ACIT, Circle-1(1), Tirupathi, Tirupathi V. SNJ Sugars and Allied Products Limited, Chittoor, Chittoor

ITA 1683/HYD/2016

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 0854 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-A
• Assessment Year: 2009-2010
• Appeal Filed On: 13-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P CHANDRA SEKHAR
• Keywords: Depreciation; Speculation loss; Tax effect; Set aside
• Section: 143(3); 153A; 14A; 37(1); 43(5); 205; 143(2); 192; 13; 153; 119; 22; 132; 28; 10; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD (THROUGH VIRTUAL CONFERENCE) BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER IT A NO S . 1683 & 1684 /H/20 1 6 AND COS 03 & 04/H/2017 ASSESSMENT YEAR S : 2 0 09 - 10 & 2010 - 11 ASST. COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), HYDERABAD. VS. SNJ SUGARS AND ALLIED PRODUCTS LTD., CHITTOOR DISTRICT. PAN AAECS 1680D (APPELLANT) (RESPONDENT) REVENUE BY: SHRI P. CHANDRASEKHAR ASSESSEE BY: S HRI K.C. DEVDAS DATE OF HEARING: 2 4 /0 6 /2021 DATE OF PRONOUNCEMENT: 13 /0 7 /2021 O R D E R PER L.P. SAHU, A.M. : BOTH T H E S E APPEAL S FILED BY THE REVENUE ARE DIRECTED AGAINST CIT(A) , TIRUPATI S ORDER S DATED 30/09/2016 FOR AY S 20 09 - 10 AND 2010 - 11 INVOLVING PROCEEDINGS U/S 14 3(3) RWS 153A OF THE INCOME - TAX ACT, 1961; IN SHORT THE ACT ON THE FOLLOWING GROUNDS OF APPEAL , WHICH ARE COMMON IN BOTH THE APPEALS UNDER CONSIDERATION, EXCEPT THE QUANTUM OF ADDITION : I TA NO S . 1683 & 1684 /HYD /20 1 6 AND COS 3 &4/H/17 M/S SNJ SUGARS AND ALLIED PRODUCTS LTD., HYD. : - 2 - : 1. THE COMMISSIONER OF INCOME TAX (APPE ALS) ERRED IN DELETING THE DISALLOWANCE OF FOREX LOSS OF RS.9,63,74,685 / - . 2. THE CIT (APPEALS) ERRED IN HOLDING THE FOREX LOSS AS BUSINESS LOSS AND NOT AS SPECULATION LOSS. 3. THE CIT (APPEALS) ERRED IN NOT PASSING A SPEAKING ORDER ON THE FOREX LOSS. 4. ANY OTHER GROUNDS THAT MAY BE URGED AT THE TIME O F HEARING. 1.1 THE A SSESSEE ALSO RAISED COS 03 & 04/ H YD/2017 AGAINST THE SAID ORDERS OF CIT(A) WHEREIN THE CROSS OBJECTIONS RAISED ARE COMMON IN BOTH THE COS, WHICH ARE AS UNDER: 1. THE APPEAL FILED BY THE LEARNED AO DATED 04.01.2017 FOR THE ASSESSMENT YEAR 2010 - 11 IS CONTRA RY LAW, FACTS AND CIRCUMSTANCE OF THE CASE . 2. THE LEARNED CIT (APPEALS) HAVE APPRECIATED THAT THE LOSS INCURRED IN RESPECT OF FOREX TRANSACTIONS TO HEDGE AGAINST FLUCTUATIONS IS BUSINESS LOSS AND NOT AS SPECULATIVE LOSS. 3. THE LEARNED CIT ( APPEALS ) HAVE APPRECIATED THAT THE ASSESSEE WAS AVAILING FOREX LIMITS WITH THE FOUR B ANKS FOR HEDGING THE FOREX EXPOSURE IN CONNECTION WITH IMPORT AND EXPORT OF RAW / WHITE SUGAR. 4. THE LEARNED CIT ( APPEALS ) HAVE APPRECIATED THAT IN ORDER TO HEDGE AGAINST LOSSESS, ASSESSEE HAD BOOKED FOREIGN EXCHANGE IN THE FORWARD MARKET WITH THE BANKS. I TA NO S . 1683 & 1684 /HYD /20 1 6 AND COS 3 &4/H/17 M/S SNJ SUGARS AND ALLIED PRODUCTS LTD., HYD. : - 3 - : 5. THE LEARNED CIT (APPEALS) HAVE APPRECIATED THAT THE TRANSACTION WAS DONE WITH THE PERMISSION OF THE RESERVE BANK OF INDIA AND SUCH CONTRACTS WERE INCIDENTAL TO THE ASSESSEE'S BUSINESS OF IMPORT / EXPORT OF SUGAR. 6. THE LEARNED CIT ( APPEALS ) HAVE APP RECIATED THAT THE ABOVE TRANSACTIONS WERE HEDGING TRANSACTIONS AND HENCE THE LOSS IN RELATION TO HEDGING TRANSACTION IS AN ALLOWABLE DEDUCTION. 7. FURTHER THE FOREX LOSS WAS ALLOWED BY THE CIT ( APPEALS ),GUNTUR IN THE APPEAL FILED BY US AGAINST THE ORDER U/S143 (3) R.W.S.147 OF THE INCOME TAX ACT 1961 IN THE ASST YEAR 2009 - 10 AND THE ORDER OF CIT (APPEALS) GUNTUR WAS ACCEPTED BY AO. 8. FURTHER IN THE ASS! YEAR 2008 - 09, THE FOREX LOSS IN THE SIMILAR ISSUE WAS ALLOWED BY THE CIT ( APPEALS ),GUNTUR IN THE APPEAL FLIED BY US AGAINST THE ORDER U/S 143 (3) F.W.S. 147 OF THE INCOME TAX ACT 1961 AND AGAINST THE ORDER OF C I T (APPEALS) GUNTUR THE DEPARTMENT FLIED APPEAL BEFORE ITAT, HYDERABAD AND ITAT, HYDERABAD UPHOLD THE ORDER OF ID CIT (APPEALS), GUNTUR AND DISMISSED THE APPEAL FILED BY THE DEPARTMENT. 9. FURTHER WE HAVE CONSISTENTLY CLAIMED THE FOREX LOSS IN THE EARLIER ASS! YEAR 2006 - 07 & 2 007 - 08 AND THE SAME WAS ACCEPTED BY THE AO AND PASSED ORDER U/ S 143 (3) O F THE INCOME TAX ACT 1961. 10. FURTHER THE AO WAS COMPLETED THE ASSESSMENT U/S 143 (3) R.W.S. 153 A OF THE INCOME TAX ACT 1961 AND NO INCRIMINATING DOCUMENTS WERE FOUND DURING THE C OURSE OF SEARCH. I TA NO S . 