Veenu Kapoor prop. Shirdi Exports, V. DCIT Circle 26 (1),

ITA 566/DEL/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1257 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 24-08-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 06-02-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SSHRI
• Assessee Lawyers: ASHWANI TANEJA
• Keywords: Opportunity of being heard; Set aside
• Section: 80HHC; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C : NEW DELHI BEFORE SHRI C.L.SETHI AND SHRI K.D.RANJAN ITA NO.206/DEL/2005 ASSESSMENT YEAR : 2001-02 MRS. VEENU KAPOOR 12/48, PUNJABI BAGH, NEW DELHI. VS. DCIT-CIRCLE 26(1) NEW DELHI. (APPELLANT) (RESPONDENT) ITA NO.566/DEL/2007 ASSESSMENT YEAR : 2001-02 MRS. VEENU KAPOOR PROP. M/S SHIRDI EXPORTS, 12/48, PUNJABI BAGH, NEW DELHI. VS. DCIT-CIRCLE 26(1) NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI TANEJA, A.R. RESPONDENT BY : SSHRI PANKAJ JINDAL, D.R. ORDER PER K.D.RANJAN, AM : THESE APPEALS BY THE ASSESSEE FOR ASSESSMENT YEAR 2 001-02 ARISE OUT OF SEPARATE ORDERS OF THE LD.CIT(A)-XXIV, NEW DELHI TH ESE APPEALS WERE HEARD TOGETHER AND FOR THE SAKE OF CONVENIENCE ARE DISPOS ED OF BY THIS COMMON ORDER. 2. THE ONLY ISSUE FOR CONSIDERATION IN ASSESSEES A PPEAL IN ITA NO.206/DEL/2004 RELATES TO CONFIRMING THE ADDITION OF RS. 22,14,385/-. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT ASSESSEE IS PR OPRIETOR OF M/S SHIRDI EXPORTS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER FOUND THAT ASSESSEE HAD MADE SALES WORTH RS.22,14,385/- TO M/S AIM CONCEPTS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS OF AIM CONCEPTS, T HE CONFIRMATION COPY OF ACCOUNT FROM M/S SHIRDI EXPORTS WAS FILED. IT WAS N OTED BY THE ASSESSING OFFICER THAT M/S AIR CONCEPTS HAD DEBITED RS.22,14,385/- IN THE PROFIT AND LOSS ACCOUNT. 2 THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE AMO UNT OF RS.22,14,385/- WAS NOT FOUND AS RECEIPT IN THE PROFITS AND GAINS OF M/S SH IRDI EXPORTS ON ACCOUNT OF LOCAL SALES. THE ASSESSEE VIDE LETTER DATED 24/2/2004 ACC EPTED THE FACT THAT THE AMOUNT WAS NOT SHOWN BY THE ASSESSEE IN PROFIT AND LOSS AC COUNT. HOWEVER, THE ASSESSEE FILED REVISED TRADING, PROFIT AND LOSS ACCOUNT WHER EIN THE AMOUNT OF RS.22,14,385/- WAS SHOWN AS LOCAL SALE BUT DEBITED THE SAME AMOUNT IN THE PROFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATION OFFERED BY THE ASSESSEE ON THE GROUND THAT THE AMOUNT WAS NOT DISC LOSED AS LOCAL SALES IN THE PROFIT AND LOSS ACCOUNT AND THE ASSESSEE HAD ATTEMP TED TO CONCEAL THE LOCAL SALES MADE TO M/S AIM CONCEPTS. IT WAS ALSO NOTED BY THE ASSESSING OFFICER THAT WHILE FINALIZING THE PROFIT AND LOSS ACCOUNT, THE ASSESSE E HAS CLEARLY GIVEN THE ACCOUNT OF PURCHASES MADE AND THE EXPENSES INCURRED DURING THE YEAR. THEREFORE, THE DEBIT NOTE OF ASSESSEE IN THE PURCHASE ACCOUNT AND PROCES SING FURNISHING CHARGES WAS NOT AT ALL ACCEPTABLE. IT WAS CLEARLY AN AFTER THOU GHT ON THE PART OF THE ASSESSEE TO CONCEAL THE LOCAL SALES WORTH RS.22,14,385/-. THE A SSESSING OFFICER ACCORDINGLY ADDED THIS AMOUNT TO THE INCOME DECLARED BY THE ASS ESSEE. 3. ON APPEAL, IT WAS PLEADED THAT THE ASSESSEE HAD RECEIVED AN ORDER OF EXPORT FROM M/S BUBLLES INC. BUT SINCE THE ASSESSEE WAS NO T HAVING THE QUOTA FOR THAT CATEGORY OF EXPORTS, THEY SOUGHT HELP OF M/S AIM CO NCEPTS WHO WAS HAVING NON- TRANSFERABLE QUOTA ALLOTTED BY AEPC. SINCE THE QUOT A WAS NON-TRANSFERABLE, THE SHIPMENT WAS MADE THROUGH THE BILL OF M/S AIM CONCE PTS TO M/S BUBBLES INC. SIMILARLY, FROM M/S BUBBLES INC THE AMOUNT OF SALE PROCEEDS WAS RECEIVED THROUGH M/S AIM CONCEPTS. THEREFORE, IT WAS SUBMITT ED BY THE LD. A.R. OF THE ASSESSEE THAT ASSESSEE HAD REDUCED THE AMOUNT OF EX PENDITURE BY CREDITING THE PURCHASE, FINISHING AND PROCESSING CHARGES. SINCE T HE ASSESSEE WAS A PROPRIETARY CONCERN, NO ACCOUNTING STANDARDS WERE APPLICABLE TO THE ASSESSEE. IT WAS ALSO SUBMITTED THAT THE ENTRY PASSED BY ASSESSEE WAS NOT HAVING ANY IMPACT ON THE PROFIT OF THE ASSESSEE. THE TRANSACTION BETWEEN ASS ESSEE AND M/S AIM CONCEPTS WAS ONLY AN ARRANGEMENT OF NON-TRANSFERABLE QUOTA A ND M/S AIM CONCEPTS HAD NOT 3 DONE ANY ACTIVITY WHICH MIGHT BE CONSIDERED AS EXPO RT MADE BY THE SAID CONCERN. THEREFORE, THE GOODS EXPORTED BY THE ASSESSEE COULD NOT BE TERMED AS LOCAL SALES TO M/S AIM CONCEPTS. 4. THE LD. CIT(A) CONSIDERED THE SUBMISSIONS MADE B Y THE ASSESSEE. HE WAS OF THE OPINION THAT SINCE ALL BILLS AND INVOICES WE RE IN THE NATURE OF M/S AIM CONCEPTS, THEREFORE, THE EXPORT WOULD BE ACCOUNTED FOR IN THE BOOKS OF M/S AIM CONCEPTS ONLY. IN THESE CIRCUMSTANCES, GOODS EXPORT ED BY ASSESSEE THROUGH M/S AIM CONCEPTS, THOUGH THEIR NON-TRANSFERABLE QUOTA W OULD BE TREATED AS LOCAL SALES MADE TO THE SAID CONCERN. THOUGH THE ASSESSEE HAD NOT CLAIMED EXPORT BENEFIT OF DEDUCTION U/S 80HHC FOR THE SAID EXPORT EARNINGS YE T BY NOT SHOWING THE SAID AMOUNT OF LOCAL SALES, IT HAD CAUSED REDUCTION IN T HE TOTAL TURNOVER FIGURE OF THE ASSESSEE WHICH IN TURN HAS ENABLED THE ASSESSEE TO CLAIM A HIGHER DEDUCTION U/S80HHC AND AS A RESULT THE TAXABLE INCOME OF ASSE SSEE HAD BEEN REDUCED. ACCORDINGLY, THE LD. CIT(A) SUSTAINED THE ORDER PAS SED BY THE ASSESSING OFFICER. 5. BEFORE US, THE LD. A.R. OF THE ASSESSEE SUBMITTE D THAT WHILE PREPARING THE ACCOUNTS, THE SALES MADE TO M/S AIM CONCEPTS HAS BE EN REDUCED FROM THE PURCHASES. IT WOULD NOT HAVE ANY IMPACT ON THE INCO ME OF THE ASSESSEE. HOWEVER, HE COULD NOT EXPLAIN AS TO HOW THE PROFIT HAS BEEN EFFECTED AND WHAT WAS THE AMOUNT OF EXPENDITURE IN THE FORM OF PURCHASES AND OTHER CHARGES RELATABLE TO SALES OF RS.22,14,385/-. HE ALSO CONCEDED THAT ASSE SSEE BY NOT DISCLOSING THE SALES IN THE PROFIT AND LOSS ACCOUNT HAS CLAIMED HIGHER A MOUNT OF DEDUCTION U/S 80HHC AS THE AMOUNT OF RS.22,14,385/- WAS TO BE ADDED IN THE TOTAL TURNOVER. HE SUBMITTED THAT THE DEDUCTION