Income Tax Appellate Tribunal - Ahmedabad
Soma Textiles & Industries ... vs The Dy.Cit, Central Circle-2(2), ... on 24 March, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL
"A" BENCH, AHMEDABAD
BEFORE SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER
& SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER
I.T.A. No.2012&2013/Ahd/2025
(Assessment Years: 2009-10 & 2010-11)
Soma Textiles & Industries Ltd., Vs. Deputy Commissioner of
Rakhial Road, Rakhial, Income Tax,
Ahmedabad-380023 Central Circle-2(2),
Ahmedabad
[PAN No.AADCS0405R]
(Appellant) .. (Respondent)
Appellant by : Shri Suresh Gandhi, CA
Respondent by: Shri Alpesh Parmar, CIT-DR
Date of Hearing 12.03.2026
Date of Pronouncement 24.03.2026
ORDER
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
Both appeals have been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals)-12, (in short "Ld. CIT(A)"), Ahmedabad vide order dated 25.08.2025 passed for A.Ys. 2009- 10 & 2010-11.
2. The assessee has taken the following grounds of appeal:
ITA No. 2012/Ahd/2025 (A.Y. 2009-10)"1. The learned CIT (A) has erred in law as well as on facts in confirming the penalty levied u/s. 271(1)(c) of the Act in respect of addition made for adjustments in Arms' Length Price for international transaction of Rs. 2,49,12,784/- without proper consideration and appreciation of the facts of the case and submission filed. In view of the facts of the case and elaborate submissions filed, the appellant's case does not fall within the scope of provisions of Section 271(1)(c) of the Act. Accordingly, the penalty in respect of the said addition of Rs. 2,49,12,784/- for Arms' Length Price requires to be quashed/cancelled.
ITA No. 2012&2013/Ahd/2025 Soma Textiles & Industries Ltd. vs. DCIT Asst. Year -2009-10 & 2010-11
- 2-
2. The learned CIT (A) has erred in law as well as on facts in confirming the penalty levied u/s. 271(1)(c) of the Act in respect of disallowance of GDR issue expenses of Rs. 15,02,592/- without proper consideration and appreciation of the facts of the case and submission filed. In view of the facts of the case and elaborate submissions filed, the appellant's case does not fall within the scope of provisions of Section 271(1)(c) of the Act. Accordingly, the penalty in respect of the said disallowance of Rs. 15,02,592/- for GDR Issue expenses requires to be quashed/cancelled.
3. The learned CIT (A) has erred in law as well as on facts in confirming the penalty levied u/s. 271(1)(c) of the Act in respect of disallowance of miscellaneous expenses of Rs. 11,76,704/- without proper consideration and appreciation of the facts of the case and submission filed. In view of the facts of the case and elaborate submissions filed, the appellant's case does not fall within the scope of provisions of Section 271(1)(c) of the Act. Accordingly, the penalty in respect of the said disallowance of miscellaneous expenses of Rs. 11,76,704/- requires to be quashed/cancelled.
4. The learned CIT (A) has erred in law as well as on facts in confirming the penalty levied u/s. 271(1)(c) of the Act in respect of addition made for foreign exchange gain of Rs. 1,24,91,216/- without proper consideration and appreciation of the facts of the case and submission filed. In view of the facts of the case and elaborate submissions filed, the appellant's case does not fall within the scope of provisions of Section 271(1)(c) of the Act. Accordingly, the penalty in respect of the said addition of foreign exchange gain of Rs. 1,24,91,216/- requires to be quashed/cancelled.
5. The learned CTT (A) has erred in law as well as on facts in confirming the penalty levied u/s. 271(1)(c) of the Act in respect of addition of Rs. 7,83,299/-on account of TDS reconciliation, without proper consideration and appreciation of the facts of the case and submission filed. In view of the facts of the case and elaborate submissions filed, the appellant's case does not fall within the scope of provisions of Section 271(1)(c) of the Act. Accordingly, the penalty in respect of the said addition of Rs. 7,83,299/- on account of TDS reconciliation requires to be quashed/cancelled.
