IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘B’: NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER and SHRIS.RIFAUR RAHMAN, ACCOUNTANT MEMBER (Assessment Year: 2014-15)

Donyi Polo Timbers Pvt. Ltd., vs. ITO, Ward 7(4), D-3, B-1, Basement Central Market, Delhi.

Prashant Vihar, New Delhi – 110 085.

(PAN :AABCD4162C)

(APPELLANT) (RESPONDENT)

ASSESSEE BY : Ms. Mansi Jain, CA Ms. Sakshi Rustagi, Advocate REVENUE BY : Shri Rajesh Kumar Dhanesta, Sr. DR Date of Hearing : 23.06.2025 Date of Order : 22.09.2025

ORDER

PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER :

1. The assessee has filed appeal against the order of the Learned Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [“Ld.

CIT(A)”, for short] dated 10.01.2024 for the Assessment Year 2014-15

2. Brief facts of the case are, original assessment under section 143(3) of the Income-tax Act, 1961 was passed on 27.09.2016. The abovesaid order was reviewed by the ld. PCIT-3, New Delhi. It was noticed that the assessee had debited exchange fluctuation loss of Rs.1,19,56,753/- in its Profit & Loss Account but there is no business activity conducted by the assessee during the AY 2014-15 as well as in AY 2013-14. It was also observed that during the original assessment proceedings, assessee submitted that the sundry creditors were outstanding in respect of goods imported by the assessee during the preceding FY but no purchase was made during FY 2012-13 and 2013-14. In view of the above facts, the matter was remanded to the AO.

3. During revision proceedings, it was observed that there were no outstanding in respect of goods imported by the assessee, however assessee has claimed foreign exchange loss of Rs.1,19,56,753/- without doing any business transaction. Accordingly, order passed u/s 143(3) is found to be erroneous so far as it is prejudicial to the interest of the Revenue and accordingly notice u/s 263 of the Act. In response, assessee has submitted that it has imported goods during FY 2009-10 in respect of which the amount was payable as on 31.03.2014 on which the exchange loss was claimed and submitted the following information :-

4. Based on the above outstanding, out of the total purchases, assessee calculated exchange rate difference and debited the same in the books of account as under:-

5. Based on the above table, ld. PCIT observed that the above claim of foreign exchange loss is not an allowable expenses or loss particularly when the input remittances are itself not fully explained by the assessee, also it was not an actual loss. Therefore, assessee was to explain complete details of working of loss of exchange rate of fluctuation, submitted the sundry creditors. It was observed that the loss on exchange rate claimed by the assessee appears to be notional loss as not made in actual payments. In response, assessee submitted as under :-

“6. In response to the above notice, assessee company submitted reply dated 16.12.2019 which was perused and it was found as per assessee's submission that the company imported goods from the Hong Kong based companies M/s. Benchmark Resources Limited and M/s. Mini Wood Traders Limited in respect of which it has to make payment of US $ 785297.22 to these overseas companies. However, as per material available in record, due to some enquiry initiated by Department of Revenue intelligence (DRI) the bank of the assessee company did not permit foreign remittances. Since, the above said payment of outstanding was not made, assessee has made calculation of difference in foreign exchange rate in Dollar term as shown in the table above and accordingly, it debited an amount of Rs.1,19,56,753/- in its P&L account as loss on foreign currency fluctuation. Upon analysis of the details filed by the assessee, it is noted that the said liability on account of which the assessee company has calculated is doubtful in view of the enquiry proceedings of DRI in the case and its outcome is not ascertainable. Secondly, assessee company ha