Even when the High Court in  435 ITR 533 (Mad) formed a view that the invocation of section 148/147 qua denial of adjustments under section 72A(1)(a) was inspired from a change of opinion it however did not quash such notice and left the assessment open by directing the assessee to participate in the proceedings before the DC and if in the course of such proceedings he concludes that there were other aspects within the purview of Explanation 3 to section 147 on which the assessment could be reopened, such income could be assessed or reassessed.
In this case, the sole reason for reopening was that the assessee was not entitled to adjust the loss of the transferor-company as the said company was not engaged in the “manufacturing activity” within the meaning of section 72A(1)(a) of the Income-tax Act, 1961. On this aspect, the Court held that there was no suppression of facts by the assessee and that the reopening of the assessment to deny the adjustments made is therefore without jurisdiction and further precluded the officer from reversing the set of adjustments allowed in the original assessment.
Explanation 3 is reckoned to any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under section 147 notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148.
Now whether explanation 3 will apply to attempt an addition on the altogether different ground when the ground on which jurisdiction was exercised under notice u/s 148 have not been acted upon is a million-dollar question for the Supreme Court to decide in the times to come