Papu Ram Vs ACIT (Rajasthan High Court)
Once the Reassessment Door Is Validly Opened, AO Can Walk into Other Rooms: Rajasthan HC Gives Wide Reach to Amended Section 147
Summary: The Rajasthan High Court has held that under the amended section 147, once reassessment proceedings have been validly initiated, the AO can assess income escaping assessment on any other issue which subsequently comes to his notice, even if no addition is ultimately made on the issue that originally triggered the reopening. A fresh procedure u/s 148A is not required for such subsequently discovered escapement.
The assessee carried on business through his proprietary concern, M/s Dara Construction Company. For AY 2018-19, reassessment was initiated on information received from the National E-Assessment Centre concerning a payment of ₹16.64 crore allegedly made to the assessee by M/s GVPREL Dara Joint Ventures.
A notice u/s 148A was issued on 17 March 2022, followed by an order u/s 148A(d) dated 29 March 2022 and a notice u/s 148. During the pending reassessment, the AO received further information/material arising from search proceedings. A show-cause notice dated 25 March 2023 was issued concerning this other escaped income, and additions were eventually made on the strength of the search material.
Significantly, the AO made no addition on the transaction which formed the original reason for reopening. The final reassessment order dated 31 March 2023 rested entirely upon the subsequently received material.
The assessee challenged not only the assessment order but also the constitutional validity of the Explanation to amended section 147. Alternatively, he sought reading down of the Explanation so that the scope of an ongoing reassessment could not be enlarged on the basis of information not mentioned in the original notice.
Old “And Also” Theory Loses Its Grip
Under the pre-amendment section 147, the AO could assess the income for which proceedings were reopened “and also” any other escaped income coming to his notice during reassessment. Courts had interpreted these words to mean that the AO must make an addition on the original issue before assessing income on an altogether different issue.
This principle was recognised in decisions such as CIT v. Jet Airways (I) Ltd., Ranbaxy Laboratories Ltd. v. CIT, PCIT v. Jakhotia Plastics Pvt. Ltd., PCIT v. Lark Chemicals Pvt. Ltd. and CIT(E) v. B.P. Poddar Foundation for Education. Contrary views of the Karnataka High Court in N. Govindaraju v. ITO and PCIT v. A.M. Constructions were also placed before the Court.
The Rajasthan High Court held that these earlier decisions had little relevance under the amended law. They turned primarily upon the expression “and also” contained in the old substantive provision. Those words no longer appear in the present section 147.
Accordingly, under the amended provision, the survival of an addition on the original issue is not a condition precedent for making an addition on another issue noticed during reassessment.
An Explanation Can Enlarge the Main Provision
The assessee argued that an Explanation ordinarily clarifies the substantive provision and cannot expand it. Reliance was placed upon S. Sundaram Pillai v. V.R. Pattabiraman, Hardev Motor Transport v. State of Madhya Pradesh and Md. Firoz Ahmad Khalid v. State of Manipur.
The High Court, however, relied upon the Constitution Bench decision in Dattatraya Govind Mahajan v. State of Maharashtra and the Supreme Court ruling in State of Andhra Pradesh v. Corporation Bank. It held that although the orthodox function of an Explanation is to remove ambiguity, its label is not decisive. Where its language reveals a legislative intention to expand the substantive provision, the Court must give effect to that intention.
The Explanation to amended section 147 permits the AO to assess or reassess income concerning “any issue” which has escaped assessment and comes to his notice subsequently during the proceedings, irrespective of whether section 148A has been complied with in relation to that issue.
These words expressly dispense with a fresh section 148A exercise for the additional issue. Therefore, the Explanation consciously widens the scope of pending reassessment and cannot be struck down merely because its operation travels beyond the apparent reach of the main provision.
Fresh Information May Come from Outside the Reassessment Record
The assessee alternatively contended that “any issue” should be confined to material already forming part of the pending reassessment. Since section 158BB(2) expressly refers to material or information available with the AO or coming to his notice, it was argued that the absence of similar language in section 147 indicated a narrower intention.