6. The appellant states that since complete details, submissions and explanation in respect of each of the items of additions / disallowances, for which penalty has been levied and confirmed by the Learned CIT(A), having been submitted before the AO as well as before the learned CTT(A), the action of the learned CIT(A) confirming the penalty u/s. 271(1)(c) of the Act totalling to Rs. 1,38,90,556/- requires to be quashed/cancelled."
3. The brief facts of the case are that the assessee was subjected to penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961 ("the Act") for Assessment Year 2009-10 on account of various additions made during the course of assessment. The Assessing Officer levied penalty amounting to ITA No. 2012&2013/Ahd/2025 Soma Textiles & Industries Ltd. vs. DCIT Asst. Year -2009-10 & 2010-11
- 3- Rs.1,38,90,556/- on account of (i) adjustment in international transactions relating to arm's length price of loan advanced to associated enterprise, (ii) disallowance of GDR issue expenses, (iii) disallowance of miscellaneous (MODVAT) expenses, (iv) addition on account of foreign exchange fluctuation gain, and (v) addition on account of TDS reconciliation. The Assessing Officer held that the assessee had furnished inaccurate particulars of income and concealed income. In respect of transfer pricing adjustment, the Assessing Officer placed reliance on Explanation 7 to section 271(1)(c) of the Act on the ground that the assessee failed to establish good faith and due diligence in determining ALP. In respect of GDR expenses, the claim was held to be contrary to settled law laid down by the Hon'ble Supreme Court in Brooke Bond India Ltd. In respect of miscellaneous expenses, the Assessing Officer held that the assessee failed to substantiate the claim with evidence. With regard to foreign exchange gain and TDS reconciliation, the Assessing Officer observed that the assessee itself admitted non-offering of such income in the return and the same was offered only during assessment proceedings. Accordingly, penalty was levied on all the additions.
4. In appeal, the Ld. CIT(Appeals) examined each of the grounds raised by the assessee and confirmed the penalty in entirety. In respect of ALP adjustment, the Ld. CIT(A) observed that the assessee failed to demonstrate that the pricing was done in good faith and with due diligence as required under Explanation 7, and therefore penalty was justified. The Ld. CIT(A) also relied on the decision of the Mumbai Tribunal in Genom Biotech Pvt. Ltd. to hold that failure to adopt proper benchmarking and absence of due diligence justifies penalty. With regard to disallowance of GDR issue expenses, the Ld. ITA No. 2012&2013/Ahd/2025 Soma Textiles & Industries Ltd. vs. DCIT Asst. Year -2009-10 & 2010-11
- 4- CIT(A) observed that the issue was squarely covered against the assessee by the decision of the Hon'ble Supreme Court in Brooke Bond India Ltd. (225 ITR 798) and also by the Tribunal in assessee's own case for earlier years. It was held that the claim made by the assessee was not a bona fide legal claim but was contrary to settled law, and therefore penalty was rightly levied. In respect of disallowance of miscellaneous (MODVAT) expenses, the Ld. CIT(A) referred to the findings of the Ahmedabad ITAT in quantum proceedings wherein it was held that the assessee failed to furnish any evidence to substantiate the claim and could not establish the correctness of writing off MVAT receivable. Relying on the decision of the Hon'ble Delhi High Court in CIT vs. Zoom Communication Pvt. Ltd. (191 Taxman 179), CIT(Appeals) held that such unsustainable claim without any basis attracts penalty. In respect of foreign exchange fluctuation gain, the Ld. CIT(A) observed that the assessee itself admitted that the income was not offered in the return and no bona fide explanation was furnished. Reliance was placed on the decision of the Hon'ble Supreme Court in CIT vs. Woodward Governor India Pvt. Ltd. (179 Taxman 326) to hold that such gain ought to have been recognized, and further reliance was placed on the decision of the Hon'ble Madras High Court in Gangotri Textiles Ltd. (121 taxmann.com
171), affirmed by the Hon'ble Supreme Court, to hold that voluntary disclosure does not absolve the assessee from penalty. Similarly, with regard to TDS reconciliation difference, the Ld. CIT(A) observed that the assessee admitted the omission and failed to provide any explanation for not offering the income in the return, and therefore penalty was justified.
