The DCIT, Central Circle-4, Surat V. Rivaa Exports, Surat

ITSSA 642/AHD/2011

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 1157 (ITAT-SURAT)
• Duration Of Justice: 9 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 23-02-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 02-08-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 01-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: KETAN H SHAH
• Keywords: Bogus purchase; Document seized; Assessment record; Documents seized; Set aside
• Section: 143(3); 142(1); 80HHC; 153A; 143(2); 13; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, HON'BLE JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, HON'BLE ACCOUNTANT MEMBER (VIRTUAL HEARING) . . ./ I.T(SS)A NO.642/AHD/2011 [ [ / ASSESSMENT YEAR: 2004-05 THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-4, SURAT. VS RIVAA EXPORTS,RIVAA HOUSE, UDHNA DARWAJA, RING ROAD, SURAT 394 238. [PAN: AADFP 1706 H] / APPELLANT /RESPONDENT [ /ASSESSEE BY SHRI KETAN H.SHAH AR /REVENUE BY SHRI SREENIVAS T.BIDARI - CIT( DR ) / DATE OF HEARING: 10 . 0 2 .20 2 1 /PRONOUNCEMENT ON: 23 . 0 2 .202 1 /O R D E R PER PAWAN SINGH, JUDICIAL MEMEBER: 1. THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-II, AHMEDABAD, HEREINAFTER REFERRED AS LD. CIT(A), DATED 01.09.2011 FOR ASSESSMENT YEAR (AY) 2004-05. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.91,91,937/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOGUS PURCHASES. 2) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S.80HHC OF THE INCOME TAX ACT OF RS.58,11,629/- INSTEAD OF RS.1,14,048/- ALLOWED BY THE ASSESSING OFFICER. 3) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN RELYING UPON THE PREVIOUS DECISION OF THE ITAT IGNORING THAT THE SAID DECISION WAS DCIT, CENTRAL CIRCLE-4, SURAT VS. M/S. RIVAA EXPORTS./ ITA NO.642/AHD/2011 FOR A.Y. 2004-05 2 BASED UPON THE DECISION OF THE ITAT IN THE CASE OF M/S.TOPMAN EXPORTS THAT HAD SINCE BEEN REVERSED BY BOMBAY HIGH COURT IN THEIR DECISION IN THE CASE OF CIT VS. KALPATARU COLOURS AND CHEMICALS, 3285 ITR 451 (MUM.). 4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. 5) IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT (A) BE SET ASIDE AND THAT OF THE A.O. BE RESTORED TO THE ABOVE EXTENT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM WAS ENGAGED IN THE BUSINESS OF EXPORT OF TEXTILE FABRIC. A SEARCH ACTION UNDER SECTION 132 OF THE ACT WAS CARRIED OUT ON THE OFFICE PREMISES OF ASSESSEE ON 20.01.2009. DURING THE SEARCH, CERTAIN INCRIMINATING