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TMI Blog2024 (10) TMI 859X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Hon ble Court and held that Forward Contracts were entered into by the assessee to hedge against foreign exchange fluctuations resulting from inflows/outflows in respect of the underlying contracts for provisions of consultancy and project management. Concededly, the assessee is not dealing in foreign exchange. Clearly, the said transactions were to hedge against the risk of foreign exchange fluctuations and thus, fall within the exceptions of proviso (a) to section 43(5) of the Act. The Forward Contracts were to guard against any loss on account of future exchange fluctuations in respect of inflows and outflows relating to contracts for execution of the works entered into by the assessee - Decided in favour of assessee. Addition u/s 68 - cash deposits during the demonetization period - HELD THAT:- Assessee has submitted the source of cash deposits from the sale of scrap sales and also filed the details of the parties along with confirmations. Assessing Officer rejected the same without making further enquiries. As the assessee has precisely explained the source of cash and also filed the confirmations as submitted the party-wise details of such scrap sales and also submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time of hearing, ld. AR for the assessee brought to our h\notice grounds of appeal raised by the assessee in this appeal and for the sake of brevity, the same is reproduced below :- 1 That the learned Commissioner Income Tax (Appeals) has grossly erred both in law and on facts in sustaining a disallowance of a sum of Rs. 4,715/- on account of employees contribution towards PFI/ESI. 2. That the learned Commissioner Income Tax (Appeals) has grossly erred both in law and on facts in sustaining a disallowance of a sum of Rs. 32,38,000/- on account of Mark to Margin Losses (M to M), thereby, holding the same to be a contingent liability as against the actual/accrued liability, as claimed by the assessee - appellant. 2.1 That the learned CIT (A) has grossly erred in sustaining the impugned disallowance with preconceived notions; relying on irrelevant judgments, recording perverse findings and also by arbitrarily brushing aside the detailed / submissions/ evidences/material/judgments placed on record, which were furnished in order to support the fact that the aforesaid losses actually accrued. to assessee. 2.2 That in doing so, the learned CIT (A) has further failed to appreciate the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that M to M loss of foreign exchange contract is to be treated as contingent losses. Accordingly, he dismissed the claim of the assessee under normal provisions as well as profit u/s 115JB of the Act. 8. Ld. AR submitted that against that above order, assessee preferred an appeal before the ld. CIT (A) and filed detailed submissions. Ld. CIT(A) after considering the submissions of the assessee dismissed the ground raised by the assessee and sustained the addition made by the Assessing Officer. 9. At the time of hearing, ld. AR for the assessee submitted that ld. CIT (A) decided the issue of M to M losses against the assessee by relying on the decision of ITAT, Delhi in the case of Bechtel India Pvt. Ltd. 2017 (82) taxmann.com 301 (Delhi-Trib.). He submitted that Hon ble Delhi High Court has decided the issue in favour of the assessee in the same case and brought to our notice the relevant decision filed in the paper book (ITA 930/2017 dated 15.03.2024). He brought to our notice the relevant findings. Further he relied on the decision of Hon ble Delhi High Court in the case of PCIT vs. Simon India Ltd. 450 ITR 316. 10. On the other hand, ld. DR for the Revenue relied on the orders o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue in favour of the assessee and held as under :- Having heard learned counsels for parties, we find that the principal question which stands raised appears to be conclusively settled in light of the following binding conclusions rendered by a coordinate Bench of this Court in Pr. Commissioner of Income Tax vs Simon India Ltd. [2022 SCC Online Del 4284]. We deem it apposite to extract the following passages from that decision: 25. Thus, according to the Revenue, the learned CIT(A) and the learned Tribunal had erred in finding that the loss on account of Forward Contracts is allowable under Section 37(1) of the Act and is covered as a hedging transaction under Section 43(5)(a) of the Act. The Revenue contends that the said loss is required to be disallowed as a speculative loss in terms of the CBDT Instruction no.3/2010. 26. The Revenue's contention is unmerited. There is no dispute that the Forward Contracts were entered into by the Assessee to hedge against foreign exchange fluctuations resulting from inflows/outflows in respect of the underlying contracts for provisions of consultancy and project management. Concededly, the Assessee is not dealing in foreign exchange, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss that might result due to foreign exchange Currency fluctuation foreign currency fluctuation. 30. Undisputedly, the Forward Contracts, in the present case, are hedging transactions, The Assessee has reinstated its debits and credits from the underlying transactions on the value of the foreign exchange on the due date. The corresponding losses/gains under the Forward Contracts, thus, were also required to be accounted for to arrive at the real profits, It would be anomalous if, on the one hand, debtors and creditors, in respect of current assets, are stated at the current value of foreign exchange and the corresponding loss on the hedging transaction is not accounted for. In essence, the Assessee has stated his income by taking into account the foreign exchange value as it stands on the due date. It is well settled that the CBDT Instructions and circulars which are contrary to law are not binding. 