Payment received through banking channels is enough to find out the source and reason

IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH “G”, NEW DELHI

BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER

AND

SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER

I.T.A. No. 1100/Del/2012

A.Y. : 1993-94

Dy. Commissioner of Income Tax,

Circle-26(1), New Delhi

D-9, Vikas Bhavan,

New Delhi

(Appellant)

Vs.

Smt. Sadhna Sachdeva,

Prop. M/s Tulips,

GH-2, 85A/86A, Ankur Apartment,

Paschim Vihar, New Delhi

(PAN/GIR NO. : ABIPS7481A)

 (Respondent)

Assessee by: Sh. Sanjay Kapoor, CA

Department by: D r. Prabha Kant, Sr. D.R.

ORDER

PER SHAMIM YAHYA: AM

This appeal by the Revenue is directed against the order of the Ld. Commissioner of Income Tax (Appeals)-XXIV, New Delhi dated 30.12.2011 pertaining to assessment year 1993-94.

2. The grounds raised read as under:-

“i) On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (A) erred in deleting the addition of ` 1,89,52,588/- under the head “Income from other sources”.

ii) On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (A) erred in holding the exports to M/s Taj, Dubai amounting to ` 1.89 crores as genuine.

iii) Set aside the order of the Ld. Commissioner of Income Tax (A) and restore the matter back to

the Assessing Officer to re-examine fresh evidences in a holistic manner.

iv) The appellant craves the right to add any other ground of appeal.”

3. In this case return of income declaring total income of ` 108107/- was filed on 31.10.1993 after claiming deduction of ` 3,08,43,785/- u/s. 80HHC of the Act. Original assessment in this case was completed u/s. 143(3) on 29.3.1996. At the time of original assessment, deduction u/s. 80HHC in respect of exports made by the assessee to M/s Taj Al-Khaleej General Trading Co., Dubai (M/s Taj, Dubai) was allowed. A search u/s. 132 of the Act was conducted against the assessee and other companies and concerns of M/s M.S. Shoe group on 29.6.1994. The cases of the group were also investigated by the DRI, who communicated with the Assessing Officer enclosing a copyof the statement of Sheikh Saud-bin-Abdullah Rashid Alnuaimi. In this statement the Sheikh has declared that he was the registered holder of trade licence issued by the Government of Dubai, UAE in favour of his concern M/s Taj Al-Khaleej General Trading Co., Dubai. The Sheikh specifically stated that he never had any business dealings or commercial transactions with M/s M.S. International or Sh. Pawan Sachdeva (husband of the assessee) or any of their concerns. The explanation given by the assessee regarding their exports to M/s Taj, Dubai were not accepted by the Assessing Officer and an addition of ` 1,89,52,588/- was made to the income of the assessee.

4. Upon assessee’s appeal Ld. Commissioner of Income Tax (A) confirmed the addition.

5. Assessee appealed before the ITAT. The ITAT vide order dated 17.2.2006 set aside the matter to the file of the Ld. Commissioner of Income Tax (A) to consider the issue afresh, after allowing the assessee further reasonable opportunity. Accordingly, the matter was taken up by the Ld. Commissioner of Income Tax (A). The assessee submitted that the inference that the export made by her to M/s Taj, Dubai were not genuine, was based on the statement of Shaikh. Assessee submitted that the said statement of Sh. Sheikh on behalf of the Taj Dubai was retracted by him in another statement, wherein he confirmed having dealt with Sh. Pawan Sachdeva, M/s Tulips and M/s M.S. International Ltd. Sh. Sheikh also wrote a letter to the Assessing Officer of the assessee confirming the transaction of  M/s Taj, Dubai with the assessee. After considering the statement of the assessee, Ld. Commissioner of Income Tax (A) observed that similar export transactions were carried out by another company of the same group namely M/s M.S. International Ltd. to the same party namely, M/s Taj Dubai, which was examined in detail by the ITAT in I.T.A. No. 36/Del/2022 for A.Y. 1993-94. It was held that the tax authorities below were not justified in treating as bogus, the export sales made by the assessee to the Shaikh’s company Taj, Dubai and therefore the orders of the tax authorities were set aside in the impugned addition of ` 6,05,43,627/-.l

