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TMI Blog2016 (5) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and dismissed this ground of the Revenue. Deduction claimed by the assessee under section 80HHC - CIT(A) allowed the same on the ground that all the aforesaid conditions have been fulfilled by the assessee - Held that:- Now to avail the benefit under section 80HHC for the profit arising from the sale of the DEBT license the above said twin conditions needs to be satisfied. We accordingly find from the submission of the assessee that both the conditions have been fulfilled as provided in (a) and (b) of third proviso to section 80HHC of the Act. For the condition specified in clause (b) the assessee submitted that the Drawback credit attributable to custom duty was 35% in terms of Custom Tariff Heading 7018 and where as the DEPB entitlement was only 20%. We also find that the ld. DR has not brought anything contrary to the findings of the ld. CIT(A). In view of above we find no reason to interfere in the order of the ld. CIT(A). Therefore we dismiss the ground of Revenue. X X X X Extracts X X X X X X X X Extracts X X X X ..... ses of ₹ 38,235/- which were made in absence of any plausible evidence. Hence, the Ld. CIT(A) was not justified in allowing the same. 7. under the facts and circumstances of the case, the Ld. CIT(A) was not correct in allowing 90% of the sale proceeds of the DEPB license as allowable deduction u/s. 80HHC(3) as the conditions laid u/s 80HHC were not fulfilled for the claim. " 2. First ground raised by Revenue is that Ld. CIT(A) erred in deleting the addition of ₹ 12,84,94,000/- made by Assessing Officer on account of inflated purchased. 3. The facts of the case are that assessee is a partnership firm engaged in manufacturing and exports business. During the year, assessee purchased goods from M/s Madho Prasad Mahabir Prasad glass beads and glass chatons. The necessary details of purchases are given as under : S.No. Goods description Quantity Rate Amount(Rs.) 1 Glass beads 19,266 Kgs. 6750/- ₹ 13,00,45,500/- 2 Glass chatons 25,000 dozens 30/- ₹ 7,50,000/- Total 'A' ₹ 13,07,95,500/- The AO during the assessment proceedings observed that all the purchases were made within the period of two months i.e. April 1999 to May 1999. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partment and also the Special Investigation Branch (SIB) of the Customs Department during the relevant period of time. Show cause notices were issued to some exporters including the appellant alleging over valuation of the exported goods. In the case of M/s. Ramapati Exports who also purchased glass beads from M/s Madho Prasad Mahabir Prasad, the show cause notice issued was adjudicated upon by the Commissioner of Customs wherein he dropped the proceedings against all the notices. On appeal the Kolkata Customs Tribunal held that the allegation of over valuation of glass beads exported was not sustainable in the absence of any positive and tangible evidences and that samples taken from respondent's consignment not tested but having been misplaced and that value of glass beads proposed in show cause notice not acceptable in absence of any co-relation made by Revenue. In that ordered the Hon'ble Tribunal also mentioned that Mr. Nirmal Kr. Sarswat filed before the Commissioner certified copies of sale/purchase agreement, challans, invoices, payment instructions and money receipts issued to the respondent (M/s M.M. Exports is also one such party). The Hon'ble Tribunal also q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of around 98% which is unrealistic, unreal & imaginary. In the circumstances of our case, Judgement on similar facts the Order of the Assessing Officer as regards taking the purchase price to be ₹ 100/- per KG needs to be set aside.' The above argument of the appellant is also supported by another evidence by way of letter dt. 21.09.99 of Commissioner of Customs (Port), Kolkata addressed to Member (Customs) wherein it was commented that there was no over invoicing in the case of decorative finished glass beads. It was further mentioned in that letter that the decorative glass beads price ranged from ₹ 6,000/- to ₹ 6,500/- per kg. during the relevant point of time. The above facts as revealed form the customs records clearly shows that there is no element of over invoicing of glass beads in the case of M/s. Ramapati Exports connected to M/s Madho Prasad Mahabir Prasad who also supplied glass beads to M/s M.M. Exports at the relevant point of time. As such, based on such information and report received from Asst. Commissioner, Customs the AO blindly adopted the value without making any marketing enquiries with regard to the comparative price of glass beads ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubsequent day and that no transport evidence was produced corresponding to the purchase in question. In my opinion, this is not a conclusive test to arrive at the bogus/inflated nature of the purchasers without verifying the payments made by the banking channels. Moreover, the AO despite assessment details furnished could not cross verify from the assessment records available. Also the AO could not prove that the corresponding export sales were bogus and non-existing. The appellant has sufficiently