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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: HON’BLE SHRI V. DURGA RAO & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member)
Aforesaid appeals by two assessees have identical facts and issues. It is admitted position that adjudication in any one appeal would apply to all the other appeals. The assessee’s appeal for Assessment Year (AY) 2006-07 arises out of the order dated 07.02.2020 passed by learned Commissioner of Income Tax (Appeals)-8, Chennai [CIT(A)] in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) r.w.s. 147 of the Act on 31-12-2010. The grounds raised
by the assessee read as under: -
1. The Order of the Ld. Commissioner of Income-tax (Appeals)-8, Chennai in ITA No. 57/CIT(A)--8/2010-11 dt. 07.02.2020 for the assessment year 2006/07 is against law, weight of evidence, and probabilities of the case.
2. The Ld. Commissioner of Income-tax (Appeals)-8, Chennai is wrong in confirming the addition of Rs.16,15,129 made by the LD. AO by merely following the observations of the ED, without application of mind independently. Under the IT Act it is only the AO who has to judiciously apply his/her mind and make an assessment and not merely rely on extraneous observations.
3. The Ld. Commissioner of Income-tax (Appeals)-8, Chennai is wrong in not accepting the submissions made by the appellant-company that the addition made by the Ld. AO is on imaginary basis without substantiating the quantum of addition.
4. The Ld. Commissioner of Income-tax (Appeals)-8, Chennai is wrong in completely brushing aside the genuine and detailed submissions made by the appellant-company with regard to: a) the adhoc basis of addition b) the nature of trade c) the benefits of exporting the same at full value d)the export part of the trade is very miniscule at about 5% or less of the total sales. e) price list of various counts, colours and designs of the lungies evidencing that the appellant-company deals in scores of varities of lungies. f) It is humanly impossible to generalize the various counts of lungies and arrive at a price and it is futile to allege on such generalization that the export price of lungies is under invoiced. g) the attempt of the ED on 16.12.2007 has merely resulted in futile exercise to compare apple with orange. The ED having failed to detect any genuine case of violation of any rules, have unsuccessfully tried to categorise all the lungies into one, cherry picked few invoices of local and export trade and drawn illogical conclusion that there has been under invoicing. and h) the ED miserably failed to identify that the alleged difference in price has been received through non-banking channels. 5) The Ld. Commissioner of Income-tax (Appeals)-8, Chennai has wrongly given weightage to the observations of the Ld. AO who has completed the assessment ignoring the facts of the case and evidences on record and merely followed the observations of the ED 6) The appellant-company wishes to draw the kind attention of the Hon'ble Members to the recent judgement of Hon'ble Gujarat High court in the case of Pr. CIT vs. Nageshwar Enterprises 421 ITR 388 (Guj) (2020) which is quoted below: "Held, dismissing the appeal, that the Tribunal was correct in holding that no addition could be made on the basis of the action of the third party, i.e., the Directorate of Revenue Intelligence. The Department could not start with the confessional statement of the assessee. The confessional statement had to be corroborated with other material on record. The appellate authorities had concurrently recorded a finding that except the statement of the partner recorded under section 108 of the 1962 Act there was no other evidence." In the instant case, the Enforcement Directorate has merely relied on the confessional statement of some certain individuals and employees of the appellant-company which have been retracted without any loss of time. Therefore, the statements by itself will not form a reasonable basis to initiate any kind of action. Each of the persons who have given the statements while retracting have specifically stated that their statements were obtained threat and coercion and its an accepted fact that coercive methods have no sanction of law.”
The Registry has noted delay of 66 days in all the appeals, the condonation of which has been sought by Ld. AR. Considering the fact that the time available to file the appeals fall within lockdown situation arising out of Covid-19 Pandemic, we condone the delay and admit the appeals for adjudication on merits.
