C I T JAIPUR vs. M/S SILVER MINES

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ITA/363/2008HC RajasthanRJHC02038131200822 May 20174 pages
AI SummaryDismissed

What did the High Court hold?

The High Court agreed with the Tribunal's decision on both issues. Regarding the trading addition, the Court found no reason to interfere with the Tribunal's view, implicitly upholding the deletion of the addition. On the second issue concerning Section 80HHC deduction for counter sales to foreign tourists, the Court relied on its previous decision in S. Kasliwal & Co. vs. The Assistant Commissioner of Income Tax and Supreme Court judgments like CIT v. Silver & Arts Palace. The Court held that the 'Sale to Foreign Tourists Voucher' with the customer's passport number and declaration was sufficient proof of export. It clarified that Explanation (aa) to Section 80HHC(4C) is a rule of exclusion and does not mandate the production of customs clearance documents for baggage, especially when sales are made against convertible foreign exchange with an undertaking not to sell within India. The issue was decided in favour of the assessee.

What were the facts?

The appellant, CIT Jaipur, challenged an order of the Income Tax Appellate Tribunal (ITAT) that dismissed the department's appeal. The ITAT had deleted a trading addition of Rs. 39,96,686/- made by the Assessing Officer (AO) and allowed deduction under Section 80HHC on counter sales of Rs. 1,11,52,095/- to foreign tourists. The AO had rejected the assessee's books of account due to a lack of stock register and quantitative details, applying a 19% gross profit rate. The assessee, dealing in manufacturing and export of silver jewellery, had declared a gross profit rate of 13.12%. The department argued that counter sales to foreign tourists should not be eligible for Section 80HHC deduction without proof of customs clearance.

What were the issues?

1. Whether, on the facts and circumstances, the ITAT was justified in deleting the trading addition of Rs. 39,96,686/- made by the AO by applying a 19% gross profit rate based on the assessee's previous profits? - Assessee's contention: Not recorded. - Revenue's contention: Not recorded. 2. Whether, on the facts and circumstances, the ITAT was justified in allowing deduction under Section 80HHC on counter sales of Rs. 1,11,52,095/- to foreign tourists? - Assessee's contention: The 'Sale to Foreign Tourists Voucher', which included customer details, passport number, and a declaration that goods would not be gifted or sold in India, was sufficient proof of export. Such sales necessarily involved customs clearance of baggage. The Explanation (aa) to Section 80HHC(4C) is a rule of exclusion, not requiring proof of customs clearance of baggage. - Revenue's contention: Deduction under Section 80HHC was not allowable as the assessee failed to provide proof of clearance at any Customs Station as defined under Section 2(13) of the Customs Act, 1962. The burden of proof was on the assessee.

Which sections of the Income-tax Act were involved?

Section 145,Section 80HHC,Section 80HHC(4C),Section 2(13)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 363 / 2008 C I T Jaipur ----Appellant Versus M/S Silver Mines ----Respondent _____________________________________________________ For Appellant(s) : Mr. Anuroop Singhi with Mr. Aditya Vijay For Respondent(s) : _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE DR. JUSTICE VIRENDRA KUMAR MATHUR

Judgment 22/05/2017

1.

By way of this appeal, the appellant has assailed the judgment and order of the Tribunal whereby the Tribunal has dismissed the appeal of the department.

2.

This court while admitting the matter framed the following substantial questions of law:- “i) Whether on the facts and circumstances of the case, the Income Tax Appellate Tribunal was justified in deleting the trading addition of Rs. 39,96,686/- made by the Assessing Officer by applying a modest g.p rate of 19% on the basis of previous profits declared by the assessee himself? ii) Whether on the facts and circumstances of the case, the Income Tax Appellate Tribunal was justified in allowing deduction under Section 80HHC on counter sales of Rs. 1,11,52,095/- to foreign tourist?

(2 of 4)

3.

On the first issue regarding trading addition, we are in complete agreement with the view taken by the Tribunal in para 17, which reads as under:- “17. The brief facts of the case are that the assessee is dealing in manufacturing and export of silver jewellery and other items. The assessee has declared the gross profit of Rs. 89,08,193/- on total sales of Rs. 6,79,20,416/- giving a gross profit rate of 13.12%. The AO noticed certain discrepancies that the assessee was not maintaining stock register and the assessee was not maintaining quantitative details. The AO rejected the books of account by invoking the Provisions of Section 145 of the Act and applied a gross profit rate of 19% and made a trading addition of Rs. 39,96,686/-. the ld. CIT(A) deleted the addition made by the AO vide para 4.4 of his order for the reasons mentioned therein.”

