Section 68 Addition Deleted & TP Comparables Included as Evidence Supported Claims: ITAT Mumbai

Alepo Technology Private Limited Vs DCIT (ITAT Mumbai)

Section 68 Addition Deleted and TP Comparables Included as Evidence Supported Claims: ITAT Mumbai

The assessee appealed against the final assessment order dated 11.11.2025 passed under Sections 143(3), 144C(13), and 144B for AY 2022-23 pursuant to the directions of the Dispute Resolution Panel (DRP). The assessee challenged transfer pricing (TP) adjustments, additions under Section 68, addition relating to foreign exchange fluctuation loss, computation of interest and fee, initiation of penalty proceedings, and also contended that the assessment order was barred by limitation.

The assessee, a wholly owned subsidiary providing IT support services to its group entities, had benchmarked its international transactions using the Transactional Net Margin Method (TNMM) with nine comparables. The Transfer Pricing Officer (TPO) rejected five comparables, retained four, determined an arm’s length margin of 23.60% against the assessee’s margin of 13.82%, and proposed a TP adjustment of ₹3.88 crore. The DRP sustained the adjustment, leading to the final assessment order.

Before the Tribunal, the assessee confined its TP challenge to inclusion of two comparables, namely Rheal Software (P) Ltd. and Toxsl Technologies Private Ltd. Regarding Rheal Software, the assessee contended that it was wrongly excluded as a persistent loss-making company although it had earned operating profit in one of the relevant years and positive profit before tax in two of the relevant years. The Revenue argued that Rheal had incurred losses in two out of three years and was functionally different. The Tribunal noted that the TPO had excluded Rheal solely on the persistent loss filter and relied on the co-ordinate bench decision in Nokia Solutions and Networks India (P) Ltd. vs ACIT, observing that Rheal had reported profit in one of the last three years and therefore could not be treated as a persistent loss-making company. The Tribunal directed the AO/TPO to include Rheal Software in the final set of comparables.

As regards Toxsl Technologies Private Ltd., the assessee submitted that it had conducted a fresh benchmarking analysis using the filters applied by the TPO and sought inclusion of Toxsl before the DRP by filing additional evidence. Although the TPO objected to the additional evidence and contended that the company was functionally different, the Tribunal examined the annual report and found Toxsl to be engaged in software development services and functionally similar to the assessee. Referring to the Pune Tribunal decision in Faurecia Interior Systems India (P) Ltd. vs ACIT, the Tribunal held that selection or rejection of comparables could be considered before appellate authorities and that, since comparability was not in dispute and the company satisfied the TPO’s filters, the DRP ought to have included it. The Tribunal accordingly directed inclusion of Toxsl and allowed Grounds 2 to 7.

Grounds 8 and 9 concerned the addition of ₹5.39 crore under Section 68 relating to unearned revenue shown as other current liabilities. The assessee submitted that the amount represented advances from customers, was accounted for in accordance with Accounting Standard-9, complete details including PANs, invoices, ledgers, agreements and supporting documents had been furnished, and the revenue had been offered to tax in subsequent years. The Revenue supported the orders of the lower authorities, contending that the assessee had failed to substantiate the advances with sufficient evidence. The Tribunal observed that the assessee had furnished complete details of the advances and that the Assessing Officer had not carried out any independent investigation despite those details. It further noted the submission that the transactions had been accepted in subsequent years and held that no addition in respect of such advances could be made without adverse material on record. Following the Surat Tribunal decision in ACIT vs Shah Virchand Govanji Jewellers Pvt. Ltd., the Tribunal directed deletion of the entire Section 68 addition.

Ground 10 related to addition of ₹91.68 lakh on account of foreign exchange fluctuation loss. The Assessing Officer had held that the assessee understated revenue by reducing foreign exchange gain from gross receivables without adding back the corresponding foreign exchange loss. The assessee submitted that both foreign exchange gain and loss were separately disclosed under “Other Income,” the net impact was reflected in the audited financial statements, and the operating revenue reconciled fully with the audited accounts and taxable income. The Tribunal found that the audited financial statements separately reflected foreign exchange gain of ₹1,59,54,673 and loss of ₹91,68,000, with the net effect considered in the accounts and the computation of total income. It therefore found no justification for the addition and allowed Ground 10.

Ground 11 challenged computation of interest and fee. The Tribunal directed the Assessing Officer to recompute the interest and fee in accordance with law after providing a fair and reasonable opportunity to the assessee, allowing the ground for statistical purposes. Grounds 12 and 13 relating to initiation of penalty proceedings were held to be premature and required no specific consideration. Ground 1, challenging the assessment as barred by limitation under Section 153, was treated as academic in view of the relief granted on merits and was dismissed as infructuous. The appeal was partly allowed.

Cases Discussed:

• Genesys Telecom Labs India Pvt. Ltd. vs DCIT – IT(TP) No. 38/Chny/2024 (Chen – Trib.)
• Nokia Solutions and Networks India (P) Ltd. vs ACIT (2024) 160 taxmann.com 729 (Delhi – Trib.)
• PCIT vs Montage Enterprises (P) Ltd. (2018) 100 taxmann.com 99 (Delhi)
• Faurecia Interior Systems India (P) Ltd. vs ACIT (2018) 96 taxmann.com 579
• ACIT vs Shah Virchand Govanji Jewellers Pvt. Ltd. – ITA No. 175/Srt/2020

FULL TEXT OF THE ORDER OF ITAT MUMBAI

1. This appeal by assessee is directed against the additions made in assessment order dated 11.11.2025, passed in pursuance of direction of Dispute Resolution Penal (DRP)-1, Mumbai dated 09.10.2025 for A.Y. 2022-23. The assessee has raised following grounds of appeal:

“Ground No. 1

On the facts and in the circumstances of the case and in law, the final assessment order passed by the Ld. AO under section 143(3) read with section 144C(13) read with section 144B of the Act, having been passed beyond limitation provided in terms of section 153 of the Act, is illegal, being barred by limitation, bad in law and therefore liable to be quashed.

Prayer

The Appellant prays that the final assessment order is bad in law and ought to be quashed.

Transfer Pricing Grounds

Ground No. 2

On the facts and in the circumstances of the case, and in law, the Ld. TPO/Ld. AO/ Ld. DRP have erred in rejecting the economic analysis conducted by the Appellant ita transfer pricing (TP) study report and consequently, making a transfer pricing (TP) adjustment of INK 3,88,86,498 to the income of the Appellant on the ground that the international transaction of provision of IT support services is not at arm’s length.

Prayer

The Assessee prays that the book value of the aforesaid international transaction be accepted to be the arm’s length price and accordingly, the TP adjustment ought to be deleted.

Ground No. 3

On the facts and in the circumstances of the case and in law, the 14. TPO/LA. AO/Ld. DRF have erred in disregarding the fact that none of the conditions, as set out in Section 92C(3) of the Act are satisfied and hence, there was no requirement to re-determine arm’s length price by the Ld. TPO.

Prayer

The Appellant prays that the TP analysis conducted by the Appellant be accepted

and consequently the TF adjustment ought to be deleted

Ground No. 4

On the facts and in the circumstances of the case and in law, the Ld. TPO/Ld. AD/Ld. DRP have erred in making a TP adjustment of INR 3,88,86,498 to the income of the Appellant on the ground that the international transaction of provision of IT support services is not at arm’s length. While doing so, the L4. TPO/LE AO/LA. DRP have erred in:

Arbitrarily modifying the existing filters and applying certain additional filters.

Not appreciating the turnover filter applied by the Appellant in its TP study report of rejecting the comparables with turnover of less than INR 1 Crore and erred in applying a filter of 1/10 to 10 times of the Appellant’s turnover, thereby, rejecting the companies which were otherwise functionally comparable to the business of the Appellant.

Rejecting companies which are functionally comparable to the business operations of the Appellant without conducting a structured search process leading to cherry picking approach.

Prayer

The Appellant prays that the benchmarking analysis conducted by the Appellant be accepted and the adjustment be deleted.

Ground No. 5

On the facts and in the circumstances of the case, and in law, the Ld. AO/Ld. TPO/Ld. DRP have erred in rejecting Rheal Software Ltd. on account of losses in two out of three years under consideration without providing any comments/ observation on the Appellant’s contention on exclusion of Rheal Software Ltd. considering that it is not a persistent loss maker.

Prayer

The Appellant prays that the Rheal Software Ltd is not a persistent loss maker and passes all the arbitrary filters applied by the Ld. TPO/Ld. AO/Ld. DRP and ought to be included in the final set.

Ground No. 6

On the facts and in the circumstances of the case, and in law, the Lad. AO/Ld. TPO/ Ld. DRP have erred in rejecting the fresh benchmarking analysis conducted by the Appellant, on a without prejudice basis.

Prayer

The Appellant prays that the fresh benchmarking analysis conducted by the Appellant ought to be accepted in case the arbitrary filters applied by the Ld. AO/Ld. TPO/Ld. DRF are accepted.

Ground No. 7

On the facts and in the circumstances of the case, the Ld. AO/ Lad. DRP has erred in not allowing the economic adjustment on account of differences in functional and risk profile of the Appellant and that of the comparable companies while determining the arm’s length price of the international transaction of Provision of IT support services.

Prayer

The Appellant prays that the economic adjustment for difference in functional and risk profile should be allowed.

Corporate Tax Grounds

Ground No. 8

On the facts and in the circumstances of the case, the Ld. AO/ Ld. DRP have erred in treating unearned revenue of INR 5,39,84,069 as sales revenue for the year under consideration and holding the said receipts as unexplained cash credits as per section 68 of the Act.

While doing so the Ld. AO/Ld. DRP failed to appreciate that the unearned revenue is an amount received in advance and is classified as a liability in accordance with Accounting Standard (AS) 9 Revenue Recognition and is accounted for as revenue only upon rendering of services to customers and accordingly, not taxable for the year under consideration.

Prayer

The Appellant submits that such addition of unexplained cash credit under section 68 of the Act is unwarranted and prays before the Hon’ble ITAT to delete the addition

Ground No. 9

Without prejudice to the above ground, the Ld. AO and the Ld. DRP have further erred, both in law and on facts, in not allowing the deduction of expenses incurred in connection with the unearned revenue recognized as income during the year under consideration. In the event any addition is made on account of such unearned revenue, the corresponding expenses incurred for earning such revenue ought to be allowed as a deduction in computing the taxable income, in accordance with the principles of income computation under the Act. The failure to grant such deduction is unjustified and contrary to the settled principles of law,

Prayer

The Appellant respectfully prays before the Hon’ble ITAT to allow the deduction of expenses incurred in connection with the said revenue, and grant such other relief as deemed fit.

Ground No. 10

On the facts and circumstances of the case, the Ld. AO/ Ld. DRP bas erred in adding back the foreign currency fluctuation loss of INR 91,68,000, by erroneously treating it as understatement of revenue.

Prayer

The Appellant submits that such addition is unwarranted and prays before the Hon’ble ITAT to delete the addition

Ground No. 11

On the facts and circumstances of the case and in law, the Ld. AO erred in levying the interest and fee of INR 2,12.05.086 while computing the impugned tax demand.

Prayer

The Appellant prays before the Hon’ble ITAT that the interest is consequential to the additions made by the Ld. AO and ought to be deleted.

Ground No. 12

On the facts and circumstances of the case and in law, the Ld. AO erred in initiating penalty proceedings under section 271AAC(1) of the Act in connection with the tax determined under section 115BBE of the Act on the addition made towards unexplained cash credit under section 68 of the Act

Prayer

The Appellant prays that there is no unexplained cash credit under section 68 of the Act and consequently, prays before the Hon’ble ITAT for direction to the Ld. AO to drop the initiation of penalty proceedings under section 271AAC(1) of the Act.

Ground No. 13

On the facts and circumstances of the case and in law, the Ld. AO erred in initiating penalty proceedings under section 270A of the Act for underreporting of income as a consequence of misreporting of income.

Prayer

The Appellant prays before the Hon’ble ITAT to direct the Ld. AO to drop the penalty proceedings under section 270A of the Act.

The above grounds are independent of and without prejudice to each other. The Appellant craves leave to add, alter, amend, or withdraw all or any of the Grounds of Appeal and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing.”

2. Brief facts of the case are that assessee-company is a wholly owned subsidiary of Alepo Technologies Inc. the assessee is providing Information Technological (IT) support services to the Alepo group in India. The assessee filed its return of income for A.Y. 2022-23 on 25.11.2022 declaring total income of Rs, 1.28 Crore. The assessee while filing return of income reported certain international transaction with its associated enterprises (AE). Consequent upon, the assessing officer (AO) made a reference to transfer pricing officer (TPO) for computation of arm’s length price in respect of international transaction. Before TPO, the assessee contended that assesses operating profit (OP)/ total cost (TC) was at 13.82%. T and benchmarked its transaction by adopting Transactional Net Margin Method (TNMM) and selected nine (9) following comparables which had range of 3.88% to 21.64%. Since, the he assessee operating margin of 13.82% fell within the range, the assessee claimed its transaction at Arm’s Length.

3. The TPO carried out his own search and rejected five (5) comparable companies and retained four (4) companies in the final set of comparables and issued show cause notice to the assessee as to why ALP @ 23.60% against the PLI of assessee at 13.82%. The assessee contested for rejection of all five comparable. However, the TPO rejected the submissions of assessee and suggested upward adjustment of Rs. 3.88 crore vide its order dated 20.01.2025.

4. On receipt of report of TPO, the AO passed the draft assessment order dated 10.03.2025. Copy of draft assessment was served upon the assessee. The assessee filed its objection before Dispute Resolution Penal (DRP), wherein the action of AO/ TPO was sustained. Accordingly, the AO passed final assessment order under section 143(3) r.w.s. 144C (13) on 11.11.2025. Further, aggrieved the assessee has filed appeal before Tribunal.

5. We have heard the rival submissions of both the parties and have gone through the orders of lower authorities carefully. The learned authorised representative (ld. AR) of the assessee submits that he is making submissions for inclusion of only two comparable that is Rheal Software (P) Limited (Alepo) and Toxsl Technologies Private Limited (ToxsL). If these two comparable companies are retained in final set of comparable, the assessee will be satisfied.

6. To support the inclusion of Rheal Software (P) Ltd. (Rheal), the ld. AR of the assessee submits that TPO excluded Rheal from final set of comparable holding that it is persistent loss making company. It incurred losses in two assessment years out of last three assessment years. The DRP upheld the action of TPO. The ld. AR of the assessee submits that the TPO has not disputed functional similarity between the assessee’s business and with Rheal. It is an undisputed fact that Rheal has earned operating profit in one of the last three years and has a positive profit before taxes in two or last three years. It is settled position in law that holding a comparable company a persistently loss maker, it has to make losses in three consecutive assessment years which is clearly missing in this case. The ld. AR provided year on year operating margins of Rheal in the following manner:

7. On the basis of aforesaid figures, the ld. AR of the assessee submits that co-ordinate bench of Tribunal in various other cases has categorically held that Rheal is not persistent loss maker. To support his submission, he relied upon the following decision:

> Genesys Telecom Labs India Pvt. Ltd. vs DCIT – IT(TP) No. 38/Chny/2024 (Chen – Trib.)

> Nokia Solutions and Networks India (P) Ltd. vs ACIT (2024) 160 taxmann.com 729 (Delhi – Trib.)

8. For inclusion of Toxsl Technologies Private Ltd. (Toxsl), the ld. AR of the assessee submits that after rejecting five comparable companies from final set of comparable by TPO, the assessee conducted a fresh benchmarking analysis by adopting the same filters as applied by TPO. The assessee filed the same as additional evidence before DRP wherein the assessee sought inclusion of Toxsl Technology Pvt. Ltd. as comparable. On filing such additional evidence, the DRP called remand report from TPO. The ld. AR submits that Toxsl qualifies filter applied by TPO. It is in software development services and functionally similar to the business of assessee. The financial of assessee in the form of annual report is available at page no. 1044 of paper book. The TPO rejected the submission of assessee in his remand report. The DRP upheld the action of TPO. The ld AR of the assessee submits that Toxsl is comparable as it is functionally similar with assessee also qualify all filters applied by TPO. To support his submission, the ld. AR relied upon the decision of Pune Tribunal in Faurecia Interior Systems India (P) Ltd. vs ACIT (2018) 96 taxmann.com 579.

9. On the other hand, the learned Senior Departmental Representative (ld. Sr. DR) for the Revenue strongly opposed the inclusion of Rheal Software Ltd. and Toxsl Technologies Private Ltd. Against the inclusion of Rheal Software Ltd., the ld. Sr. DR for the Revenue submits that TPO and DRP has clearly brought out the fact on record that this company incurred losses for two out of three years and thus, failed in persistent loss filter. Further, as per the details provided by assessee about functional profile of this company. This company is in software license distribution, customer liaising, Pricing, sales and marketing function and pricing of order, thus, the function of assessee is not software development which is basically code writing for software but IT support services. Rheal is in software development and not comparable with the assessee. Similarly, for Toxsl Technology, the ld. Sr. DR supported the order of TPO and DRP.

10. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We find that the parties have locked their horn on limited issue about the inclusion of two comparables. We find that TPO rejected the inclusion of Rheal on the ground that it is persistent loss making company. We find that coordinate bench of Mumbai Tribunal in Nokia Solutions and Networks India (P) Ltd. vs ACIT (supra) held that where TPO rejected a company selected for assessee on the ground that it was having persistent losses in last three years upto and including FY 2014-15, however, the assessee furnished evidence to demonstrate that company has made profit in subsequent financial year. The company was to be included in the list of comparable. We find that inclusion of Rheal software was also considered by co-ordinate bench in para 26 of order and held that in AY 2015-16 it has reported profit, therefore, it does not specify the persistent loss making company filter applied by TPO and cannot be rejected and directed AO / TPO to include this company in final set of comparable. Even from the details furnished before us, we find that this company has shown profit in one of last three years. Thus, following the same ratio, as has been held inNokia Solutions and Networks India (P) Ltd. vs ACIT (supra),we hold that this company cannot be treated as persistent loss making company hence AO / TPO is directed to include this comparable in final set of comparable.

11. So far as inclusion of Toxsl is concerned, we find that assessee sought to include this comparable on the basis of filters applied by TPO by way of additional evidence filed before DRP. We find that on the application of additional evidence and inclusion of additional comparable DRP sought remand report from TPO. In the remand report dated 23.05.2025, the TPO objected about admissibility of additional evidence on the ground that sufficient opportunity was allowed to the assessee and that the case of assessee does not fall under any sub-clause of Rule-46A of Income Tax Rule. In is without prejudice submission, the TPO stated that the assessee had carried out fresh benchmarking by including four new comparables companies. Such bench marking is carried out purposely by including four new comparable, so that profit margin fit in (+/-) 3% ranges. The new comparable are afterthought and picked up only to bypass the transfer pricing provisions in the hand of assessee. The comparable are functionally different. Thus, the TPO objected the inclusion of Toxsl. On perusal annual report of Toxsl, we find that this comparable is also into software development services and functionally similar with the business of assessee. We find that Pune Tribunal in Faurecia Interior Systems India (P) Ltd. vs ACIT (2018) 96 taxmann.com 579 (Pune-Trib.) also held that selection / rejection of comparable is allowed even before appellate bodies, leave alone before TPO / AO. Thus, when comparability is not in dispute as it qualified for filter applied by TPO, the DRP ought to have included this comparable. Hence, we directed the AO / TPO to include Toxsl in final set of comparable. In the result, ground no. 2 to 7 of appeal is allowed.

12. Ground no. 8 & 9 relates to addition under section 68 of Rs. 5.39 crore. The ld. AR of the assessee submits that AO made addition under section 68 with respect to unearned Revenue appearing in the audited financial statement by holding that assessee has not proved such receipt to be advance from customers. The ld. AR of the assessee submits that provision of section 68 is not applicable on the facts of present case. The assessee provided complete details pertaining to unearned Revenue and same has been offered to tax in subsequent years. Otherwise, during assessment proceedings, the details of party including PAN, e-mail address and invoices and ledgers of the parties. The assessee also proved creditworthiness of parties. The advances were received from the customers across multiple years. The assessing officer has not considered the ledgers, invoices, work orders, journal entries furnished by assessee. The assessing officer merely added closing balance shown in the ‘head other current liabilities’ and erroneously holding that this amount is unexplained. DRP also failed to appreciate the fact. The ld AR of the assessee submits that once the transaction has been accepted in the subsequent years, taxing the same in current assessment year who led to double taxation. To support such submission, the ld. AR relied upon the decision of Delhi High Court in PCIT vs vs Montage Enterprises (P) Ltd. (2018) 100 taxmann.com 99 (Delhi) and the decision of Surat Bench in ACIT vs Shah Virchand Govanji Jewellers Pvt. Ltd. in ITA No. 175/Srt/2020.

13. On the other hand, ld. Sr. DR for the Revenue supported the order of lower authorities. The impugned amount pertains to liability and claimed to be the advances received for the worked to be done in future. On show cause by assessing officer the assessee failed to substantiate with sufficient evidences. Once it is accepted that it was an advance, but the assessee was required to maintain complete record.

14. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We find that AO made addition of Rs. 5.39 crore under section 68 by taking view that assessee has shown unearned revenue of Rs. 5.39 crore. On show cause, the assessee furnished details regarding advance payment received from customers. The assessee also submits that as per accounting standard – 9, such revenue cannot be recognised since the services have not been performed. The assessee furnished complete details of advances with evidence. The assessee also provides ledger accounts, agreement and invoices. The assessing officer held that assessee regularly received payments against sales book by it. None of the ledger indicates any advance paid to the assessee. The assessing officer treated such amount as unexplained credit. The DRP upheld the action of AO. We find that no independent investigation was carried out by assessing officer despite providing complete details of advances. The ld. AR before us submitted that assessee offered the tax pertaining to such advances in subsequent years. We find that once the transaction has been accepted in subsequent years, no addition in respect of such advances can be made without bringing any adverse material on record. Similar view was taken by coordinate bench of Surat Tribunal in ACIT vs Shah Virchand Govanji Jewellers Pvt. Ltd. (supra). Hence, we direct the AO to delete the entire addition.

15. Ground no. 10 relates to understatement of revenue on account of exchange loss of Rs. 91.68 lacs. The ld. AR of the assessee submits that during assessment, the assessing officer sought reconciliation of gross receivable of Rs. 50.90 crore vis-à-vis operating revenue of Rs. 43.69 crore of the assessee for the year under consideration. The assessee provided reconciliation, copy of which is placed on record. On perusal of such reconciliation, the assessing officer alleged that assessee has understated its income by not adding back foreign exchange loss of Rs. 91,68,000/-, especially considering that assessee has reduced the amount of foreign exchange gain from gross receivable. The operating revenue figures derived through reconciliation provided by assessee exactly matches the audited financial statement and has been fully offered to tax. The net foreign exchange difference (both gain and loss) shown separately as “other income” in the accounts and have been fully brought to tax so there is no question of any income having been understated. The allegation understatement income on account of no addition of foreign exchange loss in the reconciliation is therefore, misconceived and deserves to be rejected.

16. On the other hand, the ld. Sr. DR for the Revenue submits that as net amount is offered to tax, same should have been reduced from the head of income of business and profession. During assessment, the assessing officer noted that under the different heads only the amount net of gain and loss has been offered. The assessing officer concluded that while gross amount of forex gain has been reduced from the head business and profession, only the net amount has been offered. It was pointed out that either only the net amount is reduced from the head income or if gross amount is reduced then losses are to be added to bring out the effective amount that is under the head business and profession. AS – 11 clearly mentioned that recognition of forex gain, or loss is at prevailing exchange rate as per page 152 the recognition at the monetary settlement is either in the form of income or expenditure. The assessee failed to explain the observation of assessing officer. Thus, the addition may be sustained.

17. In the rejoinder submission, the AR of the assessee submits that foreign currency fluctuation losses are considered in the audited financial statement separately under the Note – 19 – other income, which provides separate line items – foreign exchange gain. The assessee has gain of Rs. 1,59,54,673/- and loss of Rs. 91,68,000/-and net impact considered in the audited financial statement of Rs. 67,86,673/-. The net profit before tax earned by assessee is of Rs. 39,79,282/-. The ld. AR of the assessee also carried us through the statement of total income wherein Rs. 39,79,282/- has been included in the total income. The ld. AR of the assessee submits that assessee has not taken any deduction of foreign exchange gain or made any adjustment towards foreign currency fluctuation. Thus, the contention of ld. DR for Revenue that assessee made adjustment and the time of computing taxable income is completely unfounded and misplaced. AS-11 has no co-relation to the issue in hand and was never relied by lower authorities during the assessment proceeding. The financial statement of assessee is audited by reputed chartered accountant firm and is held to be in compliance with relevant accounting standard. Thus, addition on account of foreign exchange fluctuation loss is not justified.

18. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We find that assessing officer made addition on account of foreign exchange fluctuation loss of Rs. 91,68,000/- by taking view that assessee has reduced foreign currency fluctuation gain only from gross trade receivable without simultaneous addition of foreign currency loss of Rs. 91.68 lacs inspite of the fact that both gain and loss are directly related to trade receivable. The DRP upheld the action of assessing officer by holding that assessing officer has carried out an exhaustive reconciliation exercise and found that the assessee has reduced forex fluctuation gain from gross receivable, the assessee had not added back the forex fluctuation losses accordingly an understatement of Revenue to that extent was found by assessing officer and no interference is called for. Before us, the ld. AR of the assessee vehemently argued that operating revenue figure derived through the reconciliation provided by assessee, exactly matches with audited financial statement and has been fully offered to tax. It is further contention of ld. AR of the assessee that net foreign exchange difference, both gains and losses shown separately as “other income” in the accounts, have been fully brought to tax so there is no question of any income having been understated. At the time of hearing the ld AR of the assessee demonstrated that foreign currency fluctuation losses are considered in the audited financial statement separately under the Note – 19 – other income, which provides separate line items – foreign exchange gain. We find that the assessee has gain of Rs. 1,59,54,673/- and loss of Rs. 91,68,000/- and net impact is considered in the audited financial statement of Rs. 67,86,673/-. The net profit before tax earned by assessee is of Rs. 39,79,282/-. We find that the assessee has already included as net of Rs. 39,79,282/-, in the computation of total income. Thus, we do not find any justification for adding back foreign currency fluctuation.

19. In the result, this ground no. 10 is allowed.

20. Ground no. 11 relates to incorrect computation of interest and fee of Rs. 2.12 Crore. The ld AR of the assessee submits that the assessing officer erroneously made addition of Rs. 22,60,512/-without providing basis. On the other hand, the ld Sr DR for the revenue submits that assessing officer may be directed to recompute it afresh.

21. Considering the submissions of both the parties, the assessing officer is directed to recompute the interest and fee in accordance with law. Needless to direct that before passing the order the AO shall provide fair and reasonable opportunity to the assessee. In the result, this ground no. 11 is allowed for statistical purpose.

22. Ground No. 12 & 13 are initiation of penalty. We find that these grounds of appeal are premature and need no specific consideration at this stage or in the present proceedings. Ground No.1 relates to passing of final assessment order beyond the time limit under section 153. Considering the facts that we have allowed relief to the assessee on merit, hence, this ground of appeal has become academic and dismissed as infructuous.

23. In the result, the appeal of assessee is partly allowed.

Order was pronounced in the open Court on 26/05/2026.