2014 (1) TMI 1038 - AT - Income Tax

Excess duty drawback availed but not received - undisclosed income - Held that - The assessee submitted that the entire duty drawback had been received by other parties and the assessee did not have any concern with them - During the year, the only sources of income of the assessee were interest and dividend - On verification of the evidence filed, that the goods exported had actually been shipped for export to Russia and Dubai, which fact stood confirmed by the buyers, that the goods had been actually delivered to the shipping agency, which fact stood certified by the customs department, that the receipt of the export proceeds was duly evidenced by invoices, through banking channels and that there was nothing to show that the amounts had been given back to the respective parties - The CIT (A) had opined that Vision Inc. had received the duty drawback in F.Y. 2002-03 and had duly disclosed it as part of its income - The addition had been made by the Assessing Officer by merely and solely relying on the show cause notice issued by the DRI in 2004, without rebutting any of the evidences filed by the assessee - The CIT(A) was justified in deleting the addition on the basis of consideration of all the evidences filed by the assessee - Decided against Revenue.

Summary

Issues Involved:
1. Deletion of addition of Rs. 1,90,00,000/- by CIT (A) due to lack of material evidence.
2. Confession by the assessee regarding wrongful availing of duty drawback.
3. Verification of the assessee's statement regarding non-receipt of duty drawback by his firms.

Detailed Analysis:

1. Deletion of Addition of Rs. 1,90,00,000/- by CIT (A) Due to Lack of Material Evidence:
The Department's appeal challenged the CIT (A)'s deletion of Rs. 1,90,00,000/- added by the Assessing Officer as undisclosed income. The addition was based on a show cause notice from the Director of Revenue Intelligence (DRI), alleging that the assessee and firms controlled by him over-invoiced exports to claim excess duty drawback. The CIT (A) deleted the addition, stating that the Department failed to provide material evidence that the assessee received the Rs. 2 crores duty drawback. The CIT (A) noted that the assessment was completed without considering the assessee's submissions and evidence that the duty drawback was received by other parties, not the assessee. The CIT (A) also referenced the deletion of a similar addition in the case of Vision Inc., where the duty drawback was properly disclosed and verified.

2. Confession by the Assessee Regarding Wrongful Availing of Duty Drawback:
The Department argued that the CIT (A) erred in deleting the addition despite the assessee's confession of wrongful availing of Rs. 2 crores duty drawback. However, the CIT (A) found that the assessee's statements to the DRI were retracted immediately, alleging they were made under threat and coercion. The CIT (A) took into account affidavits and export documents from other firms, supporting the claim that the duty drawback belonged to those firms and not the assessee.

3. Verification of the Assessee's Statement Regarding Non-Receipt of Duty Drawback by His Firms:
The Department contended that the CIT (A) failed to verify the assessee's statement that no duty drawback was received by his firms. The CIT (A) conducted detailed inquiries and received remand reports from the Assessing Officers of Vision Inc. and RA Overseas, confirming that the duty drawback was accounted for in their audited books. The CIT (A) concluded that the Department did not provide evidence that the duty drawback received by other parties constituted undisclosed income of the assessee. The CIT (A) emphasized that the burden of proof lay with the Department, which was not discharged.

Conclusion:
The Tribunal upheld the CIT (A)'s decision, finding no merit in the Department's appeal. The Tribunal agreed that the addition was made solely based on the DRI's show cause notice without rebutting the evidence provided by the assessee. The Tribunal noted that the assessee's confession was retracted and found to be coerced. The Tribunal also observed that the duty drawback was properly accounted for by other firms, and the Department failed to prove that the assessee was the beneficiary. Consequently, the appeal filed by the Department was dismissed.