produced the necessary documentary evidences in respect of the purchases in question. v. Decision: In view of the foregone discussion and circumstances and facts of the case especially in the light of the findings noticed from the Customs recourses, I am of the view that the AO failed to bring on record any corroborative material evidence on record to indicate the over invoicing of purchase prices of the glass beads and chatons. Accordingly, I held that the addition made on account of alleged over invoicing of purchases is without any basis. Accordingly I direct the AO to delete this addition of ₹ 12,87,94,000/- made on account of inflation of purchases." Being aggrieved by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... banking channel. The goods were exported after the custom clearance and the payment was realized in terms of convertible of foreign exchange. We also find from the report of the custom department that no over invoicing for the export of the goods was made. The ld. AR also drew our attention on pages 85 to 90 of the paper where the affidavit given by Mr. Nirmal Kumar Sarswata partner of M/s Madho Prasad Mahavir Prasad before the Ld. CHIEF METROPOLITAN MAGISTRATE regarding the sale of the goods to the assessee is placed. Therefore considering the totality of the case and submission we find no reason to interfere in the order of the ld. CIT(A), hence the ground raised by the Revenue is dismissed. 5. Second issue raised by Revenue is that Ld. CIT(A) erred in deleting the addition made by AO for ₹ 20,000/- on account of bogus purchase from M/s Monoharlal Mahabir Prasad. 6. During the year assessee claimed to have purchased goods worth of ₹ 20,000/- from M/s Monoharlal Mahabir Prasad. The AO found that the party operates from the same address as that of assessee. On enquiry from the party for the sale of goods, it was found that no sale was made to the assessee. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A), therefore we are confirming the order of the ld. CIT(A) and dismissed this ground of the Revenue. 10. Ground No.3 raised by Revenue is that Ld. CIT(A) has erred in deleting the addition made by AO for an amount of ₹ 3,51,117/- on account of inflating purchase from M/s Atul Enterprise. 11. During the year assessee claimed to have made purchase for an amount of ₹ 3,51,117/- from M/s Atul Enterprise. But the assessee failed to produce the purchase bills from the party. The AO made enquiry from the party concern u/s. 133(6) of the Act, but the notice was returned by the Postal Department as 'unserved'. The assessee also failed to provide the present address of the party. Therefore, AO could not make necessary enquiry for the purpose of verification of purchase bill. Hence, the purchase amount of ₹ 3,51,117/- was disallowed and added it to the income of assessee. 12. Aggrieve, assessee preferred appeal before Ld. CIT(A) who has deleted the addition by observing as under:- "i. The AO made the addition in the absence of purchase bills and the present postal address of the party. ii. The AR furnished the present postal address of Mr Arun Kumar Todi o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the party. But we find from the order of the ld. CIT(A), all the necessary details were furnished at the time of the remand report to the AO. The ld. DR. has also not brought anything on record to controvert the finding of the ld. CIT(A). In view of above we find no reason to interfere in the order of the ld. CIT(A). Hence this ground of Revenue appeal is dismissed. 15. Ground No.4 raised by Revenue in this appeal is that Ld. CIT(A) erred in deleting the addition for an amount of ₹ 37,27,578/- on account of inflated purchase from M/s Unisilk. 16. During the year, assessee claimed to have purchased goods worth of ₹ 37,27,578/- from M/s Unisilk Ltd. having address at 1615/16/F 1, Star House, 3, Salis Buri Road, Kowloon, Hong Kong. Several opportunities were given to assessee to produce necessary evidence in respect of the above stated purchases. But the assessee failed to provide the documentary evidence. Therefore, AO held that such purchase cannot be treated as genuine, therefore disallowed and added to the income of assessee. 17. Aggrieved, assessee preferred second appeal before Ld. CIT(A) who deleted the addition made by AO by observing as under:- "i. As s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported silk worth of ₹ 37,27,578.00 due to non production of the necessary supporting documents. But we find from the order of ld. CIT(A) that all the requisite details were furnished to the AO at the time of remand report. The ld. DR has not brought anything on record to controvert the findings of the ld. CIT(A). In view of above we find no reason to interfere in the order of the ld. CIT(A). Hence this ground of Revenue appeal is dismissed. 19. Ground No.5 raised by Revenue in this appeal is that Ld. CIT(A) erred in treating the addition for an amount of ₹ 1,21,553/- on account of cessation of liability with respect to w.r.t. M/s A.B.N. Lamenators. 20. During the course of assessment proceedings AO found that the creditors worth of ₹ 1,21,553/- was appearing at the end of year in the name of M/s A.B.N. Lamenators. The AO observed that the creditor was outstanding for the last several years and assessee was not having the current address of the said party. Therefore, AO opined that such liability is not payable and cannot be enforced for payment. Hence, AO found that liability is ceased to exist. Therefore, same added to the income of assessee. 