RAM PUNJWANI, ULHASNAGAR V. ITO 23(30(2), MUMBAI

ITA 1493/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78726 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 1999-2000
• Appeal Filed On: 21-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A D ANWANI
• Keywords: Business income; Wrong claim; Onus to prove
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUM BAI , , BEFORE SHRI SANJAY ARORA, AM AND SHRI VIJAY PAL RA O, JM ./ I.T.A. NO. 1493/MUM/2011 ( / ASSESSMENT YEAR: 1999-2000) RAM PUNJWANI FLAT NO.401, MOONLIGHT APARTMENT, 4 TH FLOOR, GODAVAN NAGAR, O. T. SECTION, ULHASNAGAR 421 002 / VS. INCOME TAX OFFICER, WARD 23 (3)(2), BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400 051 ./ ./PAN/GIR NO. AAAHR 5370 N ( ! /APPELLANT ) : ( '#! / RESPONDENT ) ! $ % / APPELLANT BY : SHRI A. D. ANWANI '#! $ % / RESPONDENT BY : SHRI SANJEEV JAIN & ' ( $ ) * / DATE OF HEARING : 03.02.2014 +,- $ ) * / DATE OF PRONOUNCEMENT : 09.04.2014 . / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-33, MUMBAI (CIT(A) FOR SH ORT) DATED 17.12.2010, DISMISSING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S .143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A. Y.) 1999-2000 VIDE ORDER DATED 22.12.2009. 2 ITA NO. 1493/MUM/2011 (A.Y. 1999-2000) RAM PUNJWANI VS. ITO 2. IT WOULD BE RELEVANT TO RECOUNT THE BACKGROUND FACTS OF THE CASE. THE ASSESSEE, ENGAGED IN MANUFACTURING AND EXPORTING OF GARMENTS TO RUSSIA, RETURNED HIS INCOME FOR THE YEAR ON 31.12.1999 AT RS. NIL, CLAIMING DEDUCTI ON U/S.80-HHC AT RS.90,68,594/-. THE SAME, AS IT APPEARS, STOOD ACCEPTED FOLLOWING THE V ERIFICATION PROCEDURE UNDER THE ACT. SUBSEQUENTLY, NOTICE U/S.148 WAS ISSUED AND SERVED ON 02.05.2002 ON THE BASIS OF INFORMATION RECEIVED FROM THE DIRECTORATE OF REVENU E INTELLIGENCE (DRI) IN THE CUSTOMS DEPARTMENT, TO THE EFFECT THAT THE ASSESSEE HAD INF LATED THE EXPORT SALES AND THEREBY ENGAGED IN MONEY LAUNDERING AS WELL AS FRAUDULENT C LAIM OF DUTY DRAWBACK (DDB) ( QUA CUSTOMS DUTY), FOR RS.85.82 LACS, ON WHICH DEDUCTIO N U/S.80-HHC HAD ALSO BEEN CLAIMED. ASSESSMENT U/S. 143(3) R.W.S. 147 OF THE ACT WAS, A CCORDINGLY, FRAMED AT A GROSS TOTAL INCOME OF RS.225 LACS (AS INCOME FROM OTHER SOURCES ) AND BUSINESS LOSS AT RS.693.32 LACS, DENYING THE ASSESSEE ITS CLAIM FOR DEDUCTION U/S.80-HHC. IN APPEAL, THE FIRST APPELLATE AUTHORITY DETERMINED THE BUSINESS INCOME AT RS.5,02,933/-, I.E., THE PROFIT RETURNED, NET OF DUTY DRAWBACK. FURTHER, THE SAME, RECEIVED AT RS.85,51,863/-, WAS DIRECTED BY HIM FOR BEING ASSESSED AS INCOME FROM O THER SOURCES, I.E., AS AGAINST THE BUSINESS RECEIPT U/S.28(III)(C), ALSO THEREBY IN EF FECT WITHDRAWING THE DEDUCTION U/S.80- HHC THEREON. IN FURTHER APPEAL BEFORE THE TRIBUNAL, TO WHOM THE MATTER WAS CARRIED AT THE INSTANCE OF THE ASSESSEE, IT NOTED THAT THOUGH THE VERACITY OF THE ASSESSEES CLAIM OF HAVING MADE GENUINE EXPORTS AND, THUS, OF HAVING RA ISED VALID CLAIM/S FOR DDB, WAS DOUBTED ON THE BASIS OF THE INFORMATION RECEIVED FR OM DRI, NO CASE HAD BEEN MADE OUT. THE ENQUIRY BY THE CUSTOM AUTHORITIES HAD NOT COME TO ANY DEFINITE CONCLUSION. THE MATTER WAS, ACCORDINGLY, RESTORED BACK BY IT TO THE FILE OF THE ASSESSING OFFICER (A.O.) TO CARRY OUT AN INDEPENDENT ENQUIRY INTO THE ALLEGATIO N SO MADE, IN WHICH THE ASSESSEE WAS ALSO REQUIRED TO CO-OPERATE (IN ITA NO.1602/MUM/200 5 DATED 01.08.2007/PB PGS.435- 437). THE REVENUE ACCORDING THE SAME TREATMENT IN T HE SECOND ROUND AS WELL, THE ASSESSEE IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 3 ITA NO. 1493/MUM/2011 (A.Y. 1999-2000) RAM PUNJWANI VS. ITO 3.1 THE ASSESSEES CASE BEFORE US WAS THAT, APART F ROM DOUBTING ITS EXPORTS, AND THUS THE GENUINENESS OF ITS DDB RECEIPTS, AND REITERATIN G ITS STAND, NO CASE HAS BEEN MADE OUT BY THE REVENUE. THE ASSESSEE ON ITS PART HAD FURNIS HED ALL THE DOCUMENTS IN RELATION TO ITS EXPORTS AND DDB CLAIMS BEFORE THE A.O. THE ENQUIRY BY THE DRI IS STILL NOT BEEN FINALIZED EVEN AS ON DATE, SO THAT NO ADVERSE INFER ENCE COULD BE DRAWN. THERE IS, ACCORDINGLY, NOTHING ON RECORD TO SUGGEST ANY WRONG DOING BY THE ASSESSEE. THE LD. AR, HOWEVER, AGREED TO THE PROPOSITION THAT IF AND TO T HE EXTENT THE DDB IS FOUND AS WRONGLY RECEIVED, THE SAME IS LIABLE TO BE ASSESSED AS INCO ME FROM OTHER SOURCES AND, THUS, NOT ELIGIBLE FOR DEDUCTION U/S.80-HHC. THE REVENUES CASE, ON THE OTHER HAND, IS THAT THE ASSESSEE HAS NOT CO-OPERATED IN THE ENQUIRY, AS ENJOINED UPON HIM BY THE TRIBUNAL. THE VERY SAME AUTHORITY WHICH HAD CLEARED ITS ENTITLEMENT TO DDB IN THE FIRST INSTANC E, I.E., THE CUSTOMS DEPARTMENT, HAD SUBSEQUENTLY CHALLENGED THE SAME, FURNISHING A SPEC IFIC REPORT BY ITS INTELLIGENCE WING ISSUING THE SHOW CAUSE NOTICE (U/S. 124 OF THE CUST OMS ACT, 1962). ACCORDINGLY, THE ASSESSEES CLAIM OF THE SUMS RECEIVED AS DDB BEING ONLY OSTENSIBLY SO, CANNOT BE ACCEPTED AS SUCH. THE SAME HAVING BEEN RECEIVED, AN D, ADMITTEDLY, IN ITS OWN RIGHT BY THE ASSESSEE, WOULD NEVERTHELESS BE ASSESSABLE AS INCOM E IN ITS HANDS. HENCE ITS ASSESSMENT AS INCOME FROM OTHER SOURCES AND NOT AS BUSINESS IN COME BY WAY OF DDB (U/S. 28(IIIC)), WHICH THOUGH WOULD BE LIABLE FOR RECTIFICATION, ALL OWING APPROPRIATE RELIEF TO THE ASSESSEE IF AND WHERE THE ASSESSEE IS EXONERATED BY THE CUST OMS DEPARTMENT/DRI (REFER PARA 5.12 OF THE IMPUGNED ORDER). 3.2 OUR FIRST OBSERVATION IN THE MATTER IS AS TO HO W COULD THE ENQUIRY AS TO THE GENUINENESS OF THE ASSESSEES CLAIM IN RESPECT OF D DB BE POSSIBLY DELINKED OR CONSIDERED INDEPENDENT OF THAT QUA THE GENUINENESS OF ITS EXPORTS INASMUCH AS THE DDB CLAIM/S ARISES ONLY ON THE BASIS OF THE SALE INVOICES TOWAR D EXPORT OF GARMENTS TO RUSSIA. THE ASSESSEE HAD, APART FROM FURNISHING THE DOCUMENTARY EVIDENCES IN RELATION TO EXPORTS, DONE PRECIOUS LITTLE TOWARD ESTABLISHING THE GENUIN ENESS OF ITS EXPORTS IN THE SET ASIDE PROCEEDINGS. THAT THE DOCUMENTS ARE IN ORDER IS PAT ENT AND INDEED IMPLICIT IN THE ASSESSEE 4 ITA NO. 1493/MUM/2011 (A.Y. 1999-2000) RAM PUNJWANI VS. ITO HAVING BEEN ALLOWED ONLY ON THEIR STRENGTH, DDB C LAIM/S IN THE FIRST PLACE. IT IS THE TRUTH OF THOSE DOCUMENTS OR, PUT DIFFERENTLY, OF THE SAME BEING A TRUE REPRESENTATION OF THE TRANSACTIONS THEY PURPORT TO, ON WHICH THE VALIDITY OF THE ASSESSEES CLAIM HINGES, SO THAT MERE FURNISHING OF THE EXPORT DOCUMENTS WOULD BE TO NO AVAIL. NO DOUBT, IT COULD BE ARGUED, AND ONLY REASONABLY, THAT THE APPARENT IS R EAL UNLESS PROVEN OTHERWISE, AND THE ONUS TO PROVE THAT IT IS NOT SO IS ON THE PERSON WH O SO CLAIMS OR ALLEGES. THE ASSESSEE COULD NOT POSSIBLY BE CASTIGATED AND ITS CLAIM OUST ED MERELY ON THE BASIS OF AN ALLEGATION OR DOUBT. HOWEVER, THERE IS MUCH MORE THAT NEEDS TH E EYE IN THE INSTANT CASE, AS WE GATHER FROM THE MATERIAL ON RECORD, AS SHALL BE APPARENT F ROM THE ENSUING PART OF THIS ORDER. THERE IS, TO BEGIN WITH, A DETAILED REPORT SUBMITTE D BY DRI, AND ON THE BASIS OF WHICH ONLY THE SHOW CAUSE NOTICE HAD BEEN ISSUED TO THE ASSESSEE BY THE CUSTOMS DEPARTMENT. THE SAME HAS NEITHER BEEN BROUGHT ON RE CORD NOR IS ITS STAND WITH REFERENCE THERETO EXPLAINED BY THE ASSESSEE TO THE REVENUE. W HY, EVEN AS OBSERVED QUIZZICALLY BY THE BENCH DURING HEARING ITSELF, EVEN THE BASIS ON WHICH THE ASSESSEES CLAIM HAS BEEN CONSIDERED AS FALSE BY THE CUSTOMS DEPARTMENT, WHIC H WOULD ONLY BE IN THE ASSESSEES KNOWLEDGE, HAS NOT BEEN MADE KNOWN OR IS FORTHCOMIN G EITHER FROM THE READING OF THE TRIBUNALS ORDER IN THE FIRST ROUND OR FROM THE STA TEMENT OF ITS CASE AS MADE BEFORE US BY THE LD. AUTHORIZED REPRESENTATIVE (AR). IN OUR VIEW , THIS IS CRUCIAL, AND SHOULD ORDINARILY BE THE FIRST THING THAT SHOULD HAVE BEEN COMMUNICAT ED BY THE ASSESSEE. AND FOR THE SIMPLE REASON THAT IT IS ONLY BY SHOWING INFIRMITY THEREIN OR REBUTTING THE SAME THAT THE ASSESSEE COULD ESTABLISH THE GENUINENESS OF ITS CLAIMS AS WE LL AS ITS BONA FIDES IN THE MATTER. IN FACT, SO MUCH SO THAT EVEN THE FACT THAT A DETAILED INVESTIGATION BY THE DRI HAD PRECEDED THE ISSUE OF THE SHOW CAUSE NOTICE AND, FURTHER, TH AT THE MATTER HAD BEEN SUBJECT TO AN EXTENSIVE EXAMINATION BY THE REVENUE IN THE FIRST ROUND ITSELF, IS REVEALED TO US ONLY UPON READING THEIR ORDERS (AT PB PGS.449-467 AND 43 9-447), TO WHICH OF THOSE IN THE SECOND ROUND, MUCH LESS IN THE FIRST ROUND, OUR ATT ENTION WAS NOT DRAWN DURING HEARING BY EITHER THE LD. AR OR LD. DEPARTMENTAL REPRESENTATIV E (DR). IN FACT, IT IS ONLY A READING OF THE DETAILED ORDERS PASSED IN THE FIRST ROUND BY TH E REVENUE AUTHORITIES THAT ENABLES 5 ITA NO. 1493/MUM/2011 (A.Y. 1999-2000) RAM PUNJWANI VS. ITO PLACING THE ORDER BY THE TRIBUNAL, AS WELL AS THEIR ORDERS IN THE SECOND ROUND IN PROPER PERSPECTIVE, THEREBY LEADING TO AN UNDERSTANDING TH EIR IMPORT CORRECTLY. 