The Court rejected this interpretation. The words “any issue” are wide and unqualified. They cover not merely information already present in the reassessment record but also material subsequently reaching the AO from an outside source, including material collected during a search.
Where reassessment is already pending, the Department has two permissible courses. It may enlarge the pending reassessment by using the search material, or independently initiate the proceedings prescribed for search-related escapement. Choosing one legally available route over the other does not invalidate the assessment.
The writ petition was, therefore, dismissed.
Author’s Comments
This is an important and decidedly Revenue-friendly interpretation of the post-2021 reassessment regime. The old rule that the original recorded reason must ultimately produce an addition has been treated as a consequence of the now-deleted words “and also”, rather than an enduring jurisdictional safeguard.
The ruling draws a clear distinction between valid initiation and the eventual assessment result. Once jurisdiction has been validly assumed after complying with section 148A for the original information, failure of that original issue does not collapse the entire reassessment. The AO may continue with other escaped-income issues discovered during the proceedings.
However, the decision should not be read as permitting an invalid reopening to be rescued by a later discovery. The initial assumption of jurisdiction must still satisfy the statutory requirements. The ruling only says that after the reassessment is validly born, it does not die merely because its original reason fails.
Cases Discussed
- CIT (Exemption) Vs. B.P. Poddar Foundation For Education — Calcutta High Court.
- Principal Commissioner of Income Tax-1 Vs. M/s Lark Chemicals Pvt. Ltd. — Bombay High Court.
- Principal Commissioner of Income Tax (Central)-3, New Delhi Vs. Jakhotia Plastics Pvt. Ltd. — Delhi High Court.
- Ranbaxy Laboratories Ltd. Vs. Commissioner of Income Tax — Delhi High Court.
- CIT Vs. JET Airways (I) Ltd. — Bombay High Court.
- Principal Commissioner of Income Tax Navangar Vs. A.M. Constructions — Karnataka High Court.
- N. Govindaraju Vs. Income Tax Officer — Karnataka High Court.
- Dattatraya Govind Mahajan & Ors. Vs. State of Maharashtra & Anr. — Supreme Court.
- S. Sundaram Pillai Vs. V.R. Pattabiraman — Supreme Court.
- State of Andhra Pradesh Vs. Corporation Bank — Supreme Court.
- Hardev Motor Transport Vs. State of M.P. — Supreme Court.
- Md. Firoz Ahmad Khalid Vs. The State of Manipur — Supreme Court.
FULL TEXT OF THE JUDGMENT/ORDER OF RAJASTHAN HIGH COURT
1) The present writ petition challenges the action of the respondents in resorting to reassessment proceedings on the basis of different information suggesting escapement of income from assessment, while deciding to proceed with reassessment proceedings on the basis of the material collected 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. Accordingly, proceedings were initiated by issuing a notice dated 17.03.2022 under Section 148A of the Income Tax Act, 1961 (hereinafter referred to as “the Act of 1961”). After following the prescribed procedure, an order dated 29.03.2022 was passed under Section 148A(d) of the Act of 1961, directing issuance of notice under Section 148 of the Act of 1961. Pursuant thereto, a notice dated 29.08.2022 was also issued under Section 148 of the Act of 1961.
3) The respondent Authority with a view to enlarging the scope of the reassessment proceedings, issued a show-cause notice dated 25.03.2023 in respect of further escaped income for the said assessment year, which had subsequently come to its notice during the course of the reassessment proceedings. The petitioner-Assessee submitted his response to the said show-cause notice. However, the final reassessment proceedings culminated in an addition of the income of the petitioner based on information/material received during the course of the search proceedings. Significantly, no addition was ultimately made in respect of the escaped income forming the basis of the original reassessment proceedings. The final reassessment orders were passed on 31.03.2023. Aggrieved by the said reassessment orders, the petitioner preferred the present writ petition.
