Assessee engaged in the business of manufacturing had filed its return of income for which AO had completed assessment. Subsequently, AO issued notice and initiated reopening under section 147 of the Act. Assessee submitted that return of income filed be treated as return of income filed in compliance to notice. Subsequently, Assessee was provided with copy of reasons for reopening wherein it was stated that in view of the provisions of section 43A of the Act, cost of the asset required to be increased to the extent of loss in foreign exchange fluctuation account not done resulting in underassessment of income after providing for depreciation required to be added to the cost of the asset. Incidentally, during the previous year, the foreign exchange fluctuation gain was reduced from the cost of the asset and not credited to the profit and loss account. Accordingly AO concluded that income of the Assessee has escaped assessment made addition CIT(A) confirmed addition made by AO. 

On Appeal, Tribunal held that reopening was initiated after expiry of 4 years and there is nothing in reasons recorded for reopening the assessment indicating that there is any failure of Assessee to disclose fully and truly all material facts necessary for its assessment. Assumption of jurisdiction section 147 of the Act by issuing notice section 148 of the Act is without jurisdiction, particularly, when AO failed to record his satisfaction that income has escaped assessment by reason of failure on the part of Assessee to disclose fully and truly all material facts necessary for its assessment. Accordingly, Tribunal held that Assumption of jurisdiction under section 147 of the Act is invalid, bad in law and thus quashed the reopening proceedings and ruled in favour of Assessee. (AY.2008-09)