1683 & 1684 /HYD /20 1 6 AND COS 3 &4/H/17 M/S SNJ SUGARS AND ALLIED PRODUCTS LTD., HYD. : - 4 - : 11. RESPONDENT CRAVES L EAVE TO ADDUCE ADDITIONAL GROUNDS AT THE TIME OF HEARING . 2. BRIEFLY THE FACTS AS CULLED OUT FROM AY 2009 - 10 ARE THAT THE ASSESSEE A COMPANY, ENGAGED IN MANUFACTURING OF WHITE CRYSTAL SUGAR, ALCOHOL AND GENERAT ION OF POWER, THE RETURN OF INCOME FOR A.Y. 2009 - 10 WAS FILED ON 30.09.2009 DECLARING A LOSS OF RS,16,64,00,570/ - . SCRUTINY ASSESSMENT U/S 143(3) WAS COMPLETED BY THE AO, ON 31 - 12 - 2011 BY MAKING CERTAIN DISALLOWANCES. AGGRIEVED BY THE SAID ORDER, THE ASSE SSEE PREFERRED AN APPEAL BEFORE THE CIT{A) AND THE CIT(A) VIDE HIS ORDER IN ITA NO.0313 & 0314/ CIT{A)/ GNT/11 - 12, DATED:09.05.2011 HAS DECIDED ALL THE ISSUE IN FAVOUR OF THE ASSESSEE EXCEPT CONFIRMING AN ADDITION OF RS. 19,96,239/ - ON VARIOUS EXPENSES CL AIMED. GIVING EFFECT TO THE ORDER OF THE CIT ( A ) WAS PASSED ON 03.07.2012. AGAINST THE ORDER OF THE CIT ( A), THE REVENUE HAS PREFERRED FURTHER APPEAL ON THE QUESTION OF ALLOWABILITY OF DEPRECIATION AS PER RULE 5(1) OF THE IT RULES AND THE I TAT VIDE ITS ORDER ITA NOS.1087 & 1088/HYD/2012 DATED 12.11.2014 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 2.1 IN THE MEANWHILE, AN ACTION UNDER SECTION 132 OF THE ACT WAS CARRIED OUT IN THIS CASE ON 15.05.2012 BY THE DIRECTOR OF INCOME TAX (INVES TIGATION), CHENNAI. ACCORDINGLY, A NOTICE UNDER SECTION 153A OF THE ACT WAS ISSUED TO THE ASSESSEE ON 09.04.2014. IN RESPONSE TO THIS I TA NO S . 1683 & 1684 /HYD /20 1 6 AND COS 3 &4/H/17 M/S SNJ SUGARS AND ALLIED PRODUCTS LTD., HYD. : - 5 - : NOTICE , THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 08.05.2014. NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED TO TH E ASSESSEE ON 19.08.2014 AND ASSESSMENT COMPLETED ON 27 - 03 - 2015 BY DISALLOWING FOREX LOSS OF RS.9,63,74,685 AND 14A DISALLOWANCE OF RS. 23,37,045/ - FOR AY 2009 - 10 AND RS. 3,70,60,204/ - TOWARDS FOREX LOSS AND DISALLOWANCE U/S 14A OF THE OF RS. 19,11,615/ - F OR AY 2010 - 11. SINCE FOR AY 2009 - 10 ON THE DATE OF SEARCH, NO ASSESSMENT WAS PENDING , THEREFORE, THIS YEAR IS TO BE TREATED UNABATED ASSESSMENT YEAR. FURTHER, IN RESPECT OF AY 2010 - 11, THE ASSESSMENT U/S 143(3) WAS PENDING ON THE DATE OF SEARCH, THEREFORE , THIS AY WILL BE TREATED AS ABATED ASSESSMENT YEAR. ON GOING THROUGH, ISSUE INVOLVED IN BOTH THE YEARS REGARDING FOREX LOSS WAS COMMON, WE TAKE THE FACTS FROM AY 2009 - 10 TO DISPOSE OF THESE APPEALS ON MERITS AND THE DECISION TAKEN IN AY 2009 - 10 SHALL MUTA TIS MUTANDIS APPLY IN AY 2010 - 11. 3. WHEN THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), THE CIT(A) FOLLOWING HIS PREDECESSOR ORDER IN ASSESSEE S OWN CASE FOR AY 2008 - 09, HELD THAT FOREX LOSSES OF THE ASSESSEE SHOULD BE CONSIDERED AS BUSINESS LOSS AND NOT AS SPECULATIVE LOSS AND ACCORDINGLY, DELETED THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF FOREX LOSS. I TA NO S . 1683 & 1684 /HYD /20 1 6 AND COS 3 &4/H/17 M/S SNJ SUGARS AND ALLIED PRODUCTS LTD., HYD. : - 6 - : 4. AGGRIEVED BY THE ORDER OF CIT(A), T HE REVENUE IS IN APPEAL BEFORE THE ITAT. 5. BEFORE US, THE LD. DR RELIED ON THE ORDER OF AO AND SUBMITTED THAT THE FOREX LOSS CLAIMED BY THE ASSESSEE IS NOT ALLOWABLE AS THE SAID TRANSACTION IS PURELY SPECULATIVE IN NATURE. HE RELIED ON THE FOLLOWING CASE S IN SUPPORT OF REVENUES CASE: 1. PANKAJ OIL MILLS. V/S COMMISSIONER OF INCOME TAX. [1978J 115 ITR 824 (GUJARAT). 2. ARASKA DIAMOND (P.) LTD. VIS ACIT, 5(1), MUMBAI, [2014J 52 TAXMANN.COM 238 (MUMBAI - TRIB.) 3. SOPROPHA S.A., IN RE - , [2004] 138 TAXMANN 75 (AAR.) 4. S. VINODKUMAR DIAMONDS (P.) LTD. V IS ADDL CIT, RANGE - 5(3), MUMBAI, [2013] 35 TAXMANN.COM 337 (MUMBAI - TRIB.) 6. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE REIETERED THE SUBMISSIONS AS MADE BEFORE THE CIT(A) AND BESIDES RELYING ON THE ORDER OF CIT(A), SUBMITTED THAT THE ASSESSEE HAS BEEN CONSISTENTLY CLAIMING THE FOREX LOSS IN THE EARLIER AYS 2006 - 07 & 2007 - 08 AND THE SAME WAS ACCEPTED BY THE AO IN THE ORDERS PASSED U/S 143(3) OF THE ACT. HE FURTHER SUBMITTED THAT IN AY 2008 - 09, THE ITAT UPHELD THE ORDER OF CIT(A) WHO ALLOWED THE ASSESSEES CLAIM OF FOREX LOSSES AGAINST THE APPEAL FILED BY THE REVENUE. HE FURTHER I TA NO S . 