TMI Blog2017 (2) TMI 1458X X X X Extracts X X X X X X X X Extracts X X X X ..... to issue of notice u/s.148 of the Act on 214.03.2014. It is well settled principle that the AO can form an independent opinion on an issue which may have been brought to his notice by Audit Party and seek to reopen the assessment , provided it is AO s independent belief that income chargeable to tax has escaped assessment. Reference in this aspect may be made to the decision of Adani Exports [ 1998 (12) TMI 51 - GUJARAT HIGH COURT] that though the audit objection may serve as information, the basis of which the Income-tax Officer can act, the ultimate action must depend directly and solely on the formation of belief by the Income- tax Officer on his own where such information passed on to him by the audit that income has escaped assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct was completed on 12.12.2011 assessing the income at ₹ 6,04,62,942/-. The assessment was reopened on the reason that the assessee claimed loss on forward contract at ₹ 2,47,93,531/- due to trade in foreign exchange derivatives, which is required to be disallowed since it is not covered u/s.43(5)(d) of the Act. Accordingly, the reassessment was completed u/s.143(3) r.w.s.147 of the Act on 20.03.2015 disallowing loss of foreign exchange amounting to ₹ 1,97,55,214/-. Against this, the assessee went in appeal before the Ld.CIT(A) challenging the reopening of assessment and also with regard to disallowance of loss on forward contract at ₹ 1,97,55,214/-. On appeal, the Ld.CIT(A) decided both the issues in favour of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the assessment under section 147 of the Act as follows: The Loss claimed on forward contract of ₹ 2,47,93,531/- due to trade in foreign exchange derivatives, is a loss incurred not on business but it is a liability of contingent nature. Since it is not covered u/s 43(5) (d), the same is required to be disallowed. In response, the assessee company objected the re-opening of the assessment vide its letter dated 19.02.2015, stating that, all the details, explanations is already furnished before the AO during the scrutiny assessment and hence, the re-opening of the assessment under section 147 of the Act is invalid. The Learned AO dismissed the objection raised by the assessee and passed an order on 17.02.2015 as below: The ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue of investment by the assessee in certain companies as quid pro quo was never examined at the time of the original assessment, as the said information was not available at that time. 5.1 The ld.A.R submitted that, the reasons for re-opening the assessment was not on the issue of investment by the assessee in certain companies, but the re-opening was done on the issue of loss of cancellation of forward contracts. Hence, the objections dismissed by the Learned Assessing Officer are totally unjustified and unlawful. It was informed that, the re-assessment was initiated based on the audit objection. Even the AO explained before the audit party that, the loss of cancellation of forward contract is an allowable expenditure and not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been brought to his notice by Audit Party and seek to reopen the assessment , provided it is AO s independent belief that income chargeable to tax has escaped assessment. Reference in this aspect may be made to the decision of Supreme Court in the case of Adani Exports [1999] 240 ITR 224 (Guj) that though the audit objection may serve as information, the basis of which the Income-tax Officer can act, the ultimate action must depend directly and solely on the formation of belief by the Income- tax Officer on his own where such information passed on to him by the audit that income has escaped assessment. In the said decision, the court had referred to and relied upon the decision of the Supreme Court in the case of Indian and Eastern Newsp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure ad not a speculation loss. Later on the same reason, when the audit party did not accept the version of the AO, the AO opted to reopen the concluded assessment. This is nothing but there is no independent formation of opinion by the AO and it is only on account of compulsion exerted by the Revenue Audit Party. It cannot be a reason for reopening of the assessment. In other words, in the absence of independent belief of AO to hold that, income chargeable to tax has escaped assessment, no assessment can be re-opened at the instance of the audit party. The same view was taken by the jurisdictional High Court in the case of C. Seshachalam Chetty (DECD.) in [2000] 243 ITR 531 (Mad), Gujarat High Court in the case of Sheth Brothers Vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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