INCOME TAX ACT, 1961

Section 147, Expln (3)

Reassessment - Applicability of Expln. (3) to section 147 - Income coming to notice of AO during section 147 proceedings - No escapement proved as regards items of income being subject-matter of reasons recorded under section 148(2)

AO reopened assessment as regards certain items of income but made addition as regards other items of income being not subject-matter of reasons recorded for reopening. Assessee challenged this on the ground that once items for which reasons had been recorded were not added or held to be not assessable then no other item of income could be added in reassessment proceedings, AO took plea of Explanation (3) to section 147. Held: Explanation (3) to section 147, however, pre-supposes that issue with reference to which reason was recorded, was found to be legally & judicially tenable and with reference thereto. AO was able to prove that income had indeed escaped assessment. It is only then AO would be able to be expand the scope of reassessment proceedings by assessing any other escaped income which comes to his notice in the course of reassessment. In the instant case, AO was not able to justify reopening of concluded assessment with reference to reasons recorded under section 148(2) and on examination of assessee's submissions AO agreed that on the basis of reasons recorded it could not be held that income had escaped assessment within the meaning of section 147, therefore, in such an event very reopening of concluded assessment stood vitiated and, therefore, AO could not expand the scope of reassessment by including some more issues or reasons which did not find mention in the reasons recorded under section 148(2).

Relied:CIT v. Jet Airways India Ltd. (2011) 331 ITR 236 (Bom) : 2011 TaxPub(DT) 218 (Bom-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2006-07

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