4) Heard the learned counsel appearing for the petitioner as well as the learned counsel for the respondents.
5) The learned counsel appearing for the petitioner submits that the amended provision of Section 147 of the Act of 1961 is, in substance, the same as the original provision. It is submitted that while interpreting the fundamental provision contained in Section 147, the majority of the High Courts have consistently held that where the Department fails to establish escapement of the original income, which forms the foundation for initiating reassessment proceedings, no addition can be made in respect of any other income which comes to the notice of the Assessing Officer during the course of proceedings undertaken to enlarge the scope of reassessment on the basis of subsequent or different information. Since the amended provision is, in substance, the same as the original provision, the aforesaid legal principle would equally apply to the amended provision. In the present reassessment proceedings, no addition has been made in respect of the escaped income 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 292-Gujarat High Court,
(vii) CIT Vs. JET Airways (I) Ltd., reported in 2010(4) TMI 431-Bombay High Court and
(viii) Commissioner of Income Tax, West Bengal-I Vs. Vegetable Products Ltd., reported in 1973(1) TMI 1-Supreme Court.
6) The learned counsel appearing for the petitioner further contends that the Explanation to the amended Section 147 of the Act of 1961 cannot be construed so as to broaden the scope of Section 147 in a manner not intended by the legislature. The Explanation must be interpreted keeping in view its true and limited function, namely, to explain or clarify the meaning and effect of the main provision. It cannot broaden the scope of the main provision. On this count, it is contended that the Explanation is liable to be struck down. In the alternative, it is prayed that the Explanation be read down to the extent necessary to ensure that it remains consistent with, and does not run contrary to the substantive provision of Section 147, and does not have the effect of enlarging its scope beyond what was contemplated by the legislature. In support of his contention, the learned counsel has relied upon the following decisions of Apex Court in the case of:
(i) S. Sundaram Pillai Vs. V.R. Pattabiraman, reported in (1985) 1 SCC 591,
(ii) Hardev Motor Transport Vs. State of MP, reported in MANU/SC/8596/2006 and
(iii) Md. Firoz Ahmad Khalid Vs. The State of Manipur, reported in 2025 INSC 535.
7) The learned counsel for the petitioner contends that any subsequent reassessment proceedings based on information obtained in the course of the pending reassessment proceedings must be referable to the information already available with the Assessing Officer and not to fresh information which is sought to be made the foundation for further reassessment proceedings in respect of other escaped income.
8) It is further contended that the additional information in the present case is related to search proceedings. According to the learned counsel, such material cannot be relied upon to enlarge the scope of the reassessment proceedings, which were initiated on the basis of the original information relating to the alleged escapement of income. The learned counsel for the petitioner tried to support such contention by placing reliance on Section 158BB(2) of the Act of 1961, inserted in 2024, particularly the words “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 reassessment proceedings on the basis of different information. In support of his contention, the learned counsel has relied upon the following decisions rendered by the Division Bench of Karnataka High Court in the cases of:
(i) Principal Commissioner of Income Tax Navangar Vs. A.M. Constructions, [Income Tax Appeal No.100152/2015], decided on 21.02.2018 and
(ii) N. Govindaraju Vs. Income Tax Officer, reported in (2015) 377 ITR 243.
10) The learned counsel appearing for the respondents further contended that the orthodox role of an Explanation has been expanded to the extent that it may also be used as a reflection of the legislative intent. If the legislature intended to widen the scope of the substantive provision, such legislative intent must be given effect to. According to the learned counsel, the Explanation to the amended Section 147 of the Act of 1961 clearly indicates the legislative intent to permit reassessment proceedings in respect of any issue relating to income which has escaped assessment and which subsequently comes to the notice of the Assessing Officer in the course of proceedings under the said Section, without following the procedure prescribed under Section 148A of the Act of 1961.
