M/s Anand Nishikawa Company Ltd., New Delhi V. ACIT, New Delhi

ITA 3561/DEL/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4118 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-03-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 13-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUSHA KHURANA
• Assessee Lawyers: BALJEET SINGH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH `A : NEW DELHI) BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE VICE PRES IDENTAND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NO.3561/DEL./2009 (ASSESSMENT YEAR : 2005-06) ANAND NISHIKAWA COMPANY LTD., VS. ITO, CIRCLE 1(1 ), 25/31, EAST PATEL NAGAR, NEW DELHI. NEW DELHI. (PAN/GIR NO.AAECA0338G) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI BALJEET SINGH, CA REVENUE BY : MS. ANUSHA KHURANA, SR.DR ORDER PER A.D. JAIN: JM THIS IS ASSESSEES APPEAL FOR ASSESSMENT YEAR 20 05-06 TAKING THE FOLLOWING GROUNDS: 1. THAT CIT(A) HAS ERRED IN LAW AND ON THE FACTS DISA LLOWING A SUM OF `1,75,864 BEING LOSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION. 2. THE CIT(A) HAS ERRED IN LAW AND ON THE FACTYS DISALLOW ING A SUM OF `699432 BEING DEBIT BALANCES WRITTEN OFF. 3. THE CIT(A) HAS ERRED IN NOT ALLOWING THE ASSESSEE SUFFICI ENT TIME TO PRODUCE THE DETAILS REQUIRED. 2. APROPOS GROUND NO.1, WHILE MAKING THE DISALLOWANC E OF `1,75,864 CONCERNING LOSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUAT ION, THE AO OBSERVED, INTER ALIA, THAT THE ASSESSEE HAD CLAIMED THE SAID AMOUNT BY C ALCULATING THE DIFFERENCE OF THE VALUE OF THE FOREIGN CURRENCY ON THE DATE OF THE BALANC E SHEET AND THE VALUE OF THE ORIGINAL COST; THAT SUCH NOTIONAL LOSS CANNOT BE ALLOWED AS EXPENDITURE; AND THAT I.T.A. NO.3561/DEL./2009 (A.Y. : 2005-06) 2 IT HAS TO BE ALLOWED IF THE ASSESSEE HAS ACTUALLY INCURRED ANY EXPENDITURE IN THIS REGARD. 3. THE CIT(A), WHILE UPHOLDING THE DISALLOWANCE, OBSERVED THAT THE AO WAS NOT CORRECT IN DISALLOWING THE LOSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION AS A NOTIONAL LOSS OR CONTINGENT LIABILITY; THAT THE HON BLE SUPREME COURT HAS HELD IN THE CASE OF CIT VS. WOODWORD GOVERNOR(INDIA) PVT. LTD. 294 I.T.R. 451 (DEL.) THAT LOSS ON FOREIGN EXCHANGE FLUCTUATION CANNOT BE HELD AS A NOT IONAL LOSS IF IT IS IN RELATION TO REVENUE ITEMS; THAT HOWEVER, WOODWORD GOVERNOR (INDIA) PV T. LTD. (SUPRA) IS ONLY RELATED TO REVENUE ITEMS; THAT THE ASSESSEE HAD STATED THAT TH IS LOSS WAS ON REVENUE ITEMS, NO DETAILS HAD BEEN SUBMITTED TO SUBSTANTIATE THIS CLAIM. 4. APROPOS GROUND NO.2 THE AO, WHILE DISALLOWING A SU M OF `699432 ON ACCOUNT OF DEBIT BALANCES, SHOULD NOT HAVE OBSERVED THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF `1895850, OUT OF WHICH, `1196418 WAS I N RESPECT OF INSURANCE CLAIM RECEIVABLE; THAT AS FOR THE REST OF THE CLAIM OF `699432, THE ASSESSEE HAD STATED THAT IT HAD CLAIMED THIS AMOUNT SINCE IN THE OPINION O F THE COMPANY, IT WAS NOT RECOVERABLE OR THERE WAS SOME DISPUTE WITH REGARD TO THE TRA NSACTION. THE AO DISALLOWED THE AMOUNT, HOLDING THE WRITEN OFF OF THE AMO UNT TO BE COVERED UNDER THE PROVISIONS OF SECTION 36(1)(VII) READ WITH SECTION 36(2) OF THE ACT. 5. THE CIT(A) OBSERVED THAT THE ASSESSEE HAD NOT PROVIDED A NY MATERIAL TO REBUT THE AOS OBSERVATIONS; THAT SUFFICIENT EVIDENCE HAD ALSO NOT BEEN PRODUCED TO ESTABLISH THAT THE AMOUNT WRITTEN OFF