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Facts
The Revenue appealed the CIT(A)'s order which had partly allowed the assessee's appeal against the assessment order. The Assessing Officer added an amount as unexplained expenditure under Section 69C of the Income Tax Act, 1961, due to a difference between the disclosed import purchase cost in the ITR and the value assessed by customs authorities for duty purposes. The CIT(A) deleted this addition.
Held
The Tribunal held that the difference between the invoice value and the assessable value determined by customs authorities for duty payment does not automatically imply unexplained expenditure. The assessee's purchase value is the invoice value paid to the vendor, and the customs valuation is for duty assessment. Unless there is evidence of payment exceeding the invoice value or suppression of purchase price, Section 69C cannot be invoked. The CIT(A) correctly relied on precedents and deleted the addition.
Key Issues
Whether the difference between the invoice value of imported goods and the assessable value determined by customs authorities can be treated as unexplained expenditure under Section 69C of the Income Tax Act, 1961?
Sections Cited
69C, 143(3), 143(3A), 143(3B), Section 14 of Customs Act, 1962, Rule 12 of Customs Valuation Rules, 2007, Rule 4 of Customs Valuation Rules, 2007, Rule 9 of Customs Valuation Rules, 2007, Section 17(5) of the Customs Act, 1962
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Income Tax Appellate Tribunal, E BENCH, MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL "E" BENCH, MUMBAI SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER Income Tax Officer- 42(1)(3), Mumbai, Room No. 704, Kautilya Bhavan, C-41 To C-43, G Block, Bandra Kurla Complex (East), Mumbai - 400051 …………… Appellant Kinjal Manish Seth, Vs B-606/607, Oberoi Park View, Thakur Cinema Hall, Thakur Village, Kandivali (East), Mumbai - 400101 [PAN: AWAPS4998P] ……………. Respondent Appearance For the Appellant/Department : Shri P.D. Chougule For the Respondent/Assessee : Shri Rajesh Kalyani Shri Ajay Dhoot Date Conclusion of hearing : 26.03.2024 Pronouncement of order : 18.04.2024
O R D E R Per Rahul Chaudhary, Judicial Member: 1. By way of the present appeal the Revenue has challenged the order, dated 11/08/2023, passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘the CIT(A)’] for the Assessment Year 2018-19, whereby the Ld. CIT(A) had partly allowed the appeal of the Assessee against the Assessment Order, dated 07/04/2021, passed under Section 143(3) read with section 143(3A) and 143(3B) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
The Revenue has raised the following grounds of appeal:
Whether on the facts and the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 8,21,80,218/- as unexplained expenditure u/s 69C of the IT Act 1961? 2 Whether on the facts and the circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating the fact that the assessee has not brought anything on record to show that he did contest the value of imported goods as assessed by the Customs authorities for the purpose of customs duty?. 3. Whether on the facts and the circumstances of the case and in law, the Ld. CIT (A) has erred in not appreciating the fact that the facts of the assessee's case is not the same as that of M/s Plasto Polymer (India), relied on by the assessee in appeal? 4. Whether on the facts and the circumstances of the case and in law, the Ld. CIT(A) has erred in not giving an opportunity of being heard to the A.O before giving relief to the assessee?” 3. The relevant facts in brief are that the Assessee is an importer/dealer in industrial and commercial goods. For the Assessment Year 2018-2019, the Appellant filed return of income on 26/09/2018 claiming, inter alia, deduction of purchases aggregating to INR 15,41,71,348/- including import purchases amounting to INR 15,00,73,403/-. The case of the Assessee was selected for regular scrutiny. The Assessing Officer noted that the Assessee had disclosed import purchase cost of INR 15,00,37,403/- in the return of income whereas according to the data received from Central Board of Excise & Customs [CBEC] the total value of goods imported by the Assessee during the relevant previous year was shown as INR 23,22,17,621/-.
2 Since there was huge difference of INR 8,21,00,218/-, the Assessee was asked to show cause why the aforesaid amount should not be treated as unexplained expenditure in terms of Section 69C of the Act and added back to the income of the Assessee. In response, the Assessee filed reply explaining that the Assessee had incurred only cost of INR 15,00,37,403/- towards import purchases. However, for the purpose of customs duty payment, the value of imports have been assessed by the custom authorities at INR 23,22,17,621/-. Thus, the Assessee had not incurred any expenditure in addition to the expenditure disclosed in the return of income during the relevant previous year. However, the Assessing Officer was not convinced. Therefore, the Assessing Officer completed the assessment vide Assessment Order, dated 07/04/2021, passed under Section 143(3) read with Section 143(3A) and 143(3B) of the Act at assessed income of INR 8,66,53,748/- after making addition of INR 8,21,80,218/- under Section 69C of the Act holding the same to be unexplained expenditure.
