TMI Blog2016 (2) TMI 1212X X X X Extracts X X X X X X X X Extracts X X X X ..... nce 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. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO. 3.1. We have gone through the orders of the lower authorities. The brief background is that in this case original assessment was done u/s 143(3), vide order dated 29.09.2006. Subsequently, notice was issued u/s 148 (dated 28.03.2011). The perusal of the assessment order reveals that reopening has been done after recording following Reasons : In this case, the assessment was completed u/s. 143(3) on 29.09.2006 assessing the total loss of ₹ 3,16,92,2301 -. 2. On perusal of the records, it is observed that auditors in their report had mentioned that the p a y a b l e includes a sum of ₹ 1,35,44,600/- arising on account of exchange fluctuation translated in terms of Indian Rupee as on 31.03.2004 as there will onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment for AY 2004-05. 3.2. During the course of assessment proceedings, the assessee submitted that the reopening was invalid, as the complete facts were submitted before the AO during the course of assessment proceedings and only thereafter, assessment order was passed on merits. On the correctness of the Reasons also, it was submitted that notional income could not be added as income on account of notional foreign exchange gain, and these Reasons were invalid from this angle also. But, AO framed the reassessment order and addition on account of notional foreign exchange gain was made. 3.3. Being aggrieved, the assessee filed an appeal before the Ld. CIT(A) wherein reopening was contested by the assessee in addition to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment in this case was reopened u/s 147 r. w. s.148 subsequent to the Audit objection raised by the revenue audit. 3. It is pertinent to mention that the reopening of assessment was not done in view of revenue audit objection per se but in view of clear position of law regarding the taxability of gain of exchange fluctuation arising to the assessee during the year under consideration. Without prejudice to the above, it is further submitted that reopening of assessment was done for the purpose of taking remedial action in accordance with instructions laid down by the Board in Instruction No. 9/2006 dated 07/11/2006. 6.6 Having taken note of the A.O.'s report I find that the reopening itself was not justiied and correct, as it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of Indian Rupees as on 31/03/04, as there will only notional gain. This is not in accordance with AS-11(7). In view of all these facts, I am not in agreement with the A.O. that the aforesaid sum was taxable on pretext on reopening of assessment as well as on merit. Hence in view of the same, keeping reliance on jurisdictional High Court s decision in the case of M/s. Purity Techtextile Pvt. Ltd. (Supra) and M/s. ICICI Home Finance Co. Ltd. vs. ACIT in Writ Petition No.430/2012, the addition som made by the AO is deleted. Thus, the appellant s these grounds of appeal are allowed. (iv,) In our opinion, the Balance Sheet and Profit and Loss 3.4. The perusal of the findings of the Ld. CIT(A) reveals that the Ld. CIT(A) has calle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed 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. It is further noted that 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 reco ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
