2023 (7) TMI 802 - AT - Income Tax

Foreign exchange fluctuation loss - forex losses of current account transactions - Whether loss was arrived at by the assessee was notional in nature.? - CIT(A) deleted the addition - HELD THAT - The question as to whether such gains or losses, involving foreign exchange already stand settled in hon ble apex court s landmark decision in CIT vs. Woodward Governor India P. Ltd., 2009 (4) TMI 4 - SUPREME COURT . This is indeed coupled with the fact that the relevant Accounting standard AS-11 has also issued necessary clarification that such differences ought to be recognized as income or expenditure, as the case may be, in revenue account. There is no discussion in the Assessing Officer s corresponding findings in his assessment order 27.12.2011 that the assessee s transactions in fact, had been taken in capital than in revenue account so as to be treated as capital expenditure as per CBDT s instruction no.3/2010 dated 23.03.2010. It rather emerges that the assessee had worked-out it s various losses relating to inventory only in current account followed by it s supportive evidence issued by the Bank of Baroda s cash credit sanction letter . Decided against revenue. Penalty u/s 271(1)(c) - assessee s survey declaration - HELD THAT - 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. We also wish to quote hon ble apex court s landmark decision in CIT vs., Reliance Petro Products 2010 (3) TMI 80 - SUPREME COURT 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. Decided against revenue.

Summary

Issues Involved:
The judgment involves twin appeals against the CIT(A)'s orders for assessment years 2009-2010 and 2014-2015, addressing issues related to foreign exchange fluctuation losses and penalty under sec.271(1)(c) of the Income Tax Act, 1961.

Assessment Year 2009-2010:
The Revenue's appeal questioned the deletion of foreign exchange fluctuation loss as notional in nature and the allowance of deduction u/s 37(1) by the CIT(A). The Tribunal upheld the CIT(A)'s decision citing the hon'ble Supreme Court's ruling and Accounting standard AS-11, emphasizing that such differences should be recognized in the revenue account.

Assessment Year 2014-2015:
The appeal dealt with a penalty issue, where the CIT(A) had reversed the Assessing Officer's action based on survey declaration without supporting material. The Tribunal agreed with the CIT(A) citing CBDT circulars and the Supreme Court's decision that not every disallowance leads to automatic penalty imposition.

The Tribunal dismissed both appeals, upholding the CIT(A)'s decisions in both cases, emphasizing legal precedents and lack of substantial evidence to support the Revenue's contentions.