11) The learned counsel appearing for the respondents further contended that a restrictive interpretation of the Explanation cannot be adopted. Reassessment proceedings may be initiated in respect of any issue relating to income which has escaped assessment and which subsequently comes to the notice of the Assessing Officer in the course of proceedings under Section 147 of the Act of 1961. According to the learned counsel, where the original reassessment proceedings are sought to be enlarged on the basis of subsequently received information relating to other escaped income, it is not necessary to comply with the procedure prescribed under Section 148A of the Act of 1961. It is further contended that the information forming the basis of such subsequent reassessment proceedings need not be information which was already available on record; rather, it may comprise any other information which comes to the notice of the Assessing Officer subsequently in the course of proceedings under Section 147 of the Act of 1961.
12) We have considered the submissions of both the parties and have carefully perused the material available on record.
13) To 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 assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year:
Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year:
Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.
Explanation 1.…………
Explanation 2……………
Explanation 3.-.For the purpose of assessment or reassessment under
1) this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue 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 sub-section (2) of section 148.
Explanation 4……”.
xxx xxx xxx
Amended Provision
“147. If any income chargeable to tax, in the case of an assessee, has escaped assessment for any assessment year, the Assessing Officer may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deduction for such assessment year (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year).
Explanation.—For the purposes of assessment or reassessment or recomputation under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, irrespective of the fact that the provisions of section 148A have not been complied with.”
14) From a comparative reading of the aforesaid two provisions, it is clear that the substantive provision contained in the unamended Section 147 covered both the information relating to income 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 original reassessment proceedings, are no longer relevant for the reason that the decisions of various High Courts relied upon by the petitioner were based upon the presence of the words “and also” in the substantive provision of the unamended Section 147. The said words no longer form part of the substantive provision of Section 147. Therefore, the reliance placed by the learned counsel appearing for both parties on judgments rendered in the context of the interpretation of the unamended substantive provision of Section 147 is of little relevance to the present writ petition.
16) Adverting to the scope of explanation, we feel appropriate to refer a decision of Apex Court in the case of Dattatraya Govind Mahajan & Ors. Vs. State of Maharashtra & Anr., reported in (1977)2 Supreme court Cases 548 and also S. Sundaram Pillai (cited supra). The relevant para 9 of the judgment in Dattatraya Govind Mahajan reads as under:
“9. Before we part with this contention based on Article 31-B, we must refer to one other argument advanced on behalf of the appellants with a view to repelling the applicability of Article 31-B. The appellants leaned heavily on the Explanation to Section 3 of the Constitution (Seventeenth Amendment) Act, 1964 and urged that this Explanation shows that an acquisition made in contravention of the second proviso to clause (1) of Article 31-A is void and does not have the protection of Article 31-B, even if the law under which such acquisition is made is included in the Ninth Schedule. We do not think this contention is well founded and in fact not much argument is needed to negative it. The Constitution (Seventeenth Amendment) Act, 1964 was enacted by Parliament with a view to expanding the scope of Article 31-A by enlarging the meaning of the expression “estate” and while doing so, Parliament added the second proviso to clause (1) of Article 31-A. The Ninth Schedule was also amended by including certain State enactments relating to agrarian reform in order to remove any uncertainty or doubt that may arise in regard to their validity. One of the State enactments included in the Ninth Schedule by this amendment was the Rajasthan Tenancy Act, 1955 which was added as Entry 55. Section 3 which amended the Ninth Schedule carried the following Explanation:
“Explanation.—Any acquisition made under the Rajasthan Tenancy Act, 1955 (Rajasthan 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 intention. It must be remembered that the legislature has different ways of expressing itself and in the last analysis the words used by the legislature alone are the true repository of the intent of the legislature and they must be construed having regard to the context and setting in which they occur. Therefore, even though the provision in question has been called an Explanation, we must construe it according to its plain language and not on any a priori considerations. The Explanation so construed, does no more than provide that so far as the Rajasthan Tenancy Act, 1955 is concerned, if any acquisition is made under it in contravention of the second proviso to clause (1) of Article 31-A, it shall, to the extent of the contravention, be void. Obviously, this Explanation was rendered necessary, because otherwise, acquisition under the Rajasthan Tenancy Act, 1955, even if in contravention of the second proviso to clause (1) of Article 31-A, would have been valid under Article 31-B and that result Parliament did not wish to produce. It was manifestly not the intention of Parliament that acquisition made under any enactment included in the Ninth Schedule should be void where it conflicts with the second proviso to clause (1) of Article 31-A and that Article 31-B should not protect it from invalidation. If such had been the intention of Parliament, it would have been expressed in clear and unambiguous terms by providing that an acquisition made under any enactment included in the Ninth Schedule, in contravention of the second proviso to clause (1) of Article 31-A shall, to the extent of the contravention, be void. Parliament would not have resorted to the device of picking out one legislation from the enactments specified in the Ninth Schedule and declared only in relation to that legislation that any acquisition made under it in contravention of the second proviso to clause (1) of Article 31-A shall be void. The Explanation, in our view, far from supporting the construction contended for on behalf of the appellants, militates against it.”
17) The relevant paras 43 and 53 of the judgment in S. Sundaram Pillai read as under:-
“43. We need not multiply authorities after authorities on this point because the legal position seems to be clearly and manifestly well established. To sum up, a proviso may serve four different purposes:
(1) qualifying or excepting 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 change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment, and
(e) it cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same.”
18) The judgment in Dattatraya Govind Mahajan (cited supra) is a decision rendered by the Constitution Bench. The ratio laid down therein is that the orthodox role of an Explanation is to clarify or remove any doubt or ambiguity in the substantive provision. However, the Apex Court held that ultimately, it is the intention of the legislature which is paramount. The label assigned to a provision cannot control or deflect such legislative intention. The legislature may express its intention in different ways. Ultimately, the words used by the legislature are the true repository of legislative intent, and an Explanation must be construed having regard to the context and setting in which it occurs. The aforesaid Constitution Bench decision subsequently came up for consideration before the Apex Court in State of Andhra Pradesh v. Corporation Bank, reported in (2007) 9 SCC 55. Paragraph 12 of the said judgment reads as under:—
“12. In construing a statutory provision, the first and foremost rule of construction is the literal construction. If the provision is unambiguous and if from that provision, the legislative intent is clear, we need not call into aid the other rules of construction. The other rules of construction are invoked when the legislative intent is not clear. In Bihta Co-op. Development and Cane Marketing Union Ltd. v. Bank of Bihar [AIR 1967 SC 389] this Court was called upon to consider Explanation to Section 48(1) of the Bihar and Orissa Cooperative Societies Act, 1935. This Court observed that the Court should not go only by the label. The Court observed that an explanation must be read ordinarily to clear up any ambiguity in the main section and it cannot be construed to widen the ambit of the section. However, if on a true reading of an Explanation it appears to the Court in a given case that the effect of the Explanation is to widen the 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 definition of the word “dealer” in Section 2(1)(e) of the 1957 Act.”
19) From a reading of the aforesaid paragraph, it is clear that the role of an Explanation is to clarify or remove any ambiguity in the main provision. Ordinarily, it cannot widen the ambit of the substantive provision. However, if, upon a true and proper construction of the Explanation, it appears to the Court in a given case that the effect of the Explanation is to widen the scope of the main provision, such effect must be given to the legislative intention. The various judgments relied upon by the learned counsel for the petitioner, particularly Hardev Motor Transport and Md. Firoz Ahmad Khalid (cited supra), have considered and applied the aforesaid principle. Ultimately, what emerges from the aforesaid decisions is that if the legislative intention is clear from a reading of the Explanation that the legislature intended to widen the scope of the substantive provision, effect must be given to such legislative intention, notwithstanding the label/fact that the Explanation thereby enlarges the scope of the substantive provision.
