2016 (7) TMI 66 - HC - Income Tax

Reopening of assessment - claim of capital loss - Held that - Entire issue was thoroughly examined by the Assessing Officer during the original assessment proceedings. He had serious doubt about the assessee s claim of capital loss upon which he raised multiple queries. All these queries were explained by the assessee including pointing out the reasons for not exercising warrants. He placed heavy reliance on decision of Karnataka High Court in Dy. CIT v. BPL Sanyo Finance Ltd. 2008 (2) TMI 386 - KARNATAKA HIGH COURT for justifying the claim. It was after such minute scrutiny that the Assessing Officer made no addition in the final order of assessment. Without there being anything additional on record, it would therefore, not be permissible for the Assessing Officer to reopen the assessment on the very same material. Additionally, we may recall that the notice was issued beyond a period of four years from the end of relevant assessment year. There is not even a hint from the reasons recorded that the assessee failed to disclose truly and fully all materials. Even on this ground, notice must fail.- Decided in favour of assessee

Summary

Issues:
Challenge to notice for reopening assessment for AY 2009-2010.

Analysis:
The petitioner, a registered company, challenged a notice dated 7.4.2015 for reopening the assessment for AY 2009-2010. The original assessment was completed on 20.12.2011, where the petitioner declared nil income but claimed a capital loss of ?20.89 crores. The Assessing Officer made no additions to this claim during the original assessment. The notice for reopening was issued beyond the four-year period from the end of the relevant assessment year. The reasons for reopening included the observation of escapement of income due to the claim of short-term capital loss of ?23,89,90,320 on account of the forfeiture of application money. The Assessing Officer contended that the petitioner's reliance on a Karnataka High Court decision was not applicable in this case, as the facts differed significantly. The petitioner raised objections to the notice, which were rejected, leading to the present challenge.

The petitioner contended that the capital loss issue was scrutinized in detail during the original assessment, and there was no failure to disclose material facts. The department argued that the loss of advances for warrants did not qualify as a capital loss. The record showed that the Assessing Officer had asked for various details during the original assessment regarding the claim of capital loss. The petitioner explained the reasons for not exercising warrants and justified the claim as capital expenses based on investments in equity shares. The Assessing Officer had thoroughly examined the issue during the original assessment, raised queries, and the petitioner had provided explanations, including citing the Karnataka High Court decision to support the claim. Without any new material, it was deemed impermissible to reopen the assessment. Moreover, the notice was issued beyond the permissible four-year period, and there was no indication that the petitioner failed to disclose all material facts. Therefore, the petition was dismissed.

In a subsequent note, a correction was made to an earlier order where it was wrongly stated that the petition was dismissed. The correction clarified that the petition was allowed, thus rectifying the error in the previous order.