Being aggrieved by the above addition made by the Assessing Officer the Assessee preferred appeal before CIT(A). Vide order dated 27/06/2023, the CIT(A) allowed the appeal preferred by the Assessee and deleted the addition made by the Assessing Officer under section 609C of the Act holding as under: “5.2 The addition made by the Assessing Officer and the submissions of the appellant have been perused. The AO made addition as per CBEC data wherein import purchase was shown at Rs. 23,22,17,621/- and custom duty was paid on such enhanced assessable value. However, as per the ITR, the appellant disclosed import purchase of Rs.15,00,37,403/- and the difference of Rs.8,21,80,218/- was added as unexplained expenditure u/s.69C of the Act. It is seen from the submissions of the appellant that import value as determined for custom duty is notional/deemed value and different from commercial value which is the invoice value. It is the invoice value which is paid to the vendor. The appellant relied on the 3 ITAT, Delhi-F Bench decision in the case of ITO vs. M/s. Plasto Polymer (India) reported in (2023) 01 ITAT CK 0019 which considered the reply of the Customs Authorities and held it as under:- “12. The transaction value of the goods (invoice values) are accessible value as defined in Section 14 of Customs Act, 1962. If declared invoice value appears to be low terms of Rule 12 of Customs Valuation Rules, 2007, then a new value is redetermined in terms of Rule 4 to 9 of Customs Valuation Rules, 2007 and this determined value becomes accessible value and custom duties collected on the said determined value even though transaction value is different. Thus, it appears that accessible value which has been considered by the A.O. is not suppression of purchase price or unaccounted purchase. Moreover, the value of the goods assessed/re-determined by the custom authorities as per valuation norms for the purpose of calculation of custom duty on the import. Therefore, the same would not attract the provisions of Section 69C of the Act, since, it has not been established as unexplained expenditure actually incurred by the assessee.......” 5.2.1 In the present case also, there is no evidence that the appellant had paid more than the price mentioned in the invoice and therefore following the above decision, the addition made u/s.69C of the Act is deleted and Ground Nos. 1 and 2 are allowed. 6. In the result, the appeal is allowed” (Emphasis Supplied) 5. Being aggrieved by the above relief granted by the CIT(A), the Revenue has preferred the present appeal on the grounds reproduced in paragraph 2 above. Ground No. 5 raised by the Revenue is dismissed as being general in nature. Whereas, Ground No. 1 to 4 are taken up together hereinafter since the same are connected.
We have heard the rival submissions and perused the material on record.
On perusal of the order passed by CIT(A), we find that the 4 CIT(A) has granted relief to the Assessee by placing reliance upon the decision of the Tribunal in the case of the Income Tax Officer Vs. M/s Plasto Polymers (India) [ITA No. 8351/Del/2019, dated 17/01/2023], wherein it has been held by the Tribunal as under: “8. We have heard the parties perused the material available on record and gave our thoughtful consideration. 9. The Ld. A.O. while making the addition of Rs. 8,74,08,069/- on the ground that there is a difference between the invoice value and the accessible value of the imports. As per the ITS sheets there were 131 transactions showing an invoice value of Rs. 16,24,00,543/- and the custom duty payment of Rs. 4,75,80,782/- was made, but the assessee had shown import purchases of Rs. 7,49,92,473.72 only. The assessee is justified the difference stating as follows:- “We have shown value of our import purchase as Rs. 7,49,92,473.72 (this is amount which we have paid to our overseas suppliers in US $ or EURO along with some high seas purchases) we have made payment only for this amount. Whereas CBEC record shows value as Rs. 16,24,00,543/-. This is not our purchase value, thus a value decided by CBEC as per their valuation norms to assess custom duty, they ignore our purchase value. They have fixed bench mark to impose custom duty by taking all imported stock lot of plastic rolls @ 850$ PMT irrespective of our purchase price weather it is 10$ or 849$. This creates a huge difference in our purchase value and value given by CBEC." 10. The above said clarification given by the assessee has not been accepted by the Ld. A.O. and made the addition. It is to be noted that subsequent year i.e. Assessment Year 2016-17 was also scrutinized on the same issue and was accepted on returned income. Besides the same, the Ld.CIT(A) has called for the remand report of the A.O. to verify the comment on purchase value invoice value and accessible value of the goods imported during the relevant period. The relevant extract of the remand report is as under:- “2.3 Detailed CBEC data of import was generated from the ITD system which contain date details of imports alongwith their assessable value and invoice value (copy
