POWERICA LTD, MUMBAI V. CIT(LTU), MUMBAI

ITA 3747/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9046 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 23-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H N SINGH
• Assessee Lawyers: VIJAY MEHTA WITH GOVIND JAVERI
• Keywords: Business expenditure; Opportunity of being heard; Deemed to accrue or arise in india; Revised return
• Section: 115JB; 263

Judgement Text

ITA NO.3747/M/2017 POWERICA LTD 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C,MUM BAI BEFORE SHRI P.K. BANSAL, VICE-PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.3747/MUM/2017 (ASSESSMENT YEAR- 2012-13) M/S POWERICA LIMITED 9 TH FLOOR, BAKHTAWAR, NARIMAN POINT, MUMBAI-400021 PAN: AAACP3812E VS. CIT (LTU), 29 TH FLOOR, WORLD TRADE CENTRE I, CUFFE PARADE, MUMBAI-400005. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VIJAY MEHTA WITH GOVIND JAVERI (AR) REVENUE BY : SHRI H.N. SINGH (CIT-DR) DATE OF HEARING : 07.08.2017 DATE OF PRONOUNCEMENT : 11.10.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER : 1. THIS APPEAL BY ASSESSEE UNDER SECTION 253 OF INCOME TAX ACT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF I NCOME-TAX (LTU), MUMBAI (HEREINAFTER REFERRED AS LD. COMMISSIONER) D ATED 27 TH MARCH 2017. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL; 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE ORDER PASSED UNDER SECTION 263 OF INCOME TAX ACT 1961 BY LEARNED COMMISSIONER OF INCOME TAX DATED 27 MARCH 2017 IS A RBITRARY, ERRONEOUS, INVALID AND BAD IN LAW. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED COMMISSIONER OF INCOME TAX ERRED IN MAKING ADJUSTME NT OF RS.3,19,30,000/-IN RESPECT OF FOREX LOSS ON ECB LOA N, IN COMPUTING BOOK PROFIT UNDER SECTION 115JBOF THE ACT ITA NO.3747/M/2017 POWERICA LTD 2 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND T HE ABOVE GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE COMPANY I S MANUFACTURER OF DIESEL GENERATORS FILED ITS RETURN OF INCOME FOR RE LEVANT ASSESSMENT YEAR ON 20 SEPTEMBER 2012. SUBSEQUENTLY, A REVISED RETUR N WAS FILED ON 20 MARCH 2014 DECLARING TOTAL INCOME OF RS. NIL UNDER NORMAL PROVISION OF AND BOOK PROFIT OF RS. 94,66,55,426/-UNDER SECTION 115JB. THE ASSESSEE REVISED THE RETURN OF INCOME FOR CLAIMING EXCHANGE RATE FLUCTUATION LOSS ON ACCOUNT OF EXTERNAL COMMERCIAL BORROWING (ECB) LOANS. THE ASSESSMENT WAS COMPLETED ON 15 JANUARY 2015 UNDER S ECTION 143(3). THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDE R ALLOWED THE FOREX LOSS OF RS. 3,19,30,000/- ON ACCOUNT OF ECB AVAILED . SUBSEQUENTLY, THE ORDER OF ASSESSING OFFICER WAS REVISED BY LEARNED C OMMISSIONER VIDE ORDER DATED 27 MARCH 2017. WHILE REVISING THE ASSES SMENT ORDER LEARNED COMMISSIONER OBSERVED THAT THE MARK TO MARKET LOSS BOOKED BY THE ASSESSEE COMPANY IS BROADLY A NOTIONAL LOSS AND IS, AT THE BEST, A CONTINGENT LIABILITY WHICH CAN NEITHER BE CLAIMED I N THE BOOK PROFIT NOR IN THE COMPUTATION OF INCOME. THUS, ALLOWANCE OF SUCH ITEM IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE LEA RNED COMMISSIONER PASSED THE FOLLOWING ORDER; I HAVE CAREFULLY CONSIDERED THE ISSUE. WHILE COMPUT ING THE INCOME UNDER INCOME TAX ACT, THE DEVIATION OF ACCOUNTING S TANDARD FROM THE PROVISION OF INCOME TAX ACT HAS TO BE FACTORED. SEC TION 43A OF THE ITA NO.3747/M/2017 POWERICA LTD 3 INCOME TAX ACT PRESCRIBES HOW THE CHANGES IN RATE O F EXCHANGE OF CURRENCY HAS TO BE TREATED AND THE PROVISIONS HAS T O BE APPLIED WHILE COMPUTING THE INCOME IRRESPECTIVE OF THE PROVISIONS OF ACCOUNT THE STANDARD. FURTHER, THE CBDT HAS ISSUED INSTRUCTION NO.3 OF 2010 AFTER CONSIDERING THE JUDGEMENT OF HONOURABLE SUPREME COU RT IN WOODWARD GOVERNOR INDIA (P) LIMITED. THE SAID INSTRUCTION IS BINDING ON THE INCOME TAX AUTHORITIES. CONSIDERING THIS, THE ORDER PASSED BY ASSESSING OFFICER IS CONSIDERED ERRONEOUS AND HAS PREJUDICIAL TO THE INTEREST OF REVENUE AND AO IS DIRECTED TO RECOMPUTE THE INCOME BY DISALLOWING SUCH NOTIONAL LOSS RESULTING FROM A RESTATEMENT OF OUTSTANDING LIABILITIES/RECEIVABLE. MAT LIABILITY WILL ALSO BE RECOMPUTED ACCORDINGLY . THE LEARNED COMMISSIONER DIRECTED THE ASSESSING OFF ICER TO COMPUTE THE INCOME BY DISALLOWING SUCH NOTIONAL LOSS. THUS, AGG RIEVED BY THE ORDER OF COMMISSIONER THE ASSESSEE HAS FILED PRESENT APPE AL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD LEARNED AR OF THE ASSESSEE AND LEARNE D DR FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. THE LEARNED AR OF THE ASSESSEE ARGUED THAT THE ASSESSEE AVAILED LOAN FROM CITI BANK OF US $2,00,000/- FOR FINANCING THE INSTALLATION OF WIND MILL AT GUJARAT. THE SAID LOAN WAS VALUED BASED ON THE EXCHANGE RATE PREVAILI NG ON THE LAST DATE OF FINANCIAL YEAR AND THE ASSESSEE CLAIMED THE CONSEQU ENTIAL LOSS INCURRED AS PER ACCOUNTING STANDERED-11 (AS-11). THE DEDUCTION WAS CLAIMED AS PER THE ASSESSEE PERTAINED TO THE EXISTING LOAN LIABILI TY AS PER THE ACCOUNTING POLICY FOLLOWED BY THE ASSESSEE. DURING THE ASSE SSMENT PROCEEDINGS THE ASSESSING OFFICER RAISED QUARRY RELATED TO FOREIGN EXCHANGE LOSS ON ECB ITA NO.3747/M/2017 POWERICA LTD 4 LOAN CLAIMED IN REVISED RETURN OF INCOME. THE ASSES SEE FURNISHED ALL DETAILS RELATED WITH THE ISSUE. THE ASSESSEE FURTHE R FILED THE DETAILS OF EXCHANGE RATE FLUCTUATIONS ENTRIES AS ON 31 MARCH 2 012 ALONG WITH THE NOTE ON FOREIGN EXCHANGE FLUCTUATION COPIES OF WHIC H ARE PLACED ON RECORD. THE ASSESSING OFFICER EXAMINED THE REPLY AN D DETAILS FURNISHED ON QUESTION RAISED BY ASSESSING OFFICER. THE ASSESSING OFFICER ALLOWED THE FOREX LOSS OF RS. 3,19,30,000/- ON