SRI MONISH NESARAJ,KOLKATA vs. A.C.I.T.(IT)-1(2), KOLKATA

The main grievance of the assessee is against the action of the Ld. CIT(A) in confirming the addition of Rs.26,04,360/- made by the AO.

Brief facts of the case are that the AO noted in the assessment order that assessee had declared ‘nil’ total income. Later, the case was selected for scrutiny. The AO noted that during the relevant assessment year, the assessee was outside India for 231 days and as such his residential status was that of a non-resident. The AO noted that the assessee was employed with M/s. Wallem Shipmanagement Limited, Hong Kong as Captain. The AO noted that the remuneration earned by him as Captain of the Ship has been credited in the assessee’s bank account in HDFC, Baguiati Branch, Kolkata and the assessee had claimed exempt income of Rs.78,80,800/- as per Schedule EI of his return of income. However, the AO noted from the records available that the assessee had only produced a salary statement of Rs.45,76,441/- (US $ 70,406.79 x Rs.65/-). In the light of the same, the assessee was asked to clarify the discrepancy of showing income of Rs.78,80,800/-. However, according to the AO, the assessee did not clarify, therefore, he had no other option but to add the Monish Nesaraj, AY- 2016-17 difference of Rs.26,04,359/- (Rs.71,80,800/- - Rs.45,76,441/-). Aggrieved, assessee preferred an appeal before the Ld. CIT(A) who was pleased to confirm the same. Aggrieved, the assessee is before this Tribunal.

I have heard both the sides and have perused the material available on record. The Ld. AR drew my attention to page 2 of the paper book which is the original computation of income filed along with the return of income from which my attention was drawn to the fact that the assessee has shown US $ 70,407 as his salary. However, he has erroneously converted the same into Indian currency at Rs.71,80,800/- (i.e. @ Rs.102/- per US $ approx.) when the prevailing conversion rate of Indian currency was at the rate of US $ 65/- (Rs.45,76,441/-). However, when the discrepancy was detected by the AO, the assessee could not reply/explain since he was in high seas and did not receive the Show cause notice (SCN) issued by the AO. But, during the first appellate proceeding the assessee filed and brought it to the notice of the Ld. CIT(A) that when US $ 70,406.79 was converted into Rupees @ Rs.65/- per US $ it comes to Rs.45,76,441/- and it was a bonafide mistake while filing the computation along with ROI. However, the Ld. CIT(A) confirmed the action of AO. It is noted that though the AO had noted that the conversion rate was Rs.65/- per US $ he made the addition because the assessee did not clarify the discrepancy of assessee showing income of Rs.71,80,800/- @ Rs.102/- per US $. I note that the reason for the assessee not clarifying the discrepancy was because the assessee was in the high seas, therefore, there was a reasonable cause for him not to clarify that at that point of time to AO the error of conversion of US $ to Indian Rupee. However, during the appellate proceedings the assessee has already brought to the notice of the Ld. CIT(A) that the discrepancy was only because of the conversion rate and the assessee had not made any mistake in respect of the remuneration received i.e. US $ 70,406.79. In such a scenario, I am of the opinion that since there is no difference in respect of remuneration of assessee to the tune of US $ 70,407, the addition was not warranted merely on account of rate of conversion. It has to be kept in mind that the tax has to be levied on right person, for the right year and the right income. This is a case of mistake of fact and mistake of fact can be excused since in this case assessee has not misrepresented before AO/Ld. CIT(A) in respect of his remuneration

In the result, the appeal of assessee is allowed.