DCIT Circle 24 (1), V. Amit Khanna,

ITA 4620/DEL/2007

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9685 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2009
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 27-08-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 26-11-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRATIMA KAUSHIK
• Assessee Lawyers: SURESH ANANTHARAMAN
• Keywords: Business income; Opportunity of being heard
• Section: 80HHC

Judgement Text

ITA NO. 4620/DEL/2007 A.Y. 2003-04 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 4620/DEL/2007 A.Y. 2003-04 DY. CIT, SH. AMIT KHANNA, , CIRCLE 24(1), I-705, SOM VIHAR APARTMENT NEW DELHI VS. SANGAM MARG, R.K. PURAM, NEW DELHI [APPELLANT] (RESPONDENT) APPELLANT BY : SMT. PRATIMA KAUSHIK, SR. DR RESPONDENT BY : SH. SURESH ANANTHARAMAN, CA ORDER PER SHAMIM YAHYA, AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDERS OF THE CIT(A) DATED 2.8.2007 AND PERTAINS TO ASSESSMENT YEAR 2003-04. 2. THE ISSUE RAISED IS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFICER TO TAKE NET PROFIT AS PER PROFIT AND LOSS ACCOUNT OF M/S INDIA DIRECT OF RS. 33,68,425/- AS BUSINESS INCOME INSTEAD OF UNEXPLAINED RECEIPT OF RS. 49,43,258/- IN COME FROM OTHER SOURCES. 3. IN THIS CASE THE ASSESSEE IS A PROPRIETOR OF TW O CONCERNS, NAMELY M/S PARAMPARA INTERNATIONAL AND M/S INDIA DIRECT, WHILE M/S PRAMP ARA INTERNATIONAL IS A BUYING AGENCY AND M/S INDIA DIRECT IS ENGAGED IN THE EXPORT OF GO ODS. DURING THE COURSE OF ASSESSMENT THE ASSESSING OFFICER FOUND THAT IT CLAIMED PURCHAS ES AMOUNTING TO RS. 14,85,565/- IN THE CASE OF M/S INDIA DIRECT RS. 14,52,485/- WORTH OF PURCHASE WAS ITA NO. 4620/DEL/2007 A.Y. 2003-04 2 FROM M/S JITIN TEXTILE AND RS. 28,280/- WORTH OF PUR CHASE WAS FROM M/S DHINGRA TEXTILE. THE ASSESSING OFFICER MADE THE INVESTIGATION OF TH ESE PURCHASES AND WAS OF THE OPINION THAT THESE PURCHASES WERE BOGUS IN AS MUCH AS THE A SSESSEE HAS FAILED TO PRODUCE THE PARTY OR GIVEN THE PRESENT ADDRESS. ON THE PREMIS E THAT THE PURCHASES WERE BOGUS AND THE ASSESSING OFFICER HELD THAT THE ENTIRE EXPORT R ECEIPTS OF THE ASSESSEE COULD NOT QUALIFY DEDUCTION UNDER SECTION 80HHC. HE HELD THA T THE ENTIRE RECEIPTS AS UNEXPLAINED RECEIPTS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. 4. UPON ASSESSES APPEAL THE LD. CIT(A) WAS OF THE OPINION THAT THE ASSESSEE HAS FILED SUFFICIENT DOCUMENTARY EVIDENCE WHICH PROVE THAT PURCHASES WERE MADE BY THE ASSESSEE; EXPORT OF GOODS WAS GENUINE; GOODS REACHE D THEIR FINAL DESTINATION AND PAYMENT WAS RECEIVED IN INDIA. HENCE, THE CIT(A) CONCLUDED THAT INCOME EARNED BY THE ASSESSEE WAS HIS BUSINESS INCOME AND NOT INCOME FROM OTHER SOURCE. HE ALSO DIRECTED THE ASSESSING OFFICER TO CALCULATE THE DED UCTION TOWARDS SECTION 80HHC. 5. AGAINST THIS ORDER THE REVENUE IS AN APPEAL BEF ORE US. 6. WE HAVE HEARD THE BOTH THE COUNSELS AND PERUSED THE RECORDS. WE FIND THAT IN THIS CASE THE ASSESSING OFFICER HAS TREATED THE ENT IRE EXPORT AS BOGUS ON THE PREMISE THAT PURCHASES WERE BOGUS. IN OUR OPINION, WHEN T HERE ARE SALES THERE HAS TO BE CONNECTED PURCHASES. IN THE EVENT OF BILLS SUBMIT TED IN THIS CONNECTION, ARE NOT VERIFIABLE, RELATED EXPENDITURE ON ACCOUNT OF PURC HASES HAS TO BE ALLOWED EITHER ON ESTIMATE BASIS FROM COMPARABLE CASES OR PREVIOUS Y EAR RECORDS. IN THIS CASE, THE ASSESSING OFFICER HAS FAILED TO DO SO. IT IS A SET TLED LAW THAT CIT(A)S POWERS ARE CO- TERMINUS WITH THAT OF ASSESSING OFFICER. THE LD. CIT(A) HAS ELABORATELY CONSIDERED THE ISSUE AND GIVEN A CATEGORICALLY FINDING THAT THE PU RCHASES MADE BY THE ASSESSEE AND THEIR EXPORT TO FOREIGN COUNTRY AND CONSEQUENT REAL IZATION OF EXPORTS PROCEEDS IN CONVERTIBLE FOREIGN EXCHANGE THROUGH BANKING CHANNEL S WERE ALL GENUINE TRANSACTION. ITA NO. 4620/DEL/2007 A.Y. 2003-04 3 HOWEVER, WE FIND THAT THE LD. CIT(A) HAS NOTED THAT SINCE THE ASSESSING OFFICER HAS NOT QUESTIONED THE EXPENSES CLAIMED, HE SHOULD COMPUTE ASSESSEES INCOME ON THE BASIS OF NET PROFIT SHOWN IN PROFIT AND LOSS ACCOUNT. WE FI ND THAT THE ASSESSING OFFICER HAS CONFINED HIMSELF TO VERIFY VERACITY OF PURCHASE ONL Y. OTHER ASPECTS OF EXPENSES AND GROSS PROFIT WERE NOT EXAMINED BY HIM. IT IS NOT THE CASE THAT CITS HIMSELF EXAMINED THE SAME. HONBLE APEX COURT IN THE CASE OF KAPURC HAND SHRIMAL VS. CIT, 131 ITR 451 HAS HELD THAT IT IS THE DUTY OF THE APPELLATE AUTHO RITY TO CORRECT THE LACUNAE IN ORDER OF AUTHORITY BELOW AND ISSUE APPROPRIATE DIRECTIONS WH EN NEEDED. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO EXAMINE THE NET PROFIT DIS CLOSED BY THE ASSESSEE. THE FINDING OF THE LD. CIT(A) REGARDING PURCHASE AND SALES AND ASS ESSEES ELIGIBILITY FOR SECTION 80HHC DEDUCTION REMAIN CONFIRMED. NEEDLESS TO ADD ASSESS EE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD. 7. IN THE RESULT, THE APPEAL FILED BY THE REVE NUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH SEPTEMBER, 2009. SD/- SD/- [C.L. SETHI] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 4 TH SEPTEMBER, 2009 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES