DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-8(3), MUMBAI, MUMBAI vs. 63 MOONS TECHNOLOGIES LIMITED, ANDHERI

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ITA 3495/MUM/2026Status: DisposedITAT Mumbai31 August 2026AY 2008-0916 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the assessee had made a plausible claim based on judicial pronouncements, and merely making a claim not sustainable in law does not amount to furnishing inaccurate particulars of income. Therefore, the penalty under Section 271(1)(c) was not leviable.

What were the facts?

The assessee claimed a short-term capital loss of Rs. 10,09,02,070/- on account of foreign currency exchange fluctuations. The Assessing Officer disallowed this claim, holding that such losses on funds utilized for capital purposes cannot be adjusted against other income and initiated penalty proceedings.

What were the issues?

Whether the claim of foreign currency exchange loss as short-term capital loss, when disallowed by the Assessing Officer, amounts to furnishing inaccurate particulars of income attracting penalty under Section 271(1)(c).

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH; MUMBAI

Before: SHRI VIKRAM SINGH YADAV & SHRI SIDDHARTHA NAUTIYAL

Hearing: 23.06.2026Pronounced: 31.08.2026

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH; MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER ITA No. 3495/Mum/2026 (Assessment Year: 2008-09)

Deputy Commissioner of 63 Moons Technologies Income Tax Central Circle- Limited 8(3), Mumbai vs. FT Tower, CTS No. 256-257, Room No.-652, 6th Floor, Suren Road, Chakala, Aayakar Bhavan, M.K. Road, Andheri(E), Mumbai, Chakala Churchgate, Mumbai-400020. MIDC S.O., Mumbai, Maharashtra, India.

PAN: AAACF5737C (Appellant) (Respondent) For Assessee : Shri Sukh Sagar & Jatin Doshi For Revenue : Shri Sandeep Lakra CIT DR. Date of Hearing : 23.06.2026 Date of Pronouncement : 31.08.2026 O R D E R PER VIKRAM SINGH YADAV, A.M :

This is an appeal filed by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals) 50, Mumbai [‘Ld.CIT(A)’], dated 13.01.2026, pertaining to Assessment Year (AY) 2008-09, wherein the Revenue has taken the following grounds of appeal: “1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the penalty levied under Section 271(1)(c) of the Income-tax Act, 1961 amounting to Rs. 3,42,96,614/- without properly appreciating the facts of the case and the findings recorded by the Assessing Officer in the penalty order. 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in holding that mere disallowance or rejection of the claim of Short-Term Capital Loss amounting to Rs. 10,09,02,070/- on

ITA No. 3495/Mum/2026; A.Y. 2008-09 63 Moons Technologies Limited account of foreign currency exchange does not amount to furnishing of inaccurate particulars of income, without appreciating that the assessee had made a claim which was not in accordance with the provisions of the Income- tax Act and was not substantiated with adequate supporting evidence. 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the assessee had furnished inaccurate particulars of income by claiming the said foreign exchange loss as Short- Term Capital Loss, which was found to be inadmissible during assessment proceedings, thereby leading to under-reporting of taxable income. 4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in ignoring the fact that the assessee could not justify the allowability of the impugned loss under the relevant provisions of the Act, and therefore the claim made by the assessee was not bona fide and squarely attracted the provisions of Section 271(1)(c) of the Act.” 2. Briefly, the facts of the case are that the assessee company filed its return of income originally under Section 139 on 27.08.2008, declaring total income of Rs. 11,27,60,85,114/-. Subsequently, a search and seizure action under Section 132 was carried out in the case of Commodities Exchange Group on 19.06.2007, wherein the assessee company was also covered under the search action. Thereafter, notice under section 153A was issued and served on the assessee, and in response, assessee filed its return of income under section 153A on 10.12.2008, declaring total income of Rs. 11,27,60,85,114/- as originally declared. The assessee thereafter filed a revised return on 30.01.2009, declaring revised income at Rs. 11,26,44,49,262/-, claiming short-term capital loss of Rs. 10,09,02,070/- and claimed set-off against other short term capital gains/long term capital gains. Thereafter, notices were issued calling for the necessary information and documentation and the matter relating to claim of short short-term capital loss was taken up along with other matters for examination by the Assessing Officer.

