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D.C.I.T., Circle-8 (1) , Kolkata Versus M/s EIH Ltd. And Vice-Versa

2018 (2) TMI 347 - ITAT KOLKATA

Initiation of re-assessment proceedings - validity of reopening of assessment - proof of escapement of income - Held that:- AO for initiating the re-opening of the assessment proceedings beyond the period of 4 years from the end of the relevant assessment year has to establish that there was escapement of income chargeable to tax because of the failure of the assessee to disclose fully and truly the material facts necessary for the assessment. - Neither in the reasons recorded for reopening .....

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initiation of re-assessment proceedings is held to be bad. The decisions cited by the assessee referred to in paragraph 9 and 10 support the conclusions that reassessment proceedings are not valid in law. - For the reasons given above, we allow the grounds raised in the cross objection and hold that the reassessment proceedings are not validly initiated. Therefore order of the reassessment is liable to be annulled. Since the re-assessment order has has been annulled, the grounds raised by th .....

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s objection filed by the assessee against the very same order of CIT(A). 2. First we shall take up for consideration the grounds raised by the assessee in the cross objection with regard to the validity of initiation of re-assessment proceedings u/s 147 of the Income Tax Act, 1961 (Act). These grounds read as follows :- 1. For that the Commissioner of Income Tax (Appeals) in short (CIT(A) ) erred in dismissing the ground regarding validity of reopening of assessment under section 147 of the Act .....

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nder section 148 was issued on a mere change of opinion as all the materials and facts were available with the A.O. while framing the assessment under Section 143(3) of the Act. 4. For that the CIT(A) should have dismissed the re-opening of the assessment in as much as the objections filed by the appellant against the reasons recorded for re-opening of a assessment was not disposed of by the A.O. and the reassessment order was passed without disposing of the objections filed by the appellant. 3. .....

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ecorded by the AO before issuing notice u/s 148 of the Act are as follows :- Scrutiny of assessment records revealed that the assessee debited a sum of Rs. 3,52,05,258 towards loss on exchange (net) in the profit and. loss account. It is further stated in clause 10 of Notes to the accounts that the loss on exchange included loss amounting to Rs. 2,67,46,608 on account of currency swap transaction. It is noticed from the submission of the assessee that the assessee had entered into interest rate .....

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the above transactions included transaction entered into with various foreign banks, the same does not appear-to have fallen under the purview of the transaction to be treated as business transaction. Therefore loss on account of currency swap transaction amounting to Rs. 2,67,46.608 is required to be added back as loss not pertaining to business and omission to do so resulted in under assessment of income by Rs.2,67,46,608/-. Therefore, I have reason to believe that assessee has escaped assess .....

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the end of the relevant assessment year unless, inter alia, there has been a failure of the assessee to disclose fully and truly all material facts for his assessment for that assessment year. This is a condition precedent. The relevant proviso reads as follows : Provided that where as assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relev .....

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(3) of the Act. The said assessment was completed on 26.12.2008. It was pointed out that clause 10 of notes referred to in the recorded reason were readily available with the assessing officer while framing order under section 143(3) of the Act and there was absolutely no failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. It was submitted that no new material or information has come on record and thus, on the .....

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is of same set of facts is nothing but a change of opinion which is not allowed in the law. Hence the reassessment initiated u/s 147 is bad in law. 5. The AO did not deal with the aforesaid objections raised by the assessee. He proceeded to frame an order of assessment u/s 147 r.w.s. 143(3) of the Act making an addition of ₹ 2,67,46,608/- which is a loss on account of swap transactions by treating the same as notional loss not allowable as a deduction. Apart from the above the AO also disa .....

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(A) without considering any of its submissions dismissed the relevant grounds of appeal of the assessee by observing as follows :- I have gone through the submission and the case laws supplied by the A.R. I do not find merit in it and hence, reopening u/s 148 of the I T Act is sustained and ground No.1 is dismissed. 8. Aggrieved by the aforesaid part of the order of the CIT(A), the Assessee has filed Cross Objection before the Tribunal raising grounds which are already set out in paragraph 2 of .....

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n a view that when an assessment is reopened by issue of a notice u/s 148 of the Act in the case of an assesse whose assessment has already completed u/s 143(3) of the Act for the relevant assessment year and if notice is issued beyond the period of four years from the end of the relevant assessment year then the reasons recorded should explain as to how the escapement of income is on account of the failure of the assessee to disclose fully and truly of material facts necessary for assessment of .....

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ons the AO had examined original assessment records only and no fresh material had come in the possession of the AO. In response to our specific query also, Ld DR could not point out any fresh material available with the AO at the time of reopening of the case of the assessee. Thus, assertion of the assessee that there was no fresh material with AO for reopening of this case, remained uncontroverted. 12. In the light of the above facts with regard to recording of reasons, let us examine settled .....

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ent. The Hon ble Delhi High Court in the case of Pr. CIT vs Tupperware India Pvt. Ltd., in its order dt 10-8-15 (ITA no 415/2015 ) has taken the view that that even in the case of original assessment order having been passed u/s 143(1), it is mandatory for the AO to have in its possession, fresh tangible material before reopening of the case. In the case of CIT vs. Orient Craft Ltd. 354 ITR 536, it was held by Hon ble Delhi High Court that reasons for reassessment disclosed that AO reached belie .....

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bitrary exercise of power conferred u/s 147. Thus, reopening was held to be invalid on this ground itself. 13. The next argument of the ld. Counsel for the assessee was that the reasons recorded by the AO does not spell out that the escapement of income was due to any failure on the part of the assessee to truly and fully disclose material facts and therefore the reopening of assessment is barred by time under the proviso to Sec. 147 of the Act. On this aspect the reasons recorded by the AO befo .....

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le to tax has escaped assessment for that assessment by reasons of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year. Admittedly the assessment in the present case was sought to be re-opened, after expiry of 4 years from the end of the relevant assessment year and an order of assessment u/s 143(3) has already been passed. The proceedings u/s 147 of the Act are therefore barred by time. In this regard, we also notice that .....

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