Commissioner Of Income-Tax vs Central Provinces Manganese Ore ...
2007 Latest Caselaw 411 Bom

JUDGMENT

J.P. Devadhar, J.

1. This application filed by the Revenue under Section 256(2) of the Income-tax Act, 1961, was admitted on April 21,1998, on the following questions of law:

1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that there is no material to hold that the difference between the duty assessed by the Customs Department under Section 30(b) of the Sea Customs Act, 1878, and the contract price shown by the assessee in the contract resulted in any additional income liable to income-tax to the assessee in the face of the finding of 'proven underinvoicing' by the assessee, given by the Supreme Court?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the 'proven underinvoicing' was not deliberate or intentional?

3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that no variation to the book results could be made merely on the basis of the notional value fixed by the customs authorities under Section 30(b) of the Sea Customs Act, 1878, for the purpose of the customs duty in face of the clear finding by the Supreme Court that the assessee's 'proven underinvoicing'?

4. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in not holding that in the absence of complete books of account and the sales agreements, the Assessing Officer could not carry out any effective scrutiny of the returns?

5. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in not holding that the only legitimate course open to the Department was to determine the assessee's income of a fair and reasonable basis by adopting the concluded sale price determined by the Customs Department of the Government of India and the admission of the assessee that the figures in the loose sheets could not be co-related with the figures appearing in the balance sheet or profit and loss account?

2. The assessment year involved herein is 1953-54.

3. The assessee is a non-resident company having its office in London. The assessee derives income mainly from export of manganese ore. The original assessment for the assessment year 1953-54 was completed under Section 23(3) of the Indian Income-tax Act, 1922, on the basis of the profit and loss account and balance-sheet submitted along with the return of income.

4. Some time in the year 1958, the customs authorities had initiated proceedings against the respondent/assessee on the ground that the exports of manganese ore effected by the assessee were lesser than the market price which was in contravention of the Customs Act. During the pendency of the said proceedings, the Assessing Officer initiated reassessment proceedings for the assessment year 1953-54 by issuing notice under Section 148 of the Income-tax Act, 1961, on March 20, 1970. The assessee challenged the said notice by filing a writ petition before this court, and the same was dismissed. Thereupon, the assessee filed an appeal before the apex court and the apex court dismissed the appeal by holding that the condition precedent for initiating proceedings under Section 147 of the Act, were complied with. However, the apex court noted that the assessee's income has to be determined on the basis of price received by it for the goods exported.

5. Thereafter, in the assessment proceedings, the Assessing Officer without making any further enquiry sought to make additions on the basis of the amount computed by the authorities under the Customs Act for payment of the customs duty and made additions accordingly to the extent of Rs. 44.07 lakhs being the difference in the invoice value and market value of the goods computed by the customs authorities.

6. On appeal filed by the assessee, the Commissioner of Income-tax (Appeals) confirmed the additions made by the Assessing Officer. Aggrieved by the aforesaid order, the assessee filed further appeal before the Income-tax Appellate Tribunal and the Tribunal set aside the order of the Commissioner of Income-tax (Appeals) and deleted the additions made by the Assessing Officer. The Tribunal held that in the present case, there is no evidence on record to show that the assessee has earned any income more than what was reflected in the books of account maintained by the assessee. Since, the reference application filed by the Revenue against the order of the Tribunal was rejected, the present application is filed by the Revenue under Section 256(2) of the Income-tax Act, 1961.

7. In the present case, it is not in dispute that the Assessing Officer has made additions only on the basis of the market price determined by the customs authorities under the Customs Act. Admittedly, there is no evidence on record to show that the assessee had recovered any amount in excess of invoice issued. The fact that the customs authorities have taken the market value of the exported goods for the purpose of customs duty could not be a ground to make additions in the case of the assessee unless there was any material to show that the assessee had in fact received more amount than what was shown in the invoices/bills. Admittedly, there is no material on record to show that the assessee had received amounts in excess of what is reflected in the books of account.

8. The grievance of the Revenue that the assessee has failed to produce books of account, has been rejected by the Tribunal by upholding the contention of the assessee that it was not possible for them to produce the books relating to the financial year 1952-53 in the year 1970. In any event, at no point of time has the Revenue found that the books maintained by the assessee were incorrect. In this view of the matter, the findings recorded by the Tribunal are based on appreciation of facts and the decision of the Tribunal in rejecting the reference application cannot be faulted.

Accordingly, the reference application is dismissed. Rule discharged. No costs.