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2023 (3) TMI 984 - AT - Income TaxAssessment u/s 144C - Mandation to consider assessee submissions - Unrealized foreign currency losses - AO disallowed claim as assessee company to furnish details of foreign currency losses along with vouchers and details of dealing - HELD THAT:- Observations of the ld DRP that the ld AO considered the submissions seems to be incorrect as the draft order does not reflect the same. DRP seems to have not shown interest in examining the material on record and give a conclusive finding on issue. The provisions of Section 144C of the Act with sub-section 7 provides that DRP before issuing any directions under sub-section 5 of Section 144C can make such inquiry as it feels or call for any inquiry to be made by any Income Tax Authority. It is a settled proposition of law that the process before the DRP is continuation of the assessment proceedings as only thereafter would a final appealable assessment order be passed. The proceeding before the DRP is not an appeal proceeding but a corrective mechanism in the nature of a second look at the proposed assessment order by high functionaries of the revenue keeping in mind the interest of the assessee. It is a continuation of the assessment proceeding till such time a final order of assessment which is appealable is passed by the AO DRP thus is an authority expected to exercise its power more extensively then actually available with First Appellate Authority, CIT(A). The Bench is of considered opinion that Ld. DRP has fallen in error in not exercising it’s exhaustive powers within the scope of Section 144C and to give a finding on the merits of the objections of the assessee on the basis of record before it. Too much stress has been laid by Ld. DRP on the non-satisfaction of Ld. AO about the lack of information provided to the Ld. AO. As a quasi judicial authority, the Ld. AO and Ld DRP, both were supposed to examine the claim on merits on the basis of whatever matter was before it. Brushing aside all the submission without any marshaling of whatever evidence or submissions are available and stressing on a particular information, is not justified. On merits of the claim, the bench is of considered opinion that judgments relied by the Ld. AR in the case of CIT vs. M/s. Woodward Governor India P. Ltd. (2009 (4) TMI 4 - SUPREME COURT] and ONGC Ltd. vs. CIT (2010 (3) TMI 81 - SUPREME COURT] extensively deal with the question as to what factors should be taken into account in order to find out if an expenditure on account of fluctuation in the foreign currency rates, when the assessee is following mercantile system of accounting, is deductible. The issue requires to be remanded back to the Ld. AO with directions to take into consideration the submissions of assessee dated 22.03.2021 and 02.04.2021 along with its enclosures / annexures and to pass afresh draft assessment order. Needless to say that Ld. AO will be in it’s right to call for any further information from the assessee. Appeal of assessee is allowed for statistical purposes.
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