ITA No. 2012&2013/Ahd/2025 Soma Textiles & Industries Ltd. vs. DCIT Asst. Year -2009-10 & 2010-11
- 5-
5. Accordingly, the Ld. CIT(A) dismissed all the grounds of appeal and confirmed the penalty levied by the Assessing Officer.
6. The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee.
7. We have carefully considered the rival submissions and perused the material available on record including the orders of the lower authorities and the detailed findings of the Ahmedabad ITAT in assessee's own case for Assessment Year 2009-10 in quantum proceedings.
8. In respect of ALP adjustment, the Ahmedabad ITAT has upheld the addition made by the assessee. It would be useful to reproduce the relevant extracts of ITAT order for assessment year 2009-10 for ready reference:
"Ground No. 2: Ld. CIT(A) erred in confirming the addition of Rs. 4,87,46,666/- made by the Assessing Officer on account arms length price of loan interest
4. The brief facts relating to Grounds of appeal Number 1 and 2 of the assessee's appeal are that the assessee had advanced a certain sum of money to its subsidiary company Roma Textile FZE. The assessee company was of the view that such advance was in the nature of quasi capital and further the entire proceeds of the GDR issue have been invested in the aforesaid subsidiary and accordingly no addition was warranted u/s. 92CA(3). However, the Assessing Officer made adjustment u/s. 92CA of the Act, which were also confirmed by the CIT(A) by observing that ld. CIT(A) on similar facts for assessment year 2008-09 and also the ITAT Ahmedabad in assessee's own in ITA No. 262/Ahd/2012 dated 07-07-2015 for assessment year 2007-08 had decided this issue against the assessee and accordingly, ld. CIT(A) held that addition of Rs. 7,87,46,666/- on account of upward adjustment on ALP was justified.
5. Before us, the counsel for the assessee agreed that the issue relating to ground nos. 1 & 2 has been decided against the assessee by Hon'ble ITAT for assessment year 2008-09 in ITA No. 472/Ahd/2014 and accordingly, the assessee shall not be pressing ground no. 1 and 2. It would be useful to reproduce the relevant extract of the ITAT decision for reference:-
"4. Learned representatives fairly accept that there is no material variation in the facts and circumstances of the case, except that, in this assessment year ITA No. 2012&2013/Ahd/2025 Soma Textiles & Industries Ltd. vs. DCIT Asst. Year -2009-10 & 2010-11
- 6- and as against LIBOR plus 2% adopted by the TPO himself as arm's length interest, the TPO has recommended 8.6% as arm's length interest. 5. The justification for this variation is given as an additional 2% is higher risk in lending to the subsidiary, and is justified as to guarantee which the subsidiary would have required from the assessee. The TPO has observed that even if the subsidiary was to obtain this loan from the bank, in addition to LIBOR plus 2%, the assessee would have needed a guarantee from its parent company, as the subsidiary does not have credit rating, and the effective borrowing rate would thus have been LIBOR+ 2% for bank's margin+ 2% for the guarantee fees. Aggrieved, assessee carried grievance, inter alia, against this effective margin of LIBOR plus 4% to the CIT(A), but without any success. The CIT(A) confirmed the same on the ground that the ALP of corporate guarantee @ 2% is fair and reasonable. The assessee is aggrieved and is in appeal before us.
6. So far as the issue of ALP adjustment being required, in principle, is concerned, learned counsel for the assessee has fairly conceded that this issue must be decided against the assessee at this forum, and that he will carry the matter, if so advised, in further appeal before Hon'ble Courts above. Ground no. 1 and 2, therefore, have to be decided against the assessee and the impugned action of the authorities below, in principle, is to be confirmed."
6. In view of the above since ITAT has decided the issue against the assessee on identical facts in assessee's own case for assessment year 2008- 09, the ground nos. 1 & 2 of the assessee's appeal are dismissed accordingly."
9. Accordingly, we find no infirmity in the order of Ld. CIT(A) so as to call for any interference. Accordingly, this s Ground of Appeal of the assessee is dismissed.
