C I T JAIPUR vs. M/S CARPET MAHAL

Judgment Per Hon’ble Jhaveri, J. 10/05/2017

on the facts

and circumstances of the case, the Tribunal was justified in allowing deduction u/s 80HHC to the assessee on counter sales of Rs.4,14,45,879/- made to foreign tourists, ignoring the specific provisions of Explanation (aa) to Section 80 HHC of the Act, when the assessee has failed to prove that the goods have under gone custom clearance? (ii)

on the facts

and circumstances of the case, the Tribunal as well as the CIT(A) was justified in allowing the deduction u/s 80 HHC of the Act, when there is no finding to the effect that the goods were cleared at any of the custom station? (iii) Whether the Tribunal was justified in holding the purchases made by the assessee from M/s. Subham Handicrafts, M/s Sudhir & Company and M/s K.K. Enterprises

of Rs.9,69,780/-, Rs.11,12,500/- and Rs. 9,83,250/- respectively as genuine ignoring the fact that neither the seller was produced for examination nor the purchases were proved and particularly in the case of M/s Shubham Handicrafts neither the purchases were accepted by it nor its sales tax registration was valid during the relevant period and nor

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any sales were made by it to the assessee?

on the facts

and circumstances of the case, the Tribunal was justified in allowing deduction u/s 80HHC to the assessee on counter sales of Rs.6,36,08,403/- made to foreign tourists, ignoring the specific provisions of Explanation (aa) to Section 80 HHC of the Act, when the assessee has failed to prove that the goods have under gone custom clearance? (ii)

on the facts

and circumstances of the case, the Tribunal as well as the CIT(A) was justified in allowing the deduction u/s 80 HHC of the Act, when there is no finding to the effect that the goods were cleared at any of the custom station? (iii) Whether the Tribunal was justified in deleting the addition of Rs.1,43,06,011/- made by the Assessing Officer on the ground of unverifiable purchases and sustained by the CIT(A) to the extent of Rs.35,76,603/- even when the Tribunal itself has held that the purchases shown by the assessee are unverifiable?”

on the facts

and circumstances of the case, the Tribunal was justified in holding the appeal filed by the revenue, against order passed on rectification application by the CIT(A) as not maintainable, without giving any finding whatsoever, by simply relying upon the order passed by it in ITA No.381 and 408/JP/07 and ignoring the fact that the issues involved in ITA No.381 and 408/JP/07 were different from the issues

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involved in the present appeal? (ii) Whether the Tribunal was justified in upholding the order of CIT(A) wherein it has held that the disallowed purchases of Rs.17,80,595/- should be treated as income from business and not as income from other sources, ignoring the fact that the addition itself of Rs.17,80,595/- sustained by the CIT(A) was also challenged by the assessee before the Tribunal? (iii) Whether the Tribunal was justified in holding the purchases made by the assessee from M/s. Subham Handicrafts, Rs.71,22,380/- as genuine ignoring the fact that neither the seller was produced for examination nor the purchases was accepted by the seller was valid during the relevant period and nor any sales were made by the seller to the assessee?”

“1. The appeal is directed against the judgment of the Jaipur Bench of the Rajasthan High Court (see [2001] 248 ITR 69) dismissing the appeal under Section 260A of the Income-tax Act, 1961 (for short, "the Act"), carried by the Revenue against the order of the Income-tax Tribunal dismissing its appeal.

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out of India". Any transaction by way of sale or otherwise in a shop or emporium which does not involve clearance at a customs station as defined in Customs Act, 1962, is thereby excluded from the expression "export out of India".

and precious

stones, handicrafts, jewellery, etc. In the return filed for the assessment year 1996-97, it had declared a total income of Rs. 1,51,000 and claimed deduction of Rs. 80,12,786 under Section 80HHC of the, Act. The Assessing Officer found that the sales effected by the assessee included counter sales of Rs. 9,76,40,672 and, therefore, the deduction claimed by the assessee under Section 80HHC was disallowed by the Assessing Officer placing reliance on Explanation (aa) to Section 80HHC(4A) of the Act. The assessee's appeal to the Commissioner of Income-tax (Appeals) failed, but its appeal to the Tribunal succeeded. Before the Tribunal, material was placed on record to show the nature of the transactions made. The Allahabad High Court specifically considered the effect of introduction of Explanation (aa) to Section 80HHC(4A) of the Act and had taken the view in Ram Babu and Sons v. Union of India [1996] 222 ITR 606 that this Explanation means that, for the purpose of this section, there will be no export out of India if two conditions are cumulatively fulfilled, viz., (a) it is a transaction by way of sale or otherwise in a shop, emporium or establishment situate in India, and (b) that it does not involve clearance in any customs station as defined in the Customs Act. This view of the Allahabad High Court had been consistently followed by several other High Courts, including the Rajasthan High Court itself in ITO v. Vaibhav Textiles [2002] 258 ITR 346. Reliance was placed on a number of orders of the Income-tax Tribunal following the view taken in Ram Babu's case , consistently and the law laid down therein. In fact, even in the case of the respondent-assessee, for the previous assessment years, the Tribunal had taken the same view. Although the Revenue attempted to canvass against the view by seeking references under Sections

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256(1) and (2) of the Act, the attempt failed. There was no further challenge to the settled consistent judicial view taken on the issue. It was also pointed out that the judgment of the Allahabad High Court in Ram Babu's case [1996] 222 ITR 606, had been challenged by the Revenue before this court, but the special leave petition, was summarily dismissed. In view of this position, the Tribunal felt that consistency of the judicial decision should be respected and followed.

“3. Considering the law declared by the Special Leave to Appeal (C) No.8956/2015 Dy. C.I.T., Tax Appeal No.240/2003 decided on 20.06.2016, the parties are bound by the principle of law pronounced in the aforesaid three judgments.