TMI Blog2020 (4) TMI 391X X X X Extracts X X X X X X X X Extracts X X X X ..... terial coming into the possession of the Assessing Officer showing that there was an escapement of income from assessment and such tangible material must have an alive link with the formation of the belief. In the present case such criteria is absent. Thus, we do not find any infirmity in the order of the learned CIT (Appeals) and the same is confirmed. Hence, appeal of the Assessing Officer is dismissed. - ITA No. 2048/Del/2017 - - - Dated:- 30-1-2020 - Shri Sudhanshu Srivastava, Judicial Member And Shri Prashant Maharishi, Accountant Member For the Assessee : Shri Salil Aggarwal, Adv For the Revenue : Ms. Ashima Neb, Sr. DR ORDER PER PRASHANT MAHARISHI, A. M. : ITA. No. 2048 (Del) of 2017 is filed by the Assistant Commissioner of Income Tax, Circle 9 (1) New Delhi, against the order of the learned CIT (Appeals)-3, New Delhi, for the Assessment Year 2010-11, raising the only issue that the learned first appellate authority has quashed the re-opening of the assessment. 2. The brief facts of the case shows that assessee was assessed under Section 143(3) of the Income Tax Act, 1961 (the Act) on 19.12.2012 at ₹ 9,89,25,030/-. The case of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble. 5. The learned Authorized Representative submitted a detailed paper book wherein it is submitted that in the original proceedings under Section 143(3) of the Act assessee was asked the query with respect to the above transaction and assessee submitted a detailed reply on 11.12.2012. He also referred to Note No. 15 of that letter to show that loss on account of exchange verification and the derivatives are properly explained to the Assessing Officer on the issue whether they are speculative transaction or not. He further referred that the Assessing Officer was also shown the decision of the co-ordinate benches wherein foreign currency transactions are held to be not speculative in nature as there exist a direct and proximate nexus between the loss on account of foreign exchange derivatives. It was also pointed out that in assessment year 2009-10 similar claim of the assessee was accepted in assessment under section 143(3) of the Act. He referred to the reasons recorded by the Assessing Officer and submitted that on reading of such reasons it is apparent that the Assessing Officer perused the same material which was available before him during the course of original assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e documents including Hedging Agreements also being satisfied about the correct position of Law. Since the original assessment was completed on the basis of the material evidence submitted after forming a considered opinion, therefore the present reassessment proceedings are clearly vitiated. c The satisfaction note does not disclose any fresh or tangible material which has come to light during the proceedings for A.Y. 2011-12 necessitating the reopening of the assessment. No fresh or cogent material having a live link to the facts of A.Y. 2010-11 has come to notice for formation of the belief. The same amounts to a review of the original assessment order which is clearly impermissible under law intention of the provisions of Sec. 147. d There was no omission or commission attributable to the assessee which can lead to a conclusion that there was any escapement of income or there was any failure to disclose fully truly all material facts necessary for the formation of the correct opinion on this issue. e The assessee had furnished all the material facts before the A.O. at the time of the original assessment proceedings which were duly considered by him ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 9,89,25,030/- . Assessment in the case of assessee was completed u/s 143(3) of the Act on 19/12/2012 at total assessed income of ₹ 9,89,25,030/-. i. In the return, the assessee claimed expenses amounting to ₹ 1,75,49,200/- under the head Exchange Variation-Derivatives on account of loss on forward contracts entered with Standard Chartered Bank. During the course of assessment proceeding for the AY 2011-12 in assessee's own case, new facts relating to these transactions have been unearthed which revealed that the exchange variation on derivatives claimed by the assessee are speculative transaction and loss arising there from was a speculation loss and not a business loss. ii. The facts unearthed relating to these transactions provides that the assessee entered into two Target Redemption forward contracts with Standard Chartered on 9 October 2007 and 19 February 2008. These were complex derivatives obliging Standard Chartered to sell to the assessee US Dollars 1,25,000 at a specified rate if the Reference US Dollar- Japanese Yen exchange rate on a specified date was above the agreed Strike Rate and also obliged the assessee to buy US Dollars 2,50,000 at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioned in provisos (a) to (d) of Sec 43(5). And the assessee's claim not meeting the tests of these provisos, is a loss arising from a speculative transaction. Based on the above facts, I have reason to believe that the income of the assessee to the extent of ₹ 1,75,49,200/- which was chargeable to tax has escaped assessment for the AY 2010-11 on account of failure on part of assessee to disclose fully truly all material facts necessary for the assessment. 4. The assessee filed the objections against the reassessment proceedings vide letter dt. 26/11/2015 which are reproduced below: a. The reopening proceedings have been initiated within a period of 4 (Four) years. The assessee had diligently disclosed fully truly all material facts relating to the said issue. Moreover no new information has been unearthed which can be said to be unavailable earlier. b The reopening is based on the opinion formed by the Learned Assessing Officer while completing the Assessment Proceedings u/s 143(3) for A.Y. 2011-12 in the assessee's own case in which loss on forward contracts entered with the bankers of the assessee company have been treated as speculative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y. 2010-11 pertain to contracts denominated USD-INR (Indian Rupees). No contracts denominated in USD-JPY were settled during the year. Moreover the contracts were executed with 2 (Two) banks not 1 (One) bank as mentioned in Para 2 of the reasons. This clearly indicates that the reopening has been done in a mechanical manner without appreciating the correct facts of the case for the year under consideration. f The satisfaction note has been prepared only on the basis of possibility of Alternative Inference from the same documents facts placed before the A.O. during the assessment proceedings. g It is pertinent to note that the correct claim of the assessee has been duly upheld by the Learned CIT (Appeals) in appellate proceedings for A. Y. 2011-12 A.Y. 2012-13 it has been held that the forward contracts were non-speculative in nature. 5. The objections were not found to be acceptable by the Assessing Officer were disposed of by him on 10/02/2016 accordingly the assessment was completed on 18/03/2016 by treating the transaction on account of Loss of ₹ 1,17,94,026/- pertaining to foreign exchange forward contracts as a speculative transaction u/s 43(5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or completion of the scrutiny assessment proceedings for the A.Y. 2011-12. This clearly amounts to a change of opinion which is impermissible under the law. The power to reopen the assessment is conditional on the formation of reason to believe that income chargeable to tax has escaped assessment. The power is not akin to a review. The non-existence of any tangible material with the Assessing Officer clearly indicates an arbitrary exercise of power for reopening of the assessment. The allegations in the satisfaction note are based on the assessment proceedings for the A.Y. 2011- 12. No new facts have been unearthed for granting the jurisdiction for reopening the assessment proceedings. The Hon'ble Supreme Court in Calcutta Discount Co. Ltd. Vs ITO (41 ITR 191) CIT vs Kelvinator of India Ltd. (320 ITR 561) has explained that there must be a nexus between the material placement record the decision arrived by the Assessing Officer regarding re-opening of assessment proceedings. The Assessing Officer has to apply his mind take a conscious decision on a particular matter in issue. The re-opening of the assessment has to be based on some fresh material which comes to his k ..... X X X X Extracts X X X X X X X X Extracts X X X X
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