The officer dropped the very issue he reopened for, then taxed something else instead. Is that allowed?
No. If no addition is made on the ground for which the notice was issued, the officer cannot independently go on to assess some other income under s.147. Explanation 3 does not override the substantive part of the section.
Decided by the High Court (Bombay High Court — Dr D. Y. Chandrachud J and J. P. Devadhar J (judgment by Chandrachud J)) on 2010-04-12, reported as (2011) 331 ITR 236 (Bom); (2010) 195 Taxman 117 (Bom); (2011) 239 CTR 183 (Bom); ITA (L) Nos. 1526 of 2008 and 1714 of 2009, AYs 1994-95 and 1995-96. It bears on section 147, section 148 of the Income Tax Act 1961, in Reassessment & Reopening matters.
Reassessments routinely begin with one allegation and end somewhere else entirely. This decision confines the officer to the ground he actually opened on — and if that ground fails, everything built on it falls with it.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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Two appeals by the Revenue for assessment years 1994-95 and 1995-96 were admitted and argued only on a question of law framed at the hearing: where, on a notice under s.148 read with s.147, the Assessing Officer does not assess or reassess the income he had reason to believe had escaped assessment and which formed the basis of the notice, is it open to him to assess or reassess independently any other income not forming the subject matter of the notice. The Tribunal had noted that the identical issue had been agitated for assessment year 1997-98 and that it had then held the reopening invalid; the Revenue's appeal for that year had been dismissed for non-compliance with a conditional order on office objections, but the Court heard the question of interpretation on its merits (paras 1-2). The assessee argued that unless the income for which the belief was formed is assessed, no other income may be; the Revenue argued that the other income may be assessed regardless.
The question was answered against the Revenue and the appeals dismissed (para 18). The words 'and also' in s.147 are conjunctive and cumulative, not alternative, so the Assessing Officer must assess or reassess the income for which the belief was formed and also any other income coming to his notice in the course of the proceedings; in the absence of assessing the former he cannot independently assess the latter (para 11). Explanation 3, inserted by the Finance (No. 2) Act 2009 with effect from 1 April 1989, lifts the judicially created embargo on assessing an issue not mentioned in the recorded reasons, so Vipan Khanna and Travancore Cements no longer hold the field; but an Explanation explains a provision and cannot override it or render its substance and core nugatory, so Explanation 3 does not dispense with the substantive requirement (paras 13, 16). One limit must be stated with the holding: the Court expressly preserved the alternative route — if the Assessing Officer wishes to assess the other income after accepting the assessee's objection on the recorded reasons, a fresh notice under s.148 would be necessary, whose legality would be tested if the assessee challenged it (para 16).
The Court approached the question both as a matter of first principle on the language and on the precedents. On the language, Parliament wrote 'assess or reassess such income and also any other income chargeable to tax which has escaped assessment'; it did not write 'or', and did not rest content with 'and' but used 'and' together with 'also', which the Shorter Oxford Dictionary gives as 'further, in addition, besides, too'. Reading the words as alternatives would dilute them and rewrite the section. 'Such income' means the income in respect of which the belief was formed, so the assessment must be of that income and also of any other income coming to notice later (paras 11, 17). On precedent, the Court identified two lines. The first, Vipan Khanna (P&H) and Travancore Cements (Ker), held that an assessment could not be made on an issue not in the recorded reasons; that line is displaced by Explanation 3, whose purpose the Court took from the memorandum to the Finance (No. 2) Bill 2009 (paras 7-8, 13). The second, Shri Ram Singh (Raj) and Atlas Cycle Industries (P&H), held that if the income believed to have escaped is found not to have escaped, jurisdiction to tax other income does not survive; Parliament, aware of that construction of 'and also', did not take away its basis, so it stands (paras 14-15, 17). The Court also set out Sun Engineering Works and V. Jaganmohan Rao, both decided on the pre-1989 section (para 12).
However, if after issuing a notice under section 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a fresh notice under section 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee.
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Handle my notice → Ask a CA on WhatsAppNo. If no addition is made on the ground for which the notice was issued, the officer cannot independently go on to assess some other income under s.147. Explanation 3 does not override the substantive part of the section. This was decided by the High Court (Bombay High Court — Dr D. Y. Chandrachud J and J. P. Devadhar J (judgment by Chandrachud J)) and bears on section 147, section 148 of the Income Tax Act 1961. It is reported as (2011) 331 ITR 236 (Bom); (2010) 195 Taxman 117 (Bom); (2011) 239 CTR 183 (Bom); ITA (L) Nos. 1526 of 2008 and 1714 of 2009, AYs 1994-95 and 1995-96. Reassessments routinely begin with one allegation and end somewhere else entirely. This decision confines the officer to the ground he actually opened on — and if that ground fails, everything built on it falls with it. If it applies to you, the first step is this: Compare the reasons recorded with the additions actually made in the reassessment order, item by item.