3.3 BEFORE WE PROCEED FURTHER, IT SHALL BE NECESSAR Y TO STATE THAT AN INVESTIGATION INTO THE GENUINENESS OF THE EXPORTS, BY ITS VERY NATURE, INVOLVE AS IT DOES JURISDICTION/S BEYOND THE TERRITORIES TO WHICH THE COUNTRYS SOVEREIGNTY EXTENDS, IS IMBUED WITH SERIOUS LIMITATIONS AS FAR AS THE A.O. IS CONCERNED, PARTIC ULARLY SO AS IT DOES NOT INVOLVE THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT. IN OTHER WORDS, IT NEEDS TO BE APPRECIATED THAT THE A.O. IS SEVERELY CONSTRAINED I N THE MATTER, WHILE, ON THE OTHER HAND, THE FULL FACTS ARE ONLY IN THE KNOWLEDGE OF THE ASS ESSEE. BE THAT AS IT MAY, IN OUR VIEW, THE PRIMARY ONUS, W HICH IS ON THE REVENUE INASMUCH AS IT CLAIMS REASON/S TO BELIEVE THAT THE ASSESSEES INCOME FOR THE RELEVANT YEAR HAD ESCAPED ASSESSMENT, STANDS DISCHARGED ON THE ST RENGTH OF THE INVESTIGATION REPORT BY DRI AS WELL AS ITS OWN INVESTIGATION AS CARRIED OUT IN THE FIRST ROUND ITSELF. THE DRIS REPORT INDICTS THE ASSESSEE ON TWO COUNTS; FIRSTLY, LEVERAGING ON THE FAVOURABLE RUPEE ROUBLE RATE (FIXED UNDER THE INDO RUSSIA TRADE PACT ) VIS--VIS THE MARKET GOVERNED RUPEE DOLLAR RATE AND, TWO, THE INFLATION IN EXPORTS AND THEREBY FALSE CLAIM IN RESPECT OF DDB, THEREBY DEFRAUDING GOVERNMENT OF INDIA ON BOTH COUN TS, ALSO CLEARLY STATING THE MODUS OPERANDI BEING FOLLOWED BY IT, AMONG OTHERS, AS BROUGHT OUT IN SUFFICIENT DETAIL BY THE REVENUE PER THE ORDERS BY THE ASSESSING AND THE FIR ST APPELLATE AUTHORITY IN THE FIRST ROUND ITSELF. EVEN THE EXTENT OF INFLATION, I.E., AT 8 TO 10 TIMES, HAD BEEN WORKED OUT BY THE CUSTOMS DEPARTMENT, PLACING, AS A RESULT, THE BURDE N OF PROOF ON THE ASSESSEE, AND WHICH IT WAS REQUIRED TO DISCHARGE IN THE SECOND ROUND. T HIS IS ALL THE MORE SO AS THE TRUTH OF THE ASSESSEES CLAIMS COULD BE, OTHER THAN BY MEETING T HE EVIDENCE BEING RELIED UPON BY THE REVENUE, BE ONLY PROVED BY IT ON THE BASIS OF THE C ORROBORATIVE EVIDENCES AND SURROUNDING CIRCUMSTANCES. SAY, FOR INSTANCE, THE G ENUINENESS OF THE BUYERS. THERE IS NOTHING TO SHOW THAT THE RUSSIAN BUYERS OF THESE GO ODS ARE GARMENT TRADERS, THOUGH ORDINARILY WOULD ONLY BE REGULAR CUSTOMERS, WITH LO NG STANDING IN THE TRADE, BUYING FROM OTHER SUPPLIERS AS WELL. NO DOCUMENT TO ESTABLISH T HEIR CREDENTIALS, AS FROM THEIR BANKERS 6 ITA NO. 1493/MUM/2011 (A.Y. 1999-2000) RAM PUNJWANI VS. ITO OR THE ACCREDITATION FROM ANY RECOGNIZED INSTITUTIO N/AUTHORITY STANDS PLACED ON RECORD. THEN, AGAIN, THE SHIPPING OF THE GOODS TO RUSSIA. T HE SHIPPING LINES THROUGH WHOM THE GOODS WERE SHIPPED WOULD AGAIN BE DULY REGISTERED I N THE COUNTRY OF ORIGIN, CARRYING A VALID LICENSE TO OPERATE ON THAT ROUTE. BESIDES, TH EY WOULD HAVE, PER THE RELEVANT VOYAGES, ALSO FERRIED GOODS OF OTHER EXPORTERS. THE PAYMENT OF FREIGHT THERETO; THE PAYMENT OF IMPORT CESS, IF ANY, OR CLEARING AND FORWARDING CHA RGES FOR GOODS IN RUSSIA, ETC. WOULD ESTABLISH THE ASSESSEES CLAIMS. THE SAME AND OTHER SUCH LIKE MATERIALS, WHICH WE CITE ONLY BY WAY OF EXAMPLES, BECOME ALL THE MORE RELEVA NT IN VIEW OF DRI CLAIMING, APART FROM INFLATION IN VALUE, THAT THE GOODS HAD BEEN SH IPPED TO DUBAI. NO MATERIAL TOWARD THE SAME HAS BEEN PLACED ON RECORD EITHER IN THE FIRST OR THE SECOND ROUND BY THE ASSESSEE. 3.4 CONTINUING FURTHER, WE OBSERVE, AS AFORE-NOTED, EXTENSIVE EXAMINATION OF THE ASSESSEES CASE AS WELL AS EXTENSION OF SUFFICIENT OPPORTUNITY THERETO TO PROVE THE GENUINENESS OF ITS OPERATIONS, AND THEREBY OF ITS E XPORTS, EVEN IN THE FIRST ROUND. THE FINDINGS BY THE REVENUE, BASED ON THE MATERIALS ADD UCED (OR NOT ADDUCED) AS WELL AS THE ASSESSEES EXAMINATION U/S.131 OF THE ACT ARE AS UN DER: A) THE ASSESSEE HAD NO KNOWLEDGE OF HIS BUSINESS, WHIC H IS BEING CONTROLLED BY ONE SHRI MUKESH VORA AND ANOTHER SHRI THAKUR MULANI, WH O HAD ALSO INTRODUCED THE ASSESSEE FOR THE PURPOSE OF OPENING THE BANK ACCOUN T; AND WAS ACCORDINGLY UNABLE TO FURNISH ANY DETAILS IN ITS RESPECT; BLANK CHEQUE S HAD IN FACT BEEN SIGNED AND WERE USED BY THEM; B) THE ASSESSEE HAD NO BUSINESS OR EVEN OFFICE PREMISE S; C) SHRI MUKESH VORA AND SHRI THAKUR MULANI WERE NOT PR ODUCED AT ANY STAGE; D) THE VOUCHERS IN RESPECT OF THE PURCHASE, LABOUR CHA RGES, EXPENSES, WERE NOT PRODUCED AT ANY STAGE; AND E) THE ASSESSEE WAS UNABLE TO FURNISH ANY INFORMATION WITH REGARD TO ITS MANUFACTURING/PROCESSING OPERATIONS, VIZ. THE DET AILS OF THE PARTIES FROM WHOM THE RAW MATERIAL WAS PURCHASED, FABRICATED, ETC; F) SIMILARLY, THE ASSESSEE COULD NOT FURNISH THE DETAI LS OF THE PARTIES FROM WHOM THE FABRICATION WORK (OF GARMENTS) WAS DONE AND LABOUR CHARGES PAID; THERE WAS IN FACT NO CLAIM OF THE LABOUR CHARGES IN THE TRADING ACCOU NT; 7 ITA NO. 1493/MUM/2011 (A.Y. 1999-2000) RAM PUNJWANI VS. ITO G) NO BOOKS OF ACCOUNT NOR ANY SUPPORTING DOCUMENTS WE RE PRODUCED AT ANY STAGE, STATING THE SAME TO BE NOT TRACEABLE INASMUCH AS TH EY HAD BEEN GIVEN TO THE AUDITORS, M/S. P. H. SHAH & COMPANY, WHOSE PROPRIET OR, SHRI P. H. SHAH, HAD EXPIRED IN THE YEAR 2000. NO EXPLANATION AS TO WHY THE COMPLETE BOOKS OF ACCOUNTS, ALONG WITH THE ENTIRE SUPPORTING EVIDENC ES WERE KEPT AT HIS OFFICE AND, FURTHER, WHY AND HOW THE SAME WERE NOT AVAILABLE. E VEN THE BOOKS FOR THE EARLIER YEARS OR, FOR THAT MATTER, LATER YEAR/S, WERE NOT P RODUCED; H) NO DETAILS WHATSOEVER OF THE CLOSING STOCK, INCLUDI NG THEIR VALUATION; THE PLACE WHERE THE SAME WERE STOCKED, ETC.; THE ASSESSEE ADMITTEDLY HAD NO MANUFACTURING FACILI TY, AND THE GARMENTS WERE STATED TO BE PROCESSED ON JOB-WORK BASIS. HOWEVER, NO CHARGES WERE PAID OR CLAIMED IN THE TRADING ACCOUNT, AND NEITHER ANY DETAILS OF THE JOB-WORK FURNISHED. THE FINDINGS GO TO THE VERY ROOT OF THE MATTER, I.E., WHETHER THE ASSE SSEE IS A GENUINE GARMENT TRADER OR MANUFACTURER/PROCESSOR OR EXPORTER, THE QUESTION OF THE EXPORTER ARISING ONLY IF THE ASSESSEE IS A TRADER OR MANUFACTURER/FABRICATOR AND WHICH IS ITSELF NOT PROVED. THE CLAIM OF EXPORT/S WAS, ACCORDINGLY, TREATED AS BOGUS, AND THE ASSESSEE DENIED DEDUCTION U/S.80- HHC, RETAINING THE