2013 (12) TMI 368 - HC - Income Tax

Deduction u/s 80HHC - Held that - The Tribunal has taken note of every item of evidence including the three statements of the Sheikh - None of the documentary evidence has been impeached on behalf of the Revenue - The Tribunal has also taken due notice of the statements of the Sheikh and has preferred to accept the retraction supported later by the affidavit - No material has been brought on record or in the course of the proceedings before the Tribunal to throw any doubt on the credibility of the affidavit sworn to before the Indian Consulate in Dubai - There was copious documentary evidence in support of the exports - The findings of the Tribunal are essentially findings of fact and they cannot be subjected to the criticism of being unreasonable or perverse or irrational - Following CIT v. Daulat Ram Rawatmull 1972 (9) TMI 9 - SUPREME Court - Findings on questions of pure fact arrived at by the Tribunal are not to be disturbed by the High Court on a reference unless it appears that there was no evidence before the Tribunal upon which they as a reasonable men could come to the conclusion to which they have come ; and this is so even though the High Court would on the evidence have come to a conclusion entirely different from that of the Tribunal - Such a finding can be reviewed only on the ground that there is no evidence to support it or that it is perverse - The assessees was entitled to the deduction under section 80HHC of the Act in respect of the export of goods to Taj - Decided against Revenue.

Summary

Issues Involved:

1. Entitlement of the assessee to deduction under section 80HHC of the Income-tax Act, 1961.
2. Validity of penalty imposed under section 271(1)(c) of the Income-tax Act, 1961.

Detailed Analysis:

1. Entitlement to Deduction under Section 80HHC:

The primary issue revolves around whether the assessee was rightly held by the Income-tax Appellate Tribunal (the Tribunal) to be entitled to the deduction under section 80HHC of the Income-tax Act, 1961. The appeals, though they relate to three different assessees, involve a common question regarding this deduction.

The assessee, a public limited company, filed a return of income declaring a total income of Rs. 2,570 and claimed a deduction of Rs. 6,48,92,549 under section 80HHC, which included Rs. 6,05,43,627 for the export of synthetic rubber sole sheets to a Dubai-based company, Taj Al Khaleej General Trading Co. (TAKGT). Following a search under section 132 of the Act, the Assessing Officer (AO) questioned the genuineness of these exports based on a statement from Sheikh Suad Bin Abdullah Rashid Al Nuaimi, a partner of TAKGT, who denied any dealings with the assessee.

The AO denied the deduction, treating the amount as "Income from other sources." The Commissioner of Income-tax (Appeals) initially remanded the case for further examination, but the AO maintained his stance upon reassessment. The Tribunal, however, found that the AO and Commissioner had disregarded substantial documentary evidence provided by the assessee, which included bank certificates, export orders, customs endorsements, and shipping bills, all supporting the genuineness of the exports.

The Tribunal noted the retraction of the Sheikh's initial statement and an affidavit affirming the exports' authenticity, which was also confirmed by the Consulate General of India in Dubai. The Tribunal concluded that the tax authorities were not justified in disbelieving the documentary evidence based solely on the Sheikh's initial statement, which was later retracted.

2. Validity of Penalty under Section 271(1)(c):

The second issue pertains to the penalty imposed under section 271(1)(c) for concealment of income. The Tribunal's decision to cancel the penalty was consequential to its finding on the first issue. Since the Tribunal upheld the assessee's claim for deduction under section 80HHC and deleted the addition of the amount as "Income from other sources," it also cancelled the penalty imposed on the assessee.

Conclusion:

The High Court upheld the Tribunal's findings, emphasizing that the Tribunal's decision was based on substantial documentary evidence and a proper appreciation of the facts. The Court noted that the Tribunal had considered all relevant evidence, including the retraction and affidavit of the Sheikh, and found no basis to disbelieve the exports. The Court concluded that the Tribunal's findings were not perverse or irrational and thus upheld the assessee's entitlement to the deduction under section 80HHC and the cancellation of the penalty under section 271(1)(c). The appeals of the Revenue were dismissed, and all substantial questions of law were answered in favor of the assessee.