MATERIAL WAS FOUND IN THE OFFICE OF ASSESSEE. THE INCRIMINATING MATERIAL WAS SEIZED AS PER ANNEXURE-BS-1. THE INCRIMINATING MATERIAL CONSISTING OF ONE FILE CONTAINING ORDER PASSED BY THE EXCISE AUTHORITIES REGARDING WITHDRAWAL OF EXCISE DUTY REBATE AVAILED BY THE ASSESSEE. CONSEQUENT UPON THE SEARCH ACTION, A NOTICE UNDER SECTION 153A OF THE ACT DATED 30.09.2009 WAS SERVED UPON THE ASSESSEE. IN RESPONSE TO NOTICE UNDER SECTION 153A OF THE ACT, THE ASSESSEE FILED ITS RETURN OF INCOME ON 11.01.2010, DECLARING INCOME OF RS.1.19 CRORE. IN THE COMPUTATION OF INCOME THE ASSESSEE ALSO CLAIMED DEDUCTION UNDER SECTION 80HHC OF THE ACT OF RS.58,11,629/-. THE ASSESSEE FIRM SHOWN GROSS PROFIT (GP) OF RS.4.88 CRORES ON THE TOTAL TURNOVER OF RS.33.3 CRORES, WHICH IS 14.79 %. THE ASSESSING OFFICER (AO) AFTER SERVING A STATUTORY NOTICE UNDER DCIT, CENTRAL CIRCLE-4, SURAT VS. M/S. RIVAA EXPORTS./ ITA NO.642/AHD/2011 FOR A.Y. 2004-05 3 SECTION 143(2) AND 142(1) OF THE ACT, PROCEEDED FOR ASSESSMENT. DURING THE ASSESSMENT, THE AO, ON THE BASIS OF SEIZED DOCUMENTS NOTED THAT ASSESSEE HAS SHOWN PURCHASES OF RS.91,91,937/- OF GREY CLOTHES FROM THE VARIOUS FAKE PARTIES. DURING THE SEARCH AT THE PREMISES OF ASSESSEE LIGHT COLORED BROWN FILE OF RIVAA EXPORT LTD., FOUND AND SEIZED AS PER ANNEXURE-BS-1. THIS FILE CONTAINED THE ORDER PASSED BY EXCISE AUTHORITIES REGARDING WITHDRAWAL OF EXCISE DUTY REBATE AVAILED BY THE ASSESSEE. EXCISE AUTHORITIES FINDING ARE THAT THE ASSESSEE AND ITS ASSOCIATE CONCERNS NAMELY RIVAA EXPORT LTD., AND RIVA FASHIONS PVT LTD. HAS WRONGLY AVAILED THE REBATE OF CONSUMPTION OF DUTY PAID ON GREY CLOTHES. THE EXCISE AUTHORITY CONCLUSIVELY PROVED THAT THOSE SUPPLIERS WERE NON-EXISTENT, FICTITIOUS AND SIMPLY BOGUS. RIVAA EXPORT LTD., AND RIVAA FASHIONS PVT. LTD., IS AMALGAMATED IN RIVAA EXPORTS I.E. THE ASSESSEE. 3. ON THE BASIS OF AFORESAID FACTS AND ALLEGED INCRIMINATING MATERIAL, THE AO ISSUED SHOW CAUSE NOTICE DATED 29.09.2010 AS TO WHY THE PURCHASES OF RS.91.91 LAKHS SHOULD NOT BE DISALLOWED. THE ASSESSEE FILED ITS REPLY DATED 29.10.2010. IN THE REPLY, THE ASSESSEE SPECIFICALLY STATED THAT REGULAR ASSESSMENT UNDER SECTION 143(3) OF THE ACT HAD BEEN COMPLETED AND NO MATERIAL DURING THE COURSE IS UNEARTHED, AND ONLY ORDERS PASSED DCIT, CENTRAL CIRCLE-4, SURAT VS. M/S. RIVAA EXPORTS./ ITA NO.642/AHD/2011 FOR A.Y. 2004-05 4 BY EXCISE AUTHORITIES REGARDING WITHDRAWAL OF EXCISE DUTY IS FOUND. THE MATTER RELATING TO WITHDRAWAL OF EXCISE REBATE HAS NOT ATTAINED FINALITY, THE ASSESSEE WILL