COMMISSIONER OF INCOME TAX vs. KESRI OIL EMPORIUM INDIA

IN THE HIGH COURT OF DELHI AT NEW DELHI . 03.08.2009 . Present: Ms. Suruchi Aggarwal, Advocate for the appellant. . +ITA No. 882/2009 . 1. The assessee (the respondent herein) on the basis of exports made by it had claimed deduction of Rs.1,76,92,973/- under Section 80 HHC of the Income Tax Act. This deduction was disallowed by the Assessing Officer (AO) questioning the genuineness of the export transaction. The Assessing Officer had also made addition under Section 68 of the Income Tax Act of Rs.20 lacs which in the books of the assessee was shown as loan taken by the Assessee from one M/s Bala Enterprises doubting the bona fides of the said loan and holding that the Assessee was not able to explain the said transaction. The CIT in appeal reversed the order qua the first issue but it however maintained the addition of Rs. 20 lacs under Section 68 of the Act. Both the Revenue as well as Assessee preferred appeals before the ITAT and the ITAT has allowed the appeal of the Assessee thereby deleting the addition of Rs.20 lacs made by the Assessing Officer under Section 68 of the Act as well and the appeal of the Revenue has been rejected thereby . . . ITA No. 882/2009 page 1 of 5 maintaining the deduction under Section 80 HHC of the Income Tax Act. 2 After hearing the learned counsel for the appellant and going through the record, we find that findings of facts have been arrived at by the ITAT on both the grounds, on the basis of which order has been passed by the Tribunal and no question of law much less substantial question law arises for consideration. 3. In so far as deduction under Section 80 HHC is concerned, it relates to the exports made by the respondent to one firm M/s Monalisa in Hongkong. The Assessing Officer had put certain questions to the Assessee on the basis of which Assessing Officer was of the opinion that the said transaction of exports does not appear to be genuine and in fact it was Hawala money which the Assessee got through banking channel. 4 The CIT in appeal found the following facts in favour of the Assessee on the basis of which the CIT came to the conclusion that export transaction appeared to be genuine. (a) The Assessee had registered itself with the RBI for the purpose of exports of agreement jewellery. (b) Even as per A.O s version, the Assessee exported diamond jewelleries . ITA No. 882/2009 page 2 of 5 . worth of Rs.1.76 crores against which gross profit of Rs.1.08 crores was earned. (c) For this purpose of exports the Assessee had purchased cut and polished diamond worth Rs.68,62,050/- in December, 2000 from one M/s B.Ashok Kumar and Company, Surat. The payment to the said supplier was made by cheque through current account of the Assessee with Centurion Bank Limited, Cannaught Circus, New Delhi. This amount was duly credited in current account of M/s B.Ashok Kumar and Company with the Citi Bank. (d) The appellant got the job work of fitting loose diamonds on gold jewellery done through M/s Enchante Fine Jewellery and the labour charges of Rs. 10,000/- and cost of 18 carat gold of Rs.4500/- were paid to that party by the Assessee through bank account. (e) The payment from M/s Monalisa was received in India through banking channel. (f) The Assessee had also produced copy of export invoice, copy of Airway Bill of M/s B.V.C.Travel Agency Pvt. Ltd showing the dispatch of . ITA No. 882/2009 page 3 of 5 . goods, copy of bill of custom agent showing freight and clearing charges, copy of shipping bill of duty free goods (export promotion copy) duly examined and checked by Custom Authorities, certificate from bank regarding export realization foreign inward remittances as well as copy of the bank statement where the export realizations have been credited. 5 On the basis of aforesaid overwhelming documentary evidence, showing the export of the jewellery and receiving of the foreign exchange through banking channel, we are of the opinion that both the appellate authorities below were right in concluding that the aforesaid documents established genuineness of exports. We fail to understand in these circumstances how the Assessing Officer could treat it to be Hawala transaction. It was rightly pointed out by the CIT . . (Appeals) that no worthwhile enquiries appear to have been conducted by the Assessing Officer to disprove the export transaction declared by the Assessee. 6 In so far as the amount of RS. 20 lacs added by the Assessing Officer under Section 68 of the Income Tax Act is concerned, again a finding of fact is recorded by the Tribunal that M/s Bala Enterprises had given this amount . ITA No. 882/2009 page 4 of 5 to the Assessee. The reason for addition of this amount by the Assessing Officer was that no firm was found at the declared address. What was glossed over and ignored by the Assessing Officer was that the said M/s Bala Enterprises was in fact an Income Tax Assessee which had filed returns showing GIR number and the ward where the return was filed. The ward of M/s Bala Enterprises had changed but Assessing Officer made no enquiries from the new ward though he could have made the same. M/s Bala Enterprises had declared its income of Rs. 3.78 crores by filing its return for Assessment Year 2001-2002. The amount of Rs. 20 lacs received from Bala Enterprises was transferred by way of account payee cheque to the account of the assessee on 28th March, 2001, which was paid back on 30th March, 2001. Confirmation on this account is placed on record. 7. On this basis, we find that finding of the Tribunal is perfectly justified, as pointed out above. No substantial question of law arises. We, therefore, dismiss this appeal with costs quantified at Rs.5000/- to be paid to Delhi High Court Mediation and Conciliation Centre. A.K.SIKRI, J . . . VALMIKI J.MEHTA, J . August 03, 2009/ib ITA No. 882/2009 page 5 of 5 . . #1 .