TMI Blog2023 (4) TMI 1176X X X X Extracts X X X X X X X X Extracts X X X X ..... er was passed, and accordingly, claimed depreciation on the increased cost of plant and machinery ,qua which foreign currency fluctuation loss had been incurred. The record shows that the respondent/assessee had preferred the appeal with CIT(A) only vis-a-vis that aspect of the assessment order whereby depreciation had not been granted by the AO. As noted by the CIT(A) while dealing with the penalty order passed by the DCIT there was in fact no advantage accruing to the respondent/assessee in claiming foreign currency fluctuation loss as deductable expenditure, given the fact that it had unobserved losses. Clearly, assessee, as noted even by the CIT(A), could not have gained anything by claiming foreign currency fluctuation loss as deductable expenditure, as it would have only added to the existing burgeoning losses. At worst, in the instant case, the petitioner s action could be construed as one where it sought to make a claim which was unsustainable in law. That by itself, in the given circumstance, would not call for imposition of penalty, as once the error was pointed out by the AO, the respondent/assessee made a course correction before the assessment order was passed. The law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to the AO, whereby it claimed depreciation to the extent of Rs. 3,45,93,316/-, on account of the increase in the cost of machinery due to foreign currency fluctuation losses. In other words, the respondent/assessee accepted the position that the foreign currency fluctuation losses had to be capitalized, and therefore, logically, depreciation qua the same had to be allowed. 7. The AO while passing the assessment order added, as indicated above, Rs. 14,25,49,948/- to the income of the respondent/assessee, without giving the benefit of depreciation. 8. The respondent/assessee, being aggrieved, carried the matter in appeal to the CIT(A). The CIT(A) via order dated 31.01.2013, insofar as this issue was concerned, accepted the stance of the respondent/assessee. Accordingly, the CIT(A), while sustaining the view of the AO that addition with regard to foreign currency losses was viable, overruled the AO to the extent that he had not granted depreciation to the respondent/assessee, on account of increase in the cost of plant and machinery. 8.1 This aspect of the matter is evident upon perusal of paragraph 6.3 of the order dated 31.01.2013 passed by the CIT(A). We may note that a hard copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee under Section 274 of the Act. This show cause notice was dated 07.01.2014. 11. Being aggrieved, the respondent/assessee preferred an appeal with the CIT(A). As indicated above, the CIT(A) deleted the penalty. While doing so, the CIT(A) noted certain submissions which, in our view, contextualized the impugned action of the respondent/assessee. For the sake of convenience, paragraph 3 of the order dated 17.07.2015 of the CIT(A) is set forth hereafter: 3. In the written submissions, the A/R of appellant company submitted:- LD DCIT imposed penalty u/s 271(1)(C) on the sustained additions of Rs 14,25,49,948/- pertaining to Foreign Exchange Fluctuation Loss by concluding that explanation given by NTC is false liable by penalty. The order of LD DCIT is bad in law on the facts of the case as follows:- 1. The LD DCIT committed the factual mistake by not following the order of LD CIT(A). Please note that Ld CIT (A) directed the LD DCIT to allow depreciation of Rs 3,45,93,316/- (Ref CIT (A) order page 14) against the above addition, but with the thirst of revenue he ignored it imposed penalty on Rs 14,25,49,948/- instead of on Rs 10,79,56,632/- resulting in excessive penalty by Rs 1,06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommitted in preparation of Computation of Income, for which your Goodself are humbly requested to quash the Penalty proceedings as a matter of fairness justice. 2.6. The Foreign Exchange Fluctuation Loss was duly shown in the Profit Loss a/c. In other words there was true fair disclosure of expenses. The assessee has neither suppressed any income nor claimed any bogus or false expenditure. The disallowances have been made on technical legal ground, which does not tantamount to concealment. It has been held by the various higher authorities that no penalty can be imposed simply because the assessee has made a wrong claim or incorrect computation in the statement of income. There may be a mistake or incorrect computation on the part of the assessee or his representative while filing return, but such mistake cannot be ground of attracting penal provision u/s. 271[sic: u/s](1)(C)(101 Taxman 269). In this case the assessee has not claimed any bogus expenses, therefore, the legal presumption is that the assessee has not stated anything false. No penalty can be imposed for an accidental or intentional omission. Mere addition or disallowance does not automatically lead to penalty especiall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dates adjustment in the cost of an asset, depending on whether there was an increase or a reduction in the liability of the assessee at the time of making payment, on account of changes in the rate of exchange. 17.2 It appears that this aspect emerged during scrutiny. 18. The respondent/assessee, as rightly pointed out by Mr Jain, accepted this position, without demur, even before the assessment order was passed, and accordingly, claimed depreciation on the increased cost of plant and machinery ,qua which foreign currency fluctuation loss had been incurred. 19. The record shows that the respondent/assessee had preferred the appeal with CIT(A) only vis-a-vis that aspect of the assessment order whereby depreciation had not been granted by the AO. 20. Furthermore, as noted by the CIT(A) while dealing with the penalty order passed by the Deputy Commissioner of Income Tax [in short, DCIT ], there was in fact no advantage accruing to the respondent/assessee in claiming foreign currency fluctuation loss as deductable expenditure, given the fact that it had unobserved losses amounting to Rs.12,218.52 crores. 21. Clearly, the respondent/assessee, as noted even by the CIT(A), could not have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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