2024 (8) TMI 561 - HC - Income Tax

Reopening of assessment u/s 147 - information from the Directorate of Revenue Intelligence ( DRI ) regarding evasion of custom duty by undervaluing the Paper Cup Machines imported from China - HELD THAT - Information received from DRI. The additions were made solely relying upon the order passed by the A.O. determining the value of the goods imported. It is an undisputed fact that the order passed by the A.O. was quashed by the CESTAT. The contention of appellant that the appellate authorities should have decided the matter independently on merits, is noted to be rejected, as the additions u/s 147 were made on the basis of value of imports determined by the AO. The Income Tax Department had not done any investigation or held an inquiry. There was no other material except the value determined by the AO, consequently, setting aside the order of the AO had ramification on the proceedings initiated under the Act. Tribunal considering the pendency of customs appeal before this Court, granted liberty to the appellant for passing fresh order, in case of acceptance of custom appeal. The relevant part of the order of the Tribunal as pertinent to mention that in these appeals the liberty is granted to the Revenue in case they succeed in the appeals filed by them before Hon ble Rajasthan High Court against the order of CESTAT and then in that eventuality afresh order would be passed by the AO considering the Hon ble High Court judgment after providing opportunity of hearing to the assessee. No substantial question of law.

Issues involved:
1. Appeal against order of Income Tax Appellate Tribunal regarding evasion of custom duty.
2. Whether Tribunal erred in dismissing the appeal of Revenue.
3. Whether Tribunal was justified in granting liberty to Revenue based on pending custom appeal.
4. Whether Tribunal erred in passing order without independent findings.

Detailed Analysis:
1. The appeals were filed against the order of the Income Tax Appellate Tribunal regarding evasion of custom duty by undervaluing imported Paper Cup Machines. The proceedings were initiated under Section 148 of the Income Tax Act, 1961 based on information from the Directorate of Revenue Intelligence. The Tribunal made additions based on the order of the Adjudicating Officer determining the import valuation. The respondent succeeded before the Commissioner, Income Tax (Appeal), and the appeal was allowed. The present appeal was filed after the Tribunal dismissed the revenue appeal.

2. The appellant argued that the Appellate Authorities should have decided the matter on merits rather than relying on the Customs, Excise and Service Tax Appellate Tribunal's decision to delete the additions under the Customs Act, 1962. The Tribunal was criticized for recording that the revenue appeal was pending before the Court while the appeal by Customs Authorities was still pending. The respondent defended the order, stating that the addition was based on the A.O.'s valuation, which was no longer valid after the respondent's appeal was accepted by CESTAT.

3. The proposed substantial questions of law in the appeal raised concerns about the Tribunal's justification in dismissing the revenue appeal without considering jurisdictional errors in the Assessment Order and without delving into the merits of the case. The Tribunal's decision to grant liberty to the Revenue for passing a fresh order in case of success in the pending custom appeal before the High Court was also challenged, especially since no appeal had been filed by the Income Tax Department.

4. The Tribunal's order was criticized for not providing independent findings on the facts of the case before dismissing the appeal. The Tribunal had considered the pendency of the customs appeal and granted liberty to the appellant for a fresh order based on the outcome of that appeal. Ultimately, the Court found that no substantial question of law was involved, leading to the dismissal of the appeals.

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