Page 18 - DTPA Journal Aug 18

DTPA - J | 2017-18 | Volume 3 | August 2018

in respect of any international transaction which he crept in the statutory provision. It was observed as
was so required under section 92E ; under:
(c) where an assessment has been made, but- "52. Thus, from a conspectus of the authorities
referred to above, it is manifest that the object of an
(ca) where a return of income has not been furnished by
the assessee or a return of income has been furnished Explanation to a statutory provision is—
by him and on the basis of information or document (a) to explain the meaning and intendment of the
received from the prescribed income-tax authority, Act itself,
under sub-section (2) of section 133C, it is noticed by (b) where there is any obscurity or vagueness in
the Assessing Officer that the income of the assessee the main enactment, to clarify the same so as to
exceeds the maximum amount not chargeable to tax, or make it consistent with the dominant object which
as the case may be, the assessee has understated the it seems to sub-serve.
income or has claimed excessive loss, deduction,
allowance or relief in the return; (c) to provide an additional support to the dominant
object of the Act in order to make it meaningful and
(i) income chargeable to tax has been under purposeful.
assessed; or
(d) an Explanation cannot in any way interfere with
(ii) such income has been assessed at too or change the enactment or any part thereof but
low a rate; or
where some gap is left which is relevant for the
(iii) such income has been made the subject purpose of the Explanation, in order to suppress
of excessive relief under this Act; or the mischief and advance the object of the Act it
can help or assist the court in interpreting the true
(iv) excessive loss or depreciation allowance
or any other allowance under this Act has purport and intendment of the enactment, and
been computed. (e) It cannot, however, take away a statutory right
with which any person under a statute has been
(d) where a person is found to have any asset
(including financial interest in any entity) located clothed or set at naught the working of an Act by
outside India. becoming an hindrance in the interpretation of the
same.”
8. Scope of explanation 3 to section 147
9. Certain elementary principles
Explanation 3.—For the purpose of assessment or
reassessment under this section, the Assessing Officer a. Burden to prove that income has escaped
may assess or reassess the income in respect of any assessment lies on shoulders of revenue: CIT vs.
issue, which has escaped assessment, and such issue Pardeep Gupta [303 ITR 95 (Delhi)];
comes to his notice subsequently in the course of the b. Validity of reopening to be strictly seen in light of
proceedings under this section, notwithstanding that reasons recorded as communicated to assessee:
the reasons for such issue have not been included in the Bombay High Court Hindustan Unilever Ltd. vs.
reasons recorded under sub-section (2) of section 148. The State of Maharastra [W.P.(L) No. 122 of 2018]
case and Delhi High Court in Sarthak Securities Co.
CIT vs. Mohmed Juned Dadani [(2013) 355 ITR 172
(Guj)] (P) Ltd. vs. ITO [329 ITR 110 (Delhi)] and Signature
Hotels (P) Ltd. vs. ITO [338 ITR 51 (Delhi]);
Effect of Explanation 3 to Section 147 — AO not making
additions with respect to ground on basis of which c. Principle of natural justice to be strictly fulfilled like
notice issued — cannot in a fresh assessment make confrontation and cross examination of back material
additions on other issues which did not form part of (leading judgment in Andaman Timber Industries
reasons recorded vs. CCE [281 CTR 241 (SC)]: Held order passed in
violation of natural justice a nullity; also relevant are
“28. Explanation 3 to section 147 of the Act thus does Sahara India (Film) vs. CIT [(2008) 300 ITR 403
not in any manner, even purport to expand the powers (SC)], Kishan Chand Chellaram vs. CIT [(1980) 125
of the Assessing Officer under section 147 of the Act. In ITR 713 (SC)] and H.R. Mehta vs. ACIT [387 ITR 561
any case, an Explanation cannot expand the scope and (Bom.)];
sweep of the main body of the statutory provision. In the
case of S. Sundaram Pillai vs. V. R. Pattabiraman d. Sublato fundamento cadit opus (when foundation
reported in AIR 1985 SC 582 the Supreme Court fail super structure fall.
observed that, an Explanation added to a statutory 10. Key Steps/Check list
provision is not a substantive provision but as the plain a. Whether notice issued to existing person (refer
meaning of the word itself shows it is merely meant to Spice Infotainment Ltd. vs. CIT [(2012) 247 CTR
explain or clarify certain ambiguities which may have

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