Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH ‘A’, NEW DELHI
Before: SH. R.K PANDA & MS. SUCHITRA KAMBLE
This appeal filed by the revenue is directed against the 1. order dated 13.05.2015 of the CIT(A)-29, New Delhi, relating to A. Y. 2004-05. 2. The grounds raised by the revenue are as under :- "On the facts and circumstances of the case, the 1. Ld.CIT(A) has erred in allowing deduction u/s 80HHC by holding the export activity of the assessee as genuine, On the facts and circumstances of the case, the Ld.
2. CIT(A) has erred in allowing deduction u/s 80HHC on the one hand whereas on the other hand, upheld the action of AO of rejecting the books of account by invoking the provisions of
The order of the Ld. CIT(A) is erroneous and is not 3. tenable on facts and in law. The appellant crayzs leave to add, alter or amend any 4. of the grounds of appeal
before or during the course of appellate proceedings before Hon'ble ITAT."
3. The facts of the case, in brief, are that the assessee is an individual. A search and seizure operation in M/s. S. L. Dhingra Group of cases was conducted on 31.07.2003. The assessee filed his return of income on 01.11.2004 declaring total income of Rs.1,79,502/-. The Assessing Officer during the course of assessment proceedings noted that the assessee has declared total export sales of Rs.8,93,60,175/- and local sales of Rs.1,68,72,712/-. He has also obtained export benefits of draw back and DEPB totaling to Rs.1,00,34,766/-. Against these receipts the assessee has claimed the purchases of fabrics amounting to Rs.7,90,35,579/- and has incurred various expenses of Rs.2,11,15,375/-. The assessee claimed net profit of Rs.2,40,088/-and claimed deduction u/s 80HHC against this profit of Rs.60,587/-.
4. The Assessing Officer issued notice to the various parties from whom the assessee has purchased fabrics, packing material and consumable stores etc and came to the conclusion that the purchases shown by the assessee all are bogus. He, therefore, asked the assesee to explain as to why purchases and fabrication expenses should not be treated as bogus. He also asked the assessee to produce the parties for his verification and substantiate the claim. Rejecting the various explanation given by the assessee the Assessing Officer rejected the claim of deduction u/s. 80 HHC by holding the export activity of the 2 assessee as non genuine and also determined the total income of the assessee at Rs.4,97,96,588/-.
5. In appeal the Ld. CIT(A) allowed the appeal filed by the assessee by observing as under :-
4.1 Search and seizure operation under section 132 was conducted on 31.07.2003 on S.L. Dhingra group of cases. The family of Shri S.L. Dhingra consists of his three sons, namely, S/Sh. Harinder Dhingra, Anil Dhingra and Sanjiv Dhingra and daughters-in-laws, namely S/Smt. Poonam Dhingra and Rita Dhingra. All of these family members were engaged in the business of manufacturing of garments for export and details of various firms managed by family members of Mr. S.L. Dhingra, against whom search action was taken are as under:-
S Name Name of Relation . the concern N with Shri o S.L. . Dhingra Sh. Harinder Eldest Proprietor, Dhingra son Golden 1 Harvest
Proprietor, Sh. Anil 2nd son 2 N.D. Shah Dhingra Export 3rd son 3 Sh. Sanjeev Proprietor, Dhingra Shah Knits 4 Daughter Proprietor, Smt. - in-law Poonam Poonam Clothing Dhingra, w/o Sh. 5 Daughter Proprietor, Smt. Rita - in-law G&J Dhingra, Apparel w/o Sh. Anil Dhingra 4.1.1 During the course of search and seizure operation on each of the above 3 family members, the Investigation Wing conducted various enquiries and they found that the parties, who have been shown to have supplied fabrics and fabrication and packing services/material, were not in existence. The inquiries made by the Investigation Wing also revealed that Shri Anil Dhingra and one Shri Hardeep Nehal Singh were frequent visitors to foreign countries and they own/control the following overseas companies in Netherland/London which appear to be special purpose companies. (i) Ultimate Fashion, B.V. Netherlands, director/owner-Shri Anil Dhingra. (ii) Future Collection B V, 1090, Ambonphies, Amsterdam, Netherlands, Director/owner, Fladeep Nehal Singh and Shri Ravi Dhawan. (iii) Clothing Station Ltd. 1, Forest Fiill, London, UK, Director/owner, Shri H.N. Singh and Shri Anil Dhingra. (iv) Wexco Trading Ltd. Sun bridge Road, Bred Ford, UK, Directors, Shri Anil Dhingra, Shri H.N. Singh and Shri M. Verald Miller. (v) Trans Europe (Textiles) B V 124, M J Street, Netherlands, owner, Neena Flardeep Singh and Shri Hardeep Nehal Singh. 4.1.2 It was found in the course of investigation, that the above overseas concerns were engaged in the alleged import of readymade garments and accessories from India. Further it was also found that Shri Hardeep Nehal Singh (H. N. Singh) is a relative of Shri Anil Dhingra and as a friend/relative he had been helping the concerns of Shri S.L. Dhingra group in executing bogus exports in the names of the above noted exports concerns of the group.
Accordingly, on the basis of inquiries made, in the search assessment proceedings of all the firms of Dhingra Group (mentioned in Para 4.1 above), the respective AOs, came to the conclusion that:
(a) all the firms of Dhingra group were making bogus exports and, (b) the money received in convertible foreign exchange against the alleged export is only the Hawala amount brought into India. As a result of the above finding, the AO, while assessing the income of all the above mentioned concerns of Dhingra group disallowed the "Purchases" and "Fabrication/packing expenses" and disallowed the claim of deduction under section 80HHC and taxed the remittances received and the export benefits viz. duty draw back etc., as "Income from Other Sources."