RETURNED PROFIT, I.E., RS.90,54, 796/-, INCLUDING RECEIPT ON ACCOUNT OF DDB AT RS.85,51,863/-, WHICH WAS ASSESSED AS INCOME FROM OTHER SOURCES. THE ASSESSEE HAS IN THE SECOND ROUND, APART FROM FURNISHING THE EXPORT DOCUMENTS, WHICH WERE ALREADY ON RECORD, AND THE AUTHENTICITY OF WHICH, I.E., AS TRUE DOCUMENTS, IT WAS REQUIRED TO ESTABLISH, DONE LITTLE ELSE. IN FACT, THEIR FURNISH ING IS ITSELF SURPRISING INASMUCH AS THE ASSESSEE HAS DESPITE EXTENDED OPPORTUNITY SINGULARL Y FAILED TO FURNISH ANY BOOKS OF ACCOUNT OR ANY OTHER SUPPORTING DOCUMENTS IN RELATI ON TO THE RELEVANT YEAR ON THE PLEA THAT THE SAME HAD BEEN GIVEN TO THE AUDITORS, AND WERE N OT TRACEABLE AT THEIR END. HOW IS IT THEN THAT THE EXPORT DOCUMENTS WERE AVAILABLE ? IN FACT, THE ASSESSEE DID NOT CONTEST THE DENIAL OF DEDUCTION U/S.80-HHC ON THE PROFIT OF RS. 5,02,933/-, I.E., APART FROM DDB RECEIPT, BEFORE THE TRIBUNAL. THE SAME ONLY IMPLIES ACCEPTANCE OF THE APPELLATE ORDER (BY THE FIRST APPELLATE AUTHORITY) IN THE FIRST ROUND. HOW WE WONDER COULD IT THEN CONTEST THE DENIAL OF THE CLAIM U/S.80-HHC ON THE DDB RECEIPT O F RS.85.52 LACS ? 8 ITA NO. 1493/MUM/2011 (A.Y. 1999-2000) RAM PUNJWANI VS. ITO 3.5 THE DEDUCTION U/S.80-HHC, IT MAY BE APPRECIATED , IS ONE SINGLE CLAIM WHICH MAY HAVE ITS VARIOUS COMPONENTS. AS SUCH, WHERE THE CLA IM HAS BEEN DENIED ON THE GROUND THAT THE ASSESSEE HAS NOT BEEN ABLE TO PROVE ITS EX PORTS, AND WHICH (DENIAL) STANDS ACCEPTED BY THE ASSESSEE, THE QUESTION OF CLAIM OF DEDUCTION U/S.80-HHC ON THE SUM RECEIVED BY WAY OF DDB RECEIPT DOES NOT ARISE, I.E. , IN PRINCIPLE. THE ASSESSEE IN THE SECOND ROUND HAS AGAIN ABYSMALLY FAILED TO IMPROVE ITS CASE IN ANY MANNER, LEADING NO EVIDENCE EITHER TO MEET OR REBUT THE FINDINGS DET AILED HEREINABOVE, IN THE FIRST ROUND, OR PROVE ITS CASE IN ANY MANNER. THE WHEREABOUTS OF SH RI MUKESH VORA AND SHRI THAKUR MULANI, CLAIMED TO BE THE PERSONS BEHIND AND CONTRO LLING THE OPERATIONS, AND THE ONUS OF WHICH IS CLEARLY ON THE ASSESSEE, WERE NEITHER PROD UCED NOR THEIR WHEREABOUTS DISCLOSED. THE ASSESSEE STATES OF HAVING DISCONTINUED THE BUSI NESS, WITHOUT SPECIFYING AS TO HOW IT HAD DISPOSED OFF ITS CLOSING STOCK, I.E., WH ETHER IN THE EXPORT MARKET OR DOMESTIC MARKET. WE SAY SO AS THE SAME MAY INDIRECTLY VALIDA TE ITS PURCHASES, TOWARD WHICH NO DOCUMENT HAS BEEN FURNISHED. IN FACT, THE SAME WOUL D ONLY BE TOWARD PROCUREMENT /PROCESSING IN RESPONSE TO CERTAIN ORDERS, COPIES O F WHICH COULD ALSO HAVE BEEN GIVEN CORROBORATING THE ASSESSEES STAND. THE ASSESSEE HA S NOT EVEN EXPLAINED AS TO WHAT IT HAS STATED IN RESPONSE TO THE SHOW CAUSE NOTICE, AND WH Y THE PROCEEDINGS HAVE NOT BEEN DROPPED DESPITE A LAPSE OF TEN YEARS. THE STATUS RE PORT, I.E., SUBSEQUENT TO 11.11.2011, HAS ALSO NOT BEEN BROUGHT ON RECORD. THE ASSESSEES CLAIMS STAND IN FACT THOROUGHLY DISCREDITED, AND IT IS ONLY TAKING SHELTER OF THE P ENDENCY OF THE PROCEEDINGS BEFORE THE DRI . RATHER, AS AFORE-STATED, THE DENIAL OF THE DEDUCT ION U/S.80-HHC ON THE PREMISE THAT THE ASSESSEE IS NOT ELIGIBLE THERETO INASMUCH AS IT S EXPORT TO RUSSIA HAS NOT BEEN PROVED AND WHICH GETS FINALIZED ON NOT CONTESTING IT BEFOR E THE TRIBUNAL IN THE FIRST ROUND ITSELF AND, THUS, ACCEPTANCE BY THE ASSESSE, ITSELF PRECLU DES ITS CLAIM FOR S.80-HHC BENEFIT ON THE CLAIM OF DDB RECEIPTS. IT NEEDS TO BE APPRECI ATED THAT THE CLAIM OF DDB IS ONLY IN RESPECT OF DUTY PAID OR DUE TO BE PAID ON GOODS CON SUMED FOR THE PURPOSE OF EXPORT IN PURSUANCE TO A SCHEME BY THE GOVERNMENT, AND WHICH IS WORKED WITH REFERENCE TO THE GOODS EXPORTED. THE SAME, HOWEVER, ONLY PURPORTS OR IS INTENDED TO RECOMPENSE THE DUTY PAID ON THE GOODS, I.E., AS A MEASURE OF EXPORT INC ENTIVE. IN THE INSTANT CASE, THE ASSESSEES 9 ITA NO. 1493/MUM/2011 (A.Y. 1999-2000) RAM PUNJWANI VS. ITO PURCHASES HAVE NOT BEEN PROVED IN ANY MANNER. WHAT HAS BEEN PURCHASED AND FROM WHOM; WHETHER THE SAME WAS SUBJECT TO EXCISE OR CUS TOM DUTY, SO THAT THE SAME HAD SUFFERED EXCISE OR CUSTOMS DUTY, ETC. HAS ALSO NOT BEEN EXPLAINED AT ANY STAGE. WE ARE CONSCIOUS OF THE FACT THAT THE DDB CLAIM, IF HELD TO BE BOGUS, WOULD STAND TO BE REFUNDED BY THE ASSESSEE TO THE GOVERNMENT, I N WHICH CASE ONE COULD ARGUE THAT NO INCOME ON ACCOUNT OF DDB WOULD AT ALL ARISE FOR BEI NG TAXED. AS SUCH, EVEN IF THE ASSESSEE FAILED IN THE PROCEEDINGS BEFORE THE DRI, IT WOULD BE OF NO CONSEQUENCE IN THE INSTANT PROCEEDINGS. WE HAVE GIVEN OUR CAREFUL CONS IDERATION TO THE ARGUMENT, BEING NOT WITHOUT FORCE. THE SAME, HOWEVER, SHALL NOT SUCCEED . IN CHOWRINGHEE SALES BUREAU (P.) LTD. VS. CIT [1973] 87 ITR 542 (SC), THE ASSESSEE-AUCTIONEER CL AIMED THAT THE SALES-TAX COLLECTED FROM BUYERS WAS NOT ITS INCOME. THE SAM E WAS, HOWEVER, NOT PAID TO THE STATE EXCHEQUER, TAKING THE STAND THAT THE ASSESSEE WAS N OT A DEALER UNDER THE RELEVANT ACT. THE AMOUNT WAS ALSO NOT REFUNDED TO THE PARTIES FRO M WHOM IT HAD BEEN COLLECTED. THE SAME, THOUGH REFLECTED UNDER SALES TAX COLLECTION ACCOUNT, I.E., AS A LIABILITY, WAS HELD AS THE ASSESSEES TRADING RECEIPT AND, ACCORDINGLY, TA XABLE IN ITS HANDS. ON A PLEA THAT SAME WOULD BECOME REFUNDABLE TO THE GOVERNMENT - THE MAT TER BEING IN DISPUTE, BEING TAKEN BEFORE THE APEX COURT, IT HELD THAT THE ASSESSEE WO ULD BE ENTITLED TO CLAIM DEDUCTION AS AND WHEN IT PAYS TO THE STATE GOVERNMENT. IN SINCLAIR MURRAY & CO. PVT. LTD. VS. CIT [1974] 97 ITR 615 (SC), A SIMILAR PLEA WAS ASSUMED, STATIN G THAT NO BENEFICIAL INTEREST IN THE SALES-TAX COLLECTED HAD BEEN ACQUIRED BY THE ASSESS EE. APPLYING ITS DECISION IN CHOWRINGHEE SALES BUREAU (P.) LTD. (SUPRA), THE APEX COURT HELD THAT THE TAX COLLECTED CONSTITUTED THE ASSESSEES INCOME. HOWEVER, IF AND WHEN THE APPELLANT PAID THE AMOUNT COLLECTED TO THE STATE GOVERNMENT OR REFUNDED ANY P ART THEREOF TO THE PURCHASER, IT WOULD BE ENTITLED TO CLAIM DEDUCTION FOR THE SUM SO PAID OR REFUNDED. THE PRINCIPLE OF