3. We additionally take note of the legislative amendments which have been introduced pursuant to the view which was expressed by the Supreme Court in Commissioner of Income Tax vs Woodward Governor India Private Limited [(2009) 13 SCC1] and which has led to the introduction of Section 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34,04,500/- of SBN (demonetized currency) during the period 09.11.2016 to 30.11.2016. The Assessing Officer has reproduced the comparative chart of monthly cash receipts and deposits in his order at page 7. Based on the above chart, the Assessing Officer observed that assessee has deposited Rs. 3,36,000 during the month of November and Rs. 30,68,500/- during the month of December 2016. On an enquiry, the assessee submitted that primary source of cash deposit was cash sales/scrap sales and the details of the same were submitted by the assessee before the Assessing Officer. The same is reproduced by the Assessing Officer in his order. After considering the above submissions, Assessing Officer observed that the cash sales from the month of October and November is Rs. 98,000/- and Rs. 28,000/- respectively. The major source of cash was scrap sales. Therefore, assessee was asked to furnish details of scrap sales. The same was submitted by the assessee before AO and it is reproduced in the assessment order. The Assessing Officer observed that the majority of cash receipts from scrap sales is from three parties and the relevant details were reproduced in the assessment order. The same com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on record. We observed from the record that the assessee has deposited SBN during demonetization period and the source for the above was from their cash sales and scrap sales. Assessing Officer observed that assessee has deposited Rs. 21,00,000/- during the demonetization period and the source is claimed to be from scrap sales. On an enquiry, assessee has submitted the party-wise details of such scrap sales and also submitted confirmations from these parties. Assessing Officer observed certain discrepancies on the date of deposit regarding of cash sales from two parties i.e. Rajesh Enterprises and Hindustan Metal and he disbelieved the submissions of the assessee and proceeded to make additions. We observed from the record that assessee has submitted the party-wise details and date-wise scrap sales before the Assessing Officer and the Assessing Officer merely observed the information submitted by the assessee and proceeded to make the addition without cross-verifying from the other parties. It is against the standard conventions and in similar cases, the Hon ble Delhi High Court in the case of CIT vs. Genesis (supra) held as under :- 5. The Tribunal has noted that insofar as M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, Hon ble Delhi High Court in the case of Jhaveri Bihari Services vs. ACIT (supra) held as under :- 9. Admittedly, the assessee had produced its books of account did mention the name of the six creditors whose cash credits have not been accepted by the department in spite of the production of certificates from them by the assessee. It was, therefore, incumbent on the ITO to have resorted to the provisions of section 131, at least even once, by issuing summons to those six creditors. As to what would have been the effect of their non-appearance or the non-service of notices on them, is a question with which we are not concerned in this case. We have merely to see as to whether, on the facts and in the circumstances of the case, the onus that lay on the department can be said to have been discharged in spite of the refusal on the part of the ITO to issue summons to those six parties. The answer to our mind is clear. The law enjoins the issuance of summons in case certificates purported to have been granted by such creditors are produced before the assessing authority. We could have at once directed the deletion of the additions made to the tune of Rs. 80,354 if the identity o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmations. Assessing Officer rejected the same without making further enquiries. Therefore, we are inclined to follow the decision of Hon ble Delhi High Court and decide the issue in favour of the assessee. 25. Coming to the submissions of the ld. DR for the Revenue and ld. DR relied on the decision of ITAT, Hyderabad Bench in the case of Vaishnavi Bullion Private Limited (supra), we observed that the decision relied by the ld. DR is distinguishable to the facts of the present case. In the abovesaid decision, the assessee made out two versions of sources for the credits recorded in their books of account i.e. one is received from 2153 persons and the other as received from single person. The Bench observed that assessee failed miserably whether the same belonging to either said 2153 persons or one person with cogent evidence. The facts in the present case are different than the assessee as the assessee has precisely explained the source of cash and also filed the confirmations. Therefore, the above case is distinguishable to the facts of the present case. Accordingly, grounds no.2, 2.1 2.2 raised by the assessee are allowed. 26. Ground No.3 is general in nature, hence does not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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