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Diamines & Chemicals Ltd. Versus The Add. Commissioner of Income Tax

2017 (1) TMI 1154 - ITAT AHMEDABAD

Revision u/s 263 - genuineness of the transactions by not obtaining the Article 2 - deduction of foreign exchange fluctuation loss - non complete investigation into the nature of amount received, the nature of dispute between the assessee and DOW and the nature of rights and claims waived by the assessee against the DOW - Held that:- We find that because of not producing Article 2 by the assessee before the assessing officer he failed to make proper enquiries to ascertain the true nature of the .....

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in the assessment order nor given any kinds of findings as per which any possible view had been taken by the assessing officer. - We find that all the above stated facts prove that the assessing officer has not verified the genuineness of the transactions by not obtaining the Article 2 which was the material condition for receipt of US$ 1.5 million. - Whether the order passed by CIT u/s. 263 was bad in law as the show cause notice given by him was on a point other than the one for which .....

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T had issued the show cause related to the issue of foreign exchange loss, therefore, the contention of the assessee mentioned in the additional ground is not found to be correct. - Revision u/s 263 sustained - Decided against assessee - ITA No. 1586/Ahd/2014 - Dated:- 17-1-2017 - Shri R. P. Tolani, Judicial Member And And Shri Amarjit Singh, Accountant Member Revenue by : Shri Nivas T. Bidari, CIT-D.R. Assessee by : Shri Sanjay R. Shah, A.R. ORDER Per Amarjit Singh, Accountant Member This asses .....

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d by the Additional Commissioner of Income-tax, Range-1, Baroda ('the learned AO') prefers an appeal against the same on the following grounds, which are without prejudice to each other: 1. The order passed by the learned CIT under section 263 of the Act is bad in law as the order of learned AO under section 143(3) was neither erroneous nor prejudicial to the interest of revenue. It is submitted that it be so held now and order passed under section 263 of the Act be quashed. 1.1 The lear .....

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e interest of the revenue as has been held by the Hon'ble Supreme Court in the case of Malabar Industrial Company Ltd 243 ITR 83 and such order cannot be revised under section 263 of the Act. It is submitted that it be so held now. 2. Without prejudice to foregoing, even on merits of the case the appellant's claim of loss on foreign exchange fluctuation on reinstatement of advances is an allowable deduction as held by Hon'ble Supreme Court in case of Woodward governor India Pvt. Ltd. .....

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ding of learned CIT that the advances of US$ 15,00,000 was not on revenue account, then the same has to be on capital account. Accordingly, the amount of US$ 15,00,000 writtenback by the appellant in the subsequent AY i.e. 2010-11 should not be taxed in the said year being capital in nature. It is submitted that it be so held now and direction be given to deduct the same while computing total income of A.Y. 2010-11. 5. The learned CIT failed to appreciate that Article 2 bearing page no. 5 of the .....

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out admitting that such amount was received for settling the disputes between the appellant and the customer, the aforesaid disputes were on account of business transactions between them and thus were on trading account. All the grounds of appeals of the assessee are interconnected so they are decided together as under:- 3. In this case return of income declaring income of ₹ 2.47,07,660/- was filed on 29/09/2009. The assessing officer has completed the assessment u/s. 143(3) and accepted t .....

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; 2,74, 18,861/- foreign exchange loss was claimed. The above advance amount was forfeited and offered as income in the F.Y. 2009-10 relevant to A.Y.2010-11. Since the above advance amount was not actually paid and a kind of provisions only, the foreign exchange fluctuation loss claimed was required to be disallowed u/s 37(1) of the I.T. Act. Failure to do so has resulted into under assessment " The Ld. CIT stated that the assessee claimed loss on foreign exchange amounting to ₹ 2,50, .....

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CIT Delhi Vs. Woodward Governor India Pvt. Ltd. and others (312 ITR 254) had ruled in favour of the assessee on the issue at hand and allowed the deduction of foreign exchange fluctuation loss. The assessee had also stated before the Ld. CIT that the assessing officer had made enquiry in respect of claim of the company and the assessing officer had applied the mind to the submission made by the assessee during the course of assessment proceedings and the assessing officer had allowed the claim o .....

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and DOW and the nature of rights and claims waived by the assessee against the DOW. 4. During the course of appellate proceedings before us, the ld. counsel contended that order passed by the assessing officer was neither erroneous nor prejudicial to the interest of revenue. He further contended that assessing officer has taken a possible view after duly making necessary inquires and with due application of mind. He also emphasized on the additional ground filed contended that the order passed .....

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the issue related to noninquiry into nature of amount of US$15,00,000 land fluctuation loss on restatement. He also stated that assessing officer was not only an adjudicator what was also an investigator and it is his duty ascertain the facts stated in the return. He also relied on the judicial pronouncements in the cases of Rampyari Devi Saraogi vs. CIT (SC) 67 ITR 84, Malabar Industrial Co. Ltd. vs. CIT (SC) 243 ITR 83, Swarup Vegetable Products Industries Ltd. Vs. CIT (All) 187 ITR 412, Gee .....

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OW Chemical Pacific Ltd. (DOW) and the assessee had written back this amount in assessment year 2010-11. We have also seen the finding of the ld. CIT stating that Article 2 bearing page no. 5 of the agreement was never produced before the assessing officer nor before the Ld. CIT. The Ld. CIT further stated that the salient feature of this agreement was that it was not assessee alone which entered into agreement with DOW, but other companies as well as certain individuals were jointly and several .....

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tories to waive their claim on DOW. DOW never asked back for money no interest was provided as per the terms of the agreement. We find that because of not producing Article 2 by the assessee before the assessing officer he failed to make proper enquiries to ascertain the true nature of the amount received. We have also considered the contention of the Ld. counsel of the assessee stating that the assessing officer had taken one possible view after conducting necessary inquiries as with the case o .....

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eness of the transactions by not obtaining the Article 2 which was the material condition for receipt of US$ 1.5 million. 7. We have perused the additional ground of appeal raised by the assessee stating that the order passed by the Ld. CIT u/s. 263 was bad in law as the show cause notice given by him was on a point other than the one for which he hold the order passed by assessing officer as erroneous or prejudicial to the revenue. In this connection, we have gone through the show cause notice .....

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