10. In respect of GDR issue expenses, the Ahmedabad ITAT in quantum proceedings has clearly held that expenses incurred for issue of share capital are capital in nature and not allowable under section 35D of the Act, following the binding decision of the Hon'ble Supreme Court in Brooke Bond India Ltd. The Tribunal also noted that the conditions of section 35D were not satisfied. Since the issue is covered against the assessee by binding precedent and the assessee still made the claim, the same cannot be regarded as a bona fide claim. Therefore, penalty is rightly levied and confirmed.
ITA No. 2012&2013/Ahd/2025 Soma Textiles & Industries Ltd. vs. DCIT Asst. Year -2009-10 & 2010-11
- 7-
11. In respect of MODVAT (miscellaneous) expenses, the Tribunal has recorded a categorical finding that the assessee failed to furnish any evidence to support its claim and could not establish the correctness of the accounting treatment. The disallowance was upheld due to lack of factual substantiation. Applying the ratio of CIT vs. Zoom Communication Pvt. Ltd. (191 Taxman 179), where claims devoid of any basis attract penalty, we hold that penalty is rightly levied and the ground of the assessee is dismissed.
12. In respect of foreign exchange derivative losses, it is observed that the Tribunal in the quantum proceedings for assessment year 2009-10 has allowed the appeal of the assessee on this issue. It would be useful to reproduce the relevant extracts of ITAT order for assessment year 2009-10 for ready reference:
"Ground number 6: addition on account of foreign exchange derivatives loss while treating it as speculative in nature
16. The brief facts in relation to this ground of appeal are that the assessee had entered into an agreement with ICICI bank for auction transaction on 06-01-2005, which is the Master Agreement between the assessee and ICICI bank in order to safeguard fluctuation in dollar rates which the assessee company realizes on its exports. During the year under consideration, the assessee claimed the loss of Rs. 7,96,68,962/- on account of derivative transaction, by filing a revised computation, during the course of assessment proceedings (the assessee had omitted to make the aforesaid claim in the return of income). The AO did not allow the aforesaid loss by relying on the Supreme Court order in the case of Goetze India Ltd. [2006] 157 Taxman 1 (SC) on the ground that the assessee is precluded from making a fresh claim during the course of assessment proceedings. In appeal, Ld. CIT(A) also dismissed the assessee's appeal by relying on the decision passed by his predecessor CIT for assessment year 2008-09, in which on identical issue, the ground of the assessee was dismissed by Ld. CIT(A) vide order dated 26-11-2013.
17. Before us, the counsel for the assessee submitted that the issue has now been decided in favour of the assessee by ITAT in assessee's own case for assessment year 2008-09 on identical set of facts, and accordingly the appeal is to be disposed of in light of the aforesaid order. We observe that the ITAT the assessee's own case for ITA No. 2012&2013/Ahd/2025 Soma Textiles & Industries Ltd. vs. DCIT Asst. Year -2009-10 & 2010-11
- 8- assessment year 2008-09 has allowed the assessee's appeal on this ground with the following observations:
"15. During the course of scrutiny assessment proceedings, it was noticed that the assessee had claimed loss on derivative transactions during the year amounting to Rs 57,76,604. When the Assessing Officer probed the matter further, it was found that these transactions were stated to be hedge the foreign exchange obligations of the assessee in respect of export realizations.. As this forward contract was said to be in the course of assessee's business, and in respect of his foreign exchange dealings, the loss was claimed as a business loss. The Assessing Officer, however, did not agree. He was of the considered view that since the contract was settled, otherwise than through delivery, section 43(5) was attracted, and, accordingly, loss was required to be treated as speculative loss. The Assessing Officer was also of the view that, in the light of CBDT instruction no. 3 of 2010 dated 23rd March 2010, such a loss in foreign exchange derivates cannot be allowed as deduction. It was in this background that the Assessing Officer disallowed deduction of Rs 57,76,604. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. The CIT(A) was of the view that assessee has not been able to link he transactions in foreign exchange derivatives with the foreign exchange realizations, and as the transactions have been settled without delivery and are, as such, speculative transactions in nature. The assessee is aggrieved and is in further appeal before us.
16. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.