5 enclosed as Annexure A-l). Vide letter dated 23.01.2019 (copy enclosed as Annexure A-2), assessee was asked to reconcile the CBEC data with the declared purchases and to substantiate the same with documentary evidences including bills of entry, invoices and other documents. A letter also written to the Joint Commissioner of Customs, ICD Tughlakabad. New Delhi (copy enclosed as Annexure A-3) for clarification/basis of difference in the invoice value and assessable value. Assessee filed a reply alongwith documentary evidences vide letter dated 31.01.2019 (copy enclosed as Annexure A-4). A reply from the Custom Authority was received vide letter dated 01.03.2019 which was received in this office on 08.04.2019 (copy enclosed as per Annexure A-5). 3.1 xx xx 11. Further, the Ld.CIT(A) has also received information from the office of the Commissioner of Customs (Import) ICD, Tughlakabad, New Delhi and after analyzing the remand report and the information received from the Office of the Commissioner of Customs (Import) the Ld.CIT(A) is of the opinion that accessible value of the goods is the value on which the custom duties are calculated and ultimately deleted the addition. 12. The transaction value of the goods (invoice values) are accessible value as defined in Section 14 of Customs Act, 1962. If declared invoice value appears to be low terms of Rule 12 of Customs Valuation Rules, 2007, then a new value is re-determined in terms of Rule 4 to 9 of Customs Valuation Rules, 2007 and this determined value becomes accessible value and custom duties collected on the said determined value even though transaction value is different. Thus, it appears that accessible value which has been considered by the A.O. is not suppression of purchase price or unaccounted purchase. Moreover, the value of the goods assessed/re- determined by the custom authorities as per valuation norms for the purpose of calculation of custom duty on the import. Therefore, the same would not attract the provisions of Section 69C of the Act, since, it has not been established as unexplained expenditure actually incurred by the assessee. The Ld. CIT(A) has considered the remand report and pass the order impugned. Therefore, restoring the file back to CIT(A) for fresh adjudication does not arise. Moreover, the Ld. A.O. has conducted proper enquiry while preparing the remand
6 report. In our considered opinion, the Ld.CIT(A) has committed no error in come to such conclusion and deleting the addition made by the Ld. A.O. thus, the grounds of Appeal No. 1 to 8 of the Revenue are devoid of merit. Accordingly, Ground No. 1 to 8 of the Revenue are dismissed.” (Emphasis Supplied) 8. on perusal of above, we find that the Tribunal had deleted the addition made under Section 69C of the Act holding that even though the assessable value of imported goods was determined higher than the declared invoice value by applying the valuation rules, there was no suppression of the purchase price or existence unaccounted purchases. The Assessing Officer had failed to establish that unexplained expenditure was actually incurred. Therefore, the provisions of section 69C of the Act could not be attracted.
Similarly, in the case of DCIT Circle- 39(1), New Delhi Vs. Shri Anil Mahajan, [ITA No. 3395/Del/2009, dated 30/09/2022], passed by the Delhi Bench of the Tribunal, in identical facts and circumstances, it has been held by the Tribunal as under: “19. It was to be noted that the assessee had challenged the action o f customs authorities regarding variation in the invoice value in three cases where the Id. Commissioner of Customs (Appeals) deleted the assessment of transaction value made by the customs authorities as no evidence was brought on record by the customs authorities to show that transaction value shown by the assessee was not true commercial value. The relevant portion of observation of Id. Commissioner of Customs (A) is reproduced as under: “The Hon’ble Supreme Court’s decision in the case of M/s Etcher Tractors Limited , (2000) (122) ELT 321) , has laid down that transaction value cannot be rejected without clear and cogent evidence produced by the department with regard to the quantity, quality, country or origin and place and time of import. It also well settled that it is for the department to produce the evidence to show that the 7 transaction value is not acceptable in view of the comparable price. In this case, the department has not adduced even an iota of evidence to reject the transaction value on the ground that it is no t the true commercial value of the goods. It is also not the case of the department that there was any special relationship between the importer and the supplier and that the former has paid anything extra over and above the transacted value. In fact, contrary to the Board’s Circular no. 16/2003 dated 17.03.2003, the AO has not passed a speaking order for rejecting the transaction value which could have enlightened the appellate authority o f the reasons for rejecting the transaction value . It is settled practice o f law and it has been decided even in Supreme Court that the circular issued by the CBEC is binding on the administrative officer or