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2020 (6) TMI 303 - HC - Income TaxReopening of assessment - change of status - Independent entity for tax purposes by the tax authorities in India - statutory trust is converted into LLC [Limited Liability Company] - AICFL sought an advance ruling from AAR on the question as to whether it was entitled to carry forward accumulated capital loss ? - HELD THAT:- From the AAR application it came to the knowledge of the Assessing Officer that the loss claimed as set off under Section 74 and the claim of carry forward of loss by the assessee for the assessment year 2011-12 are not losses incurred by the assessee; rather those are losses incurred by Aberdeen Delaware Business Trust Asia Pacific Inc Japan Fund which is a different person being a trust fund or sub-trust. Respondent No.1 observed that carry forward and set off of loss is a privilege given by the Act to an assessee who has suffered the loss. Therefore, loss incurred by one assessee cannot be claimed to be carried forward or allowed to be set off by another assessee. It was on that basis that respondent No.1 issued the impugned notice under Section 148 re-opening the assessment for the assessment year 2011-12. It is quite apparent that the view taken by respondent No.1 which led to the formation of belief that income of the petitioner chargeable to tax has escaped assessment is totally erroneous being contrary to the ruling of AAR. It stood totally contradicted by the judgment of this Court in AICFL - contrary to the stand taken by the Revenue itself in the said writ proceeding. It was the stand of the Revenue that AICFL was not the assessee under the Act and it did not file return of income. Claiming of any carry forward of loss or set off of loss by AIFCL did not arise. On the other hand, it was the specific case of the Revenue that returns of income were filed by the three ‘series’ (funds) i.e., the present three writ petitioners each of which are recognised as assessees under the Act. It was admitted by the Revenue that it is the ‘series’ (funds) which would be entitled to carry forward the loss declared in the earlier returns of income to the assessment year 2011-12 and subsequent years, if otherwise eligible. In the reasons recorded by respondent No.1 it was precisely on the ground of change of status that the claim of the assessee i.e., the petitioner was found to be not acceptable which led to formation of the belief that income of the petitioner chargeable to tax had escaped assessment for the assessment year 201112. Therefore, the very foundation for formation of such belief is erroneous, which has been contradicted by this Court. In other words, after the judgment of this Court in AICFL, the very basis for re-opening the assessment no longer survived. Coming to the objection raised by learned standing counsel for the Revenue that in view of the fact that re-assessment order has been passed for the assessment year 2011-12 and assessment order for the assessment year 2012-13 petitioner should be relegated to the alternative remedy of appellate forum as provided under the statute, it is trite that if the Assessing Officer had no jurisdiction to initiate reassessment proceeding, the mere fact that subsequent orders have been passed would not render the challenge to jurisdiction infructuous. If the very basis for reopening assessment does not survive, orders on such re-opening would not survive too. The impugned notice under Section 148 of the Act issued by respondent No.1 for the assessment year 2011-12 cannot be sustained. - Decided in favour of assessee.
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