4.1.3 In the case of the appellant, i.e. Shri Harinder Dhingra, Prop. Golden 4 Harvest, in the year under consideration the AO found that the appellant had made the purchases of Rs.7,90,35,529.
From the assessment order it is seen that AO has held that the appellant had made bogus purchases, and have incurred bogus fabrication/packing expenses from the following entities:-
S.No. Particulars Amount (in Rs.) 1. Thakur Associates 1,83,72,148
Balaji and company 58,25,000 Apart from above, it is seen from the assessment order that, enquiries were carried during the post search investigation and it was found that in respect of the parties from whom purchases were made and to whom payments were made on account of fabrication/packing expenses etc., the appellant neither produced those parties for verification nor filed the confirmed copy of account and nor gave the income tax particulars.
In view of the above specific infirmities and in view of the inquiries/ investigation being carried during the search on Dhingra group, the AO in the case of the appellant held that in the year under consideration, no genuine export was made and accordingly, he withdrew the claim of deduction under section 80HHC. Having done that the AO considered the remittance on account of alleged exports as income taxable under the head "Income from Other Sources".
Aggrieved with the above action of the AO, this appeal is filed and the appellant has made almost the similar submissions as were made during the appellate proceedings for Assessment Year 2000-01, where similar issue were involved and all these submissions were duly been considered while adjudicating the appeal for Assessment Year 2000-01. In that order, I have discussed this issue in detail and vide my order dated 30.07.2013, I have held that though the exports are held to be genuine, but the book results are not reliable and they deserve to be rejected under section 145 and net profit rate of 19.50% on gross turnover (sales + export benefits) is to be adopted for determining the income for all Assessment Years 1999-2000 to 2005-2006. Therefore, AO is directed to re-compute the income and give credit for allowable deductions under chapter VIA available to the appellant in the light of the aforesaid findings, and following my order dated 30.07.2013 passed in appellant's own case for Assessment Year 2000-2001.
Aggrieved with such order of the CIT(A) , the revenue is in appeal before the Tribunal.
The Ld. Counsel for the assessee at the outset submitted that all purchases made by the assessee are genuine and revenue has failed to prove that any of the purchases are bogus. Referring to the decision of the Tribunal in the case of other family members such as Smt. Rita Dhingra and Sh. Anil Dhingra, he submitted that under identical circumstances the Tribunal has restored the issue to the file of the Assessing Officer with certain directions. Therefore, he has no objection if the matter is restored to the file of the Assessing Officer with similar directions. 8. The Ld. DR on the other hand fairly conceded that he has no objection if the matter is restored to the file of the Assessing Officer with similar directions. 9. We have heard the rival arguments made by both the sides and perused the material available on record. We find the Assessing Officer in the instant case has made addition by treating the purchases as bogus. We find the Ld. CIT(A) deleted the addition, the reasons for which have already reproduced in the preceding paragraph. We find identical issue had come up before the Tribunal in the case of Smt. Rita Dhingra proprietor 6 of G & J Apparel. We find the Tribunal in & 3524/Del/2007 A. Y. 2001-02 to 2004-05 vide order dated 21.11.2008 has restored the issue to the file of the Assessing Officer by observing as under :-
9. We have considered the rival submissions. What is challenged in appeal is deletion of addition and the reasons stated in the ground is admission of additional evidence. However, what is challenged ultimately is deletion of addition and not only admission of additional evidence. We therefore have to examine as to whether the addition made by the Assessing Officer is liable to be deleted or not. As rightly contended by the learned counsel for the assessee, no additional evidences were submitted before the Commissioner (Appeals) and hence there is no violation of Rule 46A. However, the Commissioner (Appeals) must enquire into on two points namely the result of enquiry made with the parties from whom the purchases were made and the reply by M/s. Naina Fab specifically mentioned that no goods were supplied by them to the assessee. Similar averments were made by M/s. Pal International also. Though the export is stated to be proved, the purchases are not proved. The learned Commissioner (Appeals) has failed to enquire into the aspect as to how the payments were made to M/s. Naina Fab and M/s. Pal International particularly when they have specifically denied the transaction with the assessee. What is the impact of denial of transaction by these two parties on the computation of income has not been considered. Though the assessee may be held eligible for deduction under section 80HHC, yet how the unproved purchases should be dealt with, is not considered by the Commissioner (Appeals). The learned Commissioner (Appeals) has gone over way round i.e. by holding that since goods are exported for which the amount is received through banking channels, even the purchases are to be held as genuine. In our opinion this is not a correct finding. We, therefore, restore the matter back to the file of the Commissioner (Appeals) who shall decide as to 7 whether the purchase from M/s. Naina Fab and M/s. Pal International were genuine or not and thereafter to decide the impact on computation of income. The assessee shall be afforded an opportunity to consider the replies received from M/s. Naina Fab and M/s. Pal International and thereafter to make their submissions regarding genuineness of the purchases. For this purpose the matter is restored back to the file of the Commissioner (Appeals). The Commissioner (Appeals) shall afford opportunity of hearing to both i.e. the assessee and the Assessing Officer and redecide the issue in the light of our observations above. This disposes grounds No. 1 & 2.
Respectfully following the decision of coordinate Bench of the Tribunal under identical circumstances in the case of one of the related party, we deem it proper to restore this issue to the file of the Assessing Officer with direction to re-adjudicate the issue in the light of the decision of the Tribunal cited (supra). The grounds raised
by the revenue are accordingly allowed for statistical purposes.
11. In the result, the appeal filed by the revenue is allowed for statistical purpose.
Order pronounced in the open court at the time of hearing itself i.e. on 25.03.2019.