ACCOUNT OF ECB L OAN. THE REVENUE HAS NO RIGHT TO GO BEHIND THE ASSESSMENT. THE PROFIT H AS BEEN DISCLOSED IN ACCORDANCE WITH THE PROVISIONS OF COMPANIES ACT, F INANCIAL STATEMENT AS WELL AS FORM 29 B ARE DULLY CERTIFIED BY CA. THE AS SESSING OFFICER HAS LIMITED POWER OF MAKING INCREASES AND REDUCES AS PR OVIDED FOR IN EXPLANATION TO SECTION 115. THE ASSESSING OFFICER AFTER CONSIDERING THE ENTIRE FACTS AND THE SUBMISSIONS WHICH WERE SUBSTAN TIATED ALONG WITH DOCUMENTARY EVIDENCES, TAKEN ONE OF THE POSSIBLE VI EW ON THE CLAIM OF THE ASSESSEE. THE ORDER PASSED BY ASSESSING OFFICER IS NOT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE ORDER P ASSED BY COMMISSIONER UNDER SECTION 263 IS LIABLE TO BE SET-ASIDE. IN SUP PORT OF HIS SUBMISSION THE LEARNED AR OF THE ASSESSEE RELIED UPON THE FOLL OWING DECISIONS; (1) APOLLO TYRES LTD VS CIT (255 ITR 273 SC) (2) CIT VS ADBHUT TRADING COMPANY PRIVATE LIMITED( 33 ITR 94 BOM) (3) PR CIT VS BHAGWAN INDUSTRIES LTD (ITA NO.436OF 2015 DATED18.07.2017) (4) BHARAT SERUMS & VACCINES LTD VS ACIT ( ITA 3091/M/ 2012) ITA NO.3747/M/2017 POWERICA LTD 5 (5) MALABAR INDUSTRIAL CO LTD VERSUS CIT (243 ITR 83 SC) (6) CIT VERSUS MAX INDIA (203 ITR 108 BOM) (7) CIT VERSUS GABRIEL INDIA (203 ITR 108 BOM) (8) CIT VERSUS ARVIND JEWELLERS (290 ITR 689 GUJ ARAT) (9) CIT VERSUS DEVELOPMENT CREDIT BANK LTD(323 IT R 206 BOMBAY) (10) CIT VERSUS VIKAS POLYMERS (194 TAXMAN 57 DELHI) AND (11) CIT VERSUS ANIL KUMAR SHARMA(194 TAXMAN 504 DELHI) 4. ON THE OTHER HAND THE LEARNED AR FOR THE REVENUE S UPPORTED THE ORDER OF BRANDED COMMISSIONER. IT WAS ARGUED THAT THE ASSESS ING OFFICER HAS NOT EXAMINED THE FOREX LOSS. THE ASSESSING OFFICER WAS DIRECTED BY LEARNED COMMISSIONER TO RECOMPUTE THE INCOME BY DISALLOWING SUCH NOTIONAL LOSS. THE LEARNED THE AR FOR REVENUE ARGUED THAT OR DER PASSED BY LEARNED COMMISSIONER THE JUSTIFIED. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF PARTIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE ALSO CONSI DERED THE VARIOUS DECISION RELIED BY LEARNED AR OF THE ASSESSEE. FOR APPRECIATION OF FACTS AND THE 'SECTION 263(1) IN THE INCOME- TAX ACT: (1) THE COMMISSIONER MAY CALL FO R AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, HE, MA Y, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MA KING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, I NCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLIN G THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT....... ITA NO.3747/M/2017 POWERICA LTD 6 THE SUM AND SUBSTANCE OF THE ABOVE REPR ODUCED SECTION 263(1) CAN BE SUMMARIZED IN THE FOLLOWING POINTS: (1) THE COMMISSIONER MAY CALL FOR AND E XAMINE THE RECORD OF ANY PROCEEDING UNDER THE ACT; (2) IF HE CONSIDERS THAT THE ORDER PASSED BY THE AO IS (I) ERRONEOUS; AND (II) IS PREJUDICIAL TO THE INTER EST OF REVENUE; (3) HE HAS TO GIVE AN OPPORTUNITY OF HEARING IN THI S RESPECT TO THE ASSESSEE; AND (4) HE HAS TO MAKE OR CAUSE TO MAKE SUCH ENQUIRY A S HE DEEMS NECESSARY; (5) HE MAY PASS SUCH ORDER THEREON AS THE CIRCUMS TANCES OF THE CASE JUSTIFY INCLUDING, (I) AN ORDER ENHANCING OR, (II) MODIFYING THE ASSESSMENT OR (III) CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. NOW IN THE LIGHT OF ABOVE WORDS, WE ARE R EQUIRED TO EXAMINE AS TO WHETHER THE ORDER OF THE LD. CIT IS A VALID ORDER I N THE LIGHT OF THE ABOVE STATED POINTS/PROVISIONS OF SECTION 263 OF THE ACT. 6. WE HAVE SEEN THAT DURING THE ASSESSMENT PROCEEDING S THE ASSESSING OFFICER REQUIRED THE STATEMENT OF EXCHANGE RATE FLU CTUATIONS AS ON 31 MARCH 2012 FROM THE ASSESSEE. THE ASSESSEE FURNISHE D THE STATEMENT OF EXCHANGE RATE AS ON 31 MARCH 2012 AND THE NOTE ON A CCOUNT OF FOREIGN EXCHANGE FLUCTUATION. IN THE SAID NOTE THE AUDITOR HAS EXPLAINED THAT TOTAL OF RS. 5,89,26,400/- INCLUDES EXCHANGE RATE FLUCTUA TION ON ACCOUNT OF FLUCTUATION ON THE PAYMENTS MADE IN THE NORMAL COUR SE OF BUSINESS SUCH ITA NO.3747/M/2017 POWERICA LTD 7 AS BUYERS CREDIT, PAYMENT TO FOREIGN CREDITORS, PAY MENT RECEIVED FROM EXPORT REALISATION FOR RS. 2,69,96,400/- AND RS. 3, 19,30,000/-ON ACCOUNT OF ECB LOAN AVAILED FROM CITIBANK OF US DOLLAR 20,0 00,000/-. ECB FROM CITIBANK WAS AVAILED FOR FINANCING OF INSTALLATION OF WIND MILL AT GUJARAT. THE BALANCE PART OF RS. 2,69,96,400/- PERTAINS TO T HE NORMAL BUSINESS OPERATIONS AND IS NORMAL BUSINESS EXPENDITURE. THUS , THE REVISED RETURN WAS FILED AFTER INCORPORATING THE COLLECTION, REVIS ED RETURN OF INCOME ON 20 MARCH 2014. THE ASSESSING OFFICER ACCEPTED THE C ONTENTION OF ASSESSEE WHILE PASSING ASSESSMENT ORDER ON 15 JANUARY 2015 U NDER SECTION 143(3). THE LD COMMISSIONER REVISED THE ORDER OF THE ASSESS ING OFFICER VIDE ORDER DATED 27.03.2017. THE LD COMMISSIONER ISSUED NOTIC E UNDER SECTION 263 DATED 11.11.2016 IN THE NOTICE IT WAS CONTENDED THA T FOREX LOSS OF RS.3,19,30,000/- WAS REQUIRED TO BE CAPITALIZED AS PER ACCOUNTING STANDARD-11 (AS-11)AND SHOULD BE DISALLOWED. IN RES PONSE TO THE NOTICE UNDER SECTION 263 OF INCOME TAX ACT THE ASSESSEE FI LED ITS REPLY BEFORE THE LEARNED COMMISSIONER. IN THE REPLY THE ASSESSEE IS SPECIFICALLY CONTENDED THAT PARA 10 OF OLD ACCOUNTING STANDARD-11 (AS-11) HAS BEEN DELETED IN THE AMENDED AS-11 EFFECTIVE FROM FIRST APRIL 2003. HENCE, EXCHANGE DIFFERENCE ARISING ON REPAYMENT OF LIABILITIES INCU RRED FOR ACQUIRING FIXED ASSETS SHOULD ALSO BE RECOGNISED AS INCOME OR EXPEN SES IN THE PERIOD IN WHICH THEY ARISE. THEREFORE, EXCHANGE RATE DIFFEREN CE OF RS. 3,19,30,000/- ON ACCOUNT OF ECB LOAN TAKEN FOR ACQUIRING WINDMILL IS CHARGED TO PROFIT ITA NO.3747/M/2017 POWERICA LTD 8 AND LOSS ACCOUNT. THE ASSESSEE FURTHER CONTENDED TH AT AS PER SECTION 115JB ONLY CERTAIN ADJUSTMENTS (WHICH WERE REFERRED IN THE REPLY) ARE PERMITTED TO ARRIVE BOOK PROFIT IN THE PROFIT ARRIV ED AS PER AUDITED ACCOUNTS AS PER SCHEDULE VI OF COMPANIES ACT 1956. THUS, THE ASSESSEE EXPLAINED THAT ACCOUNTANT TREATMENT GIVEN FOR LOSS ON EXCHANGE FLUCTUATION ON ECB LOAN TAKEN FOR ACQUIRING WIND MI LL TURBINE MILL IS AS PER ACCOUNTING STANDARD PRESCRIBED AND NO ADJUSTMEN T CAN BE MADE IN THE BOOK PROFIT UNDER SECTION 115JB. THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY LD COMMISSIONER. THE LD COMMISSIONER W HILE REVISING THE ORDER CONCLUDED THAT ANY DEVIATION FROM THE ACCOUNT ING STANDARD FROM THE PROVISION OF THE INCOME TAX ACT HAS TO BE FACTORED. SECTION 43A PRESCRIBED HOW THE CHANGES IN THE RATE OF EXCHANGE OF CURRENCY HAS TO BE TREATED AND THE PROVISION TO BE APPLIED WHILE COMPU TING THE INCOME IRRESPECTIVE OF THE PROVISION OF ACCOUNTING STANDAR D AND DIRECTED THE AO TO RECOMPUTE THE INCOME BY DISALLOWING SUCH NOTIONA L LOSS RESULTING FROM RESTATEMENT OF OUTSTANDING LIABILITY. MINIMUM ALTE RNATIVE TAX ( MAT) LIABILITY WILL ALSO BE RECOMPUTED ACCORDINGLY. 7. THE HONBLE JURISDICTIONAL HIGH COURT IN APOLLO TYR ES LTD SUPRA WHILE CONSIDERING THE QUESTION IF THE ASSESSING OFFICER W HILE ASSESSING A COMPANY FOR INCOME TAX UNDER SECTION 115 OF INCOME TAX ACT CAN QUESTIONS THE CORRECTNESS OF THE PROFIT AND LOSS AC COUNT PREPARED BY ASSESSEE COMPANY AND CERTIFIED BY THE STATUTORY AUD ITORS OF THE COMPANY ITA NO.3747/M/2017 POWERICA LTD 9 AS HAVING BEEN PREPARED IN ACCORDANCE WITH THE REQU IREMENT OF PART II AND III OF SCHEDULE VI TO THE COMPANIES ACT. THE HONBL E JURISDICTIONAL HIGH COURT HELD ; THAT SUB-SECTION (1A) OF SECTION115 DOES NOT EMPOWER TH E ASSESSING OFFICER TO EMBARK UPON FRESH INQUIRY WITH REGARD TO THE ENTRIES MADE IN THE BOOKS OF ACCOUNT OF THE COMPANY. THE SAID SUB-S ECTION, AS A MATTER OF FACT MANDATE THE COMPANY TO MAINTAIN ITS ACCOUNT IN ACCORDANCE WITH THE REQUIREMENT OF THE COMPANIES ACT WHICH MANDATE, ACCORDING TO US IS BODILY LIFTED FROM THE COMPANIES ACT INTO THE IN COME TAX ACT FOR LIMITED PURPOSE OF MAKING THE SAID ACCOUNTS SO MAIN TAINED AS A BASIS FOR COMPUTING THE COMPANIES INCOME FOR LEVY OF INC OME TAX ACT. BEYOND THAT, WE DO NOT THINK THAT THE SAID SUB-SECT ION EMPOWER THE AUTHORITY UNDER THE INCOME TAX ACT TO PROBE INTO TH E ACCOUNT ACCEPTED BY AUTHORITIES UNDER THE COMPANIES ACT. IF THE STAT UE MANDATE THAT INCOME PREPARED IN ACCORDANCE WITH THE COMPANIES AC T SHALL BE DEEMED INCOME FOR THE PURPOSE OF SECTION 115 OF THE ACT, T HEN IT SHOULD BE THAT INCOME WHICH IS ACCEPTABLE TO THE AUTHORITIES UNDER THE COMPANIES ACT. THERE CANNOT BE TWO INCOME ONE FOR THE PURPOSE OF C OMPANIES ACT AND ANOTHER FOR THE PURPOSE OF INCOME TAX BOTH MAINTAIN ED UNDER THE SAME ACT. ........... THEREFORE, WE ARE OF THE OPINION, THE ASSESSI NG OFFICER WHILE COMPUTING THE INCOME UNDER SECTION 115J HAS ONLY THE POWER OF EXAMINING WHETHER THE BOOKS OF ACCOUNT ARE CERTIFIED BY THE AUTHORITI ES UNDER THE COMPANIES ACT AS HAVING BEEN PROPERLY MAINTAINED IN ACCORDANCE WITH THE COMPANIES ACT. THE ASSESSING OFFICER THEREAFTER HAS THE LIMITED POWER OF MAKING INCREASE AND REDUCTION IS PROVIDED FOR THE EXPLANATION TO THE SAID SECTION. TO PUT IT DIFFERENTLY, THE ASS ESSING OFFICER DOES NOT HAVE THE JURISDICTION TO GO BEHIND THE NET PROFIT S HOWN IN THE PROFIT AND ITA NO.3747/M/2017 POWERICA LTD 10 LOSS ACCOUNT EXCEPT TO THE EXTENT PROVIDED IN EXPLA NATION TO SECTION 115J. 8. SIMILAR VIEW WAS TAKEN IN CASE OF CIT VS ADBHUT TRA DING COMPANY PRIVATE LIMITED SUPRA AND FURTHER IN BHAGWAN INDUSTRIES LTD. FURTHER WE HAVE SEEN THAT MUMBAI TRIBUNAL IN CASE OF BHARAT SE RUMS & VACCINES LTD (SUPRA) HELD THAT WHEN THE ASSESSEE CLAIMED LOSS I NCURRED DUE TO REVALUATION OF OPEN FORWARD CONTRACTS, WHICH THE AO DISALLOWED THE SAME AND ALSO RECOMPUTED BOOK PROFIT BY MAKING CONSEQUE NTIAL ADDITION PURSUANT TO THIS DISALLOWANCE BY RELYING CBDT INSTR UCTION DATE 23.03.2010. HOWEVER, THE TRIBUNAL ALLOWED THE LOSS AS CLAIMED BY THE ASSESSEE BY CONSIDERING THE DECISION OF HIGH COURT IN D CHETAN & CO (ITA NO.278 OF 2014 DATED 01.10.2016) . THE TRIBUNA L RELIED ON THE CBDT CIRCULAR, WHICH IS ALSO RELIED BY LD CIT IN IT S ORDER. IN OUR VIEW THE CASE OF THE ASSESSEE IS ON BETTER FOOTING, THE ASSESSEE HAS NOT CLAIMED LOSS ON FORWARD DERIVATIVE CONTRACTS BUT CLAIMED LO SS ON THE EXISTING LOAN LIABILITY FOR WIND MILL AT GUJARAT. THUS, THE TREAT MENT OF CHARGING OF EXCHANGE LOSS ON ACCOUNT OF ECB LOAN AVAILED FOR WI ND MILL FOR RS.3,19,30,000/- TO PROFIT AND LOSS ACCOUNT IS IN A CCORDANCE WITH THE ACCEPTED ACCOUNTING PRINCIPLES AS MANDATED UNDER AC COUNTING STANDARD (AS-11) AS REVISED UP TO DATE (REVISED IN 2003) AND AT SUCH THE BOOK PROFIT SHOULD BE COMPUTED IN ACCORDANCE WITH THE ORDER DAT ED FINAL ACCOUNTS AND PROVISIONS OF SECTION 115JB OF THE ACT. THE PERUSAL OF CIRCULAR NO. 3 ITA NO.3747/M/2017 POWERICA LTD 11 ISSUED BY CBDT DATED 23 MARCH 2010 RELIED BY LEARNE D CIT RELATES TO FOREIGN EXCHANGE DERIVATIVE TRANSACTION ONLY. FURTH ER, WE HAVE SEEN THAT THE ASSESSING OFFICER DURING THE SEEKING EXPLANATIO N FROM THE ASSESSEE ALONG WITH THE DETAILS SUBMITTED, THE ASSESSING OFF ICER TAKEN ONE OF THE POSSIBLE VIEWS AND ACCEPTED THE CONTENTION OF THE A SSESSEE WHILE PASSING THE ASSESSMENT ORDER REGARDING FOREX LOSS. 9. THE HONBLE BOMBAY HIGH COURT IN CASE OF GABRIEL IN DIA LTD (SUPRA ) HAS HELD THAT COMMISSIONER CANNOT INITIATE PROCEEDING W ITH A VIEW TO STARTING FISHING AND ROVING ENQUIRIES