$~28.
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ INCOME TAX APPEAL NO. 1545/2010
Date of decision: 6th August, 2013
CIT
..... Appellant
Through Mr. Abhishek Maratha, Sr. Standing
Counsel.
versus
PEARL INTERCONTINENTAL
..... Respondent
Through Nemo.
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE SANJEEV SACHDEVA
SANJIV KHANNA, J. (ORAL):
This appeal by the Revenue under Section 260A of the Income
Tax Act, 1961 (Act, for short) emanates from order dated 13 th August,
2009 passed by the Income Tax Appellate Tribunal (tribunal, for short)
in the case of Pearl Intercontinental Limited and relates to Assessment
Year 1994-95.
2. By order dated 16th August, 2011, the following two questions of
law were framed:-
"1. Whether the Tribunal was justified
in law deleting the addition of
Rs.82,73,328/- made by the Assessing
Officer by treating the exports to M/s. Taj
ITA No. 1545/2010 Page 1 of 6
AL Khaleej General Trading Company,
Dubai as bogus and consequentially
treating the income to the assessable as
"income from other sources"?
2. Whether on the facts and in the
circumstances of the present case, Tribunal
was correct in law in deleting the addition
of Rs.59.87 lacs made by the Assessing
Officer u/s. 69C of the Act on account of
unexplained expenditure, incurred by
assessee in respect of manufacturing
activity carried out by M/s. MS Shoes East
Ltd. for and on behalf of the assessee."
3. The first question is factual and relates to whether or not the
assessee had made exports to Taj AL Khaleej General Trading
Company, Dubai and whether the sale proceeds amounting to
Rs.82,73,328/- were genuine or bogus.
4. The Assessing Officer in the assessment order dated 31 st March,
2000 has stated that the Sheikh to whom alleged supplies were made
was not produced by the respondent-assessee for cross-examination to
check authenticity and veracity of the Sheikh's affidavit dated 13 th
January, 1997 and contents of letter dated 31st March, 1999 received
from the office of Director General of Foreign Trade. He held that the
sales made to Taj AL Khaleej General Trading Company were not
genuine. We note that similar additions on sales to Taj AL Khaleej
General Trading Company, Dubai were made for the earlier
Assessment Years 1993-94, but were deleted by the tribunal in the case
ITA No. 1545/2010 Page 2 of 6
of the assessee and in the case of sister concerns of the assessee.
Revenue had preferred appeals in the said cases before the High Court.
The High Court dismissed these appeals by a detailed order dated 28th
September, 2012 holding that the factual findings recorded by the
tribunal were not perverse. The decision of the High Court dated 28th
September, 2012 is in ITA No. 999/2006 in the case of M/s M.S.
International Limited, ITA No. 210/2007 in the case of M/s M.S. Shoes
East Limited and ITA No. 575/2007 in the case of M/s Pearl
Intercontinental Limited.
5. This decision is applicable to the present year also. The High
Court while disposing of the appeal has referred to various
documentary evidence, which were filed before the Assessing Officer,
which prove that in fact transaction had taken place and was genuine.
These included original bank certificate from UAE showing bills
received by the said bank drawn on the importer and the fact that the
respondent-assessee was paid, export orders were confirmed by the
importer and the original statement showing credit limit of the importer
issued by Export Credit Guarantee Corporation of India etc. The
Sheikh had also explained the reason why he had earlier made a
different statement. In view of the aforesaid position, we answer the
first question in favour of the respondent-assessee and against the
appellant-Revenue holding that the findings recorded by the tribunal do
ITA No. 1545/2010 Page 3 of 6
not require any interference on the ground that they are perverse.
6. On the second question, we find that the assessment order is
cryptic. The findings recorded therein read as under:-
"In the original assessment the assessee
claimed to have manufactured soles for its sister
concern. In the year under consideration also,
the assessee has claimed to have manufactured
29,93,999 pairs of PVC soles. In the assessment
order for assessment year 1993-94, the
manufacturing cost of PVC soles have been
worked out at Rs.2/- per pair. Taking this into
consideration manufacturing cost for this year is
Rs.59,87,998/-. Since the assessee has failed to
furnish any evidence in support of its contention
that it has utilised the machinery of its sister
concern i.e. MS Shoes East Ltd also as it is not
supported by evidence its contention is not
acceptable. But it is also a fact that the company
have incurred manufacturing expenses which was
not accounted in its books. Therefore, an
addition of Rs.59,87,998/- is being made to the
income of the assessee."
7. Commissioner of Income Tax (Appeals) did not agree with the
findings recorded by the Assessing Officer and deleted the addition
observing that similar addition had been made in the earlier year, i.e.,
Assessment Year 1993-94 but was deleted by the tribunal recording as
under:-
"The next common issue for consideration is
with regard to the addition on account of
unexplained expenditure in the hand of PIL and a
corresponding addition of unaccounted receipts
in the hands of MSSE.
ITA No. 1545/2010 Page 4 of 6
On this issue we find that there is no
dispute with regard to the use of manufacturing
facilities by M/s. PIL. The MD of MSSE has
filed an affidavit in the proceedings whereby he
has affirmed that they 1-Java allowed M/s. PIL to
use the manufacturing facilities and that they did
not charge any fee from them as both of them
were companies belonging to the same group.
This affidavit has not been adverted to by the
revenue authorities. The Assessing Officer has
however made a passing reference to the affidavit
without making any efforts to disprove the
contents of this affidavit. In the light of this
affidavit, we are of the view that the first
requirement of the provisions of S.69 C viz., that
the assessee should have incurred an expenditure
is not prima facie satisfied. In the case of MSSE,
there is no evidence to show that they received
Rs.34 lacs from PIL. On the other hand we have
on affidavit of the MD affirming that MSSE did
not receive any money from PIL for allowing it
to use its manufacturing facilities. The addition
in the hands of MSSE is therefore not called for.
Accordingly ground no. 2 in the case of MSSE
and ground no. 7 in the case of PIL are allowed."
8. By the impugned order the tribunal had affirmed the findings
recorded by the CIT(Appeals).
9. The findings recorded by the tribunal relating to the addition
made by the Assessing Officer under Section 69C of the Act are
factual. We notice that the Assessing Officer did not elaborate and
give detailed reasons or grounds making the said addition. Order of
the Assessing Officer is brief, devoid of details and indicates the half-
hearted attempt to make the addition. The case and the stand of the
ITA No. 1545/2010 Page 5 of 6
respondent-assessee was that they had used machinery of their sister
concern and had not paid any money for the same. No further attempt
was made by the Assessing Officer to verify the facts whether the
sister concern had the requisite machinery or not and whether the
electricity bills of the said sister concern justify the stand of the
respondent-assessee. Similar disallowance was made in the
Assessment Year 1993-94 by the Assessing Officer but was deleted by
the tribunal. Revenue had preferred an appeal before the High Court
being ITA No. 575/2007. The said appeal was admitted to hearing on
3rd October, 2008, but no specific question of law for the similar
addition made and deleted under Section 69C was framed. The
question of law as framed related to deduction under Section 80HHC
in respect of alleged export of goods worth Rs.4,36,38,057/-.
10. We do not think that the decision of the tribunal on the second
question can be categorised and treated as perverse. Accordingly, we
answer the second question in favour of the respondent-assessee and
against the appellant-Revenue.
The appeal is disposed of. No costs.
SANJIV KHANNA, J.
SANJEEV SACHDEVA, J.
AUGUST 06, 2013
VKR
ITA No. 1545/2010 Page 6 of 6
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