INCOME TAX ACT, 1961

--Reassessment --reason to believe Addition on other grounds that reasons recorded under section 148-- Assessing officer reopened assessment for relevant assessment issuing notice under section 148 on the ground that deduction under section 80HHC was not allowable to assessee and reasons were also recoded accordingly. However, reassessment order was completed wherein addition under section 80HHC was not made but additions under section 68, unverifiable purchases and other expenses were made. Commissioner (Appeals) accepted order of assessing officer. Tribunal however, allowed assessee's appeal. Held: Rightly so where assessing officer had issued notice recording reasons that deduction section 80HHC was wrongly allowed to assessee however, in reassessment assessing officer did not touch deduction under section 80HHC but made additions on other grounds the same was beyond the powers of assessing officer and Explanation 3 to section 147 also does not improve assessing officer's stand.

Explanation 3 to section 147 was meant to be clarificatory in nature and to put the issue beyond any legal controversy. When the Legislature found that in face of the provisions contained in section 147 post 1-4-1989 some of the courts had taken a view that the assessing officer is restricted to the reassessment proceedings only on issues in respect of which the reasons were recorded for reopening the assessment, such explanation was introduced in the statute. Thus, the explanation was meant to be merely clarificatory in nature and was introduced with the purpose of putting at rest the legal controversy regarding the true interpretation of section 147 which had arisen on account of certain judicial pronouncements. [i>Para 27] Explanation 3 to section 147 thus does not in any manner, even purport to expand the powers of the assessing officer under section 147. In any case, an explanation cannot expand the scope and sweep of the main body of the statutory provision. [Para 28] 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 assessment proceedings which was not mentioned in the reason for issuing notice under section 148 of the Act. In a notice for reassessment which has been issued beyond a period of four years from the end of relevant assessment year, the condition that income chargeable to tax has escaped assessment for the reason of the failure on the part of the assessee to disclose truly and fully all material facts for the purpose of assessment must also be established unless of course some other ground, viz., non-filing of the return at all etc. is available to the assessing officer. If such non-disclosure of material facts is established with respect to the reason recorded for issuing notice for reopening the assessment, it would be open for the assessing officer to thereafter even assess other income which might have escaped assessment but which may not necessarily satisfy the requirement of non-disclosure of true and full material facts. If in such a situation, the stand of the revenue is accepted, a very incongruent situation would come about if ultimately the assessing officer were to drop the ground on which notice for reopening had been issued but to chase some other grounds not so mentioned for issuance of the notice. In such a situation, even if a case 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. [Para 29]