APPROACHED THE HON'BLE HIGH COURT FOR RELIEF. IT WAS STATED THAT THE FINDING OF EXCISE DEPARTMENTS ON EXCISE DUTY HAVE BEEN SELECTIVELY USED BY THE REVENUE. EXCISE DUTY HAS NOT DISPUTED THE EXPORT OF GOODS. THERE CANNOT BE ANY SALES/EXPORT WITHOUT PURCHASE. THE ASSESSEE FURTHER STATED THAT THEY CANNOT PRODUCE THE SUPPLIER AS THE ASSESSEE HAS NO POWER LIKE INCOME TAX DEPARTMENT TO COMPEL THEIR ATTENDANCE. THE MATERIAL WERE PURCHASED AGAINST ACCOUNT PAYEE CHEQUES. THE ASSESSEE FURTHER SHOWN HIS IGNORANCE, IF ANY OTHER ENQUIRY IS INITIATED BY THE REVENUE FOR VERIFICATION FROM THEIR BANKER. THE REPLY FILED BY THE ASSESSEE WAS NOT ACCEPTED BY THE AO. THE AO HELD THAT ASSESSMENT COMPLETED UNDER SECTION 143(3) OF THE ACT WAS NOT PASSED ON MATERIAL RECOVERED DURING THE SEARCH. THE ISSUE OF BOGUS PURCHASES IS DIRECTLY RELATES TO EVIDENCE UNEARTHED DURING THE SEARCH AND THE STATEMENT OF PARTNER OF THE ASSESSEE, REGARDING THE GENUINENESS OF TRANSACTION. THE ISSUE OF BOGUS PURCHASES IS DISCOVERED DURING THE COURSE OF SUCH ACTION AND HAVE NO BEARING ON THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT. THE ORDER OF AO ON EXCISE DUTY HAS BEEN CONFIRMED BY LD. COMMISSIONER OF CENTRAL EXCISE. ON THE OBJECTION ABOUT THE GENUINENESS OF DCIT, CENTRAL CIRCLE-4, SURAT VS. M/S. RIVAA EXPORTS./ ITA NO.642/AHD/2011 FOR A.Y. 2004-05 5 PURCHASED THROUGH CHEQUES, THE AO HELD THAT PAYMENT OF M/S. RADHESHYAM FABRICS WAS MADE AFTER 240 DAYS. THE ASSESSEE HAS NOT DISCHARGED HIS ONUS NOR DISCLOSED FULL FACTS ABOUT THE TRANSACTION OF PURCHASES. ON THE OBJECTION THAT SALES/EXPORT WAS NOT DISPUTED / DOUBTED, THE AO HELD THAT ISSUE IS ABOUT THE GENUINENESS OF PURCHASES. THE ASSESSEE IS NOT A TRADER BUT A MANUFACTURER. SO, IT IS NOT THAT INPUT AND OUTPUT ARE SAME. FURTHER, THE EXCISE AUTHORITY WERE NOT AGREED WITH THE ASSESSEES CONTENTION WHILE WITHDRAWING OF EXCISE DUTY REBATE BY THE ASSESSEE. THE AO ON THE BASIS OF HIS AFORESAID OBSERVATION TREATED THE PURCHASE OF RS.91,91,237/- AS BOGUS AND ADDED TO THE INCOME OF ASSESSEE. 4. THE AO FURTHER NOTED THAT, THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80HHC OF THE ACT. THE ASSESSEE WHILE COMPUTING THE WORKING, HAS NOT REDUCED THE SALE PROCEED RECEIVED FROM SALE OF DEPB DUTY ENTITLEMENT PASS BOOK FOR ARRIVING THE PROFIT OF BOOKS ENTITLED FOR DEDUCTION UNDER 80HHC OF THE ACT. THE ASSESSEE HAS ONLY TAKEN PROFIT SALE OF DEPB I.E. THUS, BETWEEN SALE PROCEED FROM DEPB AND DEPB GRANTED TO ARRIVE AT ELIGIBLE PROFIT OF BUSINESS. THE AO DURING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT PASSED ON 22.12.2006 REVISED THE COMPUTATION IN ACCORDANCE WITH THE PROVISION OF SECTION 80HHC OF THE ACT AND REWORKED PROFIT OF BUSINESS FOR COMPUTING 80HHC OF THE ACT. DCIT, CENTRAL CIRCLE-4, SURAT VS. M/S. RIVAA EXPORTS./ ITA NO.642/AHD/2011 FOR A.Y. 2004-05 6 THE ASSESSEE FILED APPEAL BEFORE THE LD.CIT(A), WHICH WAS DISMISSED VIDE ORDER DATED 25.07.2007. ON FURTHER APPEAL BY THE ASSESSEE BEFORE THE TRIBUNAL, THE TRIBUNAL RESTORED THE ISSUE TO THE FILE OF THE AO TO RECOMPUTE THE DEDUCTION U/S.80HHC OF THE ACT IN ACCORDANCE WITH THE AMENDMENT BROUGHT IN INCOME TAX ACT W.E.F 01.04.1998. THE AO FURTHER NOTED THAT IN THE SET-ASIDE ASSESSMENT, THE ASSESSEE WAS ALLOWED DEDUCTION OF RS. 58,11629/-, VIDE ORDER DATED 15.11.2010. HOWEVER, THE A.O. AGAIN RE-CALCULATED THE CLAIM UNDER SECTION 80HHC AND RESTRICTED THE SAME AT RS. 114048/-. 5. AGGRIEVED BY THE ACTION OF AO, THE ASSESSEE FILED APPEAL BEFORE THE LD.CIT(A). THE LD.CIT(A) DELETED BOTH THE ADDITIONS / DISALLOWANCES HELD THAT EXCISE DUTY NOT ALLOWED THE REBATE AS THERE WAS SOME ALERT CIRCULAR ISSUED BY EXCISE DUTY AND THE EXCISE DEPARTMENT NOT TO CONSIDER THE VARIOUS ISSUES LIKE PAYMENT OF ACCOUNT PAYEE CHEQUE, PURCHASES OF SALES, EXPORT MADE, QUANTITATIVE DETAILS MAINTAINED ETC., IT WAS FURTHER HELD THAT ADMITTED POSITION IS THAT WHATEVER CIRCULAR ISSUED BY EVERY DEPARTMENT IS BINDING TO A SPECIFIC DEPARTMENT AND NOT TO THE INCOME TAX DEPARTMENT. THE SEIZED MATERIAL WAS ONLY FOR THE PURPOSE OF EXCISE DUTY FOR CALCULATING REBATE AND NO SUCH EVIDENCE REGARDING FAKE PURCHASES FOR THE PURPOSE OF INCOME TAX IS FOUND IN THE SEARCH. ON THE OBSERVATION OF AO, THAT PARTIES DCIT, CENTRAL CIRCLE-4, SURAT VS. M/S. RIVAA EXPORTS./ ITA NO.642/AHD/2011 FOR A.Y. 2004-05 7 WERE NOT TRACEABLE. THE LD. CIT(A) HELD THAT ASSESSMENT WAS FINALIZED AFTER 6.5 YEARS FROM THE CLOSURE OF CEN-VAT SCHEME. THUS, IN VIEW OF LAPSE OF TIME BETWEEN TRANSACTION AND THE PASSAGE OF TIME, SO MANY THINGS MAY HAVE HAPPENED. THEY MAY CLOSE THEIR BUSINESS OR HAVE MIGRATED FROM THE PLACE OF WORK. IN SUCH SITUATION, PRODUCTION OF PARTIES WERE BEYOND THE CONTROL OF ASSESSEE. THE PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES AND GOODS WERE RECEIVED. THUS, THE PURCHASES CANNOT BE TREATED AS BOGUS. 6. ON THE ISSUE OF DISALLOWANCE UNDER SECTION 80HHC OF THE ACT, THE LD.CIT(A) HELD THAT THE AO EXCEEDED HIS JURISDICTION WHILE SITTING OVER THE FINDING OF THE TRIBUNAL, WHEREIN HE HIMSELF HAS GIVEN THE APPEAL EFFECT, THE PROPER COURSE TO THE DEPARTMENT WAS TO APPROACH THE HIGHER COURT INSTEAD OF QUASHING THE ORDER OF THE TRIBUNAL. THE LD.CIT(A) ALSO REFERRED AND RELIED ON THE DECISION OF HON'BLE MADRAS HIGH COURT IN CASE OF SESHASAYEE PAPER AND BOARD LTD., VS IAC (1986) 157 ITR 342. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE THIS TRIBUNAL. 7. WE HAVE HEARD THE SUBMISSION OF LD. COMMISSIONER OF INCOME TAX / DEPARTMENTAL REPRESENTATIVE (CIT-DR) FOR THE REVENUE AND THE LEARNED AUTHORISED REPRESENTATIVE (AR) OF THE ASSESSEE AND GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES CAREFULLY. DCIT, CENTRAL CIRCLE-4, SURAT VS. M/S. RIVAA EXPORTS./ ITA NO.642/AHD/2011 FOR A.Y. 2004-05 8 GROUND NO.1 RELATES TO DELETING THE ADDITION ON BOGUS PURCHASES. THE LEARNED CIT-DR FOR THE REVENUE SUBMITS THAT A SEARCH ACTION UNDER SECTION 132 OF THE ACT WAS CARRIED OUT AT THE PREMISES OF ASSESSEE ON 20.01.2009. IN THE SEARCH, CERTAIN INCRIMINATING MATERIAL INDICATING THE BOGUS PURCHASES SHOWN BY THE ASSESSEE WAS RECOVERED. IN THE SEARCH A FILE CONTAINING ORDER OF EXCISE DEPARTMENT WAS RECOVERED. IN THE SAID FILE, THERE WAS ORDER OF EXCIDE DEPARTMENT REGARDING WITHDRAWAL OF EXCISE DUTY REBATE AVAILED BY THE ASSESSEE. ORDER OF WITHDRAWAL OF EXCISE DUTY REBATE WAS CONFIRMED BY LD.COMMISSIONER OF EXCISE. THE ASSESSEE WAS GIVEN OPPORTUNITY TO PROVE THE GENUINENESS OF PURCHASES. THE ASSESSEE FAILED TO PRODUCE THE PARTIES FOR VERIFICATION. THE AO AFTER DETAILED DISCUSSION HELD THAT ASSESSEE FAILED TO PRODUCE THE SUPPLIERS, ALL THE SUPPLIERS WAS NOT EXISTENT PARTY. THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF TRANSACTION, THUS, THE AO DISALLOWED THE ENTIRE PURCHASES. THE LD. CIT(A) ALLOWED RELIEF TO THE ASSESSEE BY TAKING VIEW THAT CIRCULAR AND ORDER OF EXCISE DEPARTMENT ARE NOT BINDING ON INCOME TAX AUTHORITIES. THE LEARNED CIT-DR PRAYED TO UPHOLD THE ORDER OF AO. IN ALTERNATIVE, THE LEARNED CIT-DR FOR THE REVENUE SUBMITS THAT SOME REASONABLE PERCENTAGE OF BOGUS PURCHASES MAY BE UPHOLD TO AVOID THE POSSIBILITY OF REVENUE LEAKAGE. DCIT, CENTRAL CIRCLE-4, SURAT VS. M/S. RIVAA EXPORTS./ ITA NO.642/AHD/2011 FOR A.Y. 2004-05 9 8. WE HAVE CONSIDERED RIVAL CONTENTION OF BOTH THE PARTIES. THE AO MADE DISALLOWANCES OF ENTIRE PURCHASES SHOWN BY THE ASSESSEE FROM THREE (03) PARTIES NAMELY GANAPATHI TEXTILE OF RS.40,10,996/-, NIKUNJ TEXTILE OF RS.28,12,149/- AND ARJUN SILK MILLS FOR RS.26,68,791/- TOTAL OF RS.91,91,936/-. THE AO DISALLOWED THE ENTIRE PURCHASES BY TAKING VIEW THAT ASSESSMENT COMPLETED UNDER SECTION 143(3) OF THE ACT WAS NOT PASSED ON THE BASIS OF INCRIMINATING MATERIAL FOUND DURING THE SEARCH. THE ISSUE OF BOGUS PURCHASES IS DIRECTLY RELATES TO THE EVIDENCE FOUND DURING THE SEARCH AND THE STATEMENT OF THE PARTY RECORDED REGARDING THE GENUINENESS OF TRANSACTION. THE ISSUE OF BOGUS PURCHASES IS DISCOVERED DURING THE COURSE OF SEARCH ACTION AND HAVE NO BEARING WITH THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT. ON THE OBJECTION ABOUT THE GENUINENESS OF PURCHASED THROUGH CHEQUES, THE AO HELD THAT PAYMENT OF M/S. RADHESHYAM FABRICS WAS MADE AFTER 240 DAYS. THE ASSESSEE HAS NOT DISCHARGED HIS ONUS NOR DISCLOSED FULL FACTS ABOUT THE TRANSACTION OF PURCHASES. ON THE OBJECTION THAT SALES/EXPORT WAS NOT DISPUTED / DOUBTED, THE AO HELD THAT ISSUE IS ABOUT THE GENUINENESS OF PURCHASES. THE ASSESSEE IS NOT A TRADER BUT A MANUFACTURER. SO, IT IS NOT THAT INPUT AND OUTPUT ARE SAME. FURTHER EXCISE AUTHORITY WERE NOT AGREED WITH THE ASSESSEES CONTENTION WHILE WITHDRAWING OF EXCISE DUTY REBATE BY THE DCIT, CENTRAL CIRCLE-4, SURAT VS. M/S. RIVAA EXPORTS./ ITA NO.642/AHD/2011 FOR A.Y. 2004-05 10 ASSESSEE. THE AO TREATED THE PURCHASE OF RS.91,91,237/- AS BOGUS AND ADDED TO THE INCOME OF ASSESSEE. THE LD.CIT(A) DELETED THE ENTIRE ADDITION BY TAKING VIEW THAT THE EXCISE DEPARTMENT NOT ALLOWED THE REBATE AS THERE WAS SOME ALERT CIRCULAR ISSUED BY EXCISE DUTY AND THE EXCISE DEPARTMENT NOT TO CONSIDER THE VARIOUS ISSUES LIKE PAYMENT OF ACCOUNT PAYEE CHEQUE, PURCHASES OF SALES, EXPORT MADE, QUANTITATIVE DETAILS MAINTAINED ETC., IT WAS FURTHER HELD THAT ADMITTED POSITION IS THAT CIRCULAR ISSUED BY OTHER DEPARTMENT IS NOT BINDING ON THE INCOME TAX DEPARTMENT. THE SEIZED MATERIAL WAS ONLY FOR THE PURPOSE OF EXCISE DUTY FOR CALCULATING REBATE AND NO SUCH EVIDENCE REGARDING FAKE PURCHASES FOR THE PURPOSE OF INCOME TAX IS FOUND IN THE SEARCH. THE LD. CIT(A) ALSO HELD THAT ASSESSMENT WAS FINALIZED AFTER 6.5 YEARS FROM THE CLOSURE OF CEN-VAT SCHEME AND DUE TO LAPSE OF TIME BETWEEN TRANSACTION AND THE PASSAGE OF TIME SO MANY THINGS MAY HAVE HAPPENED, THEY MAY HAVE CLOSE THEIR BUSINESS OR HAVE MIGRATED FROM THE PLACE OF WORK, IN SUCH SITUATION, PRODUCTION OF PARTIES WERE BEYOND THE CONTROL OF ASSESSEE AND THAT THE PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES AND GOODS WERE RECEIVED. AND THE PURCHASES CANNOT BE TREATED AS BOGUS. 