4.

However, the second issue is squarely covered by the decision of this Court in the case of S. Kasliwal & Co. vs. The Assistant Commissioner of Income Tax in DB Income Tax Appeal No.53/2004, decided on 20.02.2015 wherein this court in para 4 to 8 has observed as under:

“4. The Rajasthan High Court in several decisions, has consistently taken the same view, in Jewels Emporium & Ors. v. Union of India & Ors. (2003) 262 ITR 304 (Raj.), Commissioner of Income Tax v. Jewels Emporium (2003) 131 TAXMAN 266 (Raj.) Commissioner of Income Tax v. Rajendra Kasliwal (2004) 271 ITR 448 (Raj.) Commissioner of Income Tax v. Motilal R. Minda (2001) 250 ITR 831 (Raj.) and Income Tax Officer v. Vaibhav Textiles (2002) 258 ITR 346 (Raj.). The Allahabad High Court has also taken the same view in Marble Men v. Commissioner of Income Tax & Ors. (2005) 272 ITR 81 (All.)) following its earlier judgments.

5.

Learned counsel appearing for the Income Tax Department-respondent tried to distinguish the decision, on the ground that the language used in the Explanation (aa) of sub-section (4C) of Section 80HHC of the Income Tax Act. He submits that unless there is proof of the clearance at any Customs Station, as defined under Section 2(13) of the Customs Act, 1962,

(3 of 4)

the exemption was not allowable by the assessing authority. He submits that the burden of proof of clearance at any Customs Station was on the assessee, and that since there were no documents produced recording any clearance at any Customs Station, as defined under Section 2(13) of the Customs Act, 1962, the exemption was not allowable by the assessing authority. He submits that the burden of proof of clearance at any Customs Station was on the assessee, and that since there were no documents produced recording any clearance at any Customs Station, the exemption was denied under Section 80HHC of the Income Tax Act.

6.

The explanation (aa) of sub-section (4C) of Section 80HHC of the Income Tax Act reads as follows: "(aa) "export out of India" shall not include any transaction by way of sale or otherwise, in a shop, emporium or any other establishment situate in India, not involving clearance at any customs station as defined in the Customs Act, 1962 (52 of 1962)."

7.

In the present case, the assessee had produced the 'Sale to Foreign Tourists Voucher', which not only recorded the name and address of the customers (tourist), but also his/her passport number and the declaration given by him that the goods will not be gifted or sold in India. The goods were sold at the counter at the shop/emporium to be taken out of the country, which necessarily involved clearance of baggage, by the customs authorities. No further proof, nor any document in proof of clearance of the goods at the Customs Station by the assessee is required. The declaration in the form of Sale to Foreign Tourist Voucher, for sale made against the convertible foreign exchange with the undertaking that the goods will not be gifted or sold in India, was sufficient proof for export out of India. Unless anything contrary was alleged and proved or any material was found by the department, it was not necessary for the assessee to have produced the documents of clearance of goods sold by him to the foreign tourists at any Customs Station, nor it was feasible. The Explanation (aa) is not a rule of evidence, nor raises any presumption of such sale, which is not for export of goods out of India. It also does not require submission of any proof of clearance at any Customs Station. The explanation is couched in double negative terms. It is a rule of exclusion which excludes only those transactions, which do not involve clearance at any Customs Station. It cannot be (4 of 4)

read in a manner, as suggested by learned counsel appearing for the department that a proof of customs clearance of baggage must be provided to establish the export of goods out of India for the purpose of deduction of profits on such sales under Section 80HHC of the Income Tax Act.

8.

The question of law is even otherwise covered by judgment of the Supreme Court in Commissioner of Income Tax v. Silver & Arts Palace (supra), which has been followed by the Rajasthan High Court consistently. The facts and circumstances of the case are not distinguishable to take a different view in the matter. The question is, thus, decided in favour of the assessee and against the department. The Income Tax Appeal is allowed. The Income Tax Department will proceed in accordance with the decision on the question decided in favour of the assessee.”

5.

We are in complete agreement with the view taken by the Tribunal. No interference is called for.

6.

The issue is answered in favour of the assessee and against the department.

7.

The appeal stands dismissed. (VIRENDRA KUMAR MATHUR),J. (K.S. JHAVERI),J. A.Sharma/33

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