TMI Blog2010 (2) TMI 914X X X X Extracts X X X X X X X X Extracts X X X X ..... first plank of the assessee's argument and the CIT(A) reliance on the same that AO cannot compute the arms length price without referring the matter to the TPO is not sustainable - as decided in Kapurchand Shrimal (1981 (8) TMI 2 - SUPREME Court) the appellate authority has jurisdiction as well as the duty to correct the errors in the proceedings under appeal - issue remited to the files of the CIT(A) to consider the issue afresh after granting adequate opportunity to the assessee of being heard. Addition made on account of alleged understatement of sale of bullion - Held that:- AO on remand has himself accepted that the Delhi Bullion Association rates are wholesale rates and are not applicable to the case of the assessee. In any case, it is not the case of the AO that he has come across any material showing that the assessee is receiving something over and above that entered into the books of accounts maintained. All the requisite books and records are maintained and the same are duly audited and no specific defect in the same has been pointed out. Moreover, CIT(A) rightly observed that the lower rates of the Delhi Bullion Association are quite comparable with that shown by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 50,02,815/-. 3. The assessee in this case is a Private Limited Company engaged in the business of trading in bullion and other items. During the course of assessment AO disallowed the assessee's claim of foreign exchange loss by observing as under:- "The claim of foreign exchange loss of Rs. 50,02,815/- on revaluation of loan to subsidiary cannot be accepted on the basis of the revised computation. The subsidiary is wholly owned by the assessee company. It has ceased its operations in subsequent years. There is no reason or possibility of recovery of the loan from its subsidiary in future. In this particular case, the claim can only be allowed on actual basis. In the view of these facts, the claim of foreign exchange loss of Rs. 50,02,815/- is donated. The basis of computation of assessed income shall originate/emanate only from the return of income filed on 01.11.2004. the revised computation is ignored except the admitted inadvertent mistakes. No separate addition of Rs. 50,02,815/- is required to be made." 4. Upon asseessee's appeal ld. CIT(A) referred the decision of the Jurisdictional High Court in the case of CIT vs. Woodward Governor reported in 294 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity in admitting a genuine claim of the assessee. 8. Now coming to the merit of the issue, we find that the advance was given by the assessee to subsidiary company for trading purpose. In such a case loss on account of foreign exchange fluctuation has to be dealt with in accordance with the decision of the Hon'ble Jurisdictional High Court referred by the ld. CIT(A) in the case of Woodward Governor cited above. This decision has also been affirmed by the Hon'ble Apex Court. As per the ratio emanating from this case, loss on account of foreign exchange fluctuation is not a notional loss and if the loss is on revenue a/c it has to be allowed as revenue loss. In this view of the matter, we do not find any infirmity in the ld. CIT(A) orders on this issue. Accordingly, we uphold the same. 9. The next issue raised is that ld. CIT(A) erred in deleting the addition of Rs. 14,51,465/- made by the AO by invoking provisions contained in section 92CA of the Act. 10. On this issue the AO noted that assessee had given loans and advances to M/s PPML its wholly subsidiary without charging any interest. Assessee has also explained to the AO that the subsidiary company was regularly decl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14. We have heard both the counsels and perused the records. We find that the transactions entered into by the assessee company with the subsidiary company falls into the meaning of international transactions, as per the prescription of section 92B of the IT Act. Section 92C provides for computation of arms length price. This section does not stipulate that AO has to mandatorily refer the matter the Transfer Pricing Officer in all cases. Section 92CA which provides for reference to TPO postulates that when AO considered it necessary or expedient so to do, he may, with the previous approval of the Commissioner, refer the matter to the TPO hence the first plank of the assessee's argument and the ld. CIT(A) reliance on the same that AO cannot compute the arms length price without referring the matter to the TPO is not sustainable. 15. We find that Hon'ble Apex court in the case of Kapurchand Shrimal vs. CIT, 131 ITR 451, it was held that the appellate authority has jurisdiction as well as the duty to correct the errors in the proceedings under appeal. Accordingly, we remit the issue to the files of the CIT(A) to consider the issue afresh after granting adequate opportunity to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling the identity of purchasers to avoid any verification at any stage. It is worth mentioning that this is not the case of purchase recorded out of books and consequent sales. It is a case of suppression of sales of goods already recorded in the books. Only a part of sales is unrecorded in the books i.e. Rs.1,19,07,201/- and by way of under-invoicing. Therefore, the entire amount of Rs.1,19,07,201/- is liable to be added to the income under section 69A of Income Tax Act, 1961." 18. Upon assessee's appeal ld. CIT(A) observed that it has been verified by the AO that he confirmed that Bullion Associations rates are in respect of retail transaction and not in respect of wholesale trade. In this view, he held that since Delhi Bullion Association rates are not applicable to the business of the assessee company, therefore, the same cannot be applied to compute understatement of sales. Hence, he held that addition of Rs. 1,19,07,201/- made on account of alleged understatement of sales by adopting Delhi Bullion Association rates was no in accordance with law. Even otherwise, the ld. CIT(A) found that assessee has submitted books of accounts which have been audited and have been duly ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the learned Officer cannot be accepted a;;lying the same logic, it will be seen that even when lower rates of Delhi Bullion Association are applied, at times, sale are more than Delhi Bullion Association and at times lower than DBA rates. Thus, mere fact that sales made on actual basis are at times, higher or at times lower than the average DBA rates cannot be a ground to suggest that addition has been made by adopting the average rates of DBA. In any case, what is relevant here is that there is no material which establishes that assessee has received sums or was entitled to receive sums in excess of declared consideration. In my opinion, in such circumstances, there was no statutory provision of the Act which enables the learned Assessing Officer to levy tax on a sum which has neither accrued to the assessee and, nor received by it. In the light of the above position, addition made of Rs.1,19,07,201/- is held to be made not in accordance with law and is therefore, deleted." 19. Against this order the revenue is in appeal before us. 20. We have heard both the counsels and perused the records. AO's basic reason is that there are cash sales which are not verifiable and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he several case laws and it was also claimed that in the preceding year, no disallowance in this regard was made. Considering the submissions, ld. CIT(A) held that AO has made the specific disallowance by referring to the specific bills which have been held to be personal expenses. During the course of assessment proceedings no material has been produced to rebut the specific findings recorded by the AO other than making the general statement and referring to past history. Ld. CIT(A) held that it is a settled law that principles of resjudicata are not applicable to the income tax proceedings. When AO had pointed out specific expenditure which he has held as nonbusiness expenditure, it was incumbent upon the assessee to lead material to rebut the finding of the AO. Since none of the findings were rebutted, ld. CIT(A) held that disallowed so made by was valid. 22.2 Against this order the assessee is in appeal before us. 23. We have heard both the counsels. We find that AO has made specific reference to the vouchers wherein various hotels bills of dinning etc. including that through credit cards were mentioned. AO observed that some of the expenditure related to the other conc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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