TaxTMI 
TaxTMI 
2026 (9) TMI 1259
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....llected during the search proceedings. The petitioner has also challenged the Explanation to Section 147 of the Income Tax Act, 1961 as amended by Finance Act, 2021 as ultra vires and has prayed for the same to be struck down. In the alternative, the petitioner has prayed that the said Explanation be read down to mean that the ongoing reassessment proceedings cannot be enlarged on the basis of any information which was not mentioned in the initial notice issued under Section 148 of the Income Tax Act, 1961. Consequently, the petitioner has sought quashing of the reassessment order dated 31.03.2023. 2) The background facts leading to the present litigation are that M/s Dara Construction Company is a proprietary concern owned by the petitioner-Assessee. Reassessment proceedings for the Assessment Year 2018-2019 were initiated on the basis of information furnished by the National E-Statement Centre, New Delhi (NEAC), regarding the escapement of income for the said assessment year. The information so furnished disclosed that, while assessing M/s GVPREL Dara Joint Ventures, an amount of Rs. 16,64,37,659/- had been paid to the petitioner-Assessee, a proprietary concern owned by him. A....
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....which constituted the very foundation for initiating the reassessment proceedings on the basis of the alleged escapement of income. Instead, the addition has been made on the basis of information/material which subsequently came to the notice of the Assessing Officer during the course of the reassessment proceedings. In support of such contention, learned counsel has relied upon the following decisions rendered in the case of: (i) Commissioner of Income Tax (Exemption) Kolkata Vs. B.P. Poddar Foundation for Edcuation, reported in 2022(9) TMI 660-Calcutta High Court, (ii) Principal Commissioner of Income Tax-1 Vs. M/s Lark Chemicals Pvt. Ltd., reported in 2018(2) TMI 1780-Bombay High Court, (iii) Principal Commissioner of Income Tax (Central)-3, New Delhi Vs. Jakhotia Plastics Pvt. Ltd., reported in 2018(1) TMI 1525-Delhi High Court, (iv) Ranbaxy Laboratories Ltd. Vs. Commissioner of Income Tax, reported in 2011(6) TMI 4-Delhi High Court, (v) Commissioner of Income Tax Vs. Adhunik Niryat Ispat Ltd., reported in 2012(11) TMI 895-Delhi High Court, (vi) Commissioner of Income Tax-II Vs. Mohmed Juned Dadani, reported in 201392) TMI 2....
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....s "any other material information whether available with the Assessing Officer or coming to his notice during the course of the proceedings". It is his contention that had the legislature intended to bring any material obtained from an outside source within the purview of the Explanation to Section 147 of the Act of 1961, it would have used language similar to that used in Section 158BB(2) of the Act of 1961, inserted in 2024. 9) The learned counsel appearing for the respondents submitted that the decisions relied upon by the petitioner in support of the contention that reassessment proceedings initiated on the basis of escapement of income detected during the course of the proceedings cannot stand independently and must be accompanied by an addition in respect of the income forming the basis of the original reassessment proceedings are no longer relevant in view of the amendment to Section 147 of the Act of 1961. It is further contended that even if the aforesaid issue is required to be adjudicated, there are conflicting judgments of different High Courts with regard to the sustainability of subsequent reassessment proceedings initiated during the pendency of the original reass....
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.... answer the above contentions, it is apt to refer to the unamended Section 147 and the amended Section 147, which read as under: Original (unamended) Provision "147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the asses....
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....me which had escaped assessment whether based on the original information or on information which subsequently came to the notice of the Assessing Officer in the course of the proceedings. Explanation 3 was incorporated to clarify that where information relating to income which had escaped assessment subsequently came to the notice of the Assessing Officer in the course of the proceedings, the requirements of Section 148A of the Act of 1961 were not required to be complied with. However, in the amended Section 147, the words "and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section" have been deleted. However, the Explanation 3 of the unamended provision was more or less incorporated except the minor changes in its wording. 15) The judgments relied upon by the petitioner in support of the contention that in order to sustain reassessment proceedings based on any subsequent information coming to the notice of the Assessing Officer during the course of the proceedings, there must be an addition in respect of the escaped income which formed the basis for initiating the orig....