UNJUST ENRICHMENT, AS EXPLAINED BY THE APEX COURT IN THE C ASE OF SHREE DIGVIJAY CEMENT MILLS LTD VS. UNION OF INDIA [2002] 259 ITR 705 (SC), WOULD IN OUR VIEW ALSO OP ERATE TO PREVENT THE ASSESSEE FROM CLAIMING DEDUCTION OR RED UCTION IN RESPECT OF THE CLAIM WITHOUT PAYING THE SAME IN-AS-MUCH AS DDB IS ONLY A RECOMPENSE FOR THE TAX/DUTY ALREADY PAID. THE LD. CIT(A) HAS, PERHAPS WITH THIS IN MIND, HELD , IN VIEW OF THE PENDENCY OF THE 10 ITA NO. 1493/MUM/2011 (A.Y. 1999-2000) RAM PUNJWANI VS. ITO PROCEEDINGS, THE ASSESSEE AS ENTITLED TO APPROPRIAT E RELIEF FOR THE CURRENT YEAR ITSELF IF THE ASSESSEE IS EXONERATED BY THE DRI. WHILE UPHOLDING THE SAME IN VIEW OF THE FOREGOING DECISIONS, WE FURTHER STATE THAT THE ASSESSEE WOULD BE ENTITLED TO REDUCTION IN ITS INCOME, AGAIN FOR THE CURRENT YEAR ITSELF, I.E., WHERE AND TO THE EXTENT HE IS NOT EXONERATED, ON PAYMENT TO THE GOVERNMENT EXCHEQUER. WE ARE CONSCIOUS, WHEN WE SAY SO, THAT IN TERMS OF DECISIONS RELIED UPON, AND IN FACT, EVEN OTHERWISE, THE CREDIT OR DEDUCTION FOR T HE AMOUNT PAID/REFUNDED WOULD ONLY ARISE FOR THE YEAR OF PAYMENT AND NOT THAT FOR THE YEAR TO WHICH THE CLAIM FOR DDB RELATES TO OR GETS RECEIVED IN. THIS IS UNDERSTANDABLE, AND IS ONLY CORRECTLY SO, AS THE TAX OF A SUM AS INCOME ONLY IMPLIES ITS BEING RECEIVED IN THIS OWN RIGHT. A DEDUCTION, CONSEQUENTLY, COULD ONLY BE FOR THE YEAR IN WHICH THE LIABILITY I N ITS RESPECT ARISES, PRIOR TO WHICH IT CANNOT BE SAID TO BE A LIABILITY, OR ONLY CONTINGEN TLY SO. HOWEVER, THE ONLY QUESTION TO BE DECIDED IS WHETHER THE ASSESSEE HAD INDEED MADE THE EXPORTS OF GARMENTS TO RUSSIA, I.E., AS CLAIMED, IF SO, WHAT IS RECEIVED FROM THE GOVERN MENT IS DUTY DRAWBACK, ELSE NOT, SO THAT THE SAME BECOMES REFUNDABLE. ACCORDINGLY, THE CONSEQUENCE OF DENIAL OF DEDUCTION U/S.80-HHC AND THE AMOUNT BEING REFUNDABLE ARISE SI MULTANEOUSLY ONLY FOR THE CURRENT YEAR. AGAIN, THE AMOUNT, THOUGH REFUNDABLE, MAY NOT ACTUALLY BE REFUNDED; THE ASSESSEE BEING A MAN OF NO (LITTLE) MEANS AND APPEARS ONLY T O BE A FRONT MAN FOR OTHERS. THIS WOULD EXPLAIN OUR DECISION IN CONFERRING THE BENEFI T OF TAX BEING NOT CHARGEABLE ON THE AMOUNT BEING REFUNDED AND, FURTHER, FOR THE CURRENT YEAR ITSELF, AS HAS BEEN BY THE LD. CIT(A) ALSO, AND WHOSE ORDER WE OTHERWISE CONFIRM. WE DECIDE ACCORDINGLY. 4. IN THE RESULT, THE ASSESSEES APPEAL IS DISPOSED OF ON THE AFORE-STATED TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON APRIL 09, 201 4 SD/- SD/- (VIJAY PAL RAO) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER & /( MUMBAI; 0' DATED : 09.04.2014 11 ITA NO. 1493/MUM/2011 (A.Y. 1999-2000) RAM PUNJWANI VS. ITO .'../ ROSHANI , SR. PS !' # $%&' (!'% / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '#! / THE RESPONDENT 3. & 1) ( ) / THE CIT(A) 4. & 1) / CIT - CONCERNED 5. 4 5 ')'67 , * 67- , & /( / DR, ITAT, MUMBAI 6. 5 89 : ( / GUARD FILE !' ) / BY ORDER, */)+ , (DY./ASSTT. REGISTRAR) , & /( / ITAT, MUMBAI