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2023 (2) TMI 515 - AT - Income TaxRevision u/s 263 by CIT - notional foreign exchange loss - As per CIT AO not having duly verified assesses claim of “foreign exchange loss on notional entries” in the computation of its income returned for taxation, despite no expense of foreign exchange loss being debited in its Books of accounts and it was a artificial loss not allowable otherwise. HELD THAT:- What we have gathered from contents of the ledger account of foreign exchange fluctuation, which were produced before us, we find that what the assessee was probably attempting to state was that it was following the practice of claiming only actual gain or loss on foreign exchange fluctuation, but in the ledger account it had debited both actual and notional gain or loss on foreign exchange following probably the Accounting Standards prescribed by the Institute of Chartered Accountants of India, AS-11, as per which it was mandatorily required to maintain its books of accounts. In the return of income, since the assessee wanted to restrict its claim only on the actual amount gain or loss on foreign exchange, it had netted off the notional gain or loss so booked in the account which accordingly was claimed in the return of income. But we find that this explanation was not clearly given by the assessee to the AO nor to the Ld.Pr.CIT, and even before us. The ld.counsel for the assessee did not explain likewise and did not come out in clear terms even before us. No infirmity in the order of the ld.Pr.CIT holding that vis-à-vis the issue of claim of notional foreign exchange fluctuation loss the claim apparently relating to notional loss which otherwise is not allowable under the Act and the issue being not examined by the AO, therefore there was an error in the order of the AO causing prejudice to the Revenue by allowing such claim to the assessee. The order of the ld.Pr.CIT is accordingly upheld on this count. Discrepancy in the claim of imported purchases as per the books and as per the CBEC data - There has to be a finding of error in the order of the AO for the PCIT to exercise his revisionary powers ,as also the error causing prejudice to the Revenue. On the impugned issue of mismatch in purchase as per CBEC data and that booked by the assessee, the Ld.PCIT finding the assesses explanation for the same to be prima facie correct he was largely satisfied with the explanation of the assessee, and therefore clearly there is no error in the order of the AO as per the Ld.PCIT also. When all facts and evidences were there before the Ld.PCIT ,he was required to go through the same and thereafter arrive at his finding of error. Subject to the verification of the evidences by the AO, clearly as per the Ld.PCIT there was no error in the order of the AO. In view of the same, on the issue of discrepancy in the claim of import purchases, we find there is no error in the claim of the assessee, and therefore, the assessment order cannot be said to be erroneous for not having examined the said claim of the assessee. To this extent, the order of the ld.Pr.CIT is set aside. PCIT has stated that the issue of mismatch in CBEC data of export sales and that booked by the assessee has also remained unexplained to the AO and even to him. But we find that this issue was never confronted to the assessee during revisionary proceedings - assessee was only put to notice about the mismatch in import purchases. The issue of mismatch in export sales never being confronted to the assessee, the Ld.PCIT’s order holding the assessment order erroneous on this count is against all principles of natural justice and accordingly is set aside on this count. Appeal of assessee partly allowed.
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