Delhi High Court
Cit vs Fancy International on 11 September, 2007
Bench: M B Lokur, S Muralidhar
ORDER
1. The revenue is aggrieved by an order dated 13-4-2006 passed by the Income Tax Appellate Tribunal, Delhi Bench 'F ('Tribunal') in ITA No. 472 /Delhi/2003 relevant for the assessment year 1997-98.
2. The assessed is a 100 per cent export unit dealing in garments. Theassessed had claimed certain expenditure towards fabrication charges.The assessing officer issued summons under Section 131 of the Income Tax Act, 1961 to 74 parties to whom the assessed claimed to have made payments towards fabrication charges. 17 of the summons came back with the report that such persons were not found existing at the given address. When asked to produce these persons, the assessed stated that the matter was 3-4 years old and the parties may have shifted or gone out of business during this period. It was also submitted that the payments were made to all those persons through account-payee cheques and that there was a strict gate: pass and challans system which was being adhered to. Therefore, according to the assessed, the fabricators were genuine. Since the assessed was unable to produce them, he requested the assessing officer to depute a person to trace out the parties.
3. The assessing officer apparently did not take any steps to trace out the parties but added an amount of Rs. 43,15,352 paid to the fabricators as income from other sources. Feeling aggrieved, the assessed preferred an appeal which was allowed by the Commissioner (Appeals).
A further appeal filed by the revenue was dismissed by the Tribunal and that is how the revenue is before us.
4. It is submitted by learned Counsel for the revenue that the burden was on the assessed to prove the genuineness of the parties to whom fabrication charges were alleged to have been paid.
5. We are of the opinion that the assessed has been able to discharge the initial burden of producing evidence to show that the amounts paid to the fabricators were through account-payee cheques as has been noticed by the Tribunal. The certificates from bankers were also placed on record reflecting that the payments were effected through cheques presented to the banks for clearing;. We also find that although the assessed had also drawn attention of the assessing officer to its gate pass and challan system, the assessing officer did not take any trouble to investigate or look into this aspect of the matter and proceeded to come to an adverse conclusion merely on the basis that the assessed had not been able to produce the persons to whom the fabrication charges were said to have been paid. Considering the fact that few years had gone by, the explanation that the parties concerned may have moved out or closed down their business appears plausible. The mechanical approach of the assessing officer to the issues at hand was not justified in the facts of the case.
6. We also find merit in the submission of learned Counsel for the assessed that at best the assessing officer could have added back the amount disallowed as deduction towards fabrication charges to the business profits and not treated it as income from other sources. It appears correct that had the amount been added to the business profits, the assessed may have been able to get the corresponding benefit of Section 80HHC of the Act. On the other hand, by treating the amount as income from other sources, the assessing officer proceeded on the premise that the amount had been siphoned off by the assessed, for which conclusion there was clearly no material on record.
7. We do not find any error having been committed by the Tribunal. No substantial question of law arises.
8. Dismissed.