3.

As per the Assessing Officer, the assessee has claimed the said amount by way of exchange rate fluctuation loss on account of conversion of currency which were held for capital account. The funds which were lying on capital account and were earmarked for capital account were

ITA No. 3495/Mum/2026; A.Y. 2008-09 63 Moons Technologies Limited converted into Indian rupees, and on conversion of such amount, the assessee had incurred losses which have been claimed as deduction set off to the extent of Rs. 10,09,02,070/- and since the assessee has gains made on sale of units of mutual funds, etc., the assessee has adjusted such gains against the losses claimed as exchange rate fluctuation loss and the assessee was asked to clarify how such losses were short-term capital losses and how they were allowable to be set off against other income.

4.

In response, the assessee company submitted that it had raised funds outside of India for deploying funds on capital account. It was submitted that income earned on conversion shall be treated as profit & loss on capital account, as the purpose of holding a foreign asset was on capital account. It was submitted that various judicial pronouncements have laid down that it is the purpose which shall be relevant and shall decide whether such income shall be on revenue account or shall be treated as capital gains. It was held that in the context of appreciation/depreciation in the value of foreign currency held, on its conversion into another currency, the Hon'ble Karnataka High Court in case of Kirloskar Asea Ltd vs CIT 117 ITR 82 has held that the profit/loss would be trading profit/loss if the foreign currency is held on revenue account, and where it is held as capital asset, profit/loss would be of capital nature. It was accordingly submitted that where such foreign currency asset is held on capital account, upon its sale/conversion, resulting gain/loss would be of capital nature. It was submitted that on the basis of aforesaid treatment approved by the Courts, the assessee had preferred to treat such income/loss as capital gains/loss. It was further submitted that only that portion of exchange rate fluctuation gain/loss was treated as short-term capital gain/loss which was intended for use on capital account, and other currency exchange gain/loss is shown as taken on revenue account. It was submitted that it is the

ITA No. 3495/Mum/2026; A.Y. 2008-09 63 Moons Technologies Limited purpose of raising of the funds which would be significantly important in deciding as to whether gains/loss on account of exchange rate fluctuation are of revenue or capital in nature. It was submitted that Courts in India have consistently held that such gains/loss would be trading profit/loss, if the foreign currency/asset is held on revenue account, or as trading asset, or as a part of circulating capital of the business; where, however, it is held as capital asset or fixed capital, the profit/loss would be of capital nature and reliance was placed on the decision of Hon'ble Supreme Court in case of Sutlej Cotton Mills Limited vs CIT 116 ITR 1.

5.

The submissions so filed by the assessee were considered but not found acceptable to the Assessing Officer. As per the Assessing Officer, the assessee had raised such funds by way of zero-coupon convertible bonds, and the present exchange loss is on account of funds appropriated for capital account. The exchange loss/gain in such case is to be adjusted with the value of capital asset for which the foreign currency loan has been utilized, and the same cannot be adjusted with the short-term capital gain on other account of the assessee. It was held by the Assessing Officer that any loss or gain on exchange fluctuation on account of funds utilized for capital asset does not affect the profitability of the concern, but only the value of the capital asset. It was held that exchange loss on funds utilized for revenue purpose is only allowed as a loss to be adjusted with the total income of the assessee and in the present case, assessee company has borne foreign currency exchange loss on funds utilized for capital purpose, and hence, the same cannot be allowed to be adjusted with any other income of the assessee company. Hence, the claim of the assessee to the extent of Rs. 10,09,02,070/- was disallowed, and penalty proceedings under section 271(1)(c) were initiated for furnishing inaccurate particulars of income.

