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2016 (2) TMI 1212 - AT - Income TaxReopening of assessment - correctness of the "Reasons to believe" - addition on account of notional foreign exchange gain - Held that:- There was full discloser on the part of the assessee in accounts filed with the return of income. The AO recorded the ‘Reasons’ on the basis of information disclosed by the assessee in his return, accounts and audit report. Thus, the reopening is clearly barred by limitation and beyond the provisions of law in view of aforesaid proviso to section 147. no fresh tangible material has come into the possession of the AO, at the time of the recording of the ‘Reasons’. It is settled law that in absence of a fresh tangible material coming into the possession of the AO, no belief can be formed about escapement of income. It is further noted by us that ‘Reasons’ have been recorded on the ground that foreign exchange fluctuation gain was taxable on notional basis. The belief of escapement of income is without any legal basis the AO has not even analysed the facts properly before recording the ‘Reasons’. It has not been mentioned in the ‘Reasons’ whether the impugned foreign exchange fluctuation gain, sought to be taxed on notional basis, was on account of revenue or capital transactions. It could be brought to tax as income, if at all it was feasible under the law, only when the resultant gain was on account of revenue transactions. If underlying transactions leading to foreign exchange fluctuation gain were on capital account, then it could not be treated as income. Thus, in our considered view the impugned ‘Reasons’ are factually and legally invalid in the eye of law - Decided in favour of assessee
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