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2013 (3) TMI 397 - AT - Income TaxIncome from undisclosed sources - suppression of sales on account of under valuation of sales of waste detected by the Intelligence Wing of the excise department - Held that - The assessee accepted that as per the assessee s own admission there was difference in the sales figure of waste amounting to Rs. 91,84,006/- pertaining to asstt. year 2001-02 to 2005-06. Assessee has accepted the order of the Settlement Commission in this regard and has duly paid excise duty of Rs. 143,73,644/- on the alleged sales amount of Rs. 91,84,006/- for the financial year 2001-02 to 2004-05. In light of the above, now the submission of the assessee is that it has accepted the verdict of Settlement Commission and the orders of the authorities in Excise Department only to buy peace of mind. This contention does not have any cogency & submissions of the assessee that no addition in the income tax assessment can be made in this regard as nothing has been found by the income tax authorities in this regard is also not tenable - against the assessee. Disallowance on account of foreign exchange fluctuation loss which remained included in the WDV in the plant and machinery which was covered under the provisions of sub-section 43A - CIT(A) deleted the disallowance - Held that - Finding agreement with the CIT(A) that before the amendment to section 43A any loss suffered by assessee on account of foreign exchange fluctuation has to be capitalized in the year of such fluctuations if the asstt. order is prior to asstt. year 2003-04. The amendment to section 43A has rightly been considered as prospective in nature. Accordingly, no infirmity in the order of the CIT hence, we uphold the same - against revenue. Disallowance of set off of unabsorbed depreciation on the ground that no adjustment is possible in view of business losses being NIL - Held that - CIT(A) observed that in view of the decision of the Met mine Investment & Trading Pvt. Ltd. vs. I.T.O. 2008 (12) TMI 631 - ITAT MUMBAI the assessee was not entitled for set off of unabsorbed depreciation - against assessee.
Issues Involved:
1. Addition as income from undisclosed sources representing suppression of sales on account of under-valuation of sales of waste. 2. Disallowance on account of foreign exchange fluctuation loss included in the WDV of plant and machinery. 3. Non-allowance of set-off for unabsorbed depreciation. Detailed Analysis: Issue 1: Addition as Income from Undisclosed Sources Representing Suppression of Sales on Account of Under-Valuation of Sales of Waste Summary of Facts: - The search and seizure activities at the assessee's office revealed under-valuation of waste sales. - The Excise Department found that the waste was sold at Rs. 5.5 per kg instead of the actual price of Rs. 20 per kg. - The differential value of sales was calculated at Rs. 91,81,006/- for the financial years 2000-01 to 2004-05. - The assessee had filed a petition before the Central Excise Settlement Commission and paid duty on the differential value. Assessee's Argument: - The excise duty was paid to avoid prolonged litigation and not because of actual suppression of sales. - The alleged suppression of sales should be considered as income in the assessment year 2008-09. Commissioner of Income Tax (A)'s Decision: - The Commissioner confirmed the addition, stating that the under-valuation was detected by the Intelligence Wing of the Excise Department. - The assessee's own admission of suppressed sales amounting to Rs. 91,84,006/- was taken as a basis for the addition. Tribunal's Decision: - The Tribunal upheld the Commissioner's decision, noting that the assessee's acceptance before the Excise Settlement Commission and payment of excise duty substantiated the suppression of sales. - The Tribunal found no infirmity in the orders of the authorities below and decided the case against the assessee. Issue 2: Disallowance on Account of Foreign Exchange Fluctuation Loss Included in the WDV of Plant and Machinery Summary of Facts: - The assessee capitalized the adverse impact of foreign exchange fluctuation in the value of plant and machinery. - The Assessing Officer disallowed depreciation on this amount, considering it a notional loss under section 43A of the Act. Assessee's Argument: - Prior to the amendment of section 43A, it was permissible to increase the value of assets by the amount of loss suffered due to foreign exchange fluctuation. - The assessee relied on the decision of the Hon'ble Apex Court in the case of Arvind Mills Ltd. 193 ITR 255. Commissioner of Income Tax (A)'s Decision: - The Commissioner allowed the assessee's appeal, stating that before the amendment to section 43A, any loss due to foreign exchange fluctuation had to be capitalized in the year of such fluctuation. Tribunal's Decision: - The Tribunal agreed with the Commissioner that the amendment to section 43A was prospective and upheld the decision to allow capitalization of the foreign exchange fluctuation loss for assessment years prior to 2003-04. - The Tribunal found no infirmity in the Commissioner's order and dismissed the revenue's appeal on this issue. Issue 3: Non-Allowance of Set-Off for Unabsorbed Depreciation Summary of Facts: - The Assessing Officer rejected the assessee's claim for setting off Rs. 4,17,94,000/- as unabsorbed depreciation. Commissioner of Income Tax (A)'s Decision: - The Commissioner upheld the Assessing Officer's decision, referencing the ITAT, Mumbai's decision in the case of Metmine Investment & Trading Pvt. Ltd. vs. I.T.O. Tribunal's Decision: - The Tribunal upheld the Commissioner's order, noting that the assessee's counsel conceded that the issue should be decided against the assessee. - The Tribunal decided the issue against the assessee and upheld the order of the Commissioner. Conclusion: All the appeals filed by the assessee and revenue were dismissed. The Tribunal upheld the decisions of the lower authorities on all issues, confirming the addition for suppression of sales, allowing capitalization of foreign exchange fluctuation loss prior to the amendment of section 43A, and denying the set-off for unabsorbed depreciation.
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