ITA No. 3495/Mum/2026; A.Y. 2008-09 63 Moons Technologies Limited 6. The assessee thereafter carried the matter in appeal before the ld. CIT(A), and thereafter, before the Tribunal and the Coordinate Bench remanded the matter to the file of ld. CIT(A) to dispose off the same on merits and thereafter, the ld. CIT(A), vide his order dated 29.03.2024, partly allowed the grounds of appeal raised by the assessee vide its order dated 29.03.2024 allowed relief to the assessee in respect of other disallowances namely, disallowance of interest on zero-coupon convertible bonds and disallowance under section 14A read with Rule 8D made by the Assessing Officer. However, as far as the disallowance on account of claim of foreign currency exchange loss of Rs.10,09,02,070/- , the ld. CIT(A) stated that as the assessee did not press the grounds of appeal, the action of the Assessing Officer was upheld.

7.

Thereafter, during the penalty proceedings, a fresh show cause was issued under section 274 read with 271(1)(c) of the Act vide notice dated 15.02.2024 and in response to the show cause, the assessee company reiterated that the claim of set-off of short-term capital loss in the revised return of income was based upon various judicial pronouncements, and detailed submissions were submitted during the course of assessment proceedings, and reference was drawn to the submission dated 24.02.2009 and to the decision of Hon'ble Supreme Court in case of Sutlej Cotton Mills Limited vs CIT (Supra), decision of the Hon'ble Karnataka High Court in case of Kirloskar Asea Limited vs CIT (supra). Further, reliance was placed on the Hon'ble Bombay High Court decision in case of CIT vs. Dalmia Dyechem Industries ITA No. 1396 of 2013, in case of Ventura Textiles vs. CIT, ITA No. 958 of 2017, and in case of Vijay Bhagwandas Raheja vs. DCIT [2024] 160 taxmann.com 684. Further, reliance was placed on Coordinate Benches decision in case of Eureka Outsourcing Solutions Private Limited vs. DCIT ITA No. 845/Mum/2023 dated 23.01.2024 and NSE Limited vs. DCIT ITA No. 5935/Mum/2014, and finally, the assessee relied on the decision of Hon'ble Supreme Court

ITA No. 3495/Mum/2026; A.Y. 2008-09 63 Moons Technologies Limited in case of Reliance Petroproducts Limited 322 ITR 158. It was submitted that permissible claim of the assessee company towards set-off of short- term capital loss which was claimed based upon judicial decisions and principle of taxation and mere rejection thereof does not constitute furnishing of inaccurate particulars of income, and it was requested to drop the penalty proceedings.

8.

The submissions so filed by the assessee were considered by the Assessing Officer. As per the Assessing Officer, the assessee company did not claim the portion of exchange rate fluctuation gain/loss as short-term capital gain in the original return of income as well as in the ITR filed in response to notice under section 153A of the Act. Therefore, the claim of exchange rate fluctuation on capital account as short-term capital loss was correctly disallowed by the Assessing Officer in terms of assessment order passed under section 143(3) read with 153B(1)(b) dated 09.04.2019. Further, during the appellate proceedings before the ld. CIT(A), the assessee company, though raised the grounds of appeal but did not pursue it further, and as a result, the assessee company acknowledged that the claim for exchange rate fluctuation loss was incorrectly made in the revised return of income. Consequently, the assessee furnished inaccurate particulars of income. Further, the Assessing Officer held that the assessee has raised such funds by way of zero-coupon convertible bonds, and the present exchange loss is on account of funds appropriated for capital account. The exchange loss or gain in such case is to be adjusted with the value of capital asset for which the foreign currency loan has been utilized, and the same cannot be adjusted with the short-term capital gain or other account of the assessee and any loss or gain on exchange fluctuation on account of funds utilized for capital asset does not affect the profitability of the concern, but only the value of the capital asset. The exchange loss on funds utilized for revenue purpose is only allowed as a loss to be adjusted

ITA No. 3495/Mum/2026; A.Y. 2008-09 63 Moons Technologies Limited with the total income of the assessee. In the present case, assessee company has borne foreign currency exchange loss on funds utilized for capital purpose, and hence, the same cannot be allowed to be adjusted with any other income of the assessee company. The assessee was accordingly held liable for levy of penalty under section 271(1)(c) of the Act, and various case laws relied upon by the assessee were held distinguishable from the facts of the instant case. Further, reliance was placed on the decision of Hon'ble Supreme Court in case of MAK Data Private Limited vs. CIT (2013) 358 ITR 593 (SC), for the proposition that in terms of Explanation 1 to section 271(1)(c), a presumption of concealment is raised where a difference is noticed by the Assessing Officer between reported and assessed income, and the burden is on the assessee to show otherwise by cogent and reliable evidence, where the initial onus placed by the Explanation has been discharged by him, the onus shifts on the revenue to show that the amount in question constitutes income and not otherwise. Further, reliance was placed on the decision of Hon'ble Rajasthan High Court in case of Badri Prasad Om Prakash vs. CIT 163 ITR 440, wherein it was held that it is the duty of the assessee to show that any particular fact mentioned in the return is inadvertent, it is not because of willful neglect or fraud, and the burden lies on the assessee to prove the fact of willful neglect, and it was held that in the instant case, in respect of the impugned addition, the onus has not been discharged during the course of assessment and penalty proceedings, and had the case not been assessed under section 143(3), the income to the said extent would have escaped assessment. It was accordingly held that it is a fit case for imposition of penalty under section 271(1)(c) for furnishing inaccurate particulars, and a minimum penalty of Rs. 3,42,96,614/-, being 100% of tax sought to be evaded was imposed vide order passed under section 271(1)(c) of the Act dated 30.03.2025.

ITA No. 3495/Mum/2026; A.Y. 2008-09 63 Moons Technologies Limited 9. The assessee thereafter carried the matter in appeal before the ld. CIT(A). The contentions raised before the Assessing Officer and the legal pronouncements relied upon before the Assessing Officer were reiterated before the ld. CIT(A). The submissions so filed by the assessee were considered, and the ld. CIT(A) deleted the levy of penalty under section 271(1)(c) of the Act. As per the ld. CIT(A), in the revised return of income filed by the assessee for the year under consideration, it had claimed short-term capital loss amounting to Rs.10,09,002,070/- on account of foreign currency exchange fluctuation on conversion, based upon legal decision, which has not been accepted by the ld. AO. It was held that the AO has levied penalty for an amount of Rs. 3,42,96,614/- u/s 271(1)(c) of Income Tax Act vide order dated 30.03.2025 for furnishing inaccurate particulars of income, being 100% of tax effect of disallowance of the aforesaid Short-Term Capital Loss. It was held by the ld CIT(A) that the fact that Short-Term Capital Loss as claimed in the revised return of income was based upon the principles of taxation and legal decisions was not disputed by the AO and the AO has not found any malafide intention towards such claim of Short Term Capital Loss based upon legal decision, where two views of said claim were possible. It was held that not pursing the matter further in the appellate proceeding does not establish any malafide intention on the part of the assessee. It was accordingly held that making the claim of aforesaid losses amounting to Rs.10,09,02,070/- in revised ITR does not tantamount to furnishing of inaccurate particular of such income, therefore, penalty levied u/s 271(1)(c) of Act amounting to Rs.3,42,96,614/- was held not sustainable. Further, the ld CIT(A) placed reliance on the following judicial pronouncements:

(i) Hon’ble Supreme Court decision in the case of Commissioner of Income Tax Vs. Reliance Petro Products Pvt Ltd (322 ITR 158)

ITA No. 3495/Mum/2026; A.Y. 2008-09 63 Moons Technologies Limited (ii) Hon’ble Bombay High Court in the case of Commissioner of Income Tax-2, Mumbai Vs. Dalmia Dyechem Industries Limited [2015] 61 taxmann.com 200 (Bombay)

(iii) Hon’ble Bombay High Court in the case of Ventura Textiles Ltd Vs. Commissioner of Income Tax, Mumbai City-II [2020] 117 taxmann.com 182 (Bombay)

(iv) Hon’ble Bombay High Court in the case of Vijay Bhagwandas Raheja V. Deputy Commissioner of Income Tax [2024] 160 taxmann.com 684 (Bombay)

10.

It was finally held by the ld CIT(A) that there was no malafide intention on the part of the assessee for furnishing of inaccurate particulars of income in the revised return furnished, merely making an incorrect claim cannot amount to any concealment of income or furnishing inaccurate particulars and penalty amounting to Rs.3,42,96,614/- levied u/s 271(1)(c) of the Act @ 100% of tax on the alleged inaccurate particulars of income of Rs.10,09,02,070/- was not justified and the AO was directed to delete the penalty so levied.

11.

Against the said findings and order of the ld CIT(A), the Revenue is in appeal before us.

12.

During the course of hearing, the ld. DR submitted that the ld. CIT(A) was not justified in deleting the penalty levied under section 271(1)(c) without properly appreciating the facts of the case and the findings recorded by the Assessing Officer in the penalty order. It was submitted that the ld. CIT(A) has deleted the levy of the penalty without appreciating that the assessee has made a claim which was not in accordance with the provisions of the Income Tax Act and was not substantiated with adequate supporting evidence. It was submitted that

ITA No. 3495/Mum/2026; A.Y. 2008-09 63 Moons Technologies Limited the ld. CIT(A) has failed to appreciate that the assessee has clearly furnished inaccurate particulars of income by claiming the foreign exchange loss as short-term capital loss, which was found to be inadmissible during assessment proceedings, leading to underreporting of taxable income. Further, it was submitted that the assessee could not justify the allowability of the impugned loss under the relevant provisions of the Act, and therefore, the claim made by the assessee was not a bonafide claim and clearly attracted the provisions of section 271(1)(c) of the Act. It was accordingly submitted that the order of the ld. CIT(A) be set aside and that of the Assessing Officer be sustained.

13.

In his submissions, the ld. AR relied on the order and the findings of the ld. CIT(A). It was submitted that the ld. CIT(A) has rightly appreciated the relevant factual matrix of the case and thereafter has deleted the levy of penalty under section 271(1)(c) of the Act. It was further submitted that the claim of the assessee was based on the decision of Hon'ble Karnataka High Court in case of Kirloskar Asea Limited vs CIT (supra), wherein it was held that for all intents and purposes, foreign currency was in the nature of a commodity which could be converted into local currency by selling it and the dollars which are repatriated to India constituted capital asset of the assessee and any profit derived on account of its transfer should be treated as capital gains, since the assessee could acquire Indian currency only by transferring the said capital asset. It was submitted that relying on the said decision, the assessee has claimed short-term capital loss on conversion of foreign currency which was held outside of India, and when the said foreign currency was repatriated to India, on such repatriation and conversion into Indian currency, there was loss which was claimed as a short-term capital loss, which has not been appreciated properly by the Assessing Officer. It was further submitted that the matter is squarely covered by the decision of Hon'ble Supreme Court in case of Reliance Petroproducts

ITA No. 3495/Mum/2026; A.Y. 2008-09 63 Moons Technologies Limited Limited (supra), wherein it was held that mere making a claim which is not sustainable in law by itself will not amount to furnishing of inaccurate particulars of income. Further, reliance was placed on the various decisions of the Hon'ble Bombay High Court which has been relied upon by the ld. CIT(A) and in particular, our reference was drawn to decision in case of Vijay Bhagwandas Raheja (supra).

14.

We have heard the rival contentions and perused the material available on record. The issue under consideration relates to levy of penalty under section 271(1)(c) of the Act for furnishing inaccurate particulars of income. The relevant facts under consideration are that the assessee had raised/borrowed certain funds in foreign exchange which were held outside of India and these funds were held on capital account. During the year under consideration, these funds were repatriated to India, and on such repatriation and conversion into Indian currency, there was a loss which was incurred by the assessee on such conversion on account of the difference in the exchange rate between the US dollar and the Indian currency when the funds were initially borrowed/raised and the exchange rate as on the date of repatriation and conversion into the Indian currency. Admittedly, the assessee did not claim the said loss in its original return of income filed in response to notice under section 153A of the Act. Thereafter, the assessee filed its revised return of income claiming set off of the said loss against other short-term capital gains or long-term capital gains under the head “Income from Capital Gains”. It is also an admitted position that it is not a case of a notional loss on re- statement of foreign exchange funds held by the assessee, and it is a case of loss actually incurred in Indian rupee terms between the date the funds were borrowed and the funds were repatriated and converted into Indian currency. It is also not in dispute that the funds were held on capital account. The assessee has relied on the decision of the Hon'ble Karnataka High Court in the case of Kirloskar Asea Ltd vs CIT (supra),

ITA No. 3495/Mum/2026; A.Y. 2008-09 63 Moons Technologies Limited wherein it was held that the foreign currency held in the form of dollars, being in the nature of commodity constitutes a capital asset and on its repatriation to India, any profit derived on its transfer/conversion has to be treated as capital gain as the assessee was able to acquire Indian currency by transferring the said capital asset held in form of foreign currency. So, relying on the said decision, the case of the assessee in the instant case is that it was holding foreign currency by way of a capital asset outside of India, and on its repatriation into the country and conversion into the Indian currency, there was a transfer of a capital asset wherein, the foreign currency was exchanged for Indian currency and since the foreign currency was held on capital account and for a period of less than 36 months, the resultant loss was claimed as short- term capital loss. The case of the Revenue is that since the borrowing in foreign currency was on capital account, any exchange loss has to be adjusted with the value of the capital asset for which the foreign currency is ultimately utilized. The Revenue, however, has not disputed the legal proposition so laid down by the Hon'ble Karnataka High Court, wherein the foreign currency was held to be a capital asset.

15.

We, therefore, find that the dispute relates to as to how the foreign currency loss which has been incurred by the assessee should be appropriated. As per the assessee, the foreign currency being a capital asset, any gain or loss will amount to gain or loss on transfer of a capital asset and has to be reflected under the head “Income from Capital Gains”. Whereas, the case of the Revenue is that since the foreign currency funds were meant for ultimate utilization for capital purposes, it will go and reduce the cost of the capital asset. In other words, the issue is limited to how the foreign currency conversion loss should be appropriated and whether one should apply either the proximate test or the ultimate utilization test. We find that the assessee has taken a plausible view, a view being supported by the legal proposition so laid down by the Hon'ble

ITA No. 3495/Mum/2026; A.Y. 2008-09 63 Moons Technologies Limited Karnataka High Court and therefore, making such a claim cannot by any stretch of imagination be treated as furnishing inaccurate particulars of income.

16.

It is a settled legal proposition that the penalty provisions have to be strictly construed, and unless the case of the assessee clearly falls within the meaning of furnishing of inaccurate particulars of income, no penalty can be levied on the assessee. The Hon'ble Supreme Court in case of Reliance Petroproducts Limited (Supra) has held that the word ‘particulars’ must mean the details supplied in the return which are not accurate, not exact or correct, not according to truth or erroneous. It was further held by the Hon'ble Supreme Court that mere making of a claim which is not sustainable in law by itself will not amount to furnishing inaccurate particulars of income. It was held that merely because the assessee has claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c) of the Act. It was further held that if the said stand of the Revenue is accepted, then in case of every return where the claim made is not accepted by the Assessing Officer for any reason, the assessee will invite penalty under section 271(1)(c) of the Act, and which cannot be the intention of the legislature.

17.

The said decision was subsequently followed by the Hon'ble Bombay High Court, to which our reference was drawn during the course of hearing, in case of Vijay Bhagwandas Raheja (supra), wherein the assessee had originally declared gains arising on sale of property as long- term capital gains, and subsequently, having noticed that the gain should have been shown as short-term capital gain, filed revised computation of income and paid taxes, it was held that the penalty under section 271(1)(c) was not leviable as mere making of a claim which was not

ITA No. 3495/Mum/2026; A.Y. 2008-09 63 Moons Technologies Limited sustainable in law by itself would not amount to furnishing inaccurate particulars of income. The Hon'ble High Court held that the only thing that the assessee did was claiming a particular income (capital gains) under different head, namely under long-term capital gains as against short-term capital gain, and such claim was made under a bona fide belief that the asset was a long-term asset as it was held for more than three years and mere making of such a claim, which is finally held not sustainable in law, by itself will not amount to furnishing inaccurate particulars of income.

18.

In the instant case as well, we find that the assessee has made requisite disclosure in his revised return of income and the computation of income enclosed therewith, wherein the assessee has disclosed the nature of asset as foreign currency US dollars held by it, the quantity and the relevant particulars of such foreign currency asset in the form of quantity, sale date, sale value, purchase date, purchase amount, and ultimate loss which has been incurred by the assessee on such conversion of foreign currency into Indian currency and has made a bonafide claim placing reliance on the decision of the Hon’ble Karnataka High Court referred supra. It is not even the case of the Revenue that any details furnished in the return of income were inaccurate, false or erroneous. The ld. CIT(A) has also returned a similar finding, which has not been disputed by the Revenue before us.

19.

Further, the fact that the assessee has not challenged the said action of the Assessing Officer in the quantum proceedings before the ld CIT(A) by not pressing its grounds of appeal, cannot be the basis for levy of penalty under section 271(1)(c) of the Act. As we have stated earlier, being the penal provision, the condition for levy of penalty has to be strictly construed and necessarily satisfied and the onus is on the Revenue to satisfy the conditions before levy of penalty. Mere

ITA No. 3495/Mum/2026; A.Y. 2008-09 63 Moons Technologies Limited disallowance or mere non-challenge therefore cannot automatically lead to levy of penalty under section 271(1)(c) of the Act.

20.

In light of the aforesaid decision, we do not find any infirmity in the findings of the ld. CIT(A), who has rightly appreciated the factual matrix of the case, the disclosure made by the assessee in the return of income, the basis of the claim relying on the Hon'ble Karnataka High Court decision in case of Kirlosakar Asea Limited (supra), as well as the legal proposition so laid down by the Hon'ble Supreme Court in case of Reliance Petroproducts Limited (supra) and Hon'ble Bombay High Court in case of Vijay Bhagwandas Raheja (supra) and other decisions. In light of the same, the grounds of appeal so taken by the Revenue are dismissed.

21.

In the result, the appeal filed by the Revenue is Dismissed.

Order pronounced in the Open Court on 31.08.2026.

Sd/- Sd/- SIDDHARTHA NAUTIYAL VIKRAM SINGH YADAV (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 31.08.2026 Karishma J. Pawar, SR. PS

Copy to : 1) The Appellant 2) The Respondent 3) The CIT concerned 4) The D.R, ITAT, Mumbai 5) Guard file

ITA No. 3495/Mum/2026; A.Y. 2008-09 63 Moons Technologies Limited By Order

Dy./Asst. Registrar I.T.A.T, Mumbai

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