The Ld. AR assailed the validity of reassessment proceedings and also assailed the impugned additions on merits. It has been submitted that the additions have been made on mere suspicion and presumptions without carrying out any investigation. The Ld. Sr. DR, on the other hand, submitted that the additions are based on the findings rendered by Enforcement Directorate. In the above background, the appeal is disposed-off as under. Proceedings before lower authorities 4.1. The assessee being resident corporate assessee is stated to be engaged in manufacturing and export of KIBS Brand of Lungies. The original return of income was processed u/s. 143(1) of the Act. However, upon receipt of information from Deputy Director of Enforcement Directorate, it was alleged that the assessee raised export invoices only for 20 to 30% of the original value. Accordingly, forming belief of escapement of income, the case was reopened and notice u/s 148 was issued on 22.01.2010. 4.2 During the course of assessment proceedings, the assessee was asked to produce item-wise and month-wise sales (both local and export) and also submit per-unit price fetched in Local market and Export market. The assessee filed the requisite details on the basis of which Ld. AO framed the assessment. 4.3 In the information received from Deputy Director, it was stated that key personnel of the assessee appeared before him and accepted that the assessee received money by hawala channels against export proceeds. The amount so received in cash for this year was stated to be Rs.16.15 Lacs which is tabulated on page-2 of assessment order. To support the same, Ld. AO observed that there was difference in sale price of similar product in local market and in the export market. On comparison, the local price per piece was found to be Rs.149/- as against Rs.72/- charged by the assessee in the export market. On the basis of this, Ld. AO proceeded to make impugned additions in the hands of the assessee. The assessee refuted the allegation of Ld. AO, however, rejecting the same, Ld. AO made addition of Rs.16.15 Lacs as undisclosed income of the assessee. 4.4 During appellate proceedings, the assessee submitted that export sale was very miniscule and less than 5% of total turnover. The trade of lungies involves dealing in scores of varieties with different counts, colors, designs etc. Even the processes of manufacturing were different viz. Handloom and power-loom. Therefore, allegation of under invoicing just by picking up few sale instances would lead to illogical conclusions. It was also submitted that the statements made before Enforcement Directorate was retracted and in fact, no further action was taken by Enforcement Directorate on these allegations and no penalty was ever levied on the assessee on this account. The assessee also submitted trading data in support of the fact the price variation in different categories of lungies would be inevitable. Further, it would not be commercially expedient to under-invoice the export and loose the benefit of duty drawback as available on export of material. Accordingly, the assessee pleaded for deletion of impugned additions. However, Ld. CIT(A) chose to confirm the impugned additions against which the assessee is in further appeal before us. Our findings and Adjudication 5. So far as the legality of reassessment proceedings is concerned, it could be seen that the original return of income was processed u/s 143(1) and the case was reopened pursuant to receipt of certain information wherein it was alleged that the assessee indulged in under- invoicing of the exports. The said information was transmitted by another government agency based on their independent investigation and therefore, the same was sufficient material to form a belief of escapement of income. At this stage, nothing more was required to reopen the case of the assessee since the information itself pointed out to possible escapement of income in the hands of the assessee. Therefore, no infirmity could be found by us in reopening the case of the assessee. The legal ground raised
by the assessee stands dismissed.
6. So far as the merits of the case are concerned, it could be seen that the assessee is dealing in Lungies which may be of different varieties, counts and colors. The same may undergo different processes. Further, it would be illogical to assume that the rate fetched in local market vis-à-vis rate fetched in overseas market would be identical since there would be multiplicity of factors which would affect pricing in two different markets. It could also be seen that the assessee has furnished item-wise trading data before Ld. AO and no fault in the same could be found by Ld. AO. Rather Ld. AO has picked up just few sale instances to justify the impugned additions on the assumption that the price in the local market as well as overseas market should perfectly match. No independent enquiries or investigation, whatsoever, is shown to have been carried by Ld. AO to support the additions. Rather the additions have been made primarily on mere suspicion, assumptions and presumptions which are unsustainable in the eyes of law. It could be seen that the onus was on revenue to support the conclusions that the assessee under-invoiced its export proceeds and this onus has remained undischarged since the allegations are not supported by any cogent material on record. Therefore, we would hold that the impugned additions could not be sustained on merits. By deleting the same, we allow the corresponding grounds raised by the assessee. The appeal stands partly allowed in terms of our above order.
7. It is admitted position that facts as well as issues are pari-materia the same in all the other three appeals. The additions have been made by Ld. AO in similar fashion and the adjudication of Ld. CIT(A) is on similar lines. Therefore, facts being pari-materia the same, our adjudication as above shall mutatis-mutandis apply to all the other appeals also. All these appeals stand partly allowed in similar manner.
8. All the appeals stand partly allowed. Order pronounced on 21st December, 2022.