6. Considering the assessee’s submission and the ITAT orders referred above, Ld. Commissioner of Income Tax (A) held as under:-

“I have carefully considered the documents and evidences placed on record by the appellant. I have taken note of the fact that Government Authorities and Departments concerned, including DRI, DGFT and the Consulate General of India in Dubai have come out in support of the appellant. Redemption letter issued by the office of the Zonal Joint DGFT regarding realization of foreign currency is placed on record. The appellant Mrs. Sadhna Sachdeva and her proprietary concern M/s Tulips has also been cleared of all charges vide order dated 29.5.2008 of Special Director of Enforcement, Enforcement Directorate for A.Y. 1996-97. I have also taken note of the fact that various relevant Departments and banks have authenticated the exports made by the appellant to M/s Taj, Dubai and also of proper receipt of the sales proceeds in foreign currency through bank realization certificates. Thus, all the requirements of proper exports and realization of export proceeds in foreign currency, have been fulfilled by the appellant in order to make her proprietary concern M/s Tulips, fully entitled for deductions u/s. 80HHC of the Act. Thus, in view of the evidences on record, the exports by the appellant to M/s Taj Dubai cannot be treated as non-genuine. Due respect and regards is also to be accorded to the findings given by the ITAT, Delhi, Bench ‘B’, New Delhi in a related case of M/s M.S. International Ltd. vs. DCIT, CC-8, New Delhi in I.T.a. No. 36/Del/2012 for A.Y. 1993-94.”

7. Against the above order the Revenue is in appeal before us.

8. We have heard both the counsel and perused the records. Ld. Counsel of the assessee submitted that the issue is squarely covered by the decision of ITAT in assessee’s group concerns M/s M.S. International Ltd. in I.T.A. No. 36/Del/2022 vide order dated 21.10.2005. The tribunal had deleted the addition of ` 6,05,43,627/- made in this regard. Ld. Counsel of the assessee further submitted that the issue is also covered by the another decision of the Tribunal in assessee’s group company in case of M/s M.S. Shoe East Ltd. vs. DCIT in I.T.A. No. 38/Del/2002 and M/s Pearl Intercontinental Ltd. vs. DCIT in I.T.A. No. 40Del/2002. In these two cases vide common order dated 20.4.2006 the Tribunal has deleted the similar additions. Accordingly, ld. Counsel of the assessee submitted that the issue is covered by the two group companies cases.

8.1 Ld. Departmental Representative on the other hand could not controvert the above submissions of the assessee’s counsel and conceded that the issue involved is covered by the decision of the ITAT in the cases referred by the ld. Counsel of the assessee.

9. We have carefully considered the submissions and perused the records. We find that ITAT in the case of M/s M.S. International Ltd., assessee group company in I.T.A. No. 36/Del/2002 for A.Y. 1993-94 vide order dated 21.10.2005 has held as under:-

“The question required to be determined by us is whether the assessee company actually exported synthetic rubber sheets to the company of the Sheikh, TAKGT, Dubai for an amount of Rs.6,05,43,627/- in consideration for which it received foreign remittance of the aforesaid sum which should be entitled to declaration U/S 80HHC or whether the aforesaid amount had no connection with any export and that it represented the assessee's income from undisclosed sources. The unrebutted documentary evidence produced on record by the assessee undoubtedly proves the import of the raw material and the shipment of the finished goods to Dubai in response to the orders placed by the company of the Sheikh, TAKGT, Dubai, for which the assessee received the foreign remittances of Rs.6,05,43,627/-from Dubai through banking channels and that the export sales shipped to Dubai by the assessee to the company of the Sheikh, TAKGT through the customs Authorities, Director General of Foreign Trade, Shipping Line Exporters Bank in India and Buyer's Bank abroad, all authenticated the genuineness of shipping transaction and the payments made to the assessee.