9. WE HAVE NOTED THAT THE AO HAS NOT MADE ANY INDEPENDENT INVESTIGATION. THE AO SOLELY RELIED UPON THE ALLEGED DCIT, CENTRAL CIRCLE-4, SURAT VS. M/S. RIVAA EXPORTS./ ITA NO.642/AHD/2011 FOR A.Y. 2004-05 11 INCRIMINATING MATERIAL I.E. ORDER OF EXCISE DEPARTMENT AUTHORITY WITHDRAWING THE EXCISE DUTY REBATE AVAILED BY THE ASSESSEE. THE BOOKS OF ACCOUNTS OF ASSESSEE WAS NOT REJECTED. THE AO IS NOT IDENTIFIED THE RATIO OF ALLEGED BOGUS PURCHASES QUA THE OVERALL PURCHASES OF GREY MATERIAL CONSUMED IN THE PRODUCTION OF NEW MATERIAL. THE PREVIOUS OR SUBSEQUENT YEARS GROSS PROFIT WAS NOT COMPARED BY AO. NO ADVERSE MATERIAL WAS BROUGHT BY THE AO ON RECORD EXCEPT RELYING UPON THE ORDERS OF EXCISE DEPARTMENT. WE HAVE NOTED THAT THE LD. CIT(A) ON THE SUBMISSION OF ASSESSEE CALLED THE REMAND REPORT OF THE AO. THE AO FURNISHED THE REMAND REPORT DATED 19.07.2011, EXTRACT OF WHICH IS REPRODUCED IN PARA 15 OF THE IMPUGNED ORDER. THE LD. CIT(A) AFTER CONSIDERING THE REMAND REPORT HELD THAT THE EXCISE DEPARTMENT NOT ALLOWED THE REBATE, BECAUSE THERE WAS SOME ALERT CIRCULAR ISSUED BY EXCISE DEPARTMENT. THE CIRCULAR ISSUED BY EXCISE DEPARTMENT IS NOT BINDING ON INCOME TAX DEPARTMENT. THE SEIZED MATERIAL IS ONLY FOR THE PURPOSE OF CALCULATING REBATE AND THERE IS NO SUCH EVIDENCE REGARDING FAKE PURCHASES FOR THE PURPOSE OF INCOME TAX. IN OUR VIEW, THE LD.CIT(A) HAS PASSED A DETAILED AND REASONED ORDER AFTER CONSIDERING THE ENTIRE FACTS OF THE CASE. NO CONTRARY FACTS OR LAW IS BROUGHT TO OUR NOTICE TO TAKE OTHER VIEW. THUS, WE AFFIRM THE ORDER PASSED BY LD. CIT(A). 10. IN THE RESULT, GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED. DCIT, CENTRAL CIRCLE-4, SURAT VS. M/S. RIVAA EXPORTS./ ITA NO.642/AHD/2011 FOR A.Y. 2004-05 12 11. GROUND NO.2 RELATES TO RESTRICTING THE DEDUCTION U/S.80HHC OF THE ACT. THE LD. CIT(DR) RELIED UPON THE ORDER OF AO. 12. ON THE OTHER HAND, THE LEARNED AR OF THE ASSESSEE SUBMITS THAT THE ADDITION UNDER SECTION 80HHC OF THE ACT IS NOT BASED ON INCRIMINATING MATERIAL FOUND DURING THE SEARCH CARRIED OUT UNDER SECTION 132 OF THE ACT ON 20.01.2009. THE LEARNED AR FOR THE ASSESSEE SUBMITS THAT IT IS NOW ADMITTED POSITION UNDER THE LAW THAT NO ADDITION CAN BE MADE IN ABSENCE OF ANY INCRIMINATING MATERIAL IN THE COMPLETED ASSESSMENT (ABATED ASSESSMENT). DURING THE ORIGINAL ASSESSMENT ORDER PASSED ON 22.12.2006, THE AO NOT ALLOWED THE DEDUCTION OF RS.1,78,11,568/-. THE ASSESSEE FILED BEFORE THE LD.CIT(A), WHEREIN THE ACTION OF THE AO IN ORIGINAL ASSESSMENT WAS UPHELD. HOWEVER, ON FURTHER APPEAL BEFORE THE TRIBUNAL THE ISSUE WAS RESTORED BACK TO THE AO. THE A.O. IN ORDER GIVING EFFECT ALLOWED DEDUCTION OF RS. 58,11,629/- THE AO EXCEEDED HIS JURISDICTION IN RE-COMPUTING THE DEDUCTION UNDER SECTION 80HHC OF THE ACT. THE ACTION OF THE AO IS ILLEGAL AND WITHOUT AUTHORITY, THE AO EXCEEDED HIS JURISDICTION WHILE RESTRICTING THE DISALLOWANCE UNDER SECTION 80HHC OF THE ACT. 13. AT THE TIME OF HEARING WERE DIRECTED THE LD.CIT(A) TO CALL THE REPORT OF AO, IF THE ACTION OF AO ON THE ISSUE U/S.80HHC OF THE ACT IS PASSED ON ANY SEIZED MATERIAL. IN COMPLIANCE OF DIRECTION DCIT, CENTRAL CIRCLE-4, SURAT VS. M/S. RIVAA EXPORTS./ ITA NO.642/AHD/2011 FOR A.Y. 2004-05 13 OF BENCH THE AO FURNISHED HIS REPORT DATED 16.02.2021, EXTRACT WHICH IS REPRODUCED BELOW: 2. IN THIS REGARD, IT IS SUBMITTED THAT ON PERUSAL OF MATERIAL IN THIS OFFICE, IT IS NOTICED THAT IN THIS CASE ADDITIONS MADE FOR THE AY 2004-05 OF RS. 58,11,629/- U/S 80HHC HAS NO RELEVANCE WITH SEIZED MATERIAL AS THE SAME DOES EMANATE FROM ANY SEIZED MATERIAL. HOWEVER THE ADDITION ON ACCOUNT OF DISALLOWANCE OF BOGUS PURCHASE AMOUNTING TO RS. 91,91,936/- HAS BEEN MADE ON THE BASIS OF SEIZED MATERIAL CONTAINED IN ANNEXURE BS-1, (PAGE 1 TO 282). ATTESTED COPIES OF THE SAME ARE ENCLOSED HEREWITH. FURTHER, IT IS SUBMITTED THAT ORDER U/S 143(3) R.W.S 254 NOT REFLECTED ON ITBA SYSTEM BEING OLD CASE. IT MIGHT HAVE BEEN PASSED MANUALLY AS ASSESSMENT RECORDS IN THIS CASE ARE WITH O/O THE CIT(DR), D BENCH, ITAT-4, AHMEDABAD (PROOF ENCLOSED) HENCE NOT VERIFIABLE. 14. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES AND ALSO PERUSED THE REPORT OF A.O. REFERRED ABOVE. PERUSAL OF THE REPORT OF AO, IT IS CLEAR THAT ADDITION UNDER 80HHC OF THE ACT HAS NO RELEVANCE WITH THE SEIZED MATERIAL. THE LD.CIT(A) WHILE DELETING THE ADDITION ALSO HELD THAT AO EXCEEDED HIS JURISDICTION WHILE SITTING OVER THE FINDING OF THE TRIBUNAL. CONSIDERING THE AFORESAID FACTUAL AND LEGAL DISCUSSION THAT NO ADDITION CAN BE MADE IN THE COMPLETED ASSESSMENT IN ABSENCE OF INCREMENTING MATERIAL FOUND DURING THE SEARCH, HENCE, WE UPHOLD THE ORDER OF LD. CIT(A). NO CONTRARY FACTS OR LAW IS BROUGHT TO OUR NOTICE TO TAKE OTHER VIEW. ACCORDINGLY, THE GROUND NO.2 OF THE REVENUE IS ALSO DISMISSED. DCIT, CENTRAL CIRCLE-4, SURAT VS. M/S. RIVAA EXPORTS./ ITA NO.642/AHD/2011 FOR A.Y. 2004-05 14 15. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 23 RD FEBRUARY 2021 BY PLACING THE RESULT IN THE NOTICE BOARD. SD/- SD/- (DR. ARJUN LAL SAINI) (PAWAN SINGH) ( /ACCOUNTANT MEMBER) ( /JUDICIAL MEMBER) / SURAT, DATED : 23 RD FEB 2021 / #SGR COPY OF ORDER SENT TO:- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / TRUE COPY / / ASSISTANT REGISTRAR, SURAT