TaxTMI 
TaxTMI 
2023 (7) TMI 802
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....f the case, the CIT(A), Panaji-1 was justified in deleting the addition made on account of foreign exchange fluctuation loss when the loss was arrived at by the assessee was notional in nature. 3. Whether on facts of the case, the CIT(A), Panaji-1 was correct in coming to a conclusion that the difference in loan taken and loan repaid by applying the rate of exchange at the yearend represented foreign exchange fluctuation loss and not notional loss. 4. Whether on facts of the case, the CIT(A), Panaji-1 was correct in allowing deduction u/s 37(1) of the act on so called foreign exchange fluctuation loss when in reality the notional loss arrived at does not represent any expenditure as per section 37(1) of the Act. 5. Whether on facts of the case, the CIT(A), Panaji-1 erred in relying on the decision of Hon'ble Supreme Court in the case of CIT Vs Woodward Governor India Pvt. Ltd (2009) 312 ITR 254 (SC) to state that fluctuation in the rate of exchange with respect to loans taken for revenue purpose was allowable as deduction u/s 37(1) in the year of fluctuation overlooking the fact that the assessee had only reworked out the difference in loan taken and ....
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....3,05,91,000/- is based on the assessee's survey declaration only without having any corresponding supportive material found or seized by the departmental authorities. Faced with the situation, we are of the view that even the CBDT's landmark circulars issued on 10.03.20023 and 15.12.2014 have settled the issue that mere admission hardly carry any significance. Learned DR could not produce any material found or seized during the course of survey which can substantiate the Revenue's claim that the assessee had concealed or furnished inaccurate particulars of it's income. 7. Apart from the above detailed discussion, we also wish to quote hon'ble apex court's landmark decision in CIT vs., Reliance Petro Products [2010] 322 ITR 158 (SC) wherein their lordships' have settled the law that each and every disallowance/addition does not lead to automatic levy of penalty. We thus find no reason to reverse the CIT(A)'s action deleting the impugned penalty. This Revenue's latter appeal ITA.No.290/PAN./2019 is rejected therefore. 8. To sum-up, both these Revenue's appeals ITA.Nos.289 & 290/PAN./2019 are dismissed in above terms. A copy of this common order be placed in the respective c....
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....ous year). The Appellant-company too, following the said mandatory AS 11, charged the forex gains and losses made during the year to P & L A/c. However, the AO based on a wrong notion that the said losses are notional and based on certain High Court decisions rendered before the year 2009, on derivative products, disallowed. the said forex losses. A very similar issue was standing before the Hon'ble Supreme Court in the case of CIT Vs Woodward Governor India P. Ltd. (2009) 312 ITR 254 (SC) Hon'ble Apex Court, during the course of their in-depth discussion, inter-alia, held thus : "15. For the reasons given hereinabove, we hold that, in the present case, the "loss" suffered by the assessee on account of the exchange difference as on the date of the balance sheet is an item of expenditure under Section 37(1) of the 1961 Act. (y)) क 21. In conclusion, we may state that in order to find out if an expenditure is deductible the following have to be taken into account (i) whether the system of accounting followed by the assessee is mercantile system, which brings into debit the expenditure amount for which a legal liabil....
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.... is in consonance with the decisions of the Hon'ble Apex Court and also the view taken by the Tribunal in the cases cited hereinabove (supra). Hence, the view taken by AO to allow loss of Rs.43.78. crores while making assessment u/s 143(3) on account of derivative contract outstanding is not an erroneous view taken by AO, nor the action of AO is prejudicial to the interest of revenue. Hence, the order of Commissioner of Income Tax u/s 263 of the Act to hold that the action of AO is erroneous to the extent the loss considered as allowable on account of derivative contracts Page 11 of 14. Wallace Pharmaceuticals Private Limited. A.Y.2009-10 outstanding as on the date of balance sheet i.c. 31.3.2008 is neither justified nor in accordance with law. Hence, we quash the said order of ld. Commissioner of Income Tax by allowing the grounds of appeal taken by the assessee." [emphasis added] 8.10 Hon'ble Apex Court, once again, in the case of ONGC Ltd Vs CIT, rendered on March 15, 2010, (2010) 322 ITR 180 (SC), upheld a similar claim of the assessee and allowed the same. Hon'ble Apex Court, inter alia, held thus: "Applying these fact....
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....8.15 In fact, this accounting issue had been and is governed by the mandatory AS 11 issued by the ICAI and under the said AS 11, such losses and gains are to be charged to the Profit and loss A/c. The only exception is in respect of forex losses on forex loans raised for capital assets prior to April 01, 2004. The issue on hand is not covered by this exception. 8.16 I find force in the submission of the AR that the Hon'ble Supreme Court, in the case of CIT Vs Woodward Governor India P. Ltd (2009) 312 ITR 254 (SC), vide paragraph 15, held thus: "15. For the reasons given hereinabove, we hold that, in the present case, the " loss" suffered by the assessee on account of the exchange difference as on the date of the balance sheet is an item of expenditure under Section 37(1) of the 1961 Act...." 8.17 Hon'ble Jurisdictional ITAT also, in the case of Reliance Industries Ltd Vs CIT, rendered on November 20, 2013, vide paragraph 11, inter alia, held thus: "11. In view of above decisions, it is clear that the loss due to foreign exchange fluctuation in foreign currency transactions in derivatives has to be considered....
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.... against the appellant-company. 14. 15. I find force in the submissions of the AR that (a) The AO has, in the said Notice dated Dec. 21, 2016, neither ticked the right/wanted clause nor has he struck off the unwanted clause; (b) The appellant-company was, therefore, unable to respond properly to the said Notice; and (c) "Furnishing of inaccurate particulars of income" and "Concealment of particulars of income" have different connotations under the ITA and that as the specific charge is not mentioned in the said Show-cause Notice, it deprived the appellant-company an opportunity to contest the said Notice appropriately. In the case of CIT Vs CJ Rathnaswamy (1997) 223 ITR 5 (Mad), Hon'ble Madras High Court held thus: "6. According to the facts arising in the present case, the assessee agreed for an addition of the undisclosed income, but does not agree for addition on the basis that the undisclosed income is his concealed income. It was also admitted that the Department has not brought any other. materials to to show that the assessee had concealed the income or furnished inaccurate particulars so as to warrant penalty un....
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....thout any accompanying incriminating documents and in the absence of any advcrsc findings by the said Survey Team, the same is neither binding on the appellant-company nor it has any evidentiary value. 20. Hon'ble jurisdictional ITAT Mumbai in the case of Amod Shivlal Shah Vs. ACIT (2018) (TBom), rendered on 14th April 2018, reported at www.itatonline.org held thus: "Therefore, in our considered opinion, the manner in which the declaration was made at the time of survey, which ostensibly was de hors any supporting documents, was not something which could be conclusively held against the assessee in the face of the claims made by the assessee in the return of income, which were based on audited accounts and the supporting documents. Thus, on this aspect, we are inclined to uphold the stand of the assessee. Page 14 of 16 Wallace Pharmaceuticals Private Limited A.Y.2014-15 In the present case, apart from the statement at the time of survey, there is no material referred to, which has been obtained during the survey, which supports the estimation of income from the project at Rs.1,00,00,000/-. In fact, the assessment order does n....