ITO 16(3)(1), MUMBAI V. ANKIT DIAMONDS, MUMBAI

ITA 246/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2340 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 09-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACHCHIDANAND DUBE
• Assessee Lawyers: K A VAIDYALIGAN
• Section: 143(3); 142(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE HONBLE S/SHRI JOGINDER SINGH (JM), AND RAJESH KUMAR, ( AM ) ./ I.T.A. NO . 246 /MUM/20 1 4 ( / ASSESSMENT YEAR : 200 9 - 10 ) INCOME TAX OFFICER 16(3)(1), ROOM NO.219, MATRU MANDIR, MUMBAI - 400007 / VS. M /S ANKIT DIAMONDS, 1219/1220, PRASAD CHAMBER, OPERA HOUSE, MUMBAI - 400004 ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN/GIR NO. : AAAFA3924D / APPELLANT BY: SHRI SACHCHIDANAND DUBE / RESPONDENT BY SHRI K A VAIDYALIGAN / DATE OF HEARING : 2 6 . 7 .201 6 / DATE OF PRONOUNCEMENT : 29 . 7.2016 / O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AND IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) - 27 , MUMBAI DT. 1 8 . 10 .201 3 PERTAINING TO A.Y. 20 0 9 - 10 . 2. ONLY ISSUE RAISED IN THE GROUNDS OF APPEAL IS AGAINST THE DELETION OF MARK TO MARKET LOS OF RS.45,31,646/ - BY THE LD. CIT(A) AS MADE BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS ARI SI NG ON THE VALUATION OF FORWARD EXCHANGE CONTRACTS ON THE CLOSING DA T E OF ACCOUNTING YEAR AND FURTHER THAT THE LD. CIT(A) IS ERRED IN NOT TAKING THE COGNIZANCE OF DECISION RENDERED BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S VINODKUMAR DIAMONDS PVT LTD. IN ITA NO.506/MUM/2013 DATED 3.5.2013. ITA NO 246 / M/1 4 2 3 . FACTS OF THE CASE ARE THAT THE AS SESSEE - FIRM BEING A IMPORTER, MANUFACTURER AND EXPORTER OF DIAMONDS AND STUDDED JEWELLERY, FILED ITS RETURN OF INCOME ON 27.9.2009 DECLARING TOTAL INCOME OF RS.67,966/ - WHICH WAS PROCESSED U/S 143(3) OF THE ACT. THEREAFTER, SCRUTINY PROCEEDINGS WERE IM ITATED AGAINST THE ASSESSEE AND STATUTORY NOTICES UNDER SECTION 143(2) AND 142(1) WERE ISSUED AND SERVED UPON THE ASSESSEE. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAS DEBITED RS.45 , 31 , 646/ - TO PROFIT AND LOSS ACCOU NT ON ACCOUNT OF FORWARD CONTRACT LOSS . IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED BY THE AO, THE LD.AR SUBMITTED THAT THE ASSESSEE HAS ENTERED INTO THE FOREIGN EXCHANGE FORWARD CONTRACT IN THE ORDINARY COURSE OF ITS BUSINESS. THE LD. AR FURTHER SUBMI TTED THAT THE RATE OF FOREIGN EXCHANGE CONTINUED TO CHANGE FLUCTUATE FROM TIME TO TIME. THE ASSESSEE ALSO SUBMITTED THAT THE LOSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION WERE ADMISSIBLE AS THESE WERE TAKEN IN TO ACCOUNT A T THE END OF THE YEAR ON THE PR EVAILING RATE OF EXCHANGE AND THEREFORE RIGHTLY CLAIMED BY THE ASSESSEE. HOWEVER, THE AO NOT CONVINCING WITH THE REPLY ADDED BACK THE LOSS ON ACCOUNT OF MARK TO MARKET IN RESPECT OF FORWARD CONTRACT OF RS.45, 99,612/ - VIDE ORDER DATED 30.12.2011 PAS SED UNDER SECTION 143(3) OF THE ACT. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED APPEAL BEFORE THE L D. CIT(A) WHO AFTER CONSIDERING HE SUBMISSIONS OF THE ASSESSEE IN PARA 2.3. OF THE APPEAL ORDER ALLOWED THE APPEAL OF THE ASSESSEE BY FOLLOWING T HE DECISION S IN THE CASE S OF DCIT V/S ITA NO 246 / M/1 4 3 BANK OF BAHRAIN AND KUWAIT (ITAT) MUMBAI BENCH ) 43 DTR - 505, CIT V/S WOODWARD GOVERNOR INDIA (P) LTD (2009) 312 ITR 254 (SC) AND VARIOUS OTHER DECISIONS . AGGRIEVED BY THE ORDER OF LD.CIT(A) THE REVENUE IS INAPPEAL BEFORE US. 5. WE HAVE HEARD THE LD.DR, WHO STRONGLY OPPOSED THE ORDER PASSED BY THE LD.CIT(A) BEING WRONG AND CONTRARY TO THE LAW AS THE LD. CIT(A) DID NOT APPRECIATE THE FACT IN CORRECT PERSPECTIVE AND PRAYED FOR SETTING ASIDE THE ORDER OF CIT(A) AND UPHOLDING THAT OF AO. 6. ON THE CONTRARY THE LD.AR STRONGLY OPPOSING THE ARGUMENTS OF THE LD.DR SUBMITTED THAT THE ISSUE RAISED IN THIS APPEAL STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE APEX COURT IN THE CASE OF WOODWARD GOVERNO R INDIA P LTD (2009) 312 ITR 254, ONGC LIMITED (322 ITR 180(SC), SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF BANK OF BAHARAIN AND KUWAIT (41 SOT 29) MUM (SB) AND ALSO BY THE FOLLOWING DECISION S: A) OSIA DIAMONDS(GEMS) - 2163/M/2013 B) VENUS JEW ELS - 7328/7329/MUM/2013 ; C) RAJ GEMS - ITA NO.4486/M/2012 ; D) D CHETAN & CO. ITA NO.4456/M/2012 ; E) SUTARIAYA GEMS PRIVATE LIMITED - ITA NO. 3361/M/2013 ; F) MUNJANI BRAS. ITA NO.7628/M/2011 ; G) MUNJANI BRAS - ITA NO.6065/M/2012 ; H) GANDHI ENTERPRISES - IT A NO.4485/M/2012 I ) SOCIETE GENERALE ITA NO. 3597, 3595, 8198/M/2005 ; J) BHAVANI GEMS - ITA NO.2855/M/2010 ; K) H DIPAK & CO. - ITA NO.7629/M/2011 ; L ) KUMBH GEMS - ITA NO.6600/M/2012 ; M ) S RAJIV & CO. - ITA NO.7095/M/2012 ; N) H SHE RUL & CO. - ITA NO.4481/MUM/2012 ; ITA NO 246 / M/1 4 4 O ) S JOGANI EXPORTS PRIVATE LIMITED ; AND P ) INTER JEWELS PRIVATE LIMITED - AY 2008/09 (COPY ENCLOSED) THE LD.AR SUBMITTED THAT THE ORDER PASSED BY THE LD. FAA WAS TOTALLY BASED ON CORRECT APPRECIATION OF FACTS A ND AS PER THE JUDICIAL DECISIONS BY THE VARIOUS COURT OF LAW. THE LD. AR FINALLY SUBMITTED THAT SINCE THESE LOSSES INCURRED DURING THE ORDINARY COURSE OF BUSINESS ON THE FORWARD CONTRACT THE ASSESSEE SUFFERED THESE LOSSES ON FLUCTUATION IN FOREIGN EXCHANG E AND THEREFORE RIGHTLY ACCOUNTED AT THE CLOSE OF THE YEAR. THE LD. AR FINALLY PRAYED THAT IN VIEW OF THE VARIOUS DECISIONS , THE APPEAL OF THE REVENUE BE DISMISSED WITH COSTS. 7 . WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE PARTIES, PERUSED THE MA TERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW AND CASE LAWS RELIED UPON BY THE PARTIES . WE FIND THAT THE ASSESSEE IS A IMPORTER, MANUFACTURER AND EXPORTER OF DIAMONDS AND STUDDED JEWELLERY AND HAS BEING REGULARLY ENTERED INTO VARIOUS TR ANSACTION S OF IMPORT AND EXPORT IN CONNECTION THEREWITH. THE ASSESSEE HAS ENTERED INTO VARIOUS FOREIGN EXCHANGE FORWARD CONTRACTS WHICH SPAN MORE THAN A YEAR AND DURING THE ASSESSEE SUFFERED OF RS. 45,99,612/ - AS LOSS ON THE BASIS OF FOREIGN EXCHAN GE RATE AT THE END OF YEAR WHICH IN OUR OPINION ADMISSIBLE IN VIEW OF THE RATIO LAID DOWN IN THE CASE OF WOODWARD GOVERNOR INDIA P LTD (SUPRA) AND VARIOUS OTHER DECISIONS. ACCORDINGLY, WE UPHOLD THE ORDER PASSED BY THE LD.CIT(A) BY DISMISSING THE APPEA L OF THE REVENUE. ITA NO 246 / M/1 4 5 8. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 29TH JULY, 2016 . 29TH JULY, 2016 S D SD (JOGINDER SINGH ) ( RAJESH KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 29TH JULY, 2016 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. 6. , , / DR , ITAT, MUMBAI CONCERNED / GUARD FILE. / BY ORDER, T RUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI