2024 (7) TMI 729 - HC - Income Tax

Addition in the block assessment proceedings - Addition u/s 69A - Validity of import of articles as well as the aspects relating to the statement of Sh. Chander Prakash Sachdeva - ITAT deleted addition - HELD THAT - Tribunal has ultimately on facts come to the conclusion that the factum of exports could not be doubted and that the export proceeds stood duly reflected in the books of account. It has categorically observed that there was no justification for additions being made u/s 69A since the record had established that the assesee had made genuine export sales and received export remittances through regular banking channels. Statement of Sh. Chander Prakash Sachdeva and the denial of a right of cross-examination - While in the instant appeal the appellants have sought to question the correctness of the conclusions ultimately arrived at and noticed hereinabove, in our considered opinion, the aspects pertaining to import lose all significance bearing in mind the findings returned by the Tribunal as held conditions are not satisfied in the case of the assessee as Shri Chander Prakash Sachdeva was available to the A.O. because his statement at various stages have been recorded after the search and at the assessment stage. Therefore, he was available for cross- examination on behalf of the assesee. When assessee asked for cross-examination to his statement, he was capable to give statement. He was not kept out of the way by the assessee and that there was no delay in the proceedings. Therefore, it is clear that without any just cause Shri Chander Prakash Sachdeva refused to cross-examination on behalf of the assessee. A.O. has also not exercised his powers to summon him to produce him for cross- examination on behalf of the assessee. Therefore, when Shri Chander Prakash Sachdeva refused for cross-examination on behalf of the assessee which were recorded at the back of the assessee by the Investigation Wing and the A.O, his statement cannot be relied upon against the assessee to frame the assessment. As according to assessment order, statement of Shri Chander Prakash Sachdeva was also recorded on 09.11.1998 i.e., prior to the search. Therefore, such statement cannot be considered as statement recorded under section 132 (4) of the I.T. Act. Therefore, allegation of the alleged threat to Shri Chander Prakash Sachdeva is not substantiated through any evidence or material on record. There is no justification to apply Section 69C of the I.T. Act against the assessee. No evidence was found during the course of search to prove that purchases made by assessee were bogus. No evidence has also been found during the course of search that assessee made purchases in cash from other concerns. It was merely an inference of the Ld. CIT(A) that assessee made purchases in cash from other parties. The Bank Accounts of these two concerns have been operated by Shri Chander Prakash Sachdeva only. Therefore, on the basis of evidence and material on record, we hold that assessee made the purchases for exports from M/ s. Sachdeva Trading Co and M/s. Rave Scans only. We, accordingly hold that purchases were not made in cash as mentioned by the authority below. There is no evidence of such purchases having been made in cash. Benefits under Section 80HHC - Auditor's Report filed in the name of proprietorship concern before Ld. CIT(A) was admitted by the Ld. CIT(A) on calling the report from the A.O. at the appellate proceedings. We may also note that Shri S.S. Rana, attended the appellate proceedings before Ld. CIT(A). There is no specific ground taken by the Revenue against the action of the Ld. CIT(A) in admitting Auditor's Report filed in the name of proprietorship concern. It may be noted here that assessee filed return of income under section 158BC of the IT. Act and assessment was completed against him in his proprietorship concern. Therefore, assessee rightly claimed deduction under section 80HHC with respect to export proceeds. Therefore, taking into account the facts and circumstances of the case and also in view of the fact that exports were made, export proceeds were received through Banking channel, Auditor's Report was admitted and examined by the Ld. CIT(A), the report of the A.O. was called or and Revenue was represented by Shri S.S. Rana, the assessee is entitled for deduction under section 80HHC - No infirmity in the Order of the Ld. CIT(A) in allowing the claim of assessee. Accordingly, deduction under section 80HHC was rightly allowed by the Ld. CIT(A). Appeal dismissed.

Summary

Issues Involved:
1. Deletion of addition in block assessment proceedings.
2. Validity of block assessment proceedings under Section 158BC.
3. Right to cross-examine witness and its implications.
4. Applicability of Section 69A of the Income Tax Act.
5. Deduction under Section 80HHC of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Deletion of Addition in Block Assessment Proceedings:
The Tribunal deleted the addition of Rs. 5,23,78,058/- in the block assessment proceedings. The High Court examined whether the Tribunal was correct in its decision. The Tribunal concluded that the export sales were genuine, the proceeds were received through banking channels, and there was no material evidence to rebut these findings. The High Court upheld the Tribunal's decision, noting that the factum of exports and the reflection of export proceeds in the books of account were established.

2. Validity of Block Assessment Proceedings under Section 158BC:
The High Court scrutinized the initiation of block assessment proceedings under Section 158BC. It held that the initiation depends on facts at the initial stage and not on the final outcome. The Tribunal's findings that no evidence was found during the search to indicate bogus transactions were deemed incorrect and legally unacceptable. The High Court emphasized that the Tribunal failed to consider the clear factual matrix recorded by the Assessing Officer and Commissioner (Appeals).

3. Right to Cross-examine Witness and Its Implications:
The Tribunal's decision to ignore the statement of Chander Prakash Sachdeva due to the lack of cross-examination was a significant issue. The High Court noted that the Tribunal should have examined the reasons for the witness's refusal to cross-examine and its implications. The Tribunal observed that the principles of natural justice require a fair procedure, and the absence of cross-examination could not invalidate the statement if the witness was threatened. The High Court stressed the need for corroborative evidence and thorough examination of surrounding facts.

4. Applicability of Section 69A of the Income Tax Act:
The Tribunal concluded that Section 69A was not applicable as the export proceeds were recorded in the books of account and received through banking channels. The High Court agreed, noting that the Tribunal found no material evidence to disprove the exports or indicate undisclosed income. The Tribunal's findings that the purchases were genuine and made through banking channels were upheld.

5. Deduction under Section 80HHC of the Income Tax Act:
The Tribunal allowed the deduction under Section 80HHC, noting that the Auditor's Report was admitted and examined by the Commissioner (Appeals). The High Court upheld this decision, emphasizing that the export proceeds were received through banking channels and the Auditor's Report was properly verified. The Tribunal's reliance on relevant case law to support the deduction was deemed appropriate.

Conclusion:
The High Court dismissed the appeal, finding no substantial question of law arising from the Tribunal's judgment. The Tribunal's conclusions on the genuineness of exports, the applicability of Section 69A, and the allowance of deduction under Section 80HHC were upheld. The High Court emphasized the importance of corroborative evidence and adherence to principles of natural justice in the assessment proceedings.