DCIR CC 2(3), MUMBAI, MUMBAI vs. SHREE SALASAR MARBLES IMPEX PRIVATE LIMITED, MMUMBAI

4.1. Subsequently, ld. Assessing Officer after receiving an information from the DCIT, CC- 3(1), Kolkata that the search u/s.132 of the Act was carried in the case of Shri Praveen Agarwal and his group companies, wherein he admitted of providing the accommodation entries to various parties/beneficiaries and the assessee had received the accommodation entries from such two entities of Rs.60,00,000/-, framed a reason to believe that the assessee had taken accommodation entries in the form of bogus loans from the entities managed by Shri. Praveen Agarwal, therefore the assessee's income to the tune of Rs.60,00,000/- had escaped assessment as provided in section 147 of the Act.

4.2. Further, ld. Assessing Officer received another information from DDIT(Inv.), Unit-4(1), Mumbai that a search was carried by DRI authorities at assessee's premise which revealed that assessee had undervalued the import of marbles from foreign exporters named M/s Henrauxx Spa and M/s Venill's SRL on four transactions of Rs.56,37,709/- and therefore, the assessee's income to the tune of said amount had escaped assessment as provided in section 147 of the Act. Accordingly, ld. Assessing Officer issued notice u/s 148 of the Act on 28.03.2019 and reopened the completed assessment. and 3723/Mum/2024 Shree Salasar Marbles Impex Pvt. Ltd. AYs 2013-14 and 2012-13 5. Ld. Assessing Officer passed an order u/s 143(3) r.w.s. 147 of the Act on 21.12.2019 by making the addition u/s.68 of the Act on account of unsecured loans received of Rs.60,00,000/- and u/s 69C of the Act for under valuation of import purchase of marble blocks of Rs.56,37,709/-, determining total income of Rs.1,42,25,220/-. Aggrieved, assessee went in appeal before ld. CIT(A).

6.1. For deleting the addition of undervaluation of import of marbles, ld. CIT(A) while allowing the ground raised by the assessee observed and held that ld. AO made the addition relying on the note-verbale information received from Custom authorities, however, the Appellate Authority under the Customs Act had set aside the allegations and decided the issue in favour of the assessee. Further, he observed that assessee had furnished documentary evidences to justify the import of marble for which no defects were pointed out by the ld. AO. He further took note of the decision of Coordinate Bench of ITAT Mumbai in case of Trident Marbles Pvt. Ltd. vs. DCIT in dated 28.06.2023, wherein on identical fact pattern the addition made by ld. AO was deleted. He also referred to the decision of Coordinate Bench in the case of Mohan Takkar in to 1437 Mum/2018, dated 24.05.2021, wherein similar addition of undervaluation of import purchase was deleted. Accordingly, ld. CIT(A) concluded to delete the addition of undervaluation of import of marble.

6.2. Aggrieved, Revenue is in appeal before the Tribunal.

7.1. We note that ld. CIT(A) elaborately dealt with explanations corroborated by documentary evidences, to give his objective findings. Assessee has discharged its onus casted upon it, u/s.68 to establish identity and credit worthiness of the lender as well as genuineness of the transaction. It is also a fact on record that assessee has repaid the loan taken by it along with interest which was subjected to TDS. From the perusal of the paper book, we note that relevant documentary evidences to establish identity and credit worthiness of the lender company and genuineness of the transaction are placed on record. We also take note of the elaborate and well reasoned findings arrived at by ld. CIT(A) after taking into consideration, details and documents furnished by the assessee. We also note that ld. CIT(A) has referred to various judicial precedents, while granting relief to the assessee.

8.1. Ld. AO has not bothered to discuss or point out any defect or deficiency in the documents of the lender companies furnished by the assessee. These evidences furnished have been neither controverted by the Ld. AO during the assessment proceedings nor anything substantive brought on record to justify the addition made by him.

