2011 (11) TMI 679 - HC - Income Tax

Claim for deduction u/s 80HHC denied - Held that - The burden of proof, that the three firms were actually creditors of the assessee, and that the amount outstanding in the assessee s account was on the appellant-assessee. He could neither produce them nor their confirmation letters. It is alleged that the confirmation letters were filed on record, but were not considered. We do not find that any such argument has been raised, or any ground has been taken that the confirmation letters were produced. So far as benefit under Section 80HHC is concerned, it was for the assessee to claim reductions. Since he did not choose to claim deductions for rebate on exports, it could not be said that the authority erred in law in addition of these amounts as income.

Summary

Issues:
Challenging findings regarding creditors' confirmation letters and outstanding balance, rejection of deduction claim under Section 80HHC, burden of proof on the appellant to establish creditors' authenticity, non-production of confirmation letters, dismissal of appeal based on questions of law.

Analysis:
The appellant-assessee contested the findings of the Assessing Authority, upheld in appeal and second appeal by the Tribunal, concerning the inability to produce confirmation letters of creditors Meenakshi Textiles, Kamal Fabrics, and Mahavir Textiles, totaling specific amounts in the trade of textile exports. The Tribunal emphasized that the outstanding balance with these creditors was significantly higher, indicating the appellant's engagement with them. Notices under Section 133(6) were issued but remained unserved, leading to an adverse inference. The appellant failed to demonstrate that goods purchased from these creditors were utilized in the export business, impacting the claim for deduction under Section 80HHC.

The appellant raised several grounds in the appeal, questioning the addition of creditors' amounts to income, alleging an error in disallowing creditors' genuineness for a specific year, and challenging the disallowance without rejecting account books. Additionally, the appellant queried the taxation of income exempted under Section 80HHC. The burden to prove the creditors' authenticity rested on the appellant, who failed to produce confirmation letters or the creditors themselves. Allegations of filing confirmation letters were made but not substantiated. As the appellant did not claim deductions under Section 80HHC, the addition of the amounts as income was deemed appropriate.

The High Court noted that the appellant did not raise arguments or grounds regarding the non-consideration of confirmation letters. Since the appellant did not opt for deductions under Section 80HHC, the authority's inclusion of the amounts as income was deemed lawful. Consequently, the questions of law framed by the appellant were considered irrelevant for High Court consideration. The Income Tax Appeal was consequently dismissed based on the above analysis.