17. We have noticed that, as evident from a plain reading of the assessment order, the short case of the Assessing Officer is that since the transaction leading to the impugned loss is a speculative transaction, under section 43(5) of the Act, the loss incurred on the transaction is required to be treated as loss from speculative business which cannot be set off against income of the assesse under the head 'profits and gains from business and profession'. However, in our considered view, this approach itself proceeds on the fallacy that every loss, in the course of or due to a speculative transaction, is to be treated as loss of the speculative business. Explanation 2 to Section 28 states, "Where speculative transactions carried on by an assessee are of such a nature as to constitute a business, the business (hereinafter referred to as "speculation business" shall be deemed to be distinct and separate from any other business", which implies it is only when speculative transactions are of such a nature as to constitute business on standalone basis, the income and losses from such transactions is required to be treated as distinct and separate from any other normal business. In other words, even speculative transactions, as long as such transactions are incidental to the main business of the assessee, cannot result in the profits or losses from such transactions being treated separately as that of a speculation business and thus making them ineligible for being set off against normal business profits and losses. Nothing really, therefore, turns on a transaction being settled, otherwise than through delivery, as long as such a transaction has standalone character isolated from ITA No. 2012&2013/Ahd/2025 Soma Textiles & Industries Ltd. vs. DCIT Asst. Year -2009-10 & 2010-11
- 9- the main activities of business. For this short reason alone, the action of the Assessing Officer must be held to be unsustainable in law. In any event, the assessee has filed detailed contracts notes before us which link the transactions to forward contracts entered into by the assessee. As a matter of fact, each of the confirmation so filed from the ICICI Bank categorically states that "the notional principal amount of the transaction does not exceed the outstanding amount of underlying transactions which the counterparty ( i.e. the assessee), seeks to hedge against". In this view of the matter, all the derivate transactions are specific hedging transactions against foreign exchange transactions of the assessee and are to be treated as integral part of the business transactions of the assessee. These transactions, by no stretch of logic, cannot be treated as standalone transactions, and as such loss on these transactions cannot be treated as loss from speculation business ineligible for set off against normal business profits. As for the CBDT instruction relied upon by the Assessing Officer, such instructions do not bind the appellate authorities, and nothing, therefore, turns on the same- so far as our adjudication is concerned. The losses on account of foreign exchange contracts are bonafide expenses incurred in furtherance of legitimate business interests of the assessee and are to be allowed as deduction under section 37(1) as such. In view of these discussions, as also bearing in mind entirety of the case, we uphold the plea of the assessee. The Assessing Officer is, therefore, directed to delete the impugned disallowance of Rs 57,76,604.
17. Ground no. 5 is thus allowed."
18. Respectfully following the decision of ITAT, we hereby allow ground number 6 of the assessee's appeal."
13. Accordingly, we are of the considered view that penalty is liable to be deleted with respect to this issue.
14. In respect of PF and ESIC disallowance, the issue is governed by clear statutory provisions and the assessee has failed to demonstrate any reasonable cause or bona fide explanation for non-compliance. Therefore, penalty levied on this issue is justified and the ground of the assessee is dismissed.
15. In so far as the levy of penalty under section 271(1)(c) of the Act with respect to addition on account of foreign exchange gain is concerned, we note that the Ld. CIT(A) has recorded a categorical finding that the assessee itself ITA No. 2012&2013/Ahd/2025 Soma Textiles & Industries Ltd. vs. DCIT Asst. Year -2009-10 & 2010-11
- 10- admitted that such income was not offered to tax in the return of income and was brought to tax only during the course of assessment proceedings. The Ld. CIT(A) has further observed that the said gain arose on account of export transactions and represented difference in foreign exchange rates between the date of export and date of realization, and therefore was clearly taxable in the relevant year. It has also been noted that at the time of filing of return of income, the law on the subject was well settled by the Hon'ble Supreme Court in the case of CIT vs. Woodward Governor India Pvt. Ltd. (2009) 312 ITR 254 (SC), wherein it has been held that any gain or loss arising on account of foreign exchange fluctuation is required to be recognized in the profit and loss account.
16. Despite the settled legal position, the assessee failed to offer such income to tax and no plausible or bona fide explanation was furnished either before the Assessing Officer or before the Ld. CIT(A) as to why such income was omitted from the return. The explanation of the assessee was neither substantiated nor shown to be bona fide. The Ld. CIT(A) has rightly relied upon the decision of the Hon'ble Madras High Court in the case of Gangotri Textiles Ltd. [2020] 121 taxmann.com 171 (Madras), affirmed by the Hon'ble Supreme Court in [2022] 137 taxmann.com 198 (SC), wherein it has been held that voluntary disclosure of income after detection by the Assessing Officer does not absolve the assessee from penalty. Similarly, reliance has also been placed on the decision of the Hon'ble Bombay High Court in the case of Mahesh N. Thakkar [2015] 59 taxmann.com 272 (Bom), wherein it was held that where income is offered only after being pointed out by the Assessing Officer, penalty under section 271(1)(c) is clearly attracted.
ITA No. 2012&2013/Ahd/2025 Soma Textiles & Industries Ltd. vs. DCIT Asst. Year -2009-10 & 2010-11
- 11-
17. In view of the above factual position, it is evident that the assessee had failed to disclose income which was otherwise taxable in the relevant year and such omission cannot be regarded as a bona fide mistake. The conduct of the assessee clearly falls within the mischief of furnishing inaccurate particulars of income and concealment thereof. Therefore, the Ld. CIT(A) was fully justified in confirming the penalty on this issue.
18. Similarly, with regard to the addition on account of TDS reconciliation difference amounting to Rs.7,83,299/-, we find that the Ld. CIT(A) has recorded that during the course of assessment proceedings, the assessee was unable to reconcile the difference between income reflected in TDS certificates and income disclosed in the books of account. The assessee itself admitted that such income was not offered to tax in the relevant year and offered the same only during assessment proceedings. The explanation furnished by the assessee was that such income was intended to be offered in a subsequent year; however, no evidence was brought on record to substantiate such claim.
19. The Ld. CIT(A) has further observed that under the mercantile system of accounting, such income was required to be recognized in the relevant assessment year itself and the assessee failed to provide any reasonable cause for not offering the same. It is also noted that the assessee did not furnish any material to demonstrate that the income was actually offered in subsequent years. In such circumstances, the omission to offer income cannot be treated as a mere clerical or inadvertent error, but amounts to furnishing of inaccurate particulars of income.
ITA No. 2012&2013/Ahd/2025 Soma Textiles & Industries Ltd. vs. DCIT Asst. Year -2009-10 & 2010-11
- 12-
20. The ratio of the judicial precedents relied upon by the Ld. CIT(A), including Gangotri Textiles Ltd. (supra) and Mahesh N. Thakkar (supra), squarely applies to the facts of the present issue as well, wherein it has been held that subsequent disclosure of income after detection does not exonerate the assessee from penalty.
21. In view of the above discussion, we find that the findings recorded by the Ld. CIT(A) are based on correct appreciation of facts and settled legal principles. The assessee has failed to discharge the burden cast upon it under the provisions of section 271(1)(c) of the Act to establish that the explanation offered was bona fide and that all material facts were disclosed.
22. Accordingly, we find no infirmity in the order of the Ld. CIT(A) in confirming the levy of penalty under section 271(1)(c) of the Act with respect to addition on account of foreign exchange gain and TDS reconciliation so as to call for any interference. The grounds raised by the assessee on these issues are dismissed.
ITA No. 2013/Ahd/2025 A.Y. 2010-1123. The assessee has raised the following grounds of appeal:
"1. The learned CIT (A) has erred in law as well as on facts in confirming the penalty levied u/s. 271(1)(c) of the Act in respect of addition made for adjustments in Arms' Length Price for international transaction of Rs. 1,99,57,094/- without proper consideration and appreciation of the facts of the case and submission filed. In view of the facts of the case and elaborate submissions filed, the appellant's case does not fall within the scope of provisions of Section 271(1)(c) of the Act. Accordingly, the penalty in respect of the said addition of Rs. 1,99,57,094/- for Arms' Length Price requires to be quashed/cancelled.