1683 & 1684 /HYD /20 1 6 AND COS 3 &4/H/17 M/S SNJ SUGARS AND ALLIED PRODUCTS LTD., HYD. : - 7 - : SUBMITTED THAT THE AO COMPLETED THE ASSESSMENT U/S 143(3) RWS 153A OF THE ACT AND NO INCRIMINATING DOCUMENTS WERE FOUND DURING THE COURSE OF SEARCH, THEREFORE, DISALLOWING FOREX LOSS IS AGAINST LAW. THE LD. AR SUBMITTED THAT THE CASE LAW RELIED ON BY THE LD. DR IS NOT APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AS WELL AS GONE THROUGH THE ORDERS OF REVENUE AUTHORITIES. AS SUBMITTED BY THE ASSESSEE, THE AO ALLOWED THE ASSESSEES CLAIM OF FOREX LOSSES IN AYS 2006 - 07 AND 2007 - 08. IN THE AY 2 008 - 09, THE COORDINATE BENCH OF THIS TRIBUNAL DISMISSED THE APPEAL OF THE REVENUE ON LOW TAX EFFECT. WE FIND SUBSTANCE ON THE SUBMISSIONS OF THE LD. AR. AS IS EVIDENT FROM THE ORDERS OF AUTHORITIES BELO W, FACTS OF THE ASSESSEES CASE ARE SIMILAR WITH THE A Y 2008 - 09 WHEREIN THE ASSESSEE HAS ENTERED INTO A MASTER AGREEMENT (ISDA) WITH FOUR BANKS AND AVAILED FOREX LIMITS WITH THESE BANKS AND CLAIMED THAT THESE LIMITS WERE UTILIZED FOR HEDGING FOREX EXPOSURE IN CONNECTION WITH IMPORT AND EXPORT OF RAW SUGAR/WHI TE SUGAR. THE ASSESSEE COMPANY HAS ENTERED INTO TRANSACTIONS OF BUYING AND SELLING OF FOREX AND INCURRED A LOSS OF RS. 3,94,83,000/ - ON THE CANCELLATION OF THE SAID CONTRACT AND CLAIMED THE SAME AS BUSINESS LOSS AND DEBITED TO P&L A/C AS FOREX LOSS UNDER T HE HEAD MANUFACTURING ADMINISTRATION EXPENDITURE . I TA NO S . 1683 & 1684 /HYD /20 1 6 AND COS 3 &4/H/17 M/S SNJ SUGARS AND ALLIED PRODUCTS LTD., HYD. : - 8 - : THEREFORE, SINCE THE FACTS IN AYS 2009 - 10 AND 2010 - 11 ARE SIMILAR TO THE AY 2008 - 09. AS PER ACCOUNTING STANDARD AS - 11 , THE ASSESSEE HAS RIGHTLY, CLAIMED THE FOREX LOSS AS BUSINESS LOSS U/S 37(1) OF THE IT ACT. THE LOSSES CLAIMED BY THE ASSESSEE ARE NOT SPECULATIVE LOSS AS ALLEGED BY THE AO. THE APPELLANT RELIED ON THE ORDER OF THE HONBLE SUPREME COURT JUDGEMENT IN THE CASE OF SUTLEJ COTTON MILLS, 116 ITR 01 WHEREIN IT WAS HELD THAT LOSS WILL BE ALLOWABLE UNDER SECTION 28 I.E. AS BUSINESS LOSS IF THE FOLLOWING CONDITIONS ARE SATISFIED: IT SHOULD BE ONE THAT IS INCIDENTAL TO THE CARRYING ON OF THE BUSINESS AND MUST ARISE OR SPRING DIRECTLY FROM OR BE INCIDENTAL TO THE CARRYING ON OF A BUSINESS OPERATION. THERE SHOULD BE A DIRECT OR PROXIMATE NEXUS BETWEEN BUSINESS OPERATION AND THE LOSS OR IT IS INCIDENTAL TO IT. IT SHOULD BE A REAL LASS AND NOT NOTIONAL OR FICTITIOUS. IT SHOULD BE A LOSS ON REVENUE ACCOUNT AND NOT ON CAPITAL ACCOUNT. IT MUST HAVE ACTUALLY ARISEN AND BEEN INCURRED NOT MERELY ANTICIPATED AS CERTAIN TO OCCUR IN THE FUTURE. THERE SHOULD BE NO PROHIBITION IN THE ACT . EXPRESS OR IMPLIED, AGAINST THE DEDUCTIBILITY THEREOF: THE COUNSEL SUBMITTED THAT THE FOREX LOSSES OF THE APPELLANT SATISFIED ALL THE ABOVE CONDITIONS AS: I TA NO S . 1683 & 1684 /HYD /20 1 6 AND COS 3 &4/H/17 M/S SNJ SUGARS AND ALLIED PRODUCTS LTD., HYD. : - 9 - : THE APPELLANT IS AN EXPORTER AND MOST OF HIS RECEIVABLES ARE DENOMINATED IN FOREIGN CURRENCY. THE APPELLANT REGULARLY ENTERS INTO FORWARD CONTRACTS TO COVER THEIR CURRENCY EXPOSURE. THE FORWARD CONTRACTS ARE SETTLED BY DELIVERY OF CURRENCY. FOREX DERIVATIVE CONTRACTS ARE ENTERED INTO WITH A VIEW TO MAKE GOOD THE LOSS INCURRED ON ACCOUNT OF RUPEE APPRECIATION . LOSS ON ACCOUNT OF FOREX DERIVATES SPRINGS DIRECTLY FROM AND IS INCIDENTAL TO THE CARRYING ON BUSINESS OF THE APPELLANT. THE LOSS IS NOT INCURRED ON THE CAPITAL ACCOUNT OR FIXED ASSETS SO AS TO MAKE IT A CAPITAL LOSS. THE LOSS IS REAL AND NOT FICTITIOUS. THERE EXISTS A DIRECT AND PROXIMATE NEXUS BETWEEN APPELLANT'S EXPORT BUSINESS AND LOSS ON ACCOUNT OF FOREX DERIVATIVES. 7.1 IN SUPPORT OF OUR DECISION, WE RELY ON THE FOLLOWING JUDGMENTS: 7. 2 IN THE CA S ES OF EMMSO NS INTERNATIONAL LTD. VS. ACIT, [2019] 112 TAXMANN.COM 205 (DELH), THE DELHI BENCH HAS HELD AS UNDER: 9. WE HAVE GONE THROUGH THE RECORD. IN THIS CASE, THE PENDING FORWARD CONTRACTS WERE RESTATED ON THE BASIS OF THE FOREIGN EXCHANGE RATE, AND SINCE THERE IS NO DISPUTE AS TO THE DETAILS OF FORWARD CONTRACT BOOKED UP TO I TA NO S . 