20) In the present case, the Explanation to the amended Section 147 clearly enlarges the scope of the substantive provision. The substantive provision, by itself, deals with assessment or reassessment proceedings in respect of income which has escaped assessment and for which the procedure prescribed under Sections 148A and 148B to 153 of the Act of 1961 is required to be followed. The Explanation, however, brings within its ambit any subsequent information relating to income which has escaped assessment and which comes to the notice of the Assessing Officer in the course of the proceedings. Significantly, in respect of such subsequent information, the requirement of following the procedure prescribed under Section 148A is dispensed with. The legislative intention is, therefore, clear. The Assessing Officer has been empowered to reassess income in respect of any issue relating to escaped income which subsequently comes to his notice in the course of the proceedings, without requiring the initiation of a fresh proceeding under Section 148A.
21) In the above context, the legislature, while incorporating the Explanation into the amended provision of Section 147, has consciously retained the substance of the Explanation with certain modifications. It cannot, therefore, 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 under Section 148A in respect of such subsequent information. The aforesaid words, therefore, have the effect of widening the scope of the original reassessment proceedings, in respect of which the procedure contemplated under Section 148A was otherwise required to be followed, need not be followed. As is evident from the ratio laid down by the Constitution Bench and other Benches of the Apex Court in the judgments referred to above, legislative intent must be given effect to even where an Explanation has the effect of broadening the scope of the substantive provision. Accordingly, the Explanation cannot be held to be liable to be struck down.
22) The further contention of the learned counsel appearing for the petitioner is that the expression “any other material or information”, whether available with the Assessing Officer or coming to his notice during the course of the proceedings, as occurring in Section 158BB of the Act of 1961 (inserted in 2024) , clearly indicates that the legislature intended to include material or information originating outside the scope of the original reassessment proceedings. It is submitted that no such expression has been used in the Explanation to Section 147 of the Act of 1961.
23) A close reading of the Explanation to Section 147 reveals that the use of words “any issue” relating to income which has escaped assessment, and which subsequently comes to the notice of the Assessing Officer in the course of the proceedings, are similarly considered. The words “any issue” do not restrict the issue relating to any material available with the Assessing Officer at the time of commencement of the reassessment proceedings. If we give restricted interpretation it violates the plain language used in the explanation. Such an issue may be in relation to escaped income not only restricted to any information which is the part of the reassessment proceedings but also any other material come to notice of the Assessment Officer from a source outside the original reassessment proceedings, may also constitute the basis for enlarging the scope of the reassessment proceedings. When the language of the provision is clear and unambiguous, there is no occasion to resort to other provisions of the enactment for the purpose of interpreting the provision in question. Such recourse may be had only where the language of the provision is ambiguous or susceptible to more than one interpretation. Therefore, the said contention of the learned counsel for the petitioner is also rejected.
24) It is also the contention of the learned counsel for the petitioner that the respondent could not have resorted to reassessment proceedings to widen the scope of the existing reassessment proceedings when there is an independent mechanism for initiating proceedings on the basis of material found during a search. It is true that there is an independent mechanism for assessing any escaped income detected by the authorities in the course of a search. Where no reassessment proceedings are pending, the procedure prescribed in respect of the search is the only procedure that can be followed. However, where reassessment proceedings are already pending, the authorities have two courses available to them. First, they may widen the scope of the pending reassessment proceedings on the basis of material collected during the search relating to any income that has escaped assessment for the relevant assessment year. Alternatively, the authority may also independently initiate proceedings in accordance with the procedure prescribed on the basis of the material collected during the search in respect of the same assessment year. Thus, merely because the authority has adopted one of the two available courses, it cannot, by itself, be said that the proceedings are illegal. Therefore, this contention is also unsustainable. In view of the above, the writ petition is devoid of merit and is liable to be dismissed.
25) In the result, the writ petition is dismissed.
26) Pending interlocutory applications, if any, shall stand disposed of.
