TaxTMI 
TaxTMI 
2026 (3) TMI 1554
X X X X Extracts X X X X
X X X X Extracts X X X X
.... submission filed. In view of the facts of the case and elaborate submissions filed, the appellant's case does not fall within the scope of provisions of Section 271(1)(c) of the Act. Accordingly, the penalty in respect of the said addition of Rs. 2,49,12,784/- for Arms' Length Price requires to be quashed/cancelled. 2. The learned CIT (A) has erred in law as well as on facts in confirming the penalty levied u/s. 271(1)(c) of the Act in respect of disallowance of GDR issue expenses of Rs. 15,02,592/- without proper consideration and appreciation of the facts of the case and submission filed. In view of the facts of the case and elaborate submissions filed, the appellant's case does not fall within the scope of provisions of Section 271(1)(c) of the Act. Accordingly, the penalty in respect of the said disallowance of Rs. 15,02,592/- for GDR Issue expenses requires to be quashed/cancelled. 3. The learned CIT (A) has erred in law as well as on facts in confirming the penalty levied u/s. 271(1)(c) of the Act in respect of disallowance of miscellaneous expenses of Rs. 11,76,704/- without proper consideration and appreciation of the facts of the case and sub....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vanced to associated enterprise, (ii) disallowance of GDR issue expenses, (iii) disallowance of miscellaneous (MODVAT) expenses, (iv) addition on account of foreign exchange fluctuation gain, and (v) addition on account of TDS reconciliation. The Assessing Officer held that the assessee had furnished inaccurate particulars of income and concealed income. In respect of transfer pricing adjustment, the Assessing Officer placed reliance on Explanation 7 to section 271(1)(c) of the Act on the ground that the assessee failed to establish good faith and due diligence in determining ALP. In respect of GDR expenses, the claim was held to be contrary to settled law laid down by the Hon'ble Supreme Court in Brooke Bond India Ltd. In respect of miscellaneous expenses, the Assessing Officer held that the assessee failed to substantiate the claim with evidence. With regard to foreign exchange gain and TDS reconciliation, the Assessing Officer observed that the assessee itself admitted non-offering of such income in the return and the same was offered only during assessment proceedings. Accordingly, penalty was levied on all the additions. 4. In appeal, the Ld. CIT(Appeals) examined each of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ty levied by the Assessing Officer. 6. The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee. 7. We have carefully considered the rival submissions and perused the material available on record including the orders of the lower authorities and the detailed findings of the Ahmedabad ITAT in assessee's own case for Assessment Year 2009-10 in quantum proceedings. 8. In respect of ALP adjustment, the Ahmedabad ITAT has upheld the addition made by the assessee. It would be useful to reproduce the relevant extracts of ITAT order for assessment year 2009-10 for ready reference: "Ground No. 2: Ld. CIT(A) erred in confirming the addition of Rs. 4,87,46,666/- made by the Assessing Officer on account arms length price of loan interest 4. The brief facts relating to Grounds of appeal Number 1 and 2 of the assessee's appeal are that the assessee had advanced a certain sum of money to its subsidiary company Roma Textile FZE. The assessee company was of the view that such advance was in the nature of quasi capital and further the entire proceeds of the GDR issue have been invested in the aforesaid subsidiary an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ore, have to be decided against the assessee and the impugned action of the authorities below, in principle, is to be confirmed." 6. In view of the above since ITAT has decided the issue against the assessee on identical facts in assessee's own case for assessment year 2008- 09, the ground nos. 1 & 2 of the assessee's appeal are dismissed accordingly." 9. Accordingly, we find no infirmity in the order of Ld. CIT(A) so as to call for any interference. Accordingly, this s Ground of Appeal of the assessee is dismissed. 10. In respect of GDR issue expenses, the Ahmedabad ITAT in quantum proceedings has clearly held that expenses incurred for issue of share capital are capital in nature and not allowable under section 35D of the Act, following the binding decision of the Hon'ble Supreme Court in Brooke Bond India Ltd. The Tribunal also noted that the conditions of section 35D were not satisfied. Since the issue is covered against the assessee by binding precedent and the assessee still made the claim, the same cannot be regarded as a bona fide claim. Therefore, penalty is rightly levied and confirmed. 