IN MATTERS OR ORDERS W HICH ARE ALREADY CONCLUDED. THERE MUST BE MATERIAL ON RECORD TO SHOW THAT TAX WHICH WAS LAWFULLY EXIGIBLE HAS NOT BEEN IMPOSED IF CLAIM WAS ALLOWED BY THE INCOME TAX OFFICER. ON BEING SATISFIED WITH THE EXP LANATION OF THE ASSESSEE, SUCH DECISION OF THE INCOME TAX OFFICER C ANNOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELABORATE DECISION IN THAT RECORD. THE HONBLE HIGH COURT FUR THER HELD THAT WHEN COMMISSIONER HIMSELF, EVEN AFTER INITIATING PROCEED ING FOR REVISION AND HEARING OF THE CASE, COULD NOT SAY THAT THE DISALLO WANCE OF THE CLAIM OF THE ASSESSEE WAS ERRONEOUS AND SIMPLY ASK THE ASSESSING OFFICER TO RE-EXAMINE THE MATTER, WHICH WAS NOT PERMISSIBLE. 10. IN OUR VIEW WHILE EXERCISING THE POWER UNDER SECTIO N 263 OF INCOME TAX ACT THE LEARNED COMMISSIONER SHOULD BE ABLE TO DEMO NSTRATE THAT THE DECISION TAKEN BY THE ASSESSING OFFICER WAS NOT POS SIBLE BEING LEGALLY ITA NO.3747/M/2017 POWERICA LTD 12 UNSUSTAINABLE AND INCORRECT AND THIS FINDING MUST B E RECORDED. MERE CONCLUSION OF LEARNED COMMISSIONER THAT ORDER OF AS SESSING OFFICER IS ERRONEOUS AND DIRECTION TO THE ASSESSING OFFICER TO RECOMPUTE THE INCOME BY IS NOT CORRECT. EVEN IN CASES WHERE THERE IS IN ADEQUATE ENQUIRY BUT NOT LAKE OF ENQUIRY, THE LEARNED COMMISSIONER MUST GIVE AND RECORD FINDING THAT ORDER/ENQUIRY MADE BY ASSESSING OFFICER IS ERR ONEOUS. THIS CAN HAPPEN IF ANY ENQUIRY AND VERIFICATION IS CONDUCTED BY THE LEARNED COMMISSIONER AND HIS ABLE TO ESTABLISH AND SHOW THE ERROR OR MISTAKE MAKE BY ASSESSING OFFICER MAKING THE ORDER UNSUSTAI NABLE IN LAW. THE MATTER CANNOT BE REMITTED FOR FRESH DECISION TO THE ASSESSING OFFICER TO CONDUCT FURTHER ENQUIRIES WITHOUT A FINDING THAT OR DER IS ERRONEOUS AND THE LEARNED COMMISSIONER FURTHER MUST ALSO SATISFIED TH E SECOND LIMB OF PROVISION THAT THE ORDER IS ALSO PREJUDICIAL TO THE INTEREST OF REVENUE. THE HONBLE APEX COURT IN CASE OF MALABAR INDUSTRIA L CO. ( SUPRA) RELIED BY LEARNED AR OF THE ASSESSEE HELD THAT WHERE TWO V IEWS ARE POSSIBLE AND THE AO ADOPTS ONE OF THE VIEW POSSIBLE IN LAW, THEN THE ORDER CANNOT BE TREATED AS ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE, UNLESS THE VIEW TAKEN BY ASSESSING OFFICER IS UNSUSTAINABLE AN D IN LAW. IN VIEW OF THE ABOVE DISCUSSION, THE ASSESSING OFFICER IN THE COUR SE OF ASSESSMENT PROCEEDING HAS TAKEN ONE OF THE POSSIBLE VIEW THUS THE REVISION PROCEEDING INITIATED BY LEARNED COMMISSIONER UNDER SECTION 263 IS INVALID. THUS THE GROUND OF APPEAL RAISED BY ASSESS EE IS ALLOWED. ITA NO.3747/M/2017 POWERICA LTD 13 11. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 TH OCTOBER, 2017. 12. /- SD/- SD/- (P.K. BANSAL) (PAWAN SINGH) VICE-PRESIDENT JUDICIAL MEMBER MUMBAI; DATED 11/10/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/