanation 3, permitted the Assessing Officer to assess or reassess any income chargeable to tax which had escaped assessment and also any other income which had escaped assessment and which came to the notice of the Assessing Officer subsequently in the course of the proceedings for reassessment. He submitted that the words "and also any other income" must be understood as to be referring to such income which has escaped assessment but the ground which has not been mentioned in the reasons recorded, in addition to income which has escaped assessment and for which mention has been made in the reasons recorded. He submitted that Explanation 3 to Section 147 of the Act did not change this basic proposition, nor it was meant to do so as would be clear from the explanatory memorandum explaining the reasons for introduction of the said explanation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome chargeable to tax which comes to his notice subsequently during the proceedings as having escaped assessment. The words 'and also' are used in a cumulative and conjunctive sense. To read these words as being in the alternative would be to rewrite the language used by Parliament. Our view has been supported by the background which led to the insertion to Explanation 3 to section 147. Parliament must be regarded as being aware of the interpretation that was placed on the words "and also" by the Rajasthan High Court in Shri Ram Singh [2008] 306 ITR 343. Parliament has not taken away the basis of that decision. While it is open to Parliament, having regard to the plenitude of its legislative powers to do so, the provisions of section 147 as they stood after the amendment of April 1, 1989, continue to hold the field." 16. In case of Ranbaxy Laboratories Ltd. v. Commissioner of Income Tax reported in 336 ITR 136 wherein Delhi High Court had taken a similar view. It was observed as under: "18. We are in complete agreement with the reasoning of the Division Bench of the Bombay High Court in the case of CIT v. Jet Airways (I) Limited (2011) 331 ITR 236 (Bom). We may also note that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings for the escaped income which had formed reason to believe and the assessee has been properly intimated to show his case, proceedings of the other incomes may also be examined along with the said income. 36. We are in respectful agreement with the view taken by the Bombay High Court in CIT v. Jet Airways (I) Ltd. (2011), 331 ITR 236 (Bom) ITR 136 (Delhi)" 18. All the decisions noted by us so far were rendered by different High Courts after introduction of Explanation 3 to Section 147 of the Act. Following decisions were brought to our notice where different High Courts prior to introduction of Explanation3 to Section 147 of the Act had considered such a question: 1. In case of Commissioner of Income-Tax v. Shri Ram Singh reported in 306 ITR 343 wherein Division Bench of Rajasthan High Court held and observed as under: "The result of the aforesaid discussion is, that the question framed, in the order dated May 23, 2006, is required to be, and is, answered in the manner, that the Tribunal was justified in holding, that the proceedings for reassessment under section 148/147 were initiated by the Assessing Officer, on non-existing facts, because ultimately the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 139 or in response to a notice under Section 142(1) or 148 of the Act or to disclose fully and truly all material facts necessary for the assessment must also be satisfied. If the requirements of giving jurisdiction to the Assessing Officer to reopen assessment are satisfied, he may assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the said section. 23. Section 147 of the Act, even without the aid of Explanation 3 thus enabled the Assessing Officer while framing an assessment under Section 147 of the Act, to assess or reassess such income for which he had recorded his reasons to believe had escaped assessment and also any other income which escaped assessment which came to his notice subsequently in the course of the assessment proceedings. 24. Sans explanation (3), Section 147 of the Act, however, by no stretch of imagination, can be construed as to provide that if the reason on which the assessment is reopened fails, the Assessing Officer still can proceed to assess some other income which according to him had escaped assessment and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year, he may assess or reassess such income after recording reasons for reopening the assessment. Further, he may also assess or reassess such other income which has escaped assessment and which comes to his notice subsequently in the course of proceedings under this section. Some courts have held that the Assessing Officer has to restrict the reassessment proceedings only to issues in respect of which the reasons have been recorded for reopening the assessment. He is not empowered to touch upon any other issue for which no reasons have been recorded. The above interpretation is contrary to the legislative intent. With a view to further clarifying the legislative intent, it is proposed to insert an Explanation in section 147 to provide that the Assessing Officer may assess or reassess income in respect of any issue which comes to his notice subsequently in the course of proceedings under this section, notwithstanding that the reason for such issue has not been included in the reasons recorded under sub-section (2) of section 148. This amendment will take effect retrospectively from 1st April, 1989 and will, accordingly, apply in relation to assessment year 1989-1990 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful. (d) an Explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment, and (e) It cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same." 29. Above decision has been referred to and relied upon in several subsequent decisions. Above proposition being well settled, it is not necessary to refer to all such decisions. 30. We may also approach the question from a slightly different angle. It is not in dispute that once an assessment is reopened by a valid exercise of jurisdiction under Section 147 of the Act, it is open for the Assessing Officer to assess or reassess any income which had escaped assessment which comes to his light during the course of his ..... X X X X Extracts X X X X X X X X Extracts X X X X
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