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....n Act 3 of 1955), in contravention of the second proviso to clause (1) of Article 31-A shall, to the extent of the contravention, be void." This Explanation, contended the appellants, explained the scope and effect of the inclusion of an enactment in the Ninth Schedule vis-a-vis contravention of the second proviso to clause (1) of Article 31-A and indicated the parliamentary intent that such inclusion is not intended to save the enactment from the invalidating consequence of the contravention. It was urged that, by taking the illustration of the Rajasthan Tenancy Act, 1955, the Explanation sought to explain and clarify that Article 31-B is not intended to be construed as validating contravention of the second proviso to clause (1) of Article 31-A. This contention, which seeks to treat the Explanation as illustrative in character, is clearly fallacious. It is true that the orthodox function of an explanation is to explain the meaning and effect of the main provision to which it is an explanation and to clear up any doubt or ambiguity in it. But ultimately it is the intention of the legislature which is paramount and mere use of a label cannot control or deflect such intenti....
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....xcepting certain provisions from the main enactment: (2) it may entirely change the very concept of the intendment of the enactment by insisting on certain mandatory conditions to be fulfilled in order to make the enactment workable: (3) it may be so embedded in the Act itself as to become an integral part of the enactment and thus acquire the tenor and colour of the substantive enactment itself; and (4) it may be used merely to act as an optional addenda to the enactment with the sole object of explaining the real intendment of the statutory provision." xxx xxx xxx "53. Thus, from a conspectus of the authorities referred to above, it is manifest that the object of an Explanation to a statutory provision is- "(a) to explain the meaning and intendment of the Act itself, (b) where there is any obscurity or vagueness in the main enactment, to clarify the same so as to make it consistent with the dominant object which it seems to subserve, (c) to provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful, (d) an Explanation cannot in any way interfere with or ch....
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....e scope of the main section then effect must be given to the legislative intent. It was held that in all such cases the Court has to find out the true intention of the legislature. Therefore, there is no single yardstick to decide whether an Explanation is enacted to clarify the ambiguity or whether it is enacted to widen the scope of the main section. On the facts it was held that before the 1948 Amendment to the Bihar and Orissa Cooperative Societies Act, 1935, there was an Explanation on the statute-book and the subsequent Explanation was only to clarify the earlier Explanation and, therefore, the Court held that the purpose of the subsequent Explanation was not to enlarge the scope of Section 48(1)(e) in the Bihar and Orissa Cooperative Societies Act, 1935. In the present case prior to amending Act 27 of 1996, there was no Explanation covering banks, LICs, etc. As stated above, Explanation IV was added for the first time by the said amending Act 27 of 1996. The definition of the word "dealer" thus stands expanded by the said amending Act 27 of 1996. In our view, therefore, Explanation IV was not to clear any doubt or ambiguity. It has been enacted in order to expand the definit....
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....re, be said that such Explanation was incorporated inadvertently or without due application of mind. A comparison of Explanation 3 to the unamended provision with the Explanation to the amended provision of Section 147, though they substantially serve the same object, reveals certain changes in the language. The Explanation to the unamended provision contained the words relating to the enlargement of the scope of reassessment "notwithstanding that the reasons for such issue had not been included in the reasons recorded under sub-section (2) of Section 148". In the amended provision, these words have been supplemented by the further stipulation that such reassessment may be undertaken "irrespective of the fact that the provisions of Section 148A have not been complied with". These amendments, though apparently minor, make the legislative intention clear. The legislature intended to empower the Assessing Officer to reassess income in respect of any issue relating to escaped income which subsequently comes to his notice in the course of the reassessment proceedings. At the same time, the legislature has consciously dispensed with the requirement of following the procedure prescribed u....