CLAIMED ORIGINALLY BY ASSESSEE U/S 80HHC WAS AT RS.24,07,957/- WHICH WILL BE REDUCED TO RS.23,07,49 9/- IF THE SALES OF RS.22,14,385/- ARE ADDED IN THE TOTAL TURNOVER OF T HE ASSESSEE. THE LD. A.R. OF THE ASSESSEE CONCEDED THAT ASSESSEE HAD CLAIMED EXCESS DEDUCTIONS U/S 80HHC. HOWEVER, IT WAS PLEADED BY HIM THAT THE CLAIM WAS B ONA FIDE. 4 6. ON THE OTHER HAND, THE LD. SR.D.R. SUPPORTED THE ORDER OF THE LD. CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE FACTS STATED ABOVE, IT IS CLEAR TH AT ASSESSEE HAD MADE SALES TO M/S AIM CONCEPTS WHICH WAS NOT DISCLOSED AS LOCAL SALES AND THE AMOUNT OF THE SAME WAS DEDUCTED FROM THE PURCHASES. FROM THE MATERIAL AVAILABLE ON RECORD, WE ARE NOT AWARE AS TO WHAT WAS THE AMOUNT OF EXPENDITURE RELATEABLE TO THE SALES OF RS.22,14,385/-. WE ARE ALSO NOT SURE AS TO WHETHER THE TRANSACTION MADE WITH M/S AIM CONCEPTS HAS RESULTED IN ANY PROFIT OR LOSS. TH EREFORE, IN OUR CONSIDERED OPINION, WE FEEL IT PROPER TO SET ASIDE THE MATTER TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION THAT HE WILL EXAMINE THE AMOUNT OF EXPENDITURE INCURRED IN RESPECT OF SALES OF RS.22,14,385/-. THE ASSESSING O FFICER WILL ALSO SEE WHETHER THERE IS DOUBLE DEDUCTION OF THE AMOUNT IN PROFIT A ND LOSS PERTAINING TO THE SALES OFRS.22,14,385/-. IN OTHER WORDS, THE ASSESSING OFF ICER HAS TO EXAMINE AS TO WHETHER THE ASSESSEE HAS DEBITED THE EXPENDITURE RE LATEABLE TO SALES OF RS.22,14,385/- INITIALLY AND AT THE SAME TIME, HE H AD AGAIN DEBITED THE AMOUNT OF RS.22,14,385/- IN THE PROFIT AND LOSS ACCOUNT WHILE GIVING THE REVISED TRADING ACCOUNT. THE ASSESSING OFFICER AFTER VERIFICATION P ASSED A SPEAKING ORDER AFTER AFFORDING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. THE ASSESSING OFFICER WILL ALLOW THE DEDUCTION U/S 80HHC AFTER TA KING INTO CONSIDERATION THE LOCAL SALES OF RS.22,14,385/- AS PER PROVISIONS OF LAW. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 9. THE APPEAL IN ITA NO.566/DEL/2007 IS DIRECTED AG AINST THE ORDER PASSED U/S 271(1)(C ). THE ASSESSING OFFICER HAS LEVIED THE PE NALTY U/S 271(1)(C ) IN RESPECT OF THE ADDITION MADE ON ACCOUNT OF LOCAL SALES OF W ORTH RS.22,14,385/-. 10. ON APPEAL, THE LD. CIT(A) HAS CONFIRMED THE PEN ALTY U/S 271(1)(C). 5 11. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. SINCE WE HAVE SET ASIDE THE QUANTUM APPEAL TO THE FILE OF ASSESSING OFFICER, WE SET ASIDE THE APPEAL FILED BY THE ASSES SEE IN PENALTY PROCEEDINGS U/S 271(1)(C ) TO THE FILE OF ASSESSING OFFICER AS THE BASIS FOR IMPOSITION OF PENALTY DOES NOT SURVIVE. HOWEVER, THE ASSESSING OFFICER WI LL BE AT LIBERTY TO INITIATE PENALTY PROCEEDINGS IF HE FINDS THAT PENALTY U/S 27 1(1)(C) IS EXIGIBLE. 12. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 27TH NOVE MBER, 2009. SD/- (C.L.SETHI) SD/- (K.D.RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 27.11.2009. PSP COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR