The assessee had originally filed its return of income for A.Y. 2007-08, which was assessed under section 143(3). Subsequently, the assessment was reopened under section 147 on the allegation that the assessee had received bogus accommodation entries. During the reassessment proceedings, however, the Assessing Officer did not make any addition on the basis of the recorded reasons for reopening. Instead, an addition under section 68 was made in respect of share premium reflected in the balance sheet. The Commissioner (Appeals) rejected the assessee’s challenge to jurisdiction but deleted the addition on merits. On further appeal, the Tribunal held that since no addition had been made on the issue forming the basis of reopening, no other addition could be sustained, and accordingly deleted the addition and quashed the reassessment. On appeal by the Revenue, the High Court dismissed the appeal and held that section 147 permits reopening only in exceptional circumstances where the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. If the very ground on which the assessment is reopened does not survive, there is no justification for expanding the scope of reassessment to other issues. Explanation 3 to section 147 only clarifies that once the Assessing Officer validly assumes jurisdiction and assesses or reassesses the income for which the assessment was reopened, he may also assess other income that comes to notice during the course of proceedings. It does not permit the Assessing Officer to make additions on other issues where no addition is made on the issue recorded as the reason for reopening. Accordingly, the Tribunal was justified in deleting the addition under section 68 and quashing the reassessment order. (A.Y. 2007-08)