TMI Blog2019 (1) TMI 586X X X X Extracts X X X X X X X X Extracts X X X X ..... lement Ramesh Kumar, Addl. CIT. ORDER PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER Assessee in this appeal, which is directed against an order dated 27.04.2018 of ld. Commissioner of Income Tax (Appeals)-7, Chennai, is aggrieved that re-assessment was done on the items of income which was not mentioned in the notice issued u/s.148 of the Income Tax Act, 1961 (in short the Act ). Further, grievance of the assessee is that addition was made for closing stock undervaluation ignoring the method of valuation of stock, accepted in the earlier years. 2. Ld. Counsel for the assessee submitted that assessee a jeweller had filed his return for the impugned assessment year disclosing income of F8,81,160/-. As per the ld. Authorised Representative, the assessment was completed u/s.143(3) of the Act on 27.03.2014 wherein an addition of F1,50,000/- was made for improper maintenance of stock register. Further, to this, as per the ld. Authorised Representative, assessee received a notice dated 01.06.2015 u/s.148 of the Act seeking a reopening of the assessment. According to the ld. Authorised Representative, the assessee thereupon requested the ld. Assessing Officer to provide wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of F1,50,000/- and raising demand of F65,431/-. During the course of assessment proceedings, the assessee had furnished detailed called for. It can be seen from the Balance Sheet that the assessee has credited a sum of F6,62,620/- in his capital as long term capital gain. However, the assessee has not admitted the same in computing the taxable income for the above year. This was not considered at the time of passing asst. order. Thus, the above amount of F6,62,620/- escaped assessment for the above assessment year. The addition made in the impugned reassessment completed on 28.12.2016 appears at para 7 of the said order, which is reproduced hereunder:- 7. In the instant case and in consideration of above facts and findings as discussed above, I have no option but proceed to adopt FIFO method in valuing the closing stock as on 31.03.2011 as under:- Opening stock (old items) : 3,685.450 Add: Purchase (new items) : 29,612.026 Total : 33,297.476 Sales : 29,488.407 Balance (cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the Assessing Officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years. 14.3. Thus, having regard to the observations made by the Supreme Court, it is clear that the impugned assessment order cannot be sustained, as the objections have not been disposed of. 15. Therefore, had the counsel for the petitioner-assessee not advanced the second submission, which I would deal with hereafter, I may have been inclined to set aside the assessment order on that limited ground alone. Since, the second submission has been made, which is substantive in nature, I would like to deal with the same. 16. In so far as the contention of the petitioner-assessee is concerned, that the impugned order does not seek to reassess its income qua the issue, which formed the basis for reopening the assessment - the respondents/ Revenue sought to rely upon Explanation 3 introduced in Finance (No. 2) Act, 2009, albeit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under subsection (2) of section 148. . (emphasis is mine) 18. A perusal of the aforesaid extract of section 147 of the Act would show that, if, the Revenue makes an attempt to reopen the assessment, within a period of four (4) years from the date, when, the relevant assessment year ends, then, all that the Assessing Officer has to show is that, he has reason to believe that any income chargeable to tax has escaped assessment for the concerned assessment year and while doing so, he is also empowered to assess any other income, which has escaped assessment and, which comes to his notice, subsequently, albeit, during the course of the assessment proceedings. 18.1. It is only if the original assessment is made under section 143(3) or under section 147 and an attempt to reopen the assessment is made after the expiry of the four (4) years from the end of the relevant assessment year, that the first proviso to section 147 of the Act kicks in, which mandates that no reassessment proceedings can be i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of reduction in the investments made in mutual funds (from ₹ 2,52,00,000, for the year ending March 31, 2007 to ₹ 2,26,21,274, for the year ending March 31, 2008), which had not been shown/offered to tax in the form of gain or loss, on account of the sale of investments made in mutual funds. This information, perhaps, was available on record, as the assessee, in his objections dated August 30, 2012, adverted to the fact that the reduction in investment was brought about consequent to redemption being made at par. Respondent No. 2 having, perhaps realised the futility of going down this path and, having, during the course of reassessment proceedings, discovered this aspect of the matter, chose to tax the forfeited share application money, on the ground that, it was a receipt, which was taxable in the hands of the petitioner-assessee under the provisions of section 28(iv) of the Act. 20. The petitioner-assessee, however, challenges this action of the respondents-Revenue, on the ground that it was not permissible for the respondents-Revenue to tax the forfeited share application money, by taking recourse to provisions of section 147 read with section 148 of the Act, u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court, which has taken a contrary view, as it were, is the Punjab and Haryana High Court in the matter of : Majinder Singh Kang v. CIT [2012] 344 ITR 358 (P H) ; [2012] 25 taxmann.com 124 (P H). 23.2. In my opinion, with respect, the court, in rendering the judgment in Majinder Singh Kang's case, ignored the fact that the provisions of Explanation 3 had to be read in conjunction with the main provision, and that, the said Explanation cannot override the main provision. 23.3. This aspect of the matter has also been brought to fore by the Bombay High Court in : CIT v. Jet Airways (I) Ltd. [2011] 331 ITR 236 (Bom). 23.4. The relevant observations made in this behalf are extracted hereafter (page 247) : 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 ba ..... 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