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TMI Blog2017 (7) TMI 963X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.1 The petitioner is a banking company. For the assessment year 2005-06, the petitioner had filed the return of income on 26.10.2005. Such return was taken in scrutiny by the Assessing Officer. He passed an order of assessment under Section 143 of the Act on 30.11.2007. To reopen such assessment, he issued the impugned notice which as can be seen was done within a period of four years from the end of the relevant assessment year. The Assessing Officer had recorded the following reasons for issuing the notice : "REASONS RECORDED FOR THE NOTICE U/S. 148 OF THE I.T. ACT In this case, the assessee has filed return of income declaring total income at Rs. 462,78,99,910/- on 26.10.2005. The assessment was finalized u/s. 143(3) on 30.11.200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the provisions of section 147 of the I.T. Act, 1961. Therefore, a notice u/s. 148 of the I.T. Act is being issued for re-assessment u/s. 147 of the I.T. Act." 2.2 The assessee raised detailed objections to the notice of reopening under a communication dated 15.12.2010. Such objections were, however, rejected by the Assessing Officer by an order dated 15.12.2010. Hence, this petition. 3. From the reasons recorded, it can be seen that the sole ground for reopening the assessment was that according to the Assessing Officer, the assessee had booked a one time market loss of Rs. 114.53 crores by merely transferring the government securities from the category of 'Available for Sale' to the category of 'Held to Maturity'. According to the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing was issued under the insistence of the audit party. In this context, the petitioner has made clear averments and assertions in the petition suggesting that the Assessing Officer was compelled by the audit party to reopen the assessment. Such assertions were made in the objections raised by the petitioner also. In the order passed by the Assessing Officer rejecting such objections, there has been no denial. In response to the petition, the affidavit filed only suggests that there was independent application of mind by the Assessing Officer and that the original audit file could not be traced. In the further affidavit, it is clarified that there was merely an internal audit and there was no objection by the audit party as commonly underst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter receiving the said communication dated 29.04.2008 from the petitioner, the Assessing Officer made a detailed presentation to the Commissioner of Income Tax under letter dated 06.05.2008 in which he offered his own comments to each of the audit objections raised in case of the petitioner with respect to the booking of loss. He stated as under: "(iii) One time loss : The assessee has booked a one time loss of Rs. 114.53 crores by transferring Govt. Securities of Rs. 3983.29 crs. from available for sale (AFS) category to hled to maturity (HTM) category, as permitted by the RBI. Since, the bank has merely transferred the Govt. securities from one head to another, the transaction has been done by the assessee with itself and without any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the date of re-classification of the assessee. Now the question that remains to be answered is whether such a practice of accounting for the loss as a result of the revaluation based on market value is allowable under the Income Tax Act or not. In this context, the following judgements support the action :..." 8.1 The Assessing Officer, thereafter, referred to several decisions of the Supreme Court and other High Courts and concluded as under: "Thus, based on the above judicial decisions, it is seen that the loss incurred as a result of reclassification of securities, by marking the securities to the market value, is an allowable deduction. Therefore, the audit objection on this ground is not acceptable." 8.2 He summed up his s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 63 of the Act if an order of assessment is found to be erroneous or prejudicial to the interest of the Revenue. Reopening of an assessment, however, has vastly different repercussions and entirely different parameters would apply. It is in this context held by this court that reopening of assessment under the insistence of the audit party would not be valid. We are not oblivion to the decision of the Supreme Court in case of Commissioner of Income Tax vs. P.V.S Beedies Pvt. Ltd reported in 237 ITR 13 taking a view that if the source of information at the hands of the Assessing Officer is an audit objection but the Assessing Officer himself is holding a belief that income chargeable to tax has escaped assessment, the same may still be permis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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