We are of the opinion that in case the AO was relying upon the statement of the Sheikh dated 28.12.94 the opportunity should also have been afforded to the assessee to cross examine the Sheikh and in the absence of same no reliance could also be placed on such statement. Further, the second statement made by the Sheikh, fully retracting from the earlier statement made by him also of course cannot be safely relied upon because the AO is deprived from the opportunity of cross examining the Sheikh as he did not choose to appear for this purpose. As regards the affidavit of the Sheikh in support of his retraction from the statement made earlier dated 28.12.94, admitting the export purchases made from the assessee and the payments being made through banking channels as claimed by the assessee, the Consulate General of India's office in the letter to additional Director of Foreign Trade has confirmed the genuineness of the affidavit of the Sheikh, on which the signature of the Sheikh were legalized the affidavit was registered by the Dubai Chamber of Commerce & Industry and has also been endorsed by the DAB Ministry of Foreign Affairs. In these facts it may not be safe to rely upon the unauthenticated statement made by the Sheikh, but, at the same time, it would also not be fair on the part of tax authorities below to ignore the affidavit, for contradicting which neither any enquiry has been made nor any evidence has been brought on record by the department. Fact remains that when the assessee from the documentary evidence is able to prove the export sales mage by it to the Sheikh's company TAKGT, Dubai, and having received the amount of Rs.6,05,43,627/- as remittance for the same, through banking channel of Dubai in the Indian Bank the export sales made by the assessee cannot be disbelieved on the solitary statement of the Sheikh made earlier on 28.12.94, when the same was subsequently retracted by the Sheikh himself in a duly authenticated affidavit. It is also important to mention here that in view of the documentary evidence furnished by the assessee in support of export sales, the same should not be disbelieved on the mere statement of the Sheikh made on 28.12.94 when the Sheikh in an affidavit/statement subsequently also admitted that all the orders of M/s. International Ltd. i.e. the assessee and its other group companies, were placed by his company and he made purchases from the assessee company and its sister concerns and in the assessment of those sisters concerns of the assessee all the export transaction with TAKGT have been accepted as bona fide and genuine, then, why only in the case of assessee, despite the documentary evidence being produced by the assessee, the export sales made to the Sheikh can be held to be in-genuine on the basis of the inconsistent statement of the Sheikh. Lastly, we have also taken into consideration the other two reasons appearing in the orders of tax authorities below where in they have concluded that with the meager expenditure on electricity and water and labour claimed by the assessee and on account of the machinery worth Rs.272249/- the assessee was not in a capacity to manufacture finished products worth more than RS.12- 3 crores.

We find that the assessee has contended that he was getting the job work done from its other sister concerns and was also getting the manufacturing done from them as is clear from the duty exemption entitlement certificate placed at page 234 & 235 of the paper book. At page 235 the assessee has mentioned the name & address of the factories where the resultant products for exports were to be manufactured i.e. 11/s. Shoes East Ltd. indicating that the entire manufacturing was not done by the assessee itself but was being got done by other sister concerns of the assessee finds support from the documents. This means that if the assessee was getting its goods manufactured from the other sister concerns, it could not be said that because of the machinery used the assessee could not have manufactured such huge amount of finished goods because the assessee never claimed that the entire goods were manufactured by it. This also explains the meager expenses claimed on electricity, water and labour, as well as, its manufacturing machinery worth Rs.272249/- which could not have manufactured such huge quantity of finished goods. We may also mention here that neither aspect has been properly examined by the tax authorities below nor the same could successfully be controverted by Ld. Departmental Representative for the revenue before us. In view of the detailed discussion given hereinabove in our order, we are of the opinion that the tax authorities below were not justified in treating the export sales made by the assessee to Sheikh's company TAKGT Dubai as ingenuine and therefore, the orders of the authorities below in this regard are set aside and the impugned addition of Rs.6,05,43,627/- made and confirmed by the tax authorities below as 'income from other sources’, is deleted.”

10. In light of the aforesaid discussion and precedents, we do not find any infirmity or illegality in the order of the Ld. Commissioner of Income Tax (A). Accordingly, we affirm the Ld. Commissioner of Income Tax (A)’s order.

11. In the result, the appeal filed by the Revenue stands dismissed.

Order pronounced in the open court on 07/9/2012.

                                                         Sd/-                 Sd/-

                                               [I.C. SUDHIR] [SHAMIM YAHYA]

                                          JUDICIAL MEMBER ACCOUNTANT MEMBER

Date 07/9/2012

“SRBHATNAGAR”

Copy forwarded to: -

1. Appellant

2. Respondent

3. CIT

4. CIT (A)

5. DR, ITAT

TRUE COPY

By Order,

Assistant Registrar,

ITAT, Delhi Benches