ITAT upheld reopening as AO had reason to believe income had escaped assessment
ITAT upheld reopening as AO had reason to believe income had escaped assessment
Daikin Industries, a foreign company, showed loss. During previous year assessee's equity shares in its Indian subsidiary were cancelled. It claimed to carry forward capital loss. AO rejected claim as there was neither relinquishment of capital asset nor any rights, and it was not a transfer u/s 2(47) (of Income Tax Act, 1961). CIT(A) allowed claim. ITAT held AO had reason to believe that income had escaped assessment and had rightly initiated reassment u/s 147 (of Income Tax Act, 1961).ITAT-501438
1. The assessee, a foreign company, had filed its return of income showing loss of Rs. 5,44,087,500/-. Notice u/s 148 (of Income Tax Act, 1961) was issued, after recording reasons for denying the assessee's claim of long term capital loss of Rs. 15,60,00,000/- and short term capital loss of Rs. 388,087,500/-, which was claimed to be carried forward to AY 2006-07. During the previous year 2004-05, 5,480,000 equity shares held by assessee in Daikin Airconditioning India Pvt. Ltd. were cancelled under the capital reduction scheme, which was approved by the Hon'ble Delhi High Court u/s 102 (of Income Tax Act, 1961) of the Companies Act, 1956. The assessee had claimed that since there was relinquishment of an asset/ extinguishment of right in shares, therefore, it amounted to transfer of a capital asset. AO held that there was neither relinquishment of the capital asset nor any rights in the capital asset, and it was not a transfer u/s 2(47) (of Income Tax Act, 1961) and rejected the assessee's claim regarding carry forward of capital loss.
2. CIT(A) rejected the assessee's claim in regard to initiation of proceedings u/s 147 (of Income Tax Act, 1961), but allowed the assessee's claim on merits.
3. On appeal, the ITAT held as under:
4. In regard to assessee's cross objection we are in agreement with the findings of ld. CIT(A) that the issue under consideration was such that prima facie it was possible to entertain a view that the assessee had wrongly claimed capital loss of Rs. 54,40,87,500/- on account of calculation of shares and thereby resulting into escapement of income. Therefore, we endorse the finding of ld. CIT(A) in holding that the AO had reason to believe that income had escaped assessment and he was within his competence to invoke the powers contained in section 147 (of Income Tax Act, 1961) to initiate reassessment of the income of the assessee. In the result, cross objection is dismissed.
5. In the result, departmental appeal is allowed and the cross-objection filed by the assessee is Dismissed.”
Case Reference- International Taxation Vs. M/s Daikin Industries Ltd
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH "B" NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND Ms. SUCHITRA KAMBLE : JUDICIAL MEMBER DCIT, Circle-1(1),
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