1683 & 1684 /HYD /20 1 6 AND COS 3 &4/H/17 M/S SNJ SUGARS AND ALLIED PRODUCTS LTD., HYD. : - 10 - : 31.03.2012 AND GAIN/LOSS THEREON, FURNISH ED BY THE ASSESSEE, ALL THE LOSSES ARE THE LOSSES BOOKED BY THE ASSESSEE IN COMPLIANCE OF MANDATORY ACCOUNTING STANDARD AS - 11. IT IS ALSO NOT IN DISPUTE THAT IN THE PRECEDING TWO YEARS THERE HAD BEEN GAIN FROM FORWARD CONTRACTS WHICH HAVE BEEN OFFERED TO TAX WHICH IS EVIDENT FROM FORWARD CONTACT GAINS OF RS. 71,58,43,411/ - AND RS. 3,74,90,231/ - OFFERED FOR TAX IN AY 2010 - 11 AND AY 2011 - 12 RESPECTIVELY; AND THAT THERE WERE ALSO INCOME OF RS. 8,50,89,012/ - AND RS. 3,97,70,567/ - FOR AY 11 AND AY 2011 - 12 RESPE CTIVELY OFFERED FOR TAX IN AY 2010 - 11 AND AY 11 - 12 RESPECTIVELY ON ACCOUNT OF APPLICATION OF AS - 11 ON THE PENDING FORWARD CONTRACTS AS ON CLOSE OF FINANCIAL YEARS. 10. IN WOODWARD GOVERNOR (P.) LTD. (SUPRA) IT IS HELD THAT THE EXCHANGE DIFFERENCES ON FOREI GN CURRENCY TRANSACTIONS IN COMPLIANCE OF AS - 11 NEED BE CONSIDERED IN THE ACCOUNTS AND THE LOSSES AND PROFIT ARISING THEREFROM NEED TO BE RECOGNIZED AS SUCH FOR INCOME TAX PURPOSES. IT IS FURTHER HELD THAT WHEN THE REVENUE TAXED THE GAINS WHICH ACCRUED TO THE ASSESSEE ON THE BASIS OF ACCRUAL AND IT IS ONLY IN THE YEAR IN QUESTION WHEN THE DOLLAR RATE STOOD INCREASED, RESULTING IN LOSS THAT THE REVENUE HAS DISALLOWED THE DEDUCTION/DEBT, WHICH AMOUNTS TO DOUBLE STANDARDS ADOPTED BY THE DEPARTMENT. IN THE ABSE NCE OF ANY FINDING OF LD. AO AS TO THE COMPLETENESS AND CORRECTNESS OF THE ACCOUNTS AND ALSO ON WANT OF COMPLIANCE OF ACCOUNTING STANDARDS, IT WAS HELD THAT THE LOSS SUFFERED BY THE ASSESSEE ON ACCOUNT OF EXCHANGE DIFFERENCE AS ON DATE OF BALANCE SHEET IS ITEM OF EXPENDITURE U/S 37(1) OF IT ACT. 11. IN ONGC (SUPRA) ALSO, HON'BLE APEX COURT TOOK A SIMILAR VIEW AND HELD THAT LOSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION ON BALANCE SHEET DATE IS ITEM OF EXPENDITURE U/S 37(1) OF IT ACT NOTWITHSTANDING THAT LI ABILITY HAD NOT BEEN DISCHARGED IN WHICH FLUCTUATION IN THE RATE OF FOREIGN EXCHANGE OCCURRED. THIS VIEW IS I TA NO S . 1683 & 1684 /HYD /20 1 6 AND COS 3 &4/H/17 M/S SNJ SUGARS AND ALLIED PRODUCTS LTD., HYD. : - 11 - : FOLLOWED BY THE BOMBAY HIGH COURT IN THE CASE OF D. CHETAN & CO. (SUPRA), INTERNATIONAL GOLD CO. LTD. (SUPRA) WHEREIN IT WAS HELD THAT LOSS ON FORWA RD CONTRACTS IS NOT A NOTIONAL LOSS AND THEREFORE NEED BE ALLOWED. IN THIS CASE, IT IS THE CONTENTION OF THE DEPARTMENT THAT SUCH LOSS IS A NOTIONAL LOSS WAS DECIDED AGAINST THE DEPARTMENT ON THE GROUND THAT IN CASE OF EXPORT AND IMPORT BUSINESS HEDGING OF RISK IN FOREIGN EXCHANGE IS A NORMAL COURSE OF BUSINESS ACTIVITY AND SUCH LOSS NEED TO BE ALLOWED. 12. IN INTERNATIONAL GOLD COMPANY LTD. (SUPRA), THE QUESTION THAT HAD FALLEN FOR CONSIDERATION WAS WHETHER THE LOSS FROM FOREIGN EXCHANGE CONTRACT IS A NOTI ONAL OR CONTINGENT IN NATURE. HON'BLE BOMBAY HIGH COURT REFERRED TO INSTRUCTION NO.03/2010 DT: 23.03.2010 TO CONFIRM THAT SUCH LOSS IS BUSINESS LOSS ALLOWABLE UNDER THE ACT AND HELD THAT CBDT CIRCULAR/INSTRUCTION HAS NO APPLICABILITY. 13. ON A CAREFUL CONS IDERATION OF THE FACTS INVOLVED IN THIS CASE, WE ARE OF THE CONSIDERED OPINION THAT THE DECISION IN THE CASE OF WOODWARD GOVERNOR (P.) LTD. (SUPRA) AND ONGC (SUPRA) ARE APPLICABLE, AND THE LINE OF JUDICIAL VIEW IS THAT THE REVENUE CANNOT BE PERMITTED TO CO NTEND THAT THERE IS A CBDT INSTRUCTION NO. 03/2010 DATED 23/3/2010 TO THE CONTRARY. NO CBDT CIRCULAR OR INSTRUCTION CAN BE CONTRARY TO THE DECISION OF THE HON'BLE APEX COURT, EVEN SUBSEQUENT TO THE DECISION OF THE HON'BLE APEX COURT. WE, THEREFORE, ACCEPT THE CONTENTION OF THE ASSESSEE AND HOLD THAT THE ADDITION IS UNSUSTAINABLE. WE, ACCORDINGLY, DIRECT THE ASSESSING OFFICER TO DELETE THE SAME. 7. 3 IN THE CASE OF PR. CIT VS. PRECOT MERIDIAN LTD., [2020] 120 TAXMANN.COM 429 (MADRAS), THE HONBLE HIGH COURT HAS HELD AS UNDER: I TA NO S . 1683 & 1684 /HYD /20 1 6 AND COS 3 &4/H/17 M/S SNJ SUGARS AND ALLIED PRODUCTS LTD., HYD. : - 12 - : 10. RECENTLY, WE HAD AN OCCASION TO CONSIDER A MORE OR LESS IDENTICAL ISSUE IN THE CASE OF CIT V. CELEBRITY FASHION LTD. [2020] 119 TAXMANN.COM 426 (MAD.) WHEREIN ONE OF THE SUBSTANTIAL QUESTIONS OF LAW, WHICH FELL FOR CONSIDERATION, WAS AS TO WHETHER THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE LOSS INCURRED ON ACCOUNT OF CANCELLATION OF FORWARD CONTRACTS WAS NOT SPECULATIVE LOSSES FALLING WITHIN THE PROVISIO NS OF SECTION 43(5) OF THE ACT. THE SAID QUESTION WAS ANSWERED IN FAVOUR OF THE ASSESSEE ON THE FOLLOWING LINES: '26. BE THAT AS IT MAY, WE HAVE CONSIDERED THE REASONS