ITA No. 2012&2013/Ahd/2025 Soma Textiles & Industries Ltd. vs. DCIT Asst. Year -2009-10 & 2010-11
- 13-
2. The learned CIT (A) has erred in law as well as on facts in confirming the penalty levied u/s. 271(1)(c) of the Act in respect of disallowance of GDR issue expenses of Rs. 15,02,592/- without proper consideration and appreciation of the facts of the case and submission filed. In view of the facts of the case and elaborate submissions filed, the appellant's case does not fall within the scope of provisions of Section 271(1)(c) of the Act. Accordingly, the penalty in respect of the said disallowance of Rs. 15,02,592/- for GDR Issue expenses requires to be quashed/cancelled.
3. The learned CIT (A) has erred in law as well as on facts in confirming the penalty levied u/s. 271(1)(c) of the Act in respect of disallowance of loss of Rs. 9,17,78,106/- due to foreign exchange rate difference in respect of loan to its 100% subsidiary without proper consideration and appreciation of the facts of the case and submission filed. In view of the facts of the case and elaborate submissions filed, the appellant's case does not fall within the scope of provisions of Section 271(1)(c) of the Act. Accordingly, the penalty in respect of the said disallowance of loss of Rs. 9,17,78,106/- due to foreign exchange rate difference in respect of loan to 100% subsidiary requires to be quashed/cancelled.
4. The learned CIT (A) has erred in law as well as on facts in confirming the penalty levied u/s. 271(2)(c) of the Act in respect of disallowance of Misc. expenditure written off of Rs. 8,91,905/- without proper consideration and appreciation of the facts of the case and submission filed. In view of the facts of the case and elaborate submissions filed, the appellant's case does not fall within the scope of provisions of Section 271(1)(c) of the Act. Accordingly, the penalty in respect of the said disallowance of Misc. expenditure written off of Rs. 8,91,905/- requires to be quashed/cancelled.
5. The learned CIT (A) has erred in law as well as on facts in confirming the penalty levied u/s. 271(1)(c) of the Act in respect of addition of Rs. 1,67,874/-on account of TDS reconciliation, without proper consideration and appreciation of the facts of the case and submission filed. In view of the facts of the case and elaborate submissions filed, the appellant's case does not fall within the scope of provisions of Section 271(1)(c) of the Act. Accordingly, the penalty in respect of the said addition of Rs. 1,67,874/- on account of TDS reconciliation requires to be quashed/cancelled.
6. The appellant states that since complete details, submissions and explanation in respect of each of the items of additions / disallowances, for which penalty has been levied and confirmed by the Learned CIT(A), having been submitted before the AO as well as before the learned CIT(A), the action of the learned CIT(A) confirming the penalty u/s. 271(1)(c) of the Act requires to be quashed/cancelled."
24. With respect to Grounds of Appeal for Assessment Year 2010-11 is concerned, with respect to penalty for penalty for ALP addition, penalty for disallowance of GDR expenses and penalty u/s 36(1)(va) of the Act are ITA No. 2012&2013/Ahd/2025 Soma Textiles & Industries Ltd. vs. DCIT Asst. Year -2009-10 & 2010-11
- 14- concerned, the penalty is hereby confirmed in light of observations for assessment year 2009-10 above.
25. With respect to penalty for addition u/s 40(a)(ia) of the Act, since the issue with respect to quantum additions has been restored to the file of the Assessing Officer for de-novo consideration, accordingly penalty u/s 271(1)(c) of the Act is also restored to file of the Assessing Officer. Accordingly, this Ground of Appeal of the assessee is allowed for statistical purposes.
26. In the result, appeal of the assessee for Assessment Year 2010-11 is partly allowed for statistical purposes.
27. In the combined result, the appeals of the assessee are partly allowed for statistical purposes.
This Order is pronounced in the Open Court on 24/03/2026
Sd/- Sd/-
(NARENDRA P. SINHA) (SIDDHARTHA NAUTIYAL)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 24/03/2026
TANMAY, Sr. PS TRUE COPY
आदे श की ितिलिप अ ेिषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. थ / The Respondent.
3. संबंिधत आयकर आयु / Concerned CIT
4. आयकर आयु (अपील) / The CIT(A)-
5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड फाईल / Guard file.
आदे शानुसार/ BY ORDER, उप/सहायक पं जीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad