Delhi High Court
Cit vs Aero Leather (P) Ltd. on 9 January, 2007
Bench: M B Lokur, V Gupta
ORDER
1. The revenue is aggrieved by an order dated 8-2-2005 passed by the Income Tax Appellate Tribunal, Delhi Bench 'A' in ITA Nos. 2603/Delhi/04, 2643/Delhi/04, 2644/Delhi/04, 2645/Delhi/04 and 2642/Delhi/04relevant for the assessment years 1994-95 to 1998-99.
2. It appears that the assessed was engaged in the business of manufacture and sale of shoes and shoe uppers. Its predominant activity was export of these items to the USSR. After disintegration of the USSR, the assessed claims that its business came to a standstill and, therefore, it did not file any return of income.
3. The department then issued a notice to the assessed under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') pursuant to which the assessed filed its return showing with income. The return was not accompanied by an audited balance sheet or profit and loss account but audited accounts were later filed by the assessed.
4. The records show that the accounts book of the assessed were seized by the police authorities on 25-3-2000 but the process of auditing had begun much earlier and that is how the assessed was able to file the audited accounts, which could not, however, be verified.
5. The assessing officer rejected the audited accounts because of certain discrepancies noted by him and assessed the income of the assessed at Rs. 16 lakhs on the basis of the discrepancies and adjustments made by the assessed under the Voluntary Disclosure of Income Scheme.
6. Feeling aggrieved, the assessed filed an appeal before the Commissioner of Income-tax (Appeals). By an order dated 31-3-2004, the Commissioner came to the conclusion that since some sales were made by the assessed, its profit rate would come to 4.73 per cent on the export sales and local sales as well as other income earned by the assessed.
7. The Commissioner noted the contention of the assessed to the effect that though it had made sales but they were below the cost price because the shoes manufactured by it were made for the USSR market and the shoes would not be saleable in the Indian market without substantial changes. The Commissioner tacitly accepted this contention and arrived at the net profit rate of 4.73 per cent on the basis of exports made by a sister concern of the assessed, M/s. Aero Traders (P) Ltd.
8. Feeling aggrieved with the assessment of the net profit rate made by the Commissioner, the assessed filed an appeal before the Tribunal and the Tribunal allowed the appeal directing the assessing officer to determine the income of the assessed at: nil It is against this order passed by the learned Tribunal that the revenue has filed the present appeal under Section 260A of the Act.
9. The learned Tribunal has noted that it was common ground between both the parties that the income of the assessed was liable to be determined on an estimate basis. The fact that the USSR had disintegrated and the fact that the predominant business of the assessed was to export shoes and shoe uppers to the USSR was not in doubt. The Commissioner proceeded on the tacit basis that the assessed made losses because of the disintegration of the USSR and this was accepted by the revenue because it did not challenge the basis on which the Commissioner proceeded in his order.
10. This being so, the learned Tribunal noted that if the sales made by the assessed were at below cost price, there is no question of estimating a net profit. We are unable to find any fault in this reasoning adopted by the learned Tribunal and are of the opinion that the impugned order does not raise any question of law much less any substantial question of law that would warrant our consideration,
11. Under the circumstances, we find no merit in this appeal and it is dismissed.