8.2. It is relevant to quote the decision of Hon’ble jurisdictional High Court of Bombay in the case of CIT v. Creative World Telefilms P. Ltd. (2011) 333 ITR 100 (Bom) wherein it was held as under: “In the case in hand, it was not disputed that the assessee had given the details of name and address of the shareholder, their PAN/GIR number and had also and 3723/Mum/2024 Shree Salasar Marbles Impex Pvt. Ltd. AYs 2013-14 and 2012-13 given the cheque number, name of the bank. It was expected on the part of the Assessing Officer to make proper investigation and reach the shareholders. The Assessing Officer did nothing except issuing summons which were ultimately returned back with an endorsement "not traceable". The Assessing Officer ought to have found out their details through PAN cards, bank account details or from their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the assessee to the Assessing Officer. In the above circumstances, the view taken by the Tribunal could not be faulted. No substantial question of law was involved in the appeal.'' 8.3. Considering the facts on record and detailed discussion made above and the findings arrived at by ld. CIT(A), we find that assessee has duly discharged the onus cast upon it, u/s.68 of the Act, to prove identity and credit worthiness of the lender company and genuineness of the transaction. Accordingly, we do not find any reason to interfere with the findings arrived at by ld. CIT(A), for deleting the addition of Rs. 60,00,000/-, made by ld. Assessing Officer u/s.68 of the Act. Accordingly, grounds raised by the Revenue are dismissed.

9. Ground No.2, relates to the deletion of addition of Rs.56,37,709/- u/s. 69C of the Act, for under valuation of import of marble blocks which is based on information received from DDIT(Inv), Unit-4(1), Mumbai, that assessee has under-billed import of marbles from two foreign suppliers named M/s. Henrauxx SPA and M/s.Venill's SRL, Italy of five transactions. Ld. Assessing Officer directed the assessee to furnish the explanation in respect of the information received from Note- Verbale received from Embassy of Italy for under-invoicing of import purchase made of Rs.56,37,709/-. In response, assessee submitted that the allegation of undervaluation of imports made by Customs authorities had been challenged by the assessee in an appeal filed before Additional/Joint Commissioner of Customs, Nhava Sheva. However, ld. Assessing Officer relying on the deposition of the Director named Mr Sanjay Agarwal making the payment of customs duty under and 3723/Mum/2024 Shree Salasar Marbles Impex Pvt. Ltd. AYs 2013-14 and 2012-13 protest and Note-Verbale received from Embassy of Italy, held that the assessee appellant has made the undervaluation of imports of marbles and accordingly, made the addition u/s.69C of Rs.56,37,709/-. Aggrieved, assessee went in appeal before the ld. CIT(A), who deleted the addition so made. Aggrieved, Revenue is in appeal before the Tribunal.

9.1. Ld. Counsel for the assessee submitted that the entire allegations made by Customs authorities and addition made in assessment order is based solely on the Note-Verbale received from Embassy of Italy issuing advisory of Import of marbles. He submitted that such allegations had been reversed in the appeal order passed by Commissioner of Customs (Appeals), Mumbai. In support, assessee filed a copy of the said appeal order on record. The Ld. Counsel submitted that entire allegations framed by Customs authorities on the basis of which the addition u/s 69C of undervaluation of imports has been made, held it invalid. Therefore, the very foundation based on which addition is made in assessment order does not exist. The Ld. AR further relied on an identical case of Trident Marbles Pvt. Ltd vs. DCIT (ITA No. 185/Mum/2023 dated 28.06.2023, wherein Coordinate Bench of ITAT Mumbai deleted the similar addition u/s.69C of undervaluation of imports of marbles, since the appellate authority under Customs Act had decided the appeal in favour of that assessee.

9. Information received from the Embassy of Italy, in the form of a Note-Verbale (212/1353), dated 11/07/2014, (placed at page 90 to 107 of the paper-book) indicating that criminal proceeding were launched in Italy against some persons in connection with money laundering, tax frauds and illegal financial activities. The investigations carried out by the Italian authorities revealed that in several cases of sale of marble (in blocks and slabs) by Italian companies to Indian companies were under-invoiced, resulting in tax frauds in Italy and loss to the government exchequer in India on account of evasion of customs duty in India. According to Investigation, the differential payments for value not forming part of invoices were received in cash or by wire transfer in countries such as Switzerland or the Bahamas having low tax rate. As per the information, the Appellant had purchased and imported marble from HENRAUX SPA for invoiced amount of € 42,360/- that was under invoiced by € 45,788/- equivalent to INR 39,12,584/-. In proceedings initiated by the customs authorities, the Appellant paid differential amount of duty of INR 5,77,841/- along with Interest of INR 3,16,636/-. The information received from Embassy of Italy in the form of Note- Verbale (212/1353), dated 11/07/2014 (along with relevant Annexures) and the proceedings before the customs department is the basis of additions of INR 39,12,584/- made by the Assessing Officer under Section 69C of the Act by treating the differential value on which differential custom duty was paid by the Appellant as unaccounted expenditure not recorded in books of accounts of the Assessee.