WAS IN THE NATURE OF A TRADING LOSS. 6. AT THE OUTSET, LD.COUNSEL FOR THE ASSESSEE HAS CONTENDED WHILE WRONGLY UPHOLDING THE AOS ORDER RELATING BOTH THE CLAIMS, THE C IT(A) HAS FAILED TO TAKE INTO CONSIDERATION THE DETAILS FILED BEFORE HIM BY WAY OF WRIT TEN SUBMISSIONS AND THE DOCUMENTS ATTACHED THERETO. IT HAS BEEN CONTENDED BY WAY OF GROUND NO.2, THAT THE CIT(A) DID NOT ALLOW THE ASSESSEE SUFFICIENT TIME TO PRODUCE THE DETAILS REQUIRED. I.T.A. NO.3561/DEL./2009 (A.Y. : 2005-06) 3 7. THE LD.DR, ON THE OTHER HAND, HAS PLACED STRONG RELI ANCE ON THE IMPUGNED ORDER. IT FINDS MENTION IN THE SECOND PARAGRAPH OF THE IMPUGNED ORDER THAT - ..ON 29.6.09 ONE MR. RAKESH KUMAR SINGH FROM C OMPANY APPEARED AND FILED A WRITTEN SUBMISSION UNDER SIGNATURE O F MR. IQBAL S. ANAND, MD OF THE APPELLANT COMPANY. ACCORDINGLY, I A M PROCEEDING TO DISPOSE OF THIS APPEAL BASED ON THE MATERIALS AVAILABLE ON RECORD AND BASED ON THE WRITTEN SUBMISSION PRESUMING THAT APPELLANT DOES NOT WANT TO AVAIL RIGHT OF BEING HEARD IN PERSON WHICH IT IS ENTITL ED AS PER SECTION 250(2)(A) OF THE I.T.ACT. 8. BEFORE US, THE ASSESSEE HAS FILED A PAPER BOOK CONTAINI NG 16 PAGES. PAGES 1-6 THEREOF CONTAIN THE ASSESSEES WRITTEN SUBMISSION BEFOR E US. PAGES 7 & 8 ARE A COPY OF THE DETAILS OF FOREIGN EXCHANGE FLUCTUATION LOSS INCURRED BY THE ASSESSEE FOR THE PERIOD FROM 1.4.04 TO 31.3.05. THESE DETAILS ARE STA TED TO HAVE BEEN FILED BEFORE THE CIT(A). HOWEVER, IT IS SEEN THAT THE CIT(A) HAS NOT ADVERTED TO THESE DETAILS AND HAS CONFIRMED THE ADDITION OBSERVING THAT N O DETAILS HAD BEEN FILED TO SUBSTANTIATE THE CLAIM. THEREFORE, THE ORDER OF THE CIT(A) IN THIS REGARD IS AN ORDER PASSED WITHOUT CONSIDERING THE MATERIAL DOCUMENTS FILED ON RECORD. 9. APROPOS THE ISSUE CONCERNING GROUND NO.2 ALSO, THE ASSESSEE HAS SUBMITTED BEFORE US A TYPED COPY OF GENERAL LEDGER FOR BALANCES WRITT EN OFF FOR THE PERIOD FROM 1.4.04 TO 31.3.05 (APB 9-12). SUCH COPIES OF TH E LEDGER ACCOUNT IS STATED TO HAVE BEEN FILED BEFORE THE CIT(A). HERE AGAIN, THE CIT(A), W HILE UPHOLDING THE DISALLOWANCE MADE BY THE AO, HAS NOT REFERRED TO THESE DOCU MENTS IN THE IMPUGNED ORDER AND DISALLOWANCE HAS BEEN CONFIRMED, OBSERV ING THAT THE ASSESSEE DID NOT FILE ANY EVIDENCE TO SHOW THAT DEBTS WERE TAKEN IN TO CONSIDERATION FOR ARRIVING AT INCOME OF THE PREVIOUS YEAR OR THE EARLIER PR EVIOUS YEAR AND THAT SUFFICIENT EVIDENCE HAD ALSO NOT BEEN PRODUCED TO ESTABLISH THAT THE AMOUNT WRITTEN OFF WAS IN THE NATURE OF A TRADING LOSS. I.T.A. NO.3561/DEL./2009 (A.Y. : 2005-06) 4 10. IN THIS REGARD ALSO, THE ORDER OF THE CIT(A) DOES NO T TAKE INTO CONSIDERATION MATERIAL EVIDENCE BROUGHT ON RECORD, CAUSING DETRIMENT TO THE ASSESSEE. 11. IN VIEW OF THE ABOVE, BOTH THESE ISSUES ARE REMITTED TO THE FILE OF THE CIT(A) TO BE DECIDED AFRESH IN ACCORDANCE WITH LAW, TAKING INTO CO NSIDERATION THE AFORESAID EVIDENCE FURNISHED BY THE ASSESSEE AND PROVIDING THE ASSESSEE W ITH ADEQUATE OPPORTUNITY OF HEARING. THE ASSESSEE, NO DOUBT, SHALL CO OPERATE IN THE FIRST APPELLATE PROCEEDINGS. 12. IN THE RESULT, FOR STATISTICAL PURPOSES, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 29.04.2011. SD/- SD/- (G.E. VEERABHADRAPPA) (A.D. JAIN) VICE PRESIDENT JUDICIAL MEMBER DATED, APRIL 29, 2011 SKB COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-IV, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR/ITAT