Two appeals by the Revenue for assessment years 1994-95 and 1995-96 were admitted and argued only on a question of law framed at the hearing: where, on a notice under s.148 read with s.147, the Assessing Officer does not assess or reassess the income he had reason to believe had escaped assessment and which formed the basis of the notice, is it open to him to assess or reassess independently any other income not forming the subject matter of the notice. The Tribunal had noted that the identical issue had been agitated for assessment year 1997-98 and that it had then held the reopening invalid; the Revenue's appeal for that year had been dismissed for non-compliance with a conditional order on office objections, but the Court heard the question of interpretation on its merits (paras 1-2). The assessee argued that unless the income for which the belief was formed is assessed, no other income may be; the Revenue argued that the other income may be assessed regardless. The matter was decided on 2010-04-12 by the High Court (Bombay High Court — Dr D. Y. Chandrachud J and J. P. Devadhar J (judgment by Chandrachud J)). On those facts the High Court held as follows. The question was answered against the Revenue and the appeals dismissed (para 18). The words 'and also' in s.147 are conjunctive and cumulative, not alternative, so the Assessing Officer must assess or reassess the income for which the belief was formed and also any other income coming to his notice in the course of the proceedings; in the absence of assessing the former he cannot independently assess the latter (para 11). Explanation 3, inserted by the Finance (No. 2) Act 2009 with effect from 1 April 1989, lifts the judicially created embargo on assessing an issue not mentioned in the recorded reasons, so Vipan Khanna and Travancore Cements no longer hold the field; but an Explanation explains a provision and cannot override it or render its substance and core nugatory, so Explanation 3 does not dispense with the substantive requirement (paras 13, 16). One limit must be stated with the holding: the Court expressly preserved the alternative route — if the Assessing Officer wishes to assess the other income after accepting the assessee's objection on the recorded reasons, a fresh notice under s.148 would be necessary, whose legality would be tested if the assessee challenged it (para 16).
The Court approached the question both as a matter of first principle on the language and on the precedents. On the language, Parliament wrote 'assess or reassess such income and also any other income chargeable to tax which has escaped assessment'; it did not write 'or', and did not rest content with 'and' but used 'and' together with 'also', which the Shorter Oxford Dictionary gives as 'further, in addition, besides, too'. Reading the words as alternatives would dilute them and rewrite the section. 'Such income' means the income in respect of which the belief was formed, so the assessment must be of that income and also of any other income coming to notice later (paras 11, 17). On precedent, the Court identified two lines. The first, Vipan Khanna (P&H) and Travancore Cements (Ker), held that an assessment could not be made on an issue not in the recorded reasons; that line is displaced by Explanation 3, whose purpose the Court took from the memorandum to the Finance (No. 2) Bill 2009 (paras 7-8, 13). The second, Shri Ram Singh (Raj) and Atlas Cycle Industries (P&H), held that if the income believed to have escaped is found not to have escaped, jurisdiction to tax other income does not survive; Parliament, aware of that construction of 'and also', did not take away its basis, so it stands (paras 14-15, 17). The Court also set out Sun Engineering Works and V. Jaganmohan Rao, both decided on the pre-1989 section (para 12). In the words reproduced by the source cited on this page: "However, if after issuing a notice under section 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a fresh notice under section 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee." The decision followed or applied CIT v. Shri Ram Singh [2008] 306 ITR 343 (Raj.) — followed and relied on (paras 14, 17); CIT v. Atlas Cycle Industries [1989] 180 ITR 319 (P&H) — approved (para 15); Vipan Khanna v. CIT [2002] 255 ITR 220 (P&H) and Travancore Cements Ltd. v. ACIT [2008] 305 ITR 170 (Ker.) — held no longer to hold the field after Explanation 3 (paras 13, 15).
It was decided by the High Court on 2010-04-12 and is reported as (2011) 331 ITR 236 (Bom); (2010) 195 Taxman 117 (Bom); (2011) 239 CTR 183 (Bom); ITA (L) Nos. 1526 of 2008 and 1714 of 2009, AYs 1994-95 and 1995-96. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 147, section 148, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The question was answered against the Revenue and the appeals dismissed (para 18). The words 'and also' in s.147 are conjunctive and cumulative, not alternative, so the Assessing Officer must assess or reassess the income for which the belief was formed and also any other income coming to his notice in the course of the proceedings; in the absence of assessing the former he cannot independently assess the latter (para 11). Explanation 3, inserted by the Finance (No. 2) Act 2009 with effect from 1 April 1989, lifts the judicially created embargo on assessing an issue not mentioned in the recorded reasons, so Vipan Khanna and Travancore Cements no longer hold the field; but an Explanation explains a provision and cannot override it or render its substance and core nugatory, so Explanation 3 does not dispense with the substantive requirement (paras 13, 16). One limit must be stated with the holding: the Court expressly preserved the alternative route — if the Assessing Officer wishes to assess the other income after accepting the assessee's objection on the recorded reasons, a fresh notice under s.148 would be necessary, whose legality would be tested if the assessee challenged it (para 16). It arises in Reassessment & Reopening matters, on section 147, section 148 of the Income Tax Act 1961, and was decided by Bombay High Court — Dr D. Y. Chandrachud J and J. P. Devadhar J (judgment by Chandrachud J). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. If the recorded ground was dropped, take that as a jurisdictional ground, not merely a merits point. Read the validity note before applying it to a notice issued under the post-2021 s.148A regime.
Still good law. Applied by the same Court in Pr. CIT-1 v. Lark Chemicals (P.) Ltd. [2018] 99 taxmann.com 311 (Bom), decided 28 February 2018, which held at para 4 that on this decision the Assessing Officer must necessarily assess the income that escaped assessment on the basis of the reasonable belief, and that in the absence of doing so the reassessment order is bad in law; the Revenue's petition against that decision was dismissed by the Supreme Court on 5 October 2018, Pr. CIT v. Lark Chemicals (P.) Ltd. [2018] 259 Taxman 365 (SC). It was also followed by the Delhi High Court in Ranbaxy and by the Gujarat High Court in CIT-II v. Mohmed Juned Dadani [2013] 30 taxmann.com 1 (Guj). No decision overruling or doubting it was found. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Read against the reported judgment. Bombay High Court, Dr D. Y. Chandrachud J and J. P. Devadhar J, 12 April 2010, ITA (L) Nos. 1526 of 2008 and 1714 of 2009 for assessment years 1994-95 and 1995-96. The decision answers a framed question of law and records no facts about the reassessment itself. Two points to carry with it. The Court expressly preserved a fresh notice under s.148 as the route open to the Assessing Officer who accepts the assessee's objection on the recorded reasons and still wishes to tax other income — the rule is not that the other income can never be taxed. And the reasoning rests on the words 'and also' in s.147 as it stood after 1 April 1989; commentary on the regime introduced from 1 April 2021 questions whether that foundation survives, so check the text in force. On status, the same Court applied this decision in Pr CIT-1 v Lark Chemicals (P) Ltd [2018] 99 taxmann.com 311 (Bom) and the Supreme Court dismissed the Revenue's petition against that on 5 October 2018. The judgment decides a question of interpretation and does not set out the facts of the reassessment. It construes s.147 as it stood after 1 April 1989 with Explanation 3; it says nothing about the reassessment regime in force from 1 April 2021. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The question was answered against the Revenue and the appeals dismissed (para 18). The words 'and also' in s.147 are conjunctive and cumulative, not alternative, so the Assessing Officer must assess or reassess the income for which the belief was formed and also any other income coming to his notice in the course of the proceedings; in the absence of assessing the former he cannot independently assess the latter (para 11). Explanation 3, inserted by the Finance (No. 2) Act 2009 with effect from 1 April 1989, lifts the judicially created embargo on assessing an issue not mentioned in the recorded reasons, so Vipan Khanna and Travancore Cements no longer hold the field; but an Explanation explains a provision and cannot override it or render its substance and core nugatory, so Explanation 3 does not dispense with the substantive requirement (paras 13, 16). One limit must be stated with the holding: the Court expressly preserved the alternative route — if the Assessing Officer wishes to assess the other income after accepting the assessee's objection on the recorded reasons, a fresh notice under s.148 would be necessary, whose legality would be tested if the assessee challenged it (para 16).
TaxSphere, “CIT v Jet Airways (I) Ltd”, https://taxnotice.vittsphere.com/caselaw/case/cit-v-jet-airways/ (validity last checked 2026-08-19)
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