Delhi High Court
Commissioner Of Income Tax-Ix vs High Tech Engineers on 21 May, 2014
Author: S.Ravindra Bhat
THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 21.05.2014
+ ITA 231/2014
COMMISSIONER OF INCOME TAX-IX ..... Appellant
versus
HIGH TECH ENGINEERS ..... Respondent
Advocates who appeared in this case:
For the Appellant : Mr Rohit Madan, Mr P. Roy Choudhary
and Mr Akash Vajpai.
For the Respondent: None.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE VIBHU BAKHRU
JUDGMENT
S. RAVINDRA BHAT, J (OPEN COURT)
1. The Revenue claims to be aggrieved by the impugned order of the
Income Tax Appellate Tribunal (ITAT), whereby the order of the
CIT(Appeals), rendered in favour of the assessee was affirmed.
2. The assessee's original return for AY 1998-99 was accepted, it had
reported an income of `4,04,930/-. The AO sought to re-assess the income
by issuing notice under Section 148 of the Income Tax Act, 1961 (the Act),
and framed a fresh assessment on 29.03.2004. In this case, the AO
disallowed a sum of `7,40,04,922/- originally claimed by the assessee
under Section 80HHC of the Act, primarily added on account of certain
investigations carried out by the Department of Revenue Intelligence
(DRI). One of the grounds was that, whereas, originally the assessee used
to export its consignments to Moscow, however, for the given relevant
period, he allegedly did so to Helsinki via Moscow. There were also
certain allegations based upon the inflated value of the bills claimed or that
some of bills/invoices were sourced from fictitious firms. These two were
based upon the DRI investigations. The reassessment order was completed
without issuing a specific notice under Section 143(2) of the Act. The
assessee's appeal was accepted by the CIT(Appeals), both on the question
of denial of natural justice as well as on the merits. The ITAT examined
the matter elaborately and concurred with the findings of the CIT(Appeals).
It first of all, upheld the assessee's complaint that the AO's reassessment
order was vitiated on account of failure to provide an opportunity of being
heard and secondly, on the merits.
3. It is urged by the revenue that the record clearly discloses that the
assessee was provided with sufficient opportunity in this regard and that on
two separate occasions it was called upon to produce materials. It was only
upon its failure to do so, that the AO resorted to Section 144 and rendered a
best judgment assessment in the circumstances of the case.
4. This Court has considered the submissions and findings of the ITAT.
As is facially evident, the impugned order, deals with both the failure to
issue notice under Section 143(2) of the Act, as well as on the merits. Most
importantly, on merits the ITAT said:-
"10. The Ld. CIT (A) has also made his observations regarding
the non-maintainability of the disallowance made by the AO in
the reassessment accepting contention of the assessee in this
regard. He has observed that in the assessment in the case of
proprietary concern of Shri Rajeev Verma also reopened u/s 148
of the Act for the assessment years 1998-99, 1999-2000 & 2000-
2000, the same Assessing Officer as that of assessee firm vide
assessment orders dated 08/10/2004 has accepted the exports
made by the proprietary concern of Shri Rajeev Verma in all the
assessment year.
1) For denial of deduction u/s 80HHC, the only issue remained as
to whether the assessee had made export outside India or not.
The AO has admitted that the assessee has earned business
income of Rs.7,39,59,930/-. He has made reference of the
investigation carried out by the DRI and he has used this report
as basis for disallowance of the deduction. As per this report the
allegation was of over valuation of export pertaining to the
period 1998 to 2000. The contention of the assessee remained
that the report of DRI pertains to the period 1998-2000 whereas
the assessment year under consideration is 1998-99, and the
relevant previous year is 1/4/1997 to 31st March 1998. The AO
has also referred the report of DRI wherein it was mentioned
that on enquiry from Russian Custom, it was revealed that the
goods were sent by the assessee to Helsinki from Mosco. The
contention of the assessee in this regard remained that u/s
80HHC there is no such condition that the exemption will be
allowed only if the goods are exported to Mosco and not to any
other country. Since there is no allegation that goods have not
been exported out of India, we are of the view that the Ld.
CIT(A) has rightly accepted this contention of the assessee.
2) The AO further observed that Mr. Rajeev Verma claimed
illegal draw back and suppliers have confirmed that they have
been issued bills for leather bags at inflated value. The assessee
objected this allegation with this contention that the draw backs
has been claimed as per the law and the suppliers have given
bills only for the amount for which the goods have been
purchased. It was contended that no statement of the suppliers
was made available to the assessee for their confrontation. And
as such, such information is not valid piece of evidence. It was
argued that even for a moment if it is assumed that the assessee
has claimed illegal "Draw Back", it will reduce the income of the
assessee under the head, "Draw Back" and it will no where affect
the computation of Section 80HHC deduction. It was argued that
if the AO is of the view that this draw back is not due to the
assessee, then it will be a liability of the assessee and cannot be
turned as income. If it is to be termed as income, then the nature
of income will "Draw Back" only, contended the assessee. In
absence of any specific rebutal of these contentions of the
assessee, we are of the view, that the Ld.CIT(A) was justified in
accepting the above contention of the assessee questioning the
disallowance of the claimed deduction u/s 80HHC of the Act. The
ground no-2 is thus rejected. So far as Ground No.-3 is concern,
we find that the assessee had sought permission for admission of
the additional evidence filed by way of photocopy of seized
record which could not have obtained during the course of
assessment proceedings. It was also contended that the AO has
made disallowance u/s 80HHC of the Act ignoring the documents
already on record and the audited balance-sheet, certificate from
auditors, etc. We thus find that sufficient reason was shown by
the assessee behind non-furnishing of these documents before the
AO, and the Ld. CIT(A) has decided the appeal after obtaining
remand report of the AO, on the material submission of the
assessee. We thus do not find substance in the issue raised in
Ground No.-3. The same is accordingly rejected.
11. In result the appeal is dismissed."
5. This Court notices that the decision of the ITAT is based upon its
consideration of the CIT(Appeals') order. Furthermore, the AO seems to
have been entirely influenced by the allegations envisaged in the DRI
report as to the alleged unjustified drawback claimed by the assessee.
There was otherwise no independent material to support the conclusions of
the AO in the reassessment proceedings-a fact which persuaded the
CIT(Appeals) to set aside the reassessment. The findings being intensely
factual, this Court finds no substantial question of law which requires
consideration in the present appeal.
6. The appeal is dismissed as bereft of merits.
S. RAVINDRA BHAT, J
VIBHU BAKHRU, J
MAY 21, 2014
MK/pkv
