- (1.) The Court :We have heard the learned counsel for the parties. We admit the appeal on the following substantial question of law. "Whether the Tribunal was right in law in confirming the decision of the Commissioner of Income Tax (Appeals), by which the assessee's claim for deduction of business expenditure was allowed, on the basis of foreign exchange loss relying on certain documents, which documents according to the Revenue, ought not to have been admitted following the stipulations of Rule 46A of the Income Tax Rules 1962 "
(2.) The appeal pertains to the assessment year 2009-10. The only question which has been urged before us by the Revenue is in relation to a sum of Rs.21,01,52,576/- which was added to the assessee's income by the Assessing Officer. Assessee's contention is that it suffered loss to that extent in foreign exchange forward contract corresponding to certain export orders. The Assessing Officer in the assessment order had disallowed this expenditure treating the same as speculation loss under Section 43(5) of the Income Tax Act, 1961. The reason for this, according to the assessment order, is that the assessee could not establish before the Assessing Officer the loss in foreign exchange forward contract was occasioned by cancellation of export contract. Thus no nexus could be established. Before the Commissioner, admitted position is that the assessee had produced certain documents as additional evidence, which pertained to various contracts. The assessee had entered into a contract with its oversees customers and through these documents the assessee sought to establish nexus between the loss in foreign exchange forward contracts and cancellation of export orders. We find from the order of the Commissioner that the Assessing Officer was given opportunity to give his comments as regards the additional evidence sought to be produced by the assessee. The response of the Assessing Officer to this exercise is contained in his communication dated 21st November, 2012 carrying memo No.DCIT, Cir-2/Appeal/2012-13/501. A copy of this communication was produced before us at the time of hearing of this appeal. Such response was in following terms:- "As per direction given by your honour during the hearing of the above-mentioned case on 07.11.2012, I have made following submission for your kind perusal. It was claimed by the A/R of M/s. LGW Ltd. during the hearing on 07/11/2012 of its appellate proceedings before your honour for the assessment year 2009-10 that it had submitted four volumes of Paper Book, with a request to treat these as an "Additional Evidence" under Rule 46A(1). Your honour also directed the undersigned during that hearing to submit report/objection on admission of additional evidences. Your honour also gave the undersigned an opportunity to rebut the same before its admission and to produce further evidence in term of Rule 46A. Accordingly I am going to submit my objection against the admission of additional evidences as filed by the A/R of the assessee before your honour in four volumes. As per Rule 46A, the appellant shall not be entitled to produce before your honour, any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the Assessing Officer, except in the following circumstances, namely :- (a) where the Assessing Officer has refused to admit evidence which ought to have been admitted; or (b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the Assessing Officer; or (c) where the appellant was prevented by sufficient cause from producing before the Assessing Officer any evidence which is relevant to any ground of appeal; or (d) where the Assessing Officer has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal. Here, A/R of the assessee did not furnish or specify any exceptional circumstances out of four above under which additional evidences have been filed by him before your honour. However, the undersigned has been verified the assessment records of the assessee in this effect and found that there is no such exceptional circumstances happened to the assessee to compel it to file these additional evidences by way of four volumes of paper book before your honour. 1. There was no such refusal by the Assessing Officer to admit such additional evidences which ought to have been admitted during the course of assessment proceedings. 2. The appellant was never prevented from production of these evidences which was called upon to produce by the Assessing Officer during the course of assessment proceedings. 3. The appellant was never prevented from production before the Assessing Officer during the course of assessment proceedings any evidence which is relevant to any ground of appeal. 4. The Assessing Officer had passed the assessment order against which appeal was filed after giving sufficient opportunity to the assessee of being heard. Considering the above, it is a humble request before your honour not to admit these additional evidences as filed by the appellant by way of four volumes of Paper book."
(3.) The Commissioner, however, had taken cognizance of the additional evidence upon admitting them. On the question of admission, the Commissioner in his order opined:- "The AO was confronted with the additional evidences on 07.11.2012 and AO filed written submission vide letter dated 21.11.2012 with a request not to admit the additional evidences as per Rule 46A. The paper book pages 132 to 621 are relating to forex contract with reference to export orders and the relevant bank advices alongwith the month-wise inventory of stock of cotton. Since AO never asked for these evidences and disallowed the losses claimed in the assessment order, the principle of natural justice requires that these evidences should be admitted as per Rule 46A and moreover these evidences are relevant and essential to the matter under consideration as these evidences go to the root of matter therefore these additional evidences are admitted in terms of Rule 46A.";