2017 (6) TMI 22 - HC - Income Tax

Eligibility to exemption u/s 80HHC - burden of proof of clearance at any Customs Station - Held that - The assessee had produced the Sale to Foreign Tourists Voucher which not only recorded the name and address of the customers (tourist) but also his/her passport number and the declaration given by him that the goods will not be gifted or sold in India. The goods were sold at the counter at the shop/emporium to be taken out of the country which necessarily involved clearance of baggage by the customs authorities. No further proof nor any document in proof of clearance of the goods at the Customs Station by the assessee is required. The Explanation (aa) is not a rule of evidence nor raises any presumption of such sale which is not for export of goods out of India. It also does not require submission of any proof of clearance at any Customs Station. The explanation is couched in double negative terms. It is a rule of exclusion which excludes only those transactions which do not involve clearance at any Customs Station. It cannot be read in a manner as suggested by learned counsel appearing for the department that a proof of customs clearance of baggage must be provided to establish the export of goods out of India for the purpose of deduction of profits on such sales under Section 80HHC of the Income Tax Act. - Decided in favour of the assessee

Summary

Issues:
Challenge to Tribunal's judgment and order regarding relief not prayed by assessee in Cross Objections and fishing inquiries in reassessment.

Analysis:

Issue 1: Relief not prayed by assessee in Cross Objections
The appellant challenged the Tribunal's decision where relief was granted to the assessee without being specifically prayed for in the Cross Objections. The substantial question of law raised was whether the Tribunal was justified in allowing relief not requested by the assessee. The court referred to a previous decision and highlighted that the issue was covered by the decision in S. Kasliwal & Co. vs. The Assistant Commissioner of Income Tax. The court emphasized that the Tribunal's decision was in line with previous judgments by the Rajasthan High Court and the Allahabad High Court. The court further discussed the burden of proof on the assessee regarding clearance at Customs Station under Section 80HHC of the Income Tax Act.

Issue 2: Fishing inquiries in reassessment
The second substantial question of law raised was whether fishing inquiries could be made during reassessment proceedings. The court referred to the explanation (aa) of sub-section (4C) of Section 80HHC of the Income Tax Act, which outlines the criteria for "export out of India." The court analyzed the documentation provided by the assessee, specifically the 'Sale to Foreign Tourists Voucher,' and concluded that the declaration and proof of sale to foreign tourists were sufficient evidence for export out of India. The court clarified that the explanation (aa) does not require proof of clearance at any Customs Station and is a rule of exclusion. The court cited the judgment of the Supreme Court in Commissioner of Income Tax v. Silver & Arts Palace, which had been consistently followed by the Rajasthan High Court.

In conclusion, the court ruled in favor of the assessee on both issues, stating that the Tribunal's decision was justified and in accordance with previous judgments. The appeal was dismissed, and the Income Tax Department was directed to proceed as per the decision in favor of the assessee.