2017 (7) TMI 359 - AT - Income Tax

Re-opening of assessment - Held that - In this case, the assessee has made the High Sea sales of ₹ 1,03,55,040/- and received the income of ₹ 1,75,01,599/- which has come to the notice of the Income Tax Department from the commercial tax Department and the assessee has not disclosed the above receipts in the income Tax returns. From a query raised from the Bench, the Ld.AR fairly conceded that the information regarding the High Sea sales and the Exchange fluctuation was not disclosed in Income Tax Return in the original Return. Thus there is a failure on the part of the assessee in not disclosing the income. - Decided against assessee. Estimation of income on High Sea Sales - Held that - In the Assessment Order, the AO has given a finding that the assessee is entitled for the consideration of 2% over and above the invoice value on High Sea sales. All the expenses would be borne by either purchaser or seller. The Ld.AR has not brought any evidence to prove that the assessee has not received the consideration over and above 2% on High Sea Sales. The Ld.A.R also did not bring any evidence relating to the expenditure incurred on High Sea sales over and above the amount debited to P&L account. Therefore, we do not find any infirmity in the order of the Ld.CIT(A) and the same is confirmed.- Decided against assessee. Addition in respect of the Exchange Rate - Held that - Whether the exchange rate fluctuation was loss or gain, whether it should be reduced from the sales or to be taxed separately, required to be verified from the bills and invoices raised by the assessee, books of accounts and the records. No such exercise was done by either the AO or the Ld.CIT(A). Therefore, we are of the considered opinion that the issue should go back to the file of AO to verify whether the exchange rate fluctuation was in fact loss or gain. Both the parties have agreed for remitting the matter back to the file of AO. Accordingly, we set-aside the orders of the lower authorities on this issue and remit the matter back to the file of the AO to decide the issue afresh

Summary

Issues Involved:
1. Re-opening of assessment.
2. Estimation of income on High Sea sales.
3. Deletion of addition in respect of Exchange Rate fluctuation.

Issue-wise Detailed Analysis:

1. Re-opening of Assessment:
The assessee argued that the re-opening of assessment under Section 147 was invalid as it was done beyond the four-year limit without any fresh material. The Assessing Officer (AO) had re-opened the assessment based on information from the Commercial Tax Department about High Sea sales and exchange rate differences not disclosed in the income tax return. The Tribunal upheld the re-opening, citing that the assessee failed to disclose fully and truly all material facts necessary for assessment. According to the proviso to Section 147, re-opening is permissible if income has escaped assessment due to the assessee's failure to disclose material facts, which was the case here. The Tribunal confirmed the AO's action, dismissing the assessee's appeal on this ground.

2. Estimation of Income on High Sea Sales:
The AO estimated the income at 2% on gross High Sea sales as the assessee did not provide evidence to show that these sales were done on a 'no Profit & Loss' basis. The assessee contended that High Sea sales were made at cost price with no profit element. However, the Tribunal found that the assessee was entitled to 2% over the invoice value as per the agreement and had not provided evidence to refute this. Consequently, the Tribunal upheld the estimation of income at 2% on High Sea sales, dismissing the assessee's appeal on this issue.

3. Deletion of Addition in Respect of Exchange Rate Fluctuation:
The Revenue appealed against the deletion of the addition of ?1,75,01,595 related to exchange rate fluctuation. The AO had added this amount to the income as the assessee failed to provide details during the assessment. The Tribunal noted that the assessee did not furnish necessary details such as party-wise export sales, exchange rates, and realization dates. The Tribunal found that the issue required verification to determine whether the exchange rate fluctuation was a gain or loss and whether it should be included in sales or taxed separately. Therefore, the Tribunal remitted the matter back to the AO for fresh verification and decision, allowing the Revenue's appeal for statistical purposes.

Conclusion:
The Tribunal upheld the re-opening of the assessment and the estimation of income on High Sea sales, dismissing the assessee's appeals on these grounds. However, it remitted the issue of exchange rate fluctuation back to the AO for further verification, allowing the Revenue's appeal for statistical purposes. The order was pronounced on 12th May 2017, at Chennai.