10. The case of the Appellant is that the differential duty was paid ‘under protest’ to buy peace of mind. Further, in case of identically placed company (i.e. Classic Marble Company Limited) which opted to challenge in the differential duty paid in appeal before the CESTAT, the levy of differential duty was deleted. On perusal Note-Verbale (212/1353), dated 11/07/2014 [relevant extract at Page 100 of the paper-book] we find that the name of Classic Marble Company Limited is mentioned at Sl. No. 2 whereas the name of the Appellant is at Sl. No. 5. On perusal of order dated 11/09/2020 passed by the CESTAT in Customs Appeal No. 87484 of 2018 in the case of Classic Marble Company Limited we find that the levy of differential custom duty has been deleted on account of lack of evidence about undervaluation of goods. The relevant extract of the aforesaid decision reads as under:

“8. The learned adjudicating authority in this case, has solely based his findings for substantiating the charges of undervaluation of imported goods on the ground that the Director of the appellant company had voluntarily made payments of the duty amount without any protest and as such, there was no requirement of consideration of additional evidence to establish such charges. Further, it has also been held in the impugned order that the fact of voluntary payment and corroboration from the Note-Verbale were sufficient evidence to establish the charge of undervaluation. We find that the appellant vide its letters dated 22.09.2016, 23.09.2016 and 16.12.2016 addressed to the Assistant Director of DRI, Mumbai Zonal Unit had stated that the payments made by it in connection with enquiry into the matter of import of the subject goods were towards 'pre-deposit'. Further, we also find from the certificate dated 14.06.2018 issued by M/s V.C. Shah & Co., Chartered Accountants that the appellant had reflected the pre-deposited amount and 3723/Mum/2024 Shree Salasar Marbles Impex Pvt. Ltd. AYs 2013-14 and 2012-13 as "Receivables from Customs Department" under the accounting head of "Current Assets"in the Balance Sheet prepared for the year ending 31.03.2017. Such documentary evidences prove the fact, beyond any shadow of doubt that the predeposited amount cannot be considered as voluntary payment and that the appellant was desirous in getting back such amount either at the adjudication or the appellate stage. Thus, it cannot be said that the appellant had deposited the duty amount out of its own volition and there was no hint of any demur or protest. Further, it is not the case of Revenue that the appellant at point of time had stated that the amount in question was paid as an admission of under valuation of goods. Even assuming that the appellant had expressed its willingness to make a deposit of the differential duty amount, but such willingness cannot be construed as an admission of undervaluation inasmuch as admission, if any, has to be backed by documentary evidence, since tax related issues are a matter of law, rather than a matter of willingness. In the case in hand, the department has not adduced any additional independent evidence to establish the charges of undervaluation of goods and had mainly relied upon the intelligence received from the Italian authorities in the form of Note-Verbale. It is a settled position of law that in a case of undervaluation, corroboration of a document/statement is required by independent evidence obtained through independent sources. We find that the department has not brought on any iota of evidence to prove the charges of undervaluation of goods. In this context, the law is well settled in the case of Union of India vs. Ashok Kumar & Ors., (2005) 8 SCC 760 that burden of establishing malafides is very heavy on the person who alleges it; that the allegations of malafides are often more easily made than proved and the very seriousness of such allegations demand proof of a high order of credibility.

10. The learned adjudicating authority in this case has accepted that the Note-Verbale only indicated commencement of criminal proceedings against the indenting agents in Italy and did not conclusively prove the guilt against such persons. In fact, as noted in the impugned order, even the Deputy Director of DRI had also expressed his inability to provide information regarding the final outcome of criminal proceedings against such persons. Since the investigations with regard to alleged fraud committed in exportation of goods in the originating country, has not attained finality, it cannot be hypothetically concluded that the appellant had indulged into the activities of undervaluing the goods. Therefore, in our considered view, the present proceedings initiated against the appellant were premature and cannot be sustained. Further, in the statement recorded under summon, Shri K.M. Swamy, Director of the appellant had denied the fact regarding involvement of the intermediaries/indenting agents in purchases made by the appellants in respect of the disputed goods from the Italian suppliers. Furthermore, the investigations made by DRI did not produce any evidence of financial flow back through non-banking channels in low tax countries. Thus, under such circumstances, the charges of undervaluation cannot be leveled on the appellant.

