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TMI Blog2021 (7) TMI 624X X X X Extracts X X X X X X X X Extracts X X X X ..... s under the head manufacturing administration expenditure . Therefore, since the facts in AYs 2009-10 and 2010-11 are similar to the AY 2008-09. As per accounting standard AS-11, the assessee has rightly, claimed the forex loss as business loss u/s 37(1) - The losses claimed by the assessee are not speculative loss as alleged by the AO Assessment u/s 153A - incriminating documents were found during the course of search or not? - HELD THAT:- On perusal of the assessment order nowhere any seized material has been referred by the AO for computing the assessment and made addition only on the basis of the financial statements. Since no incriminating documents found during the course of search u/s 153A, no addition can be made. - ITA Nos. 1683 & 1684/H/2016 and COs 03 & 04/H/2017 - - - Dated:- 13-7-2021 - Shri Satbeer Singh Godara, Judicial Member And Shri Laxmi Prasad Sahu, Accountant Member For the Assessee : Shri K.C. Devdas For the Revenue : Shri P. Chandrasekhar ORDER PER L.P. SAHU, A.M.: Both these appeals filed by the Revenue are directed against CIT(A), Tirupati s orders dated 30/09/2016 for AYs 2009-10 and 2010-11 involving proceedings u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bad and ITAT, Hyderabad uphold the order of Id CIT (Appeals), Guntur and dismissed the Appeal filed by the department. 9. Further we have consistently claimed the FOREX Loss in the earlier Ass! Year 2006-07 2007-08 and the same was accepted by the AO and passed order u/s 143 (3) of the Income Tax Act 1961. 10. Further the AO was completed the Assessment u/s 143 (3) r.w.s. 153 A of the Income Tax Act 1961 and no incriminating documents were found during the course of search. 11. Respondent craves leave to adduce additional grounds at the time of hearing . 2. Briefly the facts as culled out from AY 2009-10 are that the assessee a company, engaged in manufacturing of white crystal sugar, alcohol and generation of power, the return of income for A.Y. 2009-10 was filed on 30.09.2009 declaring a loss of Rs,16,64,00,570/-. Scrutiny assessment u/s 143(3) was completed by the AO, on 31-12-2011 by making certain disallowances. Aggrieved by the said order, the assessee preferred an appeal before the CIT{A) and the CIT(A) vide his order in ITA No.0313 0314/ CIT{A)/ GNT/11-12, dated:09.05.2011 has decided all the issue in favour of the assessee except confirming an addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . vis ACIT, 5(1), Mumbai, [2014J 52 taxmann.com 238 (Mumbai - Trib.) 3. Sopropha S.A., In re-, [2004] 138 taxmann 75 (AAR.) 4. S. Vinodkumar Diamonds (P.) Ltd. v Is Addl CIT, Range-5(3), Mumbai, [2013] 35 taxmann.com 337 (Mumbai - Trib.) 6. On the other hand, the ld. AR of the assessee reietered the submissions as made before the CIT(A) and besides relying on the order of CIT(A), submitted that the assessee has been consistently claiming the Forex loss in the earlier AYs 2006-07 2007-08 and the same was accepted by the AO in the orders passed u/s 143(3) of the Act. He further submitted that in AY 2008-09, the ITAT upheld the order of CIT(A) who allowed the assessee s claim of forex losses against the appeal filed by the revenue. He further submitted that the AO completed the assessment u/s 143(3) rws 153A of the Act and no incriminating documents were found during the course of search, therefore, disallowing forex loss is against law. The ld. AR submitted that the case law relied on by the ld. DR is not applicable to the facts of the case of the assessee. 7. We have considered the rival submissions and perused the material on record as well as gone through the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... larly enters into forward contracts to cover their currency exposure. The forward contracts are settled by delivery of currency. FOREX derivative contracts are entered into with a view to make good the loss incurred on account of rupee appreciation . loss on account of FOREX derivates springs directly from and is incidental to the carrying on business of the Appellant. The loss is not incurred on the capital account or fixed assets so as to make it a capital loss. The loss is real and not fictitious. There exists a direct and proximate nexus between Appellant's export business and loss on account of forex derivatives. 7.1 In support of our decision, we rely on the following judgments: 7.2 In the cases of Emmsons International Ltd. Vs. ACIT, [2019] 112 taxmann.com 205 (Delh), the Delhi Bench has held as under: 9. We have gone through the record. In this case, the pending forward contracts were restated on the basis of the foreign exchange rate, and since there is no dispute as to the details of forward contract booked up to 31.03.2012 and gain/loss thereon, furnished by the assessee, all the losses are the losses booked by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Company Ltd. (supra), the question that had fallen for consideration was whether the loss from foreign exchange contract is a notional or contingent in nature. Hon'ble Bombay High Court referred to instruction No.03/2010 dt: 23.03.2010 to confirm that such loss is business loss allowable under the Act and held that CBDT circular/instruction has no applicability. 