24 [2019] 202 TTJ (Del.) 1014 JDC Traders (P) Ltd. vs. DCIT ITA No. 5886/Del/2015 A.Y.: 2007-2008 Date of order: 11th October, 2019
Section 147,
Explanation 3 & Section 154 – The powers conferred on the A.O. by
Explanation 3 to section 147 cannot be extended to section 154 – Any
discrepancy that was not a subject matter of reassessment proceedings cannot,
subsequently, upon conclusion of reassessment proceedings, be brought up by the
A.O. by recourse to section 154
FACTS
The assessee was a company engaged in the
business of trading, export and printing. For A.Y. 2007-2008 it submitted its
return of income and the same was processed u/s 143(1) of the Act. Reassessment
proceedings were initiated against the assessee for the assessment year in
question after recording reasons for the same. Certain travel expenditure
claimed by the assessee was disallowed and addition was made for the same. On
conclusion of the reassessment proceedings and perusal of the assessment
records by the A.O., he noticed a discrepancy in the amount of stock appearing
in the statement of profit and loss and in the notes to financial accounts. The
A.O. issued a notice u/s 154 to the assessee as regards the difference. The
assessee submitted that the amount stated as closing stock at the time of
preparation of accounts had been inadvertently missed out to be corrected
post-finalisation of accounts and stock reconciliation. The assessee also
submitted that after reconciliation the mistake was detected and corrected. The
A.O. made an addition for the amount of difference in the amounts of closing
stock stated at different values.
The assessee preferred an appeal with the CIT(A).
However, the CIT(A) did not agree with its contention and stated that under the
provisions of Explanation 3 to section 147, the A.O. was justified in assessing
/ reassessing the income which had escaped assessment. Further, there was
nothing wrong in the A.O. rectifying the mistake in the order under sections
147 / 143(3). The assessee then filed an appeal with the ITAT.
HELD
The issue relating to the discrepancy in the
value of closing stock was not taken up by the A.O. at the time of reassessment
proceedings u/s 147. A reading of section 147 shows that it empowers the A.O.
to assess or reassess income in respect of any issue which had escaped
assessment, irrespective of the fact whether such aspect was adverted in the
reasons recorded u/s 147. The A.O. had resorted to section 154 to make addition
in respect of the issue of discrepancy in closing stock on conclusion of the
reassessment proceedings. The powers under Explanation 3 to section 147, if
extended to section 154, would empower the A.O. to make one addition after the
other by taking shelter of Explanation 3 to section 147. It was also not the
case that the A.O. had invoked section 154 with respect to the original
assessment finalised u/s 143(3).
Thus, the powers of Explanation 3 to section
147 cannot be extended to section 154, and the addition made by the A.O. for
discrepancy of closing stock values upon conclusion of reassessment proceedings
was beyond his jurisdiction.
The appeal filed by the assessee was
allowed.