ASSIGNED BY THE TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR THE EARLIER ASSESSMENT YEAR W HEREIN THE TRIBUNAL RIGHTLY TOOK NOTE OF THE EARLIEST DECISION OF THE CALCUTTA HIGH COURT ON THE SAID POINT IN THE CASE OF SOORAJMULL NAGARMULL AND POINTED OUT THAT UNDER SECTION 43(5) OF THE ACT, 'SPECULATIVE TRANSACTION' HAS BEEN DEFINED TO MEAN A TRANSA CTION, IN WHICH, A CONTRACT FOR THE PURCHASE OR SALE OF COMMODITY IS SETTLED OTHERWISE THAN BY THE ACTUAL DELIVERY OR TRANSFER OF SUCH COMMODITY. HOWEVER, AS STATED, THE ASSESSEE HEREIN WAS NOT A DEALER IN FOREIGN EXCHANGE, BUT WAS AN EXPORTER OF COTTON. T HEREFORE, THE TRIBUNAL RIGHTLY TOOK NOTE OF THE TRANSACTION DONE BY THE ASSESSEE THOUGH, IN ORDER TO HEDGE AGAINST THE LOSSES, THE ASSESSEE BOOKED FOREIGN EXCHANGE IN THE FORWARD MARKET WITH THE BANK. HOWEVER, THE EXPORT CONTRACTS ENTERED INTO BY THE ASSES SEE FOR THE EXPORT OF COTTON IN SOME CASES FAILED AND THEREFORE, THE ASSESSEE WAS HELD TO BE ENTITLED TO CLAIM DEDUCTION IN RESPECT OF THE SAID AMOUNT AS BUSINESS LOSS. .............. 29. IT WILL BE BENEFICIAL TO REFER TO THE DECISION OF THE BOMBAY HIGH CO URT IN THE CASE OF CIT V. BADRIDAS GAURIDU PVT. LTD. [REPORTED IN [2003] 261 ITR 256 ]. IN THAT CASE, THE ASSESSEE WAS NOT A DEAL ER IN FOREIGN EXCHANGE, BUT WAS AN EXPORTER OF COTTON AS IN THE CASE I TA NO S . 1683 & 1684 /HYD /20 1 6 AND COS 3 &4/H/17 M/S SNJ SUGARS AND ALLIED PRODUCTS LTD., HYD. : - 13 - : BEFORE US. THE ASSESSEE THEREIN BOOKED FOREIGN EXCHANGE CONTRACTS, WHICH WERE HELD TO BE ONLY INCIDENTAL TO THE ASSESSEE'S REGULAR COURSE OF BUSINESS. WHILE TESTING THE CORRECTNESS OF THE ORDER OF THE TRIBUNAL, WHICH HELD THAT THE TRANSACTION WAS NOT A SPECULATIVE TRANSACTION, IT WAS OBSERVED AS FOLLOWS : '3. THE ASSESSEE WAS NOT A DEALER IN FOREIGN EXCHANGE. THE ASSESSEE WAS A COTTON EXPORTER. THE ASSESSEE WAS AN EXPORT HOUSE. THEREFORE, FOREIGN EXCHANGE CONTRACTS WERE BOOKED ONLY AS INCIDENTAL TO THE ASSESSEE'S REGULAR COURSE OF BUSINESS. THE TRIBUNAL HAS RECORDED A CATEGORICAL FINDING TO THIS EFFECT IN ITS ORDER. THE ASSESSING OFFICER HAS NOT CONSIDERED THESE FACTS. UNDER SECTION 43(5) O F THE INCOME - TAX ACT, 'SPECULATIVE TRANSACTION' HAS BEEN DEFINED TO MEAN A TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF A COMMODITY IS SETTLED OTHERWISE THAN BY THE ACTUAL DELIVERY OR TRANSFER OF SUCH COMMODITY. HOWEVER, AS STATED ABOVE, THE ASSESSEE WAS NOT A DEALER IN FOREIGN EXCHANGE. THE ASSESSEE WAS AN EXPORTER OF COTTON. IN ORDER TO HEDGE AGAINST LOSSES, THE ASSESSEE HAD BOOKED FOREIGN EXCHANGE IN THE FORWARD MARKET WITH THE BANK. HOWEVER, THE EXPORT CONTRACTS ENTERED INTO BY THE ASSESS EE FOR EXPORT OF COTTON IN SOME CASES FAILED. IN THE CIRCUMSTANCES, THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION IN RESPECT OF RS. 13.50 LAKHS AS A BUSINESS LOSS. THIS MATTER IS SQUARELY COVERED BY THE JUDGMENT OF THE CALCUTTA HIGH COURT WITH WHICH WE AGRE E, IN THE CASE OF CIT V. SOORAJ MULL NAGARMULL [1981] 129 ITR 1691].'' 11. THE ABOVE DECISION IN THE CASE OF CELEBRITY FASHION LTD. (SUPRA) WOULD ALSO COME TO THE AID AND ASSISTANCE OF THE ASSESSEE. THUS, IN THE LIGHT OF THE LAW LAID DOWN BY US IN THE ABOV E DECISION, WE FIND THAT THE TRIBUNAL WAS RIGHT IN ITS FINDING THAT THE LOSS INCURRED ON FOREIGN EXCHANGE DERIVATIVE CANNOT BE DISALLOWED HOLDING IT TO BE A SPECULATIVE LOSS. IN ANY EVENT, THE TRIBUNAL REMANDED THE MATTER TO THE ASSESSING OFFICER FOR A I TA NO S . 1683 & 1684 /HYD /20 1 6 AND COS 3 &4/H/17 M/S SNJ SUGARS AND ALLIED PRODUCTS LTD., HYD. : - 14 - : LIM ITED PURPOSE, WHICH HAS BEEN CLEARLY INDICATED IN PARAGRAPH 7 OF THE IMPUGNED ORDER. FOR THE FOREGOING REASONS, WE FIND NO GROUND TO INTERFERE WITH THE IMPUGNED ORDER PASSED BY THE TRIBUNAL. 7. 4. CONSIDERING THE ABOVE CITED JUDGMENTS & FACTS OF THE CASE OF THE ASSESSEE, THE FOREX LOSS CLAIMED BY THE ASSESSEE IS A BUSINESS LOSS, WHICH IS ALLOWABLE U/S 37(1) OF THE IT ACT. 7.5 AS REGARDS THE LEGAL ISSUE RAISED BY THE ASSESSEE BY WAY OF CROSS OBJECTI ON, WE OBSERVE THAT ON PERUSAL OF THE ASSESSMENT ORDER FOR THE AY 2009 - 10, NOWHERE ANY SEIZED MATERIAL HAS BEEN REFERRED BY THE AO FOR COMPUTING THE ASSESSMENT AND MADE ADDITION ONLY ON THE BASIS OF THE FINANCIAL STATEMENTS. SINCE NO INCRIMINATING DOCUMENT S FOUND DURING THE COURSE OF SEARCH U/S 153A, NO ADDITION CAN BE MADE. IN THIS REGARD, WE RELY ON THE FOLLOWING CASE LAW: 7. 6 IN THIS CONNECTION, WE RELY ON THE DECISION OF THE CUTTACK BENCH IN THE CASES OF DR. SUKANTA CHANDRA MALLICK IN IT(SS)A NO. 86 - 91/ CTK/2018 AND OTHERS VIDE ORDER DATED 08/07/2017, WHEREIN THE COORDINATE BENCH OBSERVED AS UNDER: 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. PRIMA FACIE, THE ISSUE RAISED BY BOTH THE ASSESSEES IN THEIR RESPECTIVE APPEALS FOR THE ASSESSMENT YEARS UNDER CONSIDERATION IS WITH REGARD TO THE ASSES SMENT U/S.153A OF THE ACT IS NOT MAINTAINABLE AS NO INCRIMINATING DOCUMENTS WHATSOEVER HAS BEEN FOUND OR SEIZED BY THE SEARCH TEAM DURING THE SEARCH CONDUCTED U/S.132 OF THE ACT. WE FOUND THAT THE LD. I TA NO S . 1683 & 1684 /HYD /20 1 6 AND COS 3 &4/H/17 M/S SNJ SUGARS AND ALLIED PRODUCTS LTD., HYD. : - 15 - : AR VEHEMENTLY EMPHASIZED THAT NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH, HENCE NO ADDITION CAN BE MADE. IT WAS ALSO THE CONTENTION OF LD. AR THAT THE CIT(A) RELYING ON THE DECISIONS OF HON'BLE KERALA AND ALLAHABAD HIGH COURTS HAS DISMISSED THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IN RESPECT OF NO INCRIMINATING MATERIAL WAS FOUND IN THE COURSE OF SEARCH AND THE ASSESSMENT U/S.153A HAS TO BE COMPLETED AS PER THE ORIGINAL ASSESSMENT ORDER. DURING THE COURSE OF HEARING, LD. AR DREW OUR ATTENTION TO THE PARA 2 OF THE ASSESSMENT ORDER AND SUBMITTED THAT THE AO IN THE LAST TWO LINES HAS MENTIONED THAT CASE OF THE ASSESSEE WAS DISCUSSED DURING THE ASSESSMENT PROCEEDINGS WITH THE AR OF THE ASSESSEE WITH REFERENCE TO THE BO OKS OF ACCOUNTS SEIZED RELATING TO THE GROUP OF THE CASES AS A WHOLE. FOR THE COMPLETENESS OF OUR ORDER, WE WOULD LIKE TO REPRODUCE THE PARA 2 OF THE ASSESSMENT ORDER, WHICH READS AS UNDER : - 02.NOTICE U/S.153A WAS ISSUED ON 31.01.2017. THE A.R. OF THE ASSESSEE, MS. SWATI KEJIRWAL, FCA APPEARED AND SUBMITTED A COPY OF THE RETURN U/S.153A FILED ON 10.03.2017 SHOWING A TOTAL INCOME AT RS.2,05,420/ - . HERE TOTAL INCOME U/S.153A IS EQUAL TO THAT SHOWN IN THE RETURN U/S.139(1). ACCORDINGL Y, NOTICES US/S.143(2) & U/S.142(1) ARE ISSUED AND SERVED. THE A.R., MS. SWATI KEJIRWAL, FCA APPEARED FROM TIME TO TIME AND THE CASE IS DISCUSSED WITH HER WITH REFERENCE TO THE FACTS IN THE RETURN OF INCOME AND ALSO WITH REFERENCE TO TH E BOOKS OF ACCOUNTS SEIZED RELATING TO THE GROUP OF THE CASES AS A WHOLE. 9. FURTHER, THE LD. AR DREW OUR ATTENTION TO THE PANCHANAMA FILED IN THE PAPER BOOK AT PAGES 8 TO 23 AND SUBMITTED THAT NO SUCH BOOKS OF ACCOUNTS HAS BEEN SEIZED NEITHER ANY INCRIMINATING MATERIAL IS FOUND DURING THE COURSE OF SEARCH TO ENABLE THE AO TO INVOKE THE PROVISIONS OF SECTION 153A OF THE ACT. I TA NO S . 1683 & 1684 /HYD /20 1 6 AND COS 3 &4/H/17 M/S SNJ SUGARS AND ALLIED PRODUCTS LTD., HYD. : - 16 - : ACCEPTING THE CONTENTION OF LD. AR, WE HAVE GONE THROUGH THE PANCHANAMA FILED BY TH E ASSESSEE IN THE PAPER BOOK RUNNING FROM PAGES 8 TO 23 AND WE FOUND THAT IN THEPANCHANAMA PREPARED ON 12.03.2016 IN PARANO.5(A)(I), IT IS MENTIONED THAT BOOKS OF ACCOUNTS AND DOCUMENTS WERE FOUND AND SEIZED AS PER ANNEXURE A (01 SHEET S) AND IN ANNEXURE - 1FILED AT PAGE 10 OF THE PAPER BOOK, CONTAIINGLIST/INVENTORY OF A/C BOOKS ETC. FOUND/SEIZED, IT IS MENTIONED THAT BUNCH OF LOOSE SHEET FOUND/SEIZED AND MARKED AS SCMR - 01. SIMILARLY, IN THE PANCHANAMA PREPARED O N 14.03.2016 & 17.03.2016, IN PARA (I) OF SL.NO.5(A), WITH REGARD TO WHAT ARE FOUND AND SEIZED DURING THE COURSE OF SEARCH, THE PANCHAS HAVE PUT A CROSS MARK ON THE SAME, MEANING THEREBY THERE IS NO MENTION ABOUT THE BOOKS OF ACCOUNTS F OUND OR SEIZED DURING THE COURSE OF SEARCH. LD. DR WAS UNABLE TO ESTABLISH THAT THE LOOSE SHEETS CAN BE TREATED AS BOOKS OF ACCOUNTS, WHEREAS IN THE ASSESSMENT ORDER THE AO HAS MENTIONED THAT THE BOOKS OF ACCOUNTS HAVE BEEN SEIZED BUT IN THE COPY OF PANCHANAMA PRODUCED BEFORE US, NO SUCH BOOKS OF ACCOUNTS HAS BEEN FOUND AND SEIZED. FURTHER, IN THE ASSESSMENT ORDER WHILE MAKING ADDITION THE AO HAS NOT REFERRED TO ANY LOOSE SHEET OR ANY SPECIFIC INCRIMINATING DOCUMENT FOUND DURING THE COURSE OF SEARCH ENABLING HIM TO MAKE SUCH ADDITION. 10.WE FIND THAT THE CIT(A) RELYING UPON THE DECISIONS OF THE HONBLE HIGH COURT OF KERALA IN THE CASE OF E.N.GOPAKUMAR VS. CIT [2016] 75 TAXMANN.COM 215 (KERALA) A ND THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. RAJ KUMAR ARORA [2014] 52 TAXMANN.COM 172 (ALLAHABAD) HAS HELD THAT EVEN IF THERE IS NO INCRIMINATING MATERIAL, THE AO IS EMPOWERED TO MAKE ADDITIONS IN AN ASSESSMENT FRAMED U/S.1 53A OF THE ACT. WE FIND THAT NONE OF THE DECISION RELIED UPON BY EITHER I TA NO S . 1683 & 1684 /HYD /20 1 6 AND COS 3 &4/H/17 M/S SNJ SUGARS AND ALLIED PRODUCTS LTD., HYD. : - 17 - : OF THE PARTIES ARE OF JURISDICTIONAL HIGH COURT. IT IS A WELL SETTLED POSITION OF LAW THAT WHEN THERE ARE CONFLICTING DECISIONS OF HIGH COURTS NONE OF WHICH IS THE JURISDIC TIONAL HIGH COURT, THEN THE DECISION FAVOURING THE ASSESSEE SHOULD BE FOLLOWED. FOR THIS, WE DERIVE SUPPORT FROM THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD. 88 ITR 192 (SC). THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT IN AN ASSESSMENT MADE U/S.153A OF THE ACT FOR AN ASSESSMENT YEAR FOR WHICH ASSESSMENT HAS NOT BEEN ABATED, THEN THE JURISDICTION OF THE ASSESSING OFFICER TO MAKE ADDITION IN SUCH AN ASSESSMENT, IS CONFIN ED TO SUCH INCRIMINATING SEARCH MATERIAL AND NO ADDITION DEHORS THE SEARCH MATERIAL CAN BE MADE. 11.UNDISPUTEDLY, IN THE INSTANT CASE, THE ASSESSMENT FOR THE ASSESSMENT YEARS IN QUESTION HAVE ALREADY BEEN COMPLETED ON THE DATE OF SEARCH IN THE CASES OF BOTH THE ASSESSEES AND SINCE NO INCRIMINATING MATERIAL WAS UNEARTHED DURING THE SEARCH, AS IS EVIDENT FROM THE PANCHANAMA PREPARED DURING THE COURSE OF SEARCH, NO ADDITIONS CAN BE MADE TO THE INCOME ALREADY ASSESSED. TO SUPPORT OUR VIEW, WE SHALL RELY ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF KABUL CHAWLA, [2015] 61 TAXMANN.COM 412 (DELHI), WHEREIN THE HONBLE HIGH COURT HAS HELD AS UNDER : - ON A CONSPECTUS OF SECTION 153A(1), READ WITH THE PROVISOS THERETO, AND IN THE LIGHT OF THE LAW EXPLAINED IN VARIOUS DECISIONS, THE LEGAL POSITION THAT EMERGES IS AS UNDER: (I) ONCE A SEARCH TAKES PLACE UNDER SECTION 132, NOTICE UNDER SECTION 153A(1) WILL HAVE TO BE MANDATORILY ISSUED TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS FOR SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR IN WHICH THE SEARCH TAKES PLACE. I TA NO S . 1683 & 1684 /HYD /20 1 6 AND COS 3 &4/H/17 M/S SNJ SUGARS AND ALLIED PRODUCTS LTD., HYD. : - 18 - : (II) ASSESSMENTS AND REASSESSMENTS PENDING ON THE DATE OF THE SEARCH SHALL ABATE. THE TOTAL INCOME FOR SUCH ASSESSMENT YEARS WILL HAVE TO BE COMPUTED BY THE ASSESSING OFFICERS AS A FRESH EXERCISE. (III)THE ASSESSING OFFICER WILL EX ERCISE NORMAL ASSESSMENT POWERS IN RESPECT OF THE SIX YEARS PREVIOUS TO THE RELEVANT ASSESSMENT YEAR IN WHICH THE SEARCH TAKES PLACE. ASSESSING OFFICER HAS THE POWER TO ASSESS AND REASSESS THE 'TOTAL INCOME' OF THE AFOREMENTIONED SIX YEARS IN SEPARATE ASSESSMENT ORDERS FOR EACH OF THE SIX YEARS. IN OTHER WORDS THERE WILL BE ONLY ONE ASSESSMENT ORDER IN RESPECT OF EACH OF THE SIX ASSESSMENT YEARS 'IN WHICH BOTH THE DISCLOSED AND THE UNDISCLOSED INCOME W OULD BE BROUGHT TO TAX'. (IV) ALTHOUGH SECTION 153 A DOES NOT SAY THAT ADDITIONS SHOULD BE .STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE OF THE SEARCH, OR OTHER POST - SEARCH MATERIAL OR INFORMATION AVAILABLE WITH THE ASSESSIN G OFFICER WHICH CAN BE RELATED TO THE EVIDENCE FOUND, IT DOES NOT MEAN THAT THE ASSESSMENT 'CAN BE ARBITRARY OR MADE WITHOUT ANY RELEVANCE OR NEXUS WITH THE SEIZED MATERIAL. OBVIOUSLY AN ASSESSMENT HAS TO BE MADE UNDER THIS SECTION ONLY ON THE BASIS OF SEIZED MATERIAL.' (V) IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE COMPLETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSMENT OR REASSESSMENT CAN BE MADE. THE WORD 'ASSESS' IN SECTION 153A IS RE LATABLE TO ABATED PROCEEDINGS (I.E., THOSE PENDING ON THE DATE OF I TA NO S . 1683 & 1684 /HYD /20 1 6 AND COS 3 &4/H/17 M/S SNJ SUGARS AND ALLIED PRODUCTS LTD., HYD. : - 19 - : SEARCH) AND THE WORD' REASSESS' TO COMPLETE ASSESSMENT PROCEEDINGS. (VI) INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED, THE JURISDICTION TO MAKE THE ORIGINAL ASSESSMENT A ND THE ASSESSMENT UNDER SECTION 153A MERGES INTO ONE. ONLY ONE ASSESSMENT SHALL BE MADE SEPARATELY FOR EACH ASSESSMENT YEAR ON THE BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTHER MATERIAL EXISTING OR BROUGHT ON THE RECORD OF THE ASSESSING OFF ICER. (VII) COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE ASSESSING OFFICER WHILE MAKING THE ASSESSMENT UNDER SECTION 153A ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR REQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH WHICH WERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. [PARA 37] THE P RESENT APPEALS CONCERN ASSESSMENT YEARS 2002 - 03, 2005 - 06 AND 2006 - 07. ON THE DATE OF THE SEARCH THE SAID ASSESSMENTS ALREADY STOOD COMPLETED. SINCE NO INCRIMINATING MATERIAL WAS UNEARTHED DURING THE SEARCH, NO ADDITIONS COULD HAVE BEEN MAD E TO THE INCOME ALREADY ASSESSED. [PARA 38]THE REVENUE'S APPEALS ARE ACCORDINGLY DISMISSED.[PARA 40] 12.IN THE PRESENT CASE, WE FIND THAT THERE IS NOTHING ON RECORD TO SUGGEST THAT ANY MATERIAL WAS FOUND IN THE COURSE OF SEARCH WHICH WOULD SHOW ANY CONNECTION ON ADDITION MADE BY AO WITH THE SEIZED MATERIAL WHICH IS THE SUBJECT MATTER OF DISPUTE IN ASSESSMENT ORDER. NOTHING IS FOUND CONTRARY TO THE STATE D POSITION OF THE ASSESSEE. WE ALSO FIND THAT I TA NO S . 1683 & 1684 /HYD /20 1 6 AND COS 3 &4/H/17 M/S SNJ SUGARS AND ALLIED PRODUCTS LTD., HYD. : - 20 - : THERE IS NO MATERIAL REFERRED TO BY THE AO TO SAY THAT ANY INCRIMINATING MATERIAL WAS UNEARTHED DURING THE SEARCH. THEREFORE, IN THE FACTUAL BACKGROUND, WE DO NOT FIND ANY JU STIFICATION FOR THE AO TO MAKE THE IMPUGNED ADDITIONS/DISALLOWANCE IN AN ASSESSMENT FINALIZED U/S 153A OF THE ACT IN THE ABSENCE OF ANY INCRIMINATING MATERIAL HAVING BEEN FOUND DURING THE COURSE OF SEARCH, QUA THE IMPUGNED AD DITIONS MADE IN ASSESSMENT ORDER. RESPECTFULLY, FOLLOWING THE RATIO OF DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF KABUL CHAWLA (SUPRA), WHEREIN, THE HON'BLE HIGH COURT AFTER DETAIL ANALYSIS CONCLUDED THAT, WHERE THERE IS NO INCRIMINATING MATERIAL QUA EACH OF THE ASSESSMENT YEAR ROPED IN UNDERSECTION 153AOF THE ACT, THEN, NO ADDITION CAN BE MADE WHILE FRAMING THE ASSESSMENT UNDERSECTION 153AOF THE ACT. THE AFORESAID PRINCIPLE AND RATIO ARE CLEARLY APPLICABLE ON THE FACTS OF THE PRESENT CASE ALSO, AS ADMITTEDLY NO INCRIMINATING MATERIAL RELATING TO THESE ASSESSMENT YEARS OR AS A MATTER OF FACT FOR ANY OF THE ASSESSMENT YEARS WERE FOUND DURING THE COURSE OF SEARCH AND ACCORDIN GLY, WE SET ASIDE THE ORDERS OF BOTH THE AUTHORITIES BELOW AND HELD THAT WHEN NO INCRIMINATING MATERIAL HAS BEEN FOUND DURING THE COURSE OF SEARCH THEN, NO ADDITION CAN BE MADE WHILE FRAMING THE ASSESSMENT UNDERSECTION 153AOF THE AC T. THUS, THE GROUNDS RAISED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2010 - 2011 ARE ALLOWED. 7. 7 . THEREFORE, WE FIND FORCE IN THE ARGUMENT OF THE LD. AR OF THE ASSESSEE THAT NO INCRIMINATING DOCUMENTS WERE FOUND DURING THE COURSE OF SEARCH U/S 153 A, WHICH WOULD SUGGEST TO MAKE ADDITION. THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE JUDGMENTS, WE UPHOLD THE ORDER OF CIT(A) IN BOTH THE I TA NO S . 1683 & 1684 /HYD /20 1 6 AND COS 3 &4/H/17 M/S SNJ SUGARS AND ALLIED PRODUCTS LTD., HYD. : - 21 - : YEARS ON MERITS OF THE CASE AND DISMISS THE GROUNDS RAISED BY THE REVENUE ON THIS ISSUE. 7. 8. THE CROSS OBJECTIONS RAISED BY THE ASSESSEE IN BOTH THE YEARS IN GROUND NO. 2 TO 9, WHICH ARE REGARDING FOREX LOSS AND IN SUPPORT OF ORDERS OF CIT(A), THEREFORE, THE SAME ARE DISMISSED AS INFRUCTUOUS AS WE HAVE UPHELD THE ORDERS OF CIT(A) IN BOTH THE YEARS UNDER CONSIDERATION WHILE ADJUDICATING THE APP E ALS OF THE REVENUE. AS REGARDS GROUND. 10 OF THE CO IN AY 2009 - 10 REGARDING LEGAL ISSUE RAISED BY THE ASSESSEE IS ALLOWED AND FOR AY 2010 - 11 THE OBJECTION RAISED IN GROUND NO. 10 IS DISMISSED BECAUSE THE ASSE SSMENT YEAR WAS THE ABATED ASSESSMENT YEAR, THEREFORE THE AO HAS JURISDICTION TO PASS THE ORDER U/S 143(3) RWS 153A OF THE ACT WITHOUT REFERRING ANY SEIZED MATERIAL . 8 . IN THE RESULT, BOTH THE APPEA L S OF REVENUE ARE DISMISSED AND THE CO IN AY 2009 - 10 PARTLY ALLOWED AND IN AY 2010 - 11 DISMISSED. PRONOUNCED IN THE OPEN COURT ON 13 TH JU LY , 2021 . SD/ - S D/ - ( S.S. GODARA ) (L . P . SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDE RABAD, DATED : 13 TH JU LY , 20 2 1 . K V I TA NO S . 1683 & 1684 /HYD /20 1 6 AND COS 3 &4/H/17 M/S SNJ SUGARS AND ALLIED PRODUCTS LTD., HYD. : - 22 - : C OPY TO : 1 ACIT, CIRCLE 1(1), TIRUPATI 2 M/S SNJ SUGARS AND ALLIED PRODUCTS LTD., NELVOY (V), SRI RANGARAJAPURAM (M), CHITTOOR DISTRICT. 3 C I T(A) , TIRUPATI 4 PR. CIT , TIRUPATI 5 ITAT, DR, HYDERABAD. 6 GUARD FILE.