13. On a careful consideration of the facts involved in this case, we are of the considered opinion that the decision in the case of Woodward Governor (P.) Ltd. (supra) and ONGC (supra) are applicable, and the line of judicial view is that the Revenue cannot be permitted to contend that there is a CBDT instruction No. 03/2010 dated 23/3/2010 to the contrary. No CBDT circular or instruction can be contrary to the decision of the Hon'ble Apex Court, even subsequent to the decision of the Hon'ble Apex Court. We, therefore, accept the contention of the assessee and hold that the addition is unsustainable. We, accordingly, direct the Assessing Officer to delete the same. 7.3 In the case of Pr. CIT Vs. Precot Meridian Ltd., [2020] 120 taxmann.com 429 (Madras), the Hon ble High Court has held as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts were booked only as incidental to the assessee's regular course of business. The Tribunal has recorded a categorical finding to this effect in its order. The Assessing Officer has not considered these facts. Under section 43(5) of the Income-tax Act, speculative transaction has been defined to mean a transaction in which a contract for the purchase or sale of a commodity is settled otherwise than by the actual delivery or transfer of such commodity. However, as stated above, the assessee was not a dealer in foreign exchange. The assessee was an exporter of cotton. In order to hedge against losses, the assessee had booked foreign exchange in the forward market with the bank. However, the export contracts entered into by the assessee for export of cotton in some cases failed. In the circumstances, the assessee was entitled to claim deduction in respect of ₹ 13.50 lakhs as a business loss. This matter is squarely covered by the judgment of the Calcutta High Court with which we agree, in the case of CIT v. Sooraj Mull Nagarmull [1981] 129 ITR 1691]. ' 11. The above decision in the case of Celebrity Fashion Ltd. (supra) would also come to the aid and assistance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd submitted that the AO in the last two lines has mentioned that case of the assessee was discussed during the assessment proceedings with the AR of the assessee with reference to the books of accounts seized relating to the group of the cases as a whole. For the completeness of our order, we would like to reproduce the para 2 of the assessment order, which reads as under :- 02.Notice u/s.153A was issued on 31.01.2017. The A.R. of the Assessee, Ms. Swati Kejirwal, FCA appeared and submitted a copy of the Return u/s.153A filed on 10.03.2017 showing a Total income at ₹ 2,05,420/-. Here Total Income u/s.153A is equal to that shown in the Return u/s.139(1). Accordingly, notices us/s.143(2) u/s.142(1) are issued and served. The A.R., Ms. Swati Kejirwal, FCA appeared from time to time and the case is discussed with her with reference to the facts in the return of income and also with reference to the books of accounts seized relating to the group of the cases as a whole. 9. Further, the ld. AR drew our attention to the Panchanama filed in the paper book at pages 8 to 23 and submitted that no such books of accounts has been seized neither any incriminating materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s.153A of the Act for an assessment year for which assessment has not been abated, then the jurisdiction of the Assessing Officer to make addition in such an assessment, is confined to such incriminating search material and no addition dehors the search material can be made. 11.Undisputedly, in the instant case, the assessment for the assessment years in question have already been completed on the date of search in the cases of both the assessees and since no incriminating material was unearthed during the search, as is evident from the panchanama prepared during the course of search, no additions can be made to the income already assessed. To support our view, we shall rely on the decision of Hon ble Delhi High Court in the case of Kabul Chawla, [2015] 61 taxmann.com 412 (Delhi), wherein the Hon ble High Court has held as under :- On a conspectus of section 153A(1), read with the provisos thereto, and in the light of the law explained in various decisions, the legal position that emerges is as under: (i) Once a search takes place under section 132, notice under section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or not already disclosed or made known in the course of original assessment. [Para 37] The present appeals concern assessment years 2002-03, 2005-06 and 2006-07. On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. [Para 38]The revenue's appeals are accordingly dismissed.[Para 40] 12.In the present case, we find that there is nothing on record to suggest that any material was found in the course of search which would show any connection on addition made by AO with the seized material which is the subject matter of dispute in assessment order. Nothing is found contrary to the stated position of the assessee. We also find that there is no material referred to by the AO to say that any incriminating material was unearthed during the search. Therefore, in the factual background, we do not find any justification for the AO to make the impugned additions/disallowance in an assessment finalized u/s 153A of the Act in the absence of any incriminating material having been found during the course of search, qua the impugned addi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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