TaxTMI 
TaxTMI 
TaxTMI 
2020 (4) TMI 391
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.... Act on 16.09.2010 to be return in respect of re-opening notice. On 23.07.2015 assessee requested for the reasons for re-opening which was provided on 3.08.2015. On 26.11.2015 assessee objected to the reasons. Assessing Officer did not find them acceptable and passed a speaking order on 10.02.2016 disposing such objections. Thereafter based on the reasons recorded AO questioned that why Rs. 1,75,49,200/- should not be taxed in the hands of the assessee. Assessee made a detailed reply to that but rejected. Consequently assessment was passed on 18.03.2016 determining total income of the assessee at Rs. 11,64,74,230/-. The Assessing Officer made an addition of Rs. 1,75,49,200/-. 3. The assessee aggrieved with that order challenged the same before the learned CIT (Appeals). The main challenge against the re-opening of the assessment was made by the assessee. Vide para No. 7 of the order the ld. CIT (Appeals) held that there is a change of opinion and no tangible information has come into the possession of the Assessing Officer pursuant to the assessment made u/s 143(3) of the Act which is rationale and bear a direct nexus to the material on which recent belief is based. He followed ....
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....e order of the learned CIT (Appeals). The learned CIT (Appeals) from para No. 2 of his order to para No. 8 of the order has dealt with the issue of re-opening of the issue as under:- "1. The Ground No. 1 has been raised regarding the jurisdiction of the Assessing Officer for initiating the reassessment proceedings u/s 147 of the Act. The submissions made by the counsel of the appellant are reproduced hereunder: 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 transactions & loss arising therefrom was opined to be speculation losses & not a business losses. The said reason on the basis of which the satisfaction note was prepared is grossly misplaced & is ....
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..... 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 re-opening has been done in a mechanical manner without appreciating the correct facts of the case for the year under consideration. g. 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. We are also supported in our aforementioned contentions by the following judgements: i. 348 ITR 299 (SC) - ACIT & Ors. Vs. ICICI Securities Primary Dealership Ltd. ii. 320 ITR 561 (SC) - Kelvinator of India Ltd. Vs. CIT iii. 356 ITR 209 (Delhi) - Maruti Suzuki India Ltd. Vs. CIT iv. 373 ITR 0596 (Delhi) - Prabhu Dayal Rangwala Vs. CIT v. 372 ITR 0762 (Bombay) - CIT Vs. Jet Speed Auto (P) Ltd. vi. 371 ITR 0179 (Delhi) - A. T. Kearney India Ltd. Vs. ITO vii. 371 ITR 0087 (Delhi) - Donaldson's India Filtersystem Pvt. Ltd. Vs. DCIT viii. 367 ITR 0165 (Delhi) - Madhukar Kh....
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.... Rate was 101 for the contract dated 19.02.2008 and the contract was terminating on 22 February 2011. These Target Redemption forward contracts were claimed by the assessee to have been entered into in order to hedge the exports in Japanese Yen although these forward contracts were based on the US Dollar- Japanese Yen exchange rate. No imports of raw material, in US Dollars, have been made by the assessee to supply the goods to M/s Ichikoh Industries. Therefore all costs of manufacture and sale of the said goods to M/s Ichikoh Industries are in Rupees. iii. Therefore, the transaction relating to exchange difference was for buying- selling US Dollar, and the settlement was not by way of physical delivery but through making payment of the difference in exchange rate prevailing on the specified dates. The transaction was not for forward purchase of raw material or merchandise. Since the claim of the assessee falls within the computation of profits and gains of business and profession, the test to be applied to the transaction is provided in Sec. 43(5). The Hon'ble ITAT Mumbai in the case of M/s London Star Diamond Company (I) Pvt. Ltd. (ITA No. 6169/M/2012) has held that forward....
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.... the legal position regarding the treatment of the losses on account of settlement of foreign contracts as normal business losses & not speculative losses were duly filed / submitted by the assessee alongwith its letter dt. 11/12/2012. The same were duly considered by the Learned A.O. & no adverse inference was drawn while completing the assessment. The satisfaction note recorded amounts to a "Change in Opinion" as the original assessment was completed by the Learned AO only after satisfying himself on the issue of taxability of losses incurred on settlement of forward contracts entered by the assessee with MNC Banks & after verifying the complete 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 re-opening of the assessment. No fresh or cogent material having a live link to the fact....
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....erial should be tangible & should have a live link to the facts of the original assessment. The Hon'ble Supreme Court in the case of the CIT Vs Kelvinator of India Ltd. - 320 ITR 561 has held as under : "The concept of "change of opinion" on the part of the Assessing Officer to reopen an assessment does not stand operated after the substitution of section 147 of the Income Tax Act 1961, by the Direct Tax Laws (Amendment) Acts, 1987 8i 1989. After the amendment, the Assessing Officer has to have reason to believe that income has escaped assessment, but this does not imply that the Assessing Officer can reopen an assessment on mere change of opinion. The concept of "Change of Opinion" must be treated as an in-built test to check the abuse of power. Hence after April 1, 1989, the Assessing Officer has power to reopen an assessment, provided there is "tangible material" to come to the conclusion that there was escapement of income from assessment. Reason must have a link with the formation of the belief." 7. After going through the assessment records which were requisitioned by my office from the Assessing Officer, It is clear that the primary / material facts were disclosed by....
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.... unless information comes from an extraneous source. The relevant extract of the said decision reads as under: "The facts stated above clearly disclose that the Income-tax Officer allowed the change in the method of accounting for the assessment years concerned herein knowingly, it was not a case of an inadvertent mistake which was discovered later on after completion of the assessment or oversight. Once it is found that the change in the method of accounting was knowingly allowed by the Income-tax Officer after taking into account all the relevant facts it is not per missiblefor the Income-tax Officer, or his successor, to reopen the assessment at a later point of time under section 147(b) of the Income-tax Act unless any information comes from an extraneous source. Further, we fail to see what is the 'information' available to the Income-tax Officer in this case on the basis of which he is seeking to reopen the assessments under clause (b) of section 147." 8. Respectfully following the jurisprudence laid down by the Hon'ble Supreme Court & also the plethora of judgments available on the "change of opinion", I am of the considered opinion that the reopening is bad ....