USHADEVI PURUSHOTHAMAN,KOCHI vs. THE ITO NON CORP WARD 2(5), KOCHI

The only issue in quantum assessment is qua the assessee’s export turnover, assessed at Rs.288.55 lakhs by the Assessing Officer (AO), reduced in first appeal to Rs.177.12 lakhs. The assessee’s returned turnover (Rs.94.14 lakhs) bears nil export turnover, and, further, being below the threshold limit of Rs.100 lakhs for audit u/s. 44AB,she did not get the accounts of her business audited u/s.44AB of the Act, and which explains the second appeal (ITA No.162/Coch/2023) contesting the levy of penalty u/s. 271B for non-audit.

ITANos. 162 & 324/Coch/ 2022 (AY 2015-16) Ushadevi Purushothaman vs. ITO 3. The assessee is running a Government approved sea-food processing unit in a proprietary-firm ‘Bell Foods’, with approvals from the regulatory authorities, earning processing income and freezing rent. The merchant exporters who do not have their processing units are permitted to process and manufacture their seafood in approved plants, as the assessee’s. The income arises to her is only by way of processing charges, which stands returned u/s.44AD of the Act. However, as per the procedure followed under the Customs Act, the name of the processor/manufacturer is to be shown on the invoice. As such, the customs invoices (shipping bills) bear the name of the assessee as the manufacture-exporter, even as the invoices submitted to the bank/foreign customers bear the name of the actual exporter. The turnover reflected in the shipping bills for the relevant year was at Rs.32,02,72,567. The assessee, in assessment, explaining the procedure under Customs, furnished confirmations from merchant exporters for Rs.2914.17 lakhs, so that the balance Rs.288.55 lakhs was regarded as her export turnover and, accordingly, assessed at 8% thereof. In first appeal,a further reduction of Rs. 111.43 lacs was allowed in view of furnishing confirmations from another two exporters, even as claimed during the assessment proceedings, leaving a balance of Rs.177.12 lakhs, being objected to by the assessee.

Before us, Sh. Joseph, the learned counsel for the assessee, would take us through the assessee’s submissions before the ld. CIT(A), reproduced at pages 3-7 of the impugned order. The same contains reconciliation of the total export turnover. The value of the purged bills, i.e., cancelled on account of non-execution of the export contract (Rs.567.55 lakhs), and freight, insurance, etc. (Rs.98.01 lakhs), has not been taken into account, whereupon the entire export turnover, which in fact is at Rs.34.95 crores, and not Rs.32.03 cr., as taken by the Revenue authorities, gets explained. The ld. CIT(A), however, had omitted to take notice of the same.

We have heard both parties, and perused the material on record. 1

The matter, accordingly, shall travel back to the file of the AO for verifying the assessee’s claim/s, the burden to prove which would be on it. The AO shall decide by issuing definite findings of fact after allowing due opportunity to the assessee. The levy of penalty u/s. 271B of the Act being intimately related to the turnover, is, accordingly, also set aside for consequential adjudication. We decide accordingly.