2015 (12) TMI 1678 - HC - Income Tax

Addition in respect of export sale proceeds, bogus duty drawback, unsecured loan, sales outside books, advance received from customers and cash deposits - additions made essentially on the basis of the statement of Mr. Manoj Gupta, partner of the Assessee - ITAT deleted the addition - Held that - CIT (A) undertook a detailed examination of the material to return a finding that none of the additions were called for. The documents placed by the Assessee on record were held sufficient to demonstrate that the amount received by the Assessee was indeed towards the export sale proceeds and no bogus duty drawback was received by the Assessee. Therefore the duty drawback received could not be treated as the Assessee s unexplained income. In any event, the whether the duty drawback was wrongly received by the Assessee could be decided only when the DRI proceedings concluded. As far as the income tax proceedings were concerned, the duty drawback had to be treated as having been received in relation to export sales made by the Assessee. The materials with regard to each of the above additions were examined by the CIT (A) and found not to be justified. In the impugned order, the ITAT has discussed the evidence in detail and has concurred with the above factual findings of the CIT (A). No substantial question of law arises. - Decided in favour of assessee.

Summary

Issues:
Validity of assessment order, Deletion of additions made by AO, Justification of CIT (A) in deleting the additions

Validity of Assessment Order:
The appellant, engaged in the export of garments, was subjected to a search by the Department of Revenue Intelligence. The Assessing Officer (AO) made additions to the appellant's disclosed income for the Assessment Year (AY) 2003-04 based on various discrepancies, including over-invoicing export goods, bogus duty drawback, unsecured loans, sales outside books, advances received, and cash deposits. The additions were primarily based on the statement of a partner of the appellant, which was later retracted. The Commissioner of Income Tax (CIT) upheld the assessment's validity but deleted the additions on merits. The ITAT allowed the appellant's cross-objections regarding the assessment order's validity without examining the merits. The High Court upheld the assessment order's validity and directed the ITAT to decide on the merits.

Deletion of Additions Made by AO:
The central issue in the appeal was whether the CIT was justified in deleting the additions made by the AO. The CIT undertook a detailed examination of the material and found that the additions were unwarranted. The documents provided by the appellant demonstrated that the amounts received were legitimate export sale proceeds, and no bogus duty drawback was involved. The CIT concluded that the duty drawback received was related to export sales and not unexplained income. The ITAT concurred with the CIT's factual findings and upheld the deletion of the additions.

Justification of CIT (A) in Deleting the Additions:
Both the CIT and ITAT extensively reviewed the evidence and found that the additions made by the AO were not justified. The duty drawback received by the appellant was deemed to be in connection with legitimate export sales. The ITAT, in its impugned order, supported the CIT's decision to delete the additions, stating that no substantial question of law arose. Consequently, the appeal was dismissed, affirming the deletion of the additions made by the AO.