Schwing Stetter (India) Private Limited Vs Additional/Joint/Deputy/ACIT/ITO (Madras High Court)
For Assessment Year 2015-16, the petitioner filed its return of income on 30.11.2015 along with the financial statements for Financial Year 2014-15. During the original assessment proceedings, the Assessing Officer issued a notice under Section 142(1) of the Income-tax Act, 1961 calling for, among other things, details of large expenses claimed in the profit and loss account. The petitioner replied on 14.09.2018 and specifically furnished details relating to the net loss on foreign currency transactions and translation debited to the profit and loss account. Thereafter, the original assessment order dated 28.01.2019 was passed without making any disallowance in respect of the claim for net loss on foreign currency transactions. The original assessment order, however, expressly dealt with the disallowance relating to the provision for warranty.
Subsequently, a notice under Section 148 of the Income-tax Act was issued on 30.03.2021. Upon the petitioner’s request, reasons for reopening were furnished on 22.09.2021. The recorded reasons stated that Note 29 to the profit and loss account disclosed a debit of ₹6,56,98,000 towards net loss on foreign currency transactions and translation, while Note 2.10 to the financial statements stated that derivatives were marked to market and the resulting losses were recognised in the profit and loss account. According to the reasons recorded, such loss was notional in nature and required disallowance. It was also stated that the provision for warranty amounting to ₹1,95,94,545 required disallowance while computing book profit under Section 115JB. A reassessment order was thereafter passed. The petitioner had initially challenged the Section 148 notice and the order rejecting its objections, and after the reassessment order was passed, amended the writ petition to challenge that order as well.
