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TMI Blog2024 (8) TMI 517X X X X Extracts X X X X X X X X Extracts X X X X ..... the explanation 3 of section 147 of the Income Tax Act, 1961 in which it is provided that the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issues have not been included in the reasons recorded under sub-section (2) of section 148? 2.3 Whether Ld. ITAT has erred on the facts and circumstances of the case in placing reliance of the case of Ranbaxy Laboratories Ltd, as the facts of the said judgment of Hon'ble Delhi High Court is different from the case of the assessee. Further, the Ld. ITAT has not gone through the merits of the case of the assessee and has relied upon the above judgment to delete the addition? 2.4 Whether Ld. ITAT has erred on the facts and circumstances of the case when the addition made were not due to roving and fishing enquiries, but rather due to concrete information received from Investigation Wing of the department, based on field enquiries? 2.5 Whether Ld. ITAT has erred on the facts and circumstances of the case, when the addition done with r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the appellant had sought to press Explanation 3 of Section 147 as it stood prior to 1 April 2021. 5. The Tribunal rested its conclusions on the judgment rendered by a Division Bench of this Court in Ranbaxy Laboratories Ltd. v. Commissioner of Income-tax 2011 SCC OnLine Del 2612 to hold that once the principal grounds on which reassessment was proposed are dropped, no further additions can be made even by taking recourse to Explanation 3. 6. We deem it apposite to extract the following pertinent observations rendered in the aforenoted decision: "8. The crux of section 147 of the Act is the escapement of income which may be assessed or reassessed as well as any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of proceedings under this section. Explanation 3 makes it clear that the Assessing Officer may assess or reassess the income in respect of issue which has escaped assessment, if such issue comes to his notice in the course of proceedings under this section even though the said issue did not find mention in the reasons recorded and the notice issued under section 148. Since there was a confusion prevailin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... independent or unconnected issue, which was not the basis of the notice for reopening the assessment. 11. Now, after the insertion of Explanation 3, as noted above, the position is 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 section 147 though the reasons for such issue were not included in the reasons recorded in the notice under section 148(2) on the basis of which he had initiated proceedings under section 147. Similar question came for consideration before the Division Bench of the Bombay High Court in CIT v. Jet Airways (1) Limited, (2011) 331 ITR 236 (Bom). The court held as under (page 242): "The effect of section 147 as it now stands after the amendment of 2009 can, therefore, be summarised as follows: (i) the Assessing Officer must have reason to believe that any income chargeable to tax has escaped assessment for any assessment year; (ii) upon the formation of that belief and before he proceeds to make an assessment, reassessment or recomputation, the Assessing Officer has to serve on the assessee a notice under sub-section (1) of section 148; (iii) the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income which had formed the basis for initiation of action under Section 148 of the Act. It is in the aforesaid backdrop that the Court in Ranbaxy Laboratories Ltd. proceeded on facts to hold that since no additions had ultimately been made in respect of items such as club fees, gifts and presents, and which constituted the basis for initiation of reassessment, it would not be open to the AO to revise or modulate findings on any other head or items that may have been dealt with in the original assessment. 25. The position in law which emerges from the aforesaid discussion is that while it is true that the AO would have to establish that reassessment is warranted on account of information in its possession which appears to indicate that income chargeable to tax had escaped assessment, once the assessment itself is reopened it would not be confined to those subjects only. This would, however, be subject only to one additional rider and that being if, in the course of reassessment, the AO ultimately comes to conclude that no additions or modifications are warranted under those heads, it would not be entitled to make any additions in respect of other items forming part of the orig ..... X X X X Extracts X X X X X X X X Extracts X X X X
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