2010 (12) TMI 951 - HC - Income Tax

Additions under section 68 - assessee obtained 25 advance licenses from DGFT under DEEC scheme for duty free imports, has grossly over invoiced export of CD ROMs to show its export obligations as having been fulfilled. It was alleged in the aforesaid report that the assessee had partly sold a few of these licenses to various importers for duty free imports - ITAT confirming the order of the CIT(A) in deleting additions - Held that - Charges of over invoicing have not been conclusively proved by the Revenue. The evidence put forth in this regard can utmost be said to be in the realm of speculation, there is no allegation of any Hawala payment or any evidence that the proceeds received were in respect of anything other than the export of goods in question, liability accepted by the assessee is only in respect of non-fulfillment of export obligation which in any case has nothing to do with sales already made for which addition has been made, no infirmity in the approach adopted by the ITAT in upholding the order of the CIT(A) which was passed in accordance with the final order of the Settlement Commission as the same has been impliedly accepted by the Revenue. Against revenue.

Summary

Issues:
Appeal against deletion of additions under section 68 of the Income Tax Act.

Analysis:
1. The Revenue filed an appeal against the ITAT order confirming the CIT(A) order deleting additions under section 68 of the Income Tax Act. The genesis of the dispute involved the assessee, M/s Padmini Technologies Ltd., who obtained advance licenses under the DEEC scheme for duty-free imports. Allegations arose regarding over-invoicing of export of CD ROMs to fulfill export obligations. The Revenue initiated reassessment proceedings under section 147 of the Act based on a report from the Directorate of Revenue Intelligence.

2. The Settlement Commission admitted the assessee's petition, leading to subsequent proceedings. The AO calculated unexplained amounts totaling Rs. 38,12,25,856/- as income under section 68 of the Act. The CIT(A) confirmed the additions, but the Revenue appealed against the Settlement Commission's admission order. The Settlement Commission's final order held that the Revenue failed to substantiate over-valuation charges, settling the matter with additional duty liability and penalties.

3. The assessee appealed to the ITAT against the CIT(A)'s order. The ITAT remanded the matter to the CIT(A) for a fresh decision considering the Settlement Commission's final order and other evidence. The CIT(A) concluded that the Revenue did not conclusively prove over-invoicing charges and deleted the additions made by the AO under section 147.

4. The ITAT upheld the CIT(A)'s order, noting the absence of infirmities. The Revenue's contentions regarding non-acceptance of the Settlement Commission's order and reliance on overwhelming evidence were dismissed. The High Court, on appeal, found no infirmity in the ITAT's decision, as the Revenue's silence was construed as acceptance of the Settlement Commission's order, leading to the dismissal of the appeal.

5. The court concluded that no legal question arose, and the appeal was dismissed accordingly. The approach of upholding the CIT(A)'s order, based on the Settlement Commission's final decision implicitly accepted by the Revenue, was deemed appropriate.