11. In respect of MODVAT (miscellaneous) expenses, the Tribunal has ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lowed the assessee's appeal on this ground with the following observations: "15. During the course of scrutiny assessment proceedings, it was noticed that the assessee had claimed loss on derivative transactions during the year amounting to Rs 57,76,604. When the Assessing Officer probed the matter further, it was found that these transactions were stated to be hedge the foreign exchange obligations of the assessee in respect of export realizations.. As this forward contract was said to be in the course of assessee's business, and in respect of his foreign exchange dealings, the loss was claimed as a business loss. The Assessing Officer, however, did not agree. He was of the considered view that since the contract was settled, otherwise than through delivery, section 43(5) was attracted, and, accordingly, loss was required to be treated as speculative loss. The Assessing Officer was also of the view that, in the light of CBDT instruction no. 3 of 2010 dated 23rd March 2010, such a loss in foreign exchange derivates cannot be allowed as deduction. It was in this background that the Assessing Officer disallowed deduction of Rs 57,76,604. Aggrieved, assessee carried the matte....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... In any event, the assessee has filed detailed contracts notes before us which link the transactions to forward contracts entered into by the assessee. As a matter of fact, each of the confirmation so filed from the ICICI Bank categorically states that "the notional principal amount of the transaction does not exceed the outstanding amount of underlying transactions which the counterparty ( i.e. the assessee), seeks to hedge against". In this view of the matter, all the derivate transactions are specific hedging transactions against foreign exchange transactions of the assessee and are to be treated as integral part of the business transactions of the assessee. These transactions, by no stretch of logic, cannot be treated as standalone transactions, and as such loss on these transactions cannot be treated as loss from speculation business ineligible for set off against normal business profits. As for the CBDT instruction relied upon by the Assessing Officer, such instructions do not bind the appellate authorities, and nothing, therefore, turns on the same- so far as our adjudication is concerned. The losses on account of foreign exchange contracts are bonafide expenses incurred in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s Ltd. [2020] 121 taxmann.com 171 (Madras), affirmed by the Hon'ble Supreme Court in [2022] 137 taxmann.com 198 (SC), wherein it has been held that voluntary disclosure of income after detection by the Assessing Officer does not absolve the assessee from penalty. Similarly, reliance has also been placed on the decision of the Hon'ble Bombay High Court in the case of Mahesh N. Thakkar [2015] 59 taxmann.com 272 (Bom), wherein it was held that where income is offered only after being pointed out by the Assessing Officer, penalty under section 271(1)(c) is clearly attracted. 17. In view of the above factual position, it is evident that the assessee had failed to disclose income which was otherwise taxable in the relevant year and such omission cannot be regarded as a bona fide mistake. The conduct of the assessee clearly falls within the mischief of furnishing inaccurate particulars of income and concealment thereof. Therefore, the Ld. CIT(A) was fully justified in confirming the penalty on this issue. 18. Similarly, with regard to the addition on account of TDS reconciliation difference amounting to Rs. 7,83,299/-, we find that the Ld. CIT(A) has recorded that during the course ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rice for international transaction of Rs. 1,99,57,094/- without proper consideration and appreciation of the facts of the case and submission filed. In view of the facts of the case and elaborate submissions filed, the appellant's case does not fall within the scope of provisions of Section 271(1)(c) of the Act. Accordingly, the penalty in respect of the said addition of Rs. 1,99,57,094/- for Arms' Length Price requires to be quashed/cancelled. 2. The learned CIT (A) has erred in law as well as on facts in confirming the penalty levied u/s. 271(1)(c) of the Act in respect of disallowance of GDR issue expenses of Rs. 15,02,592/- without proper consideration and appreciation of the facts of the case and submission filed. In view of the facts of the case and elaborate submissions filed, the appellant's case does not fall within the scope of provisions of Section 271(1)(c) of the Act. Accordingly, the penalty in respect of the said disallowance of Rs. 15,02,592/- for GDR Issue expenses requires to be quashed/cancelled. 3. The learned CIT (A) has erred in law as well as on facts in confirming the penalty levied u/s. 271(1)(c) of the Act in respect of disall....