TMI Blog2012 (8) TMI 1166X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income Tax Act, 1961 (hereinafter referred to as `the Act for short ). 4. The petitioner is a partnership firm engaged in manufacturing and export of diamonds. The petitioner filed original return of income for the assessment year 200506 declaring a total income of ₹ 4,04,7,190/- during the assessment proceedings under section 139(1) of the Act. Thereafter, notices under section 143(2) and section 142(1) were issued to the assessee on 19.11.2007 to the assessee, calling for various details including details of loans obtained from various banks with the nature of security pledged and details of assets purchased during the assessment year on which depreciation has been claimed. Explanation was also sought with regard to disallowance of expenses, being capital in nature, on account of provision for exchange difference of PCFC loan of ₹ 73,77,337/- and ₹ 1,62,26,848/- of PSCFC loan. 5. Alongwith reply dated 12.12.2007, the petitioner also submitted sanction letters from various officers. Thereafter, the Assessing Officer was satisfied, and passed the assessment order under section 143(3) of the Act. After expiry of 4 years period, on 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the course of any transaction in the nature of jobbing or arbitrage to guard against loss whichmay arise in the ordinary course of his business as such member; (or) (d) an eligible transaction in respect of trading in derivatives referred to in clause 2(ac) of section 2 of the Securities contracts (Regulation) Act, 1956 (42 of 1956) carried out in a recognized stock exchange; shall not be deemed to be a speculative transaction. ....... On perusal of the profit and loss account, it is observed that a sum of ₹ 50337554.96 has been credited as income on account of exchange difference. However, on perusal of break up of provision in Schedule-E (Liabilities and provisions) to the balancesheet, it is observed that the sum includes ₹ 7377337/- on account of provision for exchange difference of PCFC loan and ₹ 16226848/- towards provision for exchange difference on PSCFC loan. Both the expenses, being of capital nature, i.e. towards repayment/liability of loan amount, deduction is not available. You are directed to explain why this should not be disallowed. 5.2 The assesse replied by his letter dated 12.12.2007 in which he explained and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) is for member of forward market or stock exchange and clause (d) is for trading in derivative as defined in clause (ac) of Section 2 of the Securities Contracts (regulation) Act, 1956 carried out in recognized stock exchange. Ultimately, the additions and disallowables made in the assessment order including on account of foreign exchange contract loss treated as speculative loss which was discussed in the body of the order. 6. In the above context, the grounds for reopening and the reasons recorded may be required to be considered. The reasons recorded dated 28.03.2011 reopening of assessment under section 147 came to be supplied to the assessee by the authority by a forwarding letter dated 26.08.2011. The reasons for reopening the case under section 147 of the Act given by the Deputy Commissioner of Income Tax, Surat are as under: On verification of the balance sheet revealed that following amounts were shown as provision under schedules-E. Current liabilities and provisions being exchange difference debited to profit and loss account on PSCFC loan and PCFC loan. 1. Provisions for exchange difference on PCFC loan Rs. 73,77,337/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view of the explanation 1 to section 147 of the Act. 12. It is not disputed by learned counsel for the Revenue that the original assessment order is sought to be re-opened after the expiry of period of four years from the end of the relevant assessment order, i.e. 2005-06. From the record it is shown that the provisions for exchange difference on PCFC loan and provisions for exchange difference on PSCFC loan were mentioned in the balance sheet of the petitioner. The Assessing Officer has raised specific queries with regard to the aforesaid two items, which were replied by the assessee along with other necessary evidence. The Assessing Officer had considered the reply to the queries given by the petitioner. If he has not made any mention about the reply in the said assessment order, it will not make the assessment order illegal nor the Court can infer that the income chargeable to that has escaped assessment and the assessee has failed to disclose material facts necessary for assessment. 13. The Apex Court in the case of Commissioner of Income Tax Delhi Vs. Kelvinator of India Ltd. (320 ITR 561) held : Prior to the Direct Tax Laws (Amendment) Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer to change his opinion unless there is some new tangible material available with the Assessing Officer, on the basis of which he has reason to believe that income chargeable to tax has escaped assessment. It is not open to the Assessing Officer to change his opinion so as to review his original assessment order. That is not permissible. So far as the argument of learned counsel for the Revenue that Explanation 1 to section 147 would apply to the facts of this case, and therefore, the Assessing Officer was justified in re-opening the assessment is concerned, we have gone through Explanation 1 to section 147 of the Act, and we find that the argument of learned counsel for the Revenue has no substance. The provision of Explanation 1 cannot apply to the facts of this case as the Assessing Officer has made specific queries from the assessee which were replied by the assessee along with evidence. The reply of the queries given by the assessee had been considered by the Assessing Officer. Merely because of the fact that it has not been mentioned by the Assessing Officer in the original assessment order, it could not be treated to be the income chargeable to tax having escaped asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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