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TMI Blog2024 (2) TMI 1170X X X X Extracts X X X X X X X X Extracts X X X X ..... - earned from the commodity transaction was not shown in the return of income. Therefore, notice u/s. 148 was issued on 19-05-2016 after recording the following reasons which are extracted below : "1. The assessee is a salaried person and had filed return of income for A.Y. 2011-12 on 01/03/2012 declaring total income of Rs. 1,53,010/-. However, as per the information received from DIT (I&CI), Mumbai it is seen that the assessee has earned profit from trading in NMCE through Star Agri Commodities. In this connection on further verification it is noticed that there is also loss to the assessee from trading in NMCE through J.K. Enterprises. 2. The profit earned by assessee in respect of trading through Star Commodities is Rs. 72,47,912 (74,65,083 - 2,71,171) whereas loss in respect of trading through J.K. Enterprises is Rs. 72,32,027/-. Thus, resultantly there is profit of Rs. 15,884/- (72,47,912 - 72,32,027) which is not disclosed by the assessee in the return of income filed for A.Y. 2011-2. Hence, income of Rs. 15,884/- has escaped the assessment for A.Y. 2011-12 within the provisions of section 147 of the Income Tax Act, 1961. 3. I, therefore, consider it to be a fit case f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake addition of Rs. 15,884/- being the amount of profit earned by the appellant from the commodity transaction. From the reading of the assessment order, it is evident that the AO had chosen not to make addition in respect of that item, however, proceeded to make addition of Rs. 72,47,912/- by holding that the commodity transactions entered into by the appellant are dubious and fictitious, undertaken to bring the unaccounted income into the books of account. Without entering into the merits of the addition, we proceed to first adjudicate the jurisdictional issue, i.e. : "Whether the AO had jurisdiction to make addition in respect of the item which does not form basis for forming opinion that income escaped assessment of tax especially, in view of the fact that no addition was made in respect of item for which the reasons were issued for by issuance notice u/s. 148 of the Act. This issue is no longer res integra by virtue of the judgment of the Hon'ble Jurisdictional High Court in the Hon'ble Bombay High Court in the case of CIT vs. Jet Airways (I) Ltd., 331 ITR 236 (Bom.), the Hon'ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. vs. CIT, 336 ITR 136 (Delhi) and the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is only when, in proceedings under section 147 the Assessing Officer, assesses or reassesses any income chargeable to tax, which has escaped assessment for any assessment year, with respect to which he had "reason to believe" to be so, then, only in addition, he can also put to tax, the other income, chargeable to tax, which has escaped assessment, and which has come to his notice subsequently, in the course of proceedings under section 147. To clarify it further, or to put it in other words, in our opinion, if in the course of proceedings under section 147, the Assessing Officer were to come to the conclusion, that any income chargeable to tax, which, according to his "reason to believe", had escaped assessment for any assessment year, did not escape assessment, then, the mere fact that the Assessing Officer entertained a reason to believe, albeit even a genuine reason to believe, would not continue to vest him with the jurisdiction, to subject to tax, any other income, chargeable to tax, which the Assessing Officer may find to have escaped assessment, and which may come to his notice subsequently, in the course of proceedings under section 147." 15. Parliament, when it enacte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when the assessment was sought to be reopened on the ground that income had escaped assessment on a certain issue, the Assessing Officer could not make an assessment or reassessment on another issue which came to his notice during the proceedings. This interpretation will no longer hold the field after the insertion of Explanation 3 by the Finance Act (No. 2) of 2009. However, Explanation 3 does not and cannot override the necessity of fulfilling the conditions set out in the substantive part of section 147. An Explanation to a statutory provision is intended to explain its contents and cannot be construed to override it or render the substance and core nugatory. Section 147 has this effect that the Assessing Officer has to assess or reassess the income ("such income") which escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which, comes to his notice during the course of the proceedings. However, if after issuing a notice under section 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Star Commodities, the AO had no jurisdiction to make addition of Rs. 72,47,912/- u/s. 69 of the Act. The contention of the ld. Sr. DR that the addition of Rs. 15,884/- is embedded in the addition of Rs. 72,47,912/- made by the AO cannot be accepted. From the reading of reasons recorded in the notice u/s. 148, it is evident that the AO sought to reopen the assessment in order to make addition of the profit earned from the commodity transaction amounting to Rs. 15,884/-. There is not even a whisper as to the genuineness of the transaction. The very fact that the AO had sought make addition of Rs. 15,884/- on the commodity transaction shows that the AO had no doubts about the genuineness of transaction. The addition of profit of Rs. 15,884/- is separate and independent of addition of Rs. 72,47,912/- made by the AO u/s. 69 of the Act. Thus, ratio of decision in the case of Jet Airways(I) Ltd. (supra) is squarely applicable to the facts of present case. Therefore, the AO had no jurisdiction to make addition of Rs. 72,47,912/-. We, therefore, direct the AO to delete the addition of Rs. 72,47,912/- and the appeal filed by the assessee stands allowed. 9. In the result, the appeal of the ..... 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