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TMI Blog2025 (2) TMI 545X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed by the assessee from year to year from 2012-13 onwards and no addition was made since then. Claim on account of the applicable gain / loss on foreign currency transactions, the petitioner has explained in detail in the objections with regard to the nature of claim by making to the effect that the petitioner had unrealized loss which was added as income and on the other hand, the petitioner has deducted the unrealized gain and also claimed net expenses in the profit and loss for computation of the book profit and it cannot be disputed that the petitioner has explained that the claim of the assessee for bank charges for raising foreign currency is required to be considered as a part of the revenue expenditure. Thus, in effect, the petitioner has claimed Rs. 46,45,115/-, i.e. Rs. 37,78,154 plus Rs.8,86,961 (Rs. 6,90,80,060 - Rs. 6,81,93,099) by giving effect to the said amount in the computation of income. Thus, it cannot be said that there is escapement of income on the part of the petitioner as the petitioner has neither claimed profit / gain or loss of unrealized foreign exchange and therefore, the reasons recorded by the respondent Assessing Officer to form prima facie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r considering the reply of the petitioner in response to the notice issued under section 142 (1) of the Act; the assessment order under section 143 (a) of the Act was passed on 09.12.2019, except in the return income of Rs. 2,96,81,980/- as per the computation of income submitted by the petitioner. 4.3 The petitioner thereafter was served with the impugned notice dated 27.03.2021 for re-opening of the assessment. The petitioner filed return of income in response to the said impugned notice on 21.04.2021 and requested for reasons recorded for re-opening. 4.4 The respondent submitted the reasons recorded on 19.05.2021 which reads as under: "2. Brief details of information collected/received by the AO: From the Statement of Total Income, it is seen that the assessee has claimed Rs. 17,37,80,816/- on account of "Any other amount allowable as deduction". Further, the assessee has made lease payment towards principal plus interest of Rs. 17,37,80,816/- on loan taken from CISCO and claimed the same as revenue expenditure. The amount of repayment of Rs. 17,37,80,816/- as principal amount of any loan is not a revenue expenditure and is not allowable under any of the provisions of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,80,060/-, it was contended as under: "4.3 NO ESCAPEMENT OF INCOME CHARGEABLE TO TAX: 4.3.1 The assessee further submits that the condition precedent for the purpose of resorting to reopening proceedings under section 147 of the Act is that there must be "escapement of any income chargeable to tax". In absence of escapement of any income chargeable to tax, it is not open for the Department to reopen the case of an assessee under section 147 of the Act by issuance of statutory notice under section 148 of the Act. 4.3.2 In the present case, your good self has not appreciated the effect of notional foreign exchange gain and loss. The assessee had claimed net foreign exchange loss of Rs. 37,78,154/- which was worked after considering various items including "Realized loss of Rs. 6,81,93,099/-" and "Unrealized gain of Rs. 6,90,80,060/-". Since gain is notional, Realized loss of Rs. 6,81,93,099/- was added back while filing return of income due to the fact that it relates to capital asset (part of Rs. 57,85,98,525/- added back in computation of income) and the gain of Rs. 6,90,80,060/- was reduced. Thus, there is no effect of such gain or loss on the income chargeable to tax in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tangible material coming in his possession and accordingly, the impugned notice is liable to be quashed and set aside as it is evident that re-opening is merely based on change of opinion and the same is not permissible in the eyes of law. 5.3 It was submitted that the reasons recorded by the respondent Assessing Officer referring to the amount of Rs. 6,90,80,060/- being unrealized profit & loss from foreign exchange is concerned, at the same time, the petitioner has also not claimed the unrealized loss of foreign exchange of Rs. 6,81,93,099/- by giving effect in the computation of income. 5.4 Learned Senior Advocate Mr. Tushar Hemani referred to the objections filed by the petitioner which are available at page 72 in relation to the issue of addition of foreign exchange loss and submitted that the petitioner has added the loss to the income and reduced the gain and thereby the petitioner has claimed about Rs.9,00,000/- which was reduced from the bank charges for hedging on foreign currency of Rs. 46,65,115/- and the petitioner had offered Rs. 37,78,154/- as net expenses after giving net effect to the unrealized profit and loss on the foreign exchange. It was submitted that it m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the three items mentioned in the reasons and therefore, the impugned notice cannot be said to be without jurisdiction. 6.1 It was submitted that on perusal of the notice issued under section 142 (1) and from the assessment order passed under section 143 (3), there is no reference to the taxability of income qua three issues as the same were not examined during the scrutiny of the assessment and therefore, it is not open for the petitioner to refer the general question raised in the notice issued issued under section 142 (1) and the reply submitted in response to such notice in the absence of any inquiry by the Assessing Officer at that stage. 6.2 It was submitted that there is nothing on record to show that the notice issued under section 142 (1) has any reference to the claim with respect to the foreign currency transaction and unrealized profit and loss from real estate and in the absence of any submission regarding change of opinion by issue No.2, the notice under section 148 deserves to be upheld. 6.3 In support of his submissions, learned Senior Standing Counsel Mr. Varun K. Patel for the respondent relied upon the following decisions: (i) Gala Gymkhan (P) Ltd. vs. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove from pages 71 and 72 of the paper book to the effect that the petitioner had unrealized loss of Rs. 6,81,93,099/- which was added as income and on the other hand, the petitioner has deducted the unrealized gain of Rs. 6,90,80,060/- and also claimed net expenses of Rs. 37,78,154/- in the profit and loss for computation of the book profit and it cannot be disputed that the petitioner has explained that the claim of the assessee for bank charges for raising foreign currency Rs. 46,65,115/- is required to be considered as a part of the revenue expenditure. Thus, in effect, the petitioner has claimed Rs. 46,45,115/-, i.e. Rs. 37,78,154 plus Rs.8,86,961 (Rs. 6,90,80,060 - Rs. 6,81,93,099) by giving effect to the said amount in the computation of income. Thus, it cannot be said that there is escapement of income on the part of the petitioner as the petitioner has neither claimed profit / gain or loss of unrealized foreign exchange and therefore, the reasons recorded by the respondent Assessing Officer to form prima facie conclusion that there is likelihood of any gain on account of revenue expenses incurred by the petitioner is also without any basis in the absence of any fresh tangi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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