9911796707
TMI Blog2024 (9) TMI 973X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction to reopen the assessment merely on change of opinion . AO while framing the original scrutiny assessment, has examined the claim of deduction made by the petitioner and as such, after considering the explanation tendered by the petitioner, the regular assessment order was passed and in the process, if he had made any legal error, then the succeeding AO cannot correct such error. Therefore, process of reopening of assessment from the reasons recorded clearly reflects that as AO seeks to correct the error in his opinion, such foreign exchange loss could not have been allowed. We are therefore of the opinion that such reasons cannot be the basis for reopening of the assessment previously framed after scrutiny. Decided in favour of assessee. - HONOURABLE MR. JUSTICE BHARGAV D. KARIA AND HONOURABLE MR. JUSTICE NIRAL R. MEHTA Appearance : For the Petitioner(s) No. 1 : Mr Manish J Shah (1320). For the Respondent(s) No. 1 : Mr Karan Sanghani Advocate For Mrs Kalpana K Raval (1046). ORAL ORDER (PER : HONOURABLE MR. JUSTICE NIRAL R. MEHTA) [1] Heard learned advocate Mr. Manish J. Shah for the petitioner and learned advocate Mr. Karan Sanghani for learned advocate Ms. Kalpana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed deduction of foreign exchange loss of Rs. 1,20,50,206/- pertaining to indigenous assets and the same was allowed. These losses claimed as deduction in respect of foreign currency loans for acquisition of assets. The assets acquired utilizing these loans were indigenous assets. Since the assets acquired were the indigenous assets under section 43A is not applicable. For application of Section 43A, the assets acquired should be from outside India in foreign currency. In the present case the asset is acquired from within India and therefore Section 43A is not applicable. As the foreign currency loan is utilized for acquisition of indigenous assets, the change in liability due to forex fluctuation would not be allowable as revenue expenditure. The unrealized/realized exchange loss pertaining to indigenous assets is capital in nature. This is sustained by Hon'ble Supreme Court Decision in the case Sutlej Cotton Mills Ltd Vs. Commissioner of Income Tax, West Bengal, 116 ITR 1 wherein the Apex Court held as under. Whether the loss suffered by the assessee was a trading loss or not would depend on the answer to the question, whether the loss was in respect of a trading asset or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that as per proviso to Section 147 of the Act, the petitioner assessee has disclosed fully and truly all material facts relevant for the assessment year and the same could not have been reopened after a period of four years to examine the same issue which has already been verified by the Assessing Officer. It was, therefore, contended that the impugned notice issued was without jurisdiction. [4.6] However, the respondent Assessing Officer, vide order dated 21st November 2019, disposed of the objections rejecting the same. [5] Being aggrieved, the petitioner has preferred this petition. [6] Learned advocate Mr. Manish Shah for the petitioner, while assailing the impugned notice, has made the following submissions: [6.1] Learned advocate Mr. Shah for the petitioner submitted that the petitioner company had disclosed all necessary facts pertaining to the foreign exchange loss. He therefore submitted that notice under Section 148 of the Act does not fulfill the conditions in proviso to Section 147 of the Act and therefore, even if it is assumed that the notice is given within four years, the same would have been the case of change of opinion. Under the circumstances, this Court may all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and thereby, the impugned notice under Section 148 of the Act is perfectly justified and therefore, he requested this Court to dismiss the present petition. [7.4] According to learned advocate Mr. Sanghani, the petitioner had utilized the foreign currency loans for acquisition of assets, thus, as result of devaluation of foreign currency, the assessee incurred foreign currency loss. Therefore, the issue to be decided is whether such loss is business loss or capital loss. Learned advocate Mr. Sanghani further submitted that the assessee did not establish that the indigenous assets were trading asset or stock in trade and therefore, the foreign exchange loss on acquisition of indigenous asset was capital in nature and the same was to be set off and carried forward in accordance with the provisions of Sections 70 to 72 of the Act. Under the circumstances, learned advocate Mr. Sanghani submitted that the impugned notice under Section 148 of the Act is rightly issued as the Assessing Officer has reason to believe that the income chargeable to tax has escaped the assessment and thereby, no fault can be found with the Assessing Authority and therefore, he requested this Court to dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the said deduction and in absence of such new information, the Assessing Officer could not have assumed the jurisdiction to reopen the assessment merely on change of opinion . [9] In the facts of the case, the Assessing Officer, while framing the original scrutiny assessment, has examined the claim of deduction made by the petitioner and as such, after considering the explanation tendered by the petitioner, the regular assessment order was passed and in the process, if he had made any legal error, then the succeeding Assessing Officer cannot correct such error. Therefore, process of reopening of assessment from the reasons recorded clearly reflects that as the respondent Assessing Officer seeks to correct the error in his opinion, such foreign exchange loss could not have been allowed. We are therefore of the opinion that such reasons cannot be the basis for reopening of the assessment previously framed after scrutiny. [10] This Court in the case of P.C. Snehal Engineers (P) Ltd. vs. Assistant Commissioner of Income-tax reported in [2023] 146 taxmann.com 54 (Gujarat) , in similar facts, held as under: 11. We are of the opinion that to confer jurisdiction to the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re-open the assessment. Therefore, post-1st April, 1989, power to re-open is much wider, However, one needs to give a schematic interpretation to the words reason to believe failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of mere change of opinion , which cannot be per se reason to re-open. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of change of opinion is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of change of opinion as an in-built test to check abuse of power by the Assessing Officer.. 12. The Assessing Officer issued notice under section 148 of the Act only to make a roving inquiry into the facts which were already considered by the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