11. The learned adjudicating authority has rejected the declared value in respect of the subject Bills of Entry under Section 14(1) ibid read with Rule 12 ibid and re-determined the assessable value under Section 14(1) ibid read with Rule 3(1) ibid, holding that sufficient evidence exists to show that actual invoice values were hidden from the Indian Customs authorities and manipulated invoices were presented for assessment purposes. We find that in support of such contentions, no credible evidences were produced by the department. Further, we also find that the procedures laid down under Rule 12 ibid have not been succinctly followed for rejection of the declared value. As per the statutory provisions, the proper officer should have reasonable doubt as to the transactional value on account of truth or accuracy of the value declared in relation to the imported goods and for that purpose, he must ask the importer of such goods further information which may include documents or evidence; and on receiving such information or in the absence of response from the importer, the proper officer has to apply his mind and decide whether or not reasonable doubt as to the truth or accuracy of the value so declared persists. When the doubt persists, then sub-rule (1) to Rule 3 will not be applicable and transaction value has to be determined by sequentially proceeding through Rules 4 to 9 of the Valuation Rules, 2007. The Hon'ble Supreme Court in the case of Century Metal Recycling (supra) has held that the procedures provided for rejection of the declared value under Rule 12 ibid was mandatory in nature and such statutory provisions are required to be strictly adhered to by the proper officer. In this case, it is an admitted fact on record that the mandates of Rule 12ibid read with Rules 4 to 9 ibid have not been complied with by the department. Thus, rejection of declared value is contrary to the statutory and 3723/Mum/2024 Shree Salasar Marbles Impex Pvt. Ltd. AYs 2013-14 and 2012-13 provisions and accordingly, redetermination of the alleged transaction value cannot stand for judicial scrutiny.

There is absolutely no other material in the hand of the A.O. of proving the addition in the hands of the assessee. Despite the assessee‟s request, the copy of information received from Australian tax Authority has not been given to the assessee. In these circumstances, the addition made, which is based upon the information from a foreign source, without confronting the same to the assessee and without any corroborative material is not at all sustainable. The case laws referred by the ld. Counsel of the assessee as above are germane and support the case of the assessee.

Since the addition is not at all sustainable as found by us hereinabove, the other aspects of the assessee‟s challenge to the addition is only of academic interest. Hence, we are not dealing with the same.” (Emphasis Supplied) 14. Similarly, in the case of M/s NITCO Ltd. Recondo Estate Vs. DCIT Central Circle-46, Mumbai, [ITA No. 2528 to 2531 & 2856 to 2858/Mum/2014, dated and 3723/Mum/2024 Shree Salasar Marbles Impex Pvt. Ltd. AYs 2013-14 and 2012-13 18/12/2018], the Mumbai Bench of the Tribunal had deleted the addition made by the Assessing Officer only on the basis of show cause notice issued by the Department of Revenue Intelligence without any evidence or supporting documents holding as under:

“45. Grievance of Revenue in the a.Y.2010-11 pertains to deletion of addition of Rs.11,31,98,298/- on the basis of show-cause notice by Customs Department.

"23.1 In the assessment order, there is no details as to how the figure of Rs. 11,31,98,298/- is arrived. No evidence brought on record to substantiate the allegation of either under invoicing or payment through hawala operator. No finding of Custom's Department is also bought on record. The appellant had shown that the materials were imported on CNF (Cost Net Freight) basis wherein the supplier had borne the freight charges and there is no liability in the hands of the importer i.e. the appellant and in support of its claim, had also submitted certain invoices. Considering the fact that there is nothing brought on record to show that the appellant company paid cash through hawala operators on account of undervaluation, no addition can be made on suspicion and guess work, therefore I hereby delete the addition of Rs.11,31,98,298/- made u/s 69Cof the Act"

15. In view of the above, we hold that addition of INR 39,12,584/- made by the Assessing Officer under Section 69C of the Act cannot be sustained in the facts and circumstances of the present case. Accordingly, the addition of INR 39,12,584/- is deleted. Ground No. 1 and 3 raised by the Appellant is allowed and therefore, Ground No. 4 is disposed of as being infructuous. Ground No. 2 raised by the Appellant, being descriptive/argumentative in nature, is also disposed off as being infructuous.

11. From the perusal of the above order and there being no change in fact and circumstances and applicable law in the present case as narrated above, respectfully following the findings arrived at by the Coordinate Bench, the same applies mutatis mutandis to the present case before us. Accordingly, we uphold the finding of the ld. CIT(A), there being no reason to interfere with the same. Ground no.2 taken by Revenue is dismissed. and 3723/Mum/2024 Shree Salasar Marbles Impex Pvt. Ltd. AYs 2013-14 and 2012-13 12. Our observations and findings in the above paragraphs for Assessment Year 2012-13 apply mutatis mutandis to the appeal for Assessment Year 2013-14, since there is no change in facts and circumstances and the applicable law.

Order is pronounced in the open court on 16 July, 2025