field o officer who am enforcing for implementing the Customs Act or Customs Valuation Rules 1988 . The circumstances that permit such rejection and the alternative basis for fixing assessable value are specified in the Valuation Rules themselves no such legally permissible steps were taken in the present case. There is catena o f decisions including the one given by the Supreme Court in the case o f M/s Eicher Tractors Limited, which say that “reading Rules 3(i) and Rule 4(1) together, it is dear that a mandate has been cast on the authorities to accept the price actually paid or payable for the goods in respect o f the goods under assessment as “Transaction Value” . The Hon’ble Supreme Court has further held that in the absence o f exceptions particularized in Rule 4(2) o f the Customs Valuation Rules and clear and cogent evidence of contemporaneous import, it is mandatory for the Customs to accept the invoice value. In this case, no evidence is brought on record to show that the transaction value is no t the true commercial value. The Hon’ble Supreme Court has held in the case o f Commissioner o f Customs, New Delhi’s vs. Prodelin India (P) Ltd, 2006 (202) ELT 13 (SC), that it is settled law that the department is bound to accept the transaction value between the two parties in absence o f any evidence that identical or similar goods imported by the importer at higher price. Moreover, vide amended provision of section 17(5) o f the Customs Act , 1962 , it is mandatory that the customs official ITA No. 3395/Del/2009 Anil Mahajan 12 have to pass the speaking order within 15 days from have to pass the speaking order within 15 days from the date o f clearance the goods in case the importer
8 does no t accept the loading o f the Value and no such orders were passed by the Assessing Authority for loading the true declared by the appellants.” 20. In the case of the assessee, there is no evidence on record to suggest that assessee , has paid any amount over and above the purchase consideration shown in the purchase bills. It may also be noted that the excise duty payable on each bill on the difference in valuation made by the customs authorities @ 16% works out to be in a few hundreds and there is a force in the contention of the assessee that, the cost of filing of further appeal is higher than additional custom duty paid and it was not economical to contest the variations. Moreover, if an assessee opts to contest the variations, it delays the clearance of the goods and result into higher cost. Therefore, keeping in view the totality of the facts and circumstances of the case , I am of the opinion that only on the fact that the assessee had paid custom duty on the enhancement made by the custom authorities cannot be regarded has a valid basis to suggest that there was unaccounted purchases made by the assessee. 21. Hence , the ld. CIT(A) held that the AO was not justified in assuming that the assessee had made unaccounted purchases solitary on the basis that the customs authorities had enhanced the value of goods imported for the purpose of payment of custom, duty. In the absence of any evidence/material on record that the assessee has paid anything extra over and above the transaction value shown in import invoices, no addition on account o f unexplained expenditure on purchases can be made and deleted the addition of Rs. 31,07,529/- made by the AO. 22. We have gone through the entire factum and without any hesitation, we hold that the Assessing Officer has made addition on a deeming fiction and the ld. CIT(A) has succinctly analyzed every aspect of the business and transactions and gave a surefire decision. Hence, we decline to interfere with the order of the ld. CIT(A) on this issue.” (Emphasis Supplied)
We note that in the present case also the CIT(A) has returned a finding that there was no evidence to show that the Assessee had made any payment in excess of the declared invoice amount. During the appellate proceedings before us the aforesaid finding return by the Tribunal has gone unconverted.
9 There is nothing on record to show that unexplained expenditure was actually incurred by the Assessee. Therefore, in view of the above decisions, we do not find any infirmity in the order passed by CIT(A) whereby the CIT(A) has deleted the addition made by the Assessing Officer under section 69C of the Act by taking the difference between the declared invoice value and the assessable value determined by the custom authorities for the purpose of determination of Customs duty as unexplained expenditure. Accordingly, the Ground No. 1 to 4 raised by the Revenue are dismissed.
In result, the present appeal preferred by the Revenue is dismissed.
Order pronounced on 18.04.2024. (Om Prakash Kant) Judicial Member मुंबई Mumbai; िदनांक Dated : 18.04.2024 Alindra, PS
10 आदेश की "ितिलिप अ"ेिषत/Copy of the Order forwarded to : 1. अपीलाथ" / The Appellant 2. ""थ" / The Respondent. 3. आयकर आयु"/ The CIT 4. "धान आयकर आयु" / Pr.CIT 5. िवभागीय "ितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai 6. गाड" फाईल / Guard file.
आदेशानुसार/ BY ORDER, स"ािपत "ित //// उप/सहायक पंजीकार /(Dy./Asstt.