21. Aggrieved, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng aggrieved by this order of Ld. CIT(A) Revenue came in appeal before us. 22. Before us the ld. AR submitted that the liability towards the creditor is very much is appearing in the books of the assessee and it has not ceased to exist. For the non-service of notice the assessee submitted that liability in the books of the assessee has been appearing for more than 7 Years so apprehended for the change of address of the company. However we find from the submissions and records that the liability towards sundry creditors has not ceased to exist in the books of the assessee. Therefore it cannot be treated as income of the assessee. The ld. DR has not brought anything on record to controvert the findings of the ld. CIT(A). In view of above we find no reason to interfere in the order of the ld. CIT(A). Hence this ground of Revenue appeal is dismissed. 23. Ground No.6 raised by Revenue in this appeal is that Ld. CIT(A) erred in deleting the addition made by AO on account of freight expenses of ₹ 23,250/- to Natwar Parikh Industries and other freight expenses of ₹ 38,235/- on account of non-production of supporting evidence. 24. During the year, assessee has incurred an exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demonstrated that the copies of the bills for an amount of ₹ 23,250.00 of M/s Natwar Parikh Industries towards freight charges were submitted before the AO at the time of remand report. The AO could have made enquiry under section 133(6) of the Act for establishing the genuineness of the expenses. Regarding the other freight expenses, the ld. AR submitted that the necessary details in support of the expenses were furnished before the AO at the time of remand report. From the aforesaid discussion we find that the above said expenses were disallowed by the AO due to non availability of the supporting documents. However some details were submitted before the AO at the time of the remand report. Accordingly the ld. CIT(A) granted the relief to the assessee. However the argument of the ld. AR that the freight charges to Natwar Parikh Industries could have been verified by issuing the notice under section 133(6) is not tenable as it is the duty of the assessee to provide the information as desired by the AO in connection with the assessment proceedings. We also find that the assessee could not produce the necessary supporting evidence before the lower authorities in connection wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the AO that para 7.14 pertains to import of gold/silver, I have perused the entire text of the Export and Import policy and it is very clear from the report that the AO misread the para 7.14 of the Handbook of procedures instead of para 7.14 of the Foreign Trade Policy. As contended, if the appellant's business activities are not eligible as per Export & Import policy the appellant would ot have granted DEPPB License at all. In view of the matter I am to hold that the appellant has correctly claimed the deduction u/s. 80HHC(3) on account of sale of DEPB License. Accordingly, I direct the AO to allow the benefit of 90% sale proceeds of DEPB license while computing the benefits u/s. 80HHC." Being aggrieved by this order of Ld. CIT(A) Revenue came in appeal before us. 30. Before us the ld. DR vehemently supported the view of the AO. On the other hand the ld. AR while strongly relying on the order of ld. CIT(A) submitted that the assessee was having the option of availing either duty drawback or the DEPB in terms of the section 5 of the Foreign Trade (Development & Regulations) Act. For the condition specified under clause (b) of 3rd proviso to section 80HHC(3), the ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xporters not desirous of going through the licensing route, an optional facility is given under DEPB. The objective of Duty entitlement pass book scheme is to neutralize the incidence of customs duty on the import content of the export product. The neutralization shall be provided by way of grant of duty credit against the export product. Under the Duty Entitlement passbook scheme (DEPB) an exporter may apply for credit, as a specified percentage of FOB value of exports, made in freely convertible currency. The credit shall be available against such export products and at such rates as may be specified by the Director general of foreign trade by way of a public notice issued in this behalf, for import of raw materials, intermediates, components, parts, packaging materials, etc. The holder of Duty Entitlement passbook scheme (DEPB) shall have the option to pay additional customs duty, if any, in cash as well." For the condition specified in clause (b) the assessee submitted that the Drawback credit attributable to custom duty was 35% in terms of Custom Tariff Heading 7018 and where as the DEPB entitlement was only 20%. We also find that the ld. DR has not brought anything con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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