Commissioner Of Income Tax v. N4/S. M.s. International Ltd

$-14 to 17* IN THE HIGH COURT OF DELHI AT NEW DELHI ' R eserved on:.3ltt' August, 2012Date of Decision: 28th September, 2012 % + tT[t394t2009 COMMISSIONER OF INCOME TAX .... Appellant VERSUS N4/S. M.S. INTERNATIONAL LTD. .... Respondent + ITA2t0t2007+ ITAt47t2007 COMMISSIONER OF INCOME TAX .... Appellant VERSUS M.S. SHOES EAST LTD. .... Respondent + tTA575t2007 COMMISSIONER OF INCOME TAX .... Appellant.... Respondent VERSUS PEARL INTERCONTINENTAL LTD. Present: Mr. Kamal Sawhney, Sr. Standing Counsel for Revenue in ITANos.999/2006,21012007 , 57 512007 and 14712007 . Mr. Sanjeev Sabharwal, Sr. Standing Counsel with Mr. PuneetGupta, Jr. Standing Counsel with Ms. Gayatri Verma, Adv. inITA No.139412009. Mr. Pavan Sachdeva, respondent in person in all matters. ITA Nos. 139412009, 210 12007, 57 5 /2007 & | 47 12007 Page I of2 Signature Not Verified CORAM:MR. JUSTICE S. RAVINDRA BHATMR. JUSTICE R.V. EASWAR I . Whether Reporters of local [papers ][may ][be ][allowed ][to ][see ][the ][judgment?] 2. To be refened to the Reporters [or not?] 3. Whether the [judgment ]should [be ][reported ][in ][the Digest?] R.V. EASWAR, J.: For order see ITA No.999/2009. [U".--,(R.v.EASWAR)JT]DGE SEPTEMBERZ8,2012 hs (S. RAVINDRA BHAT)JUDGE ITA Nos. 1394 12009, 210/2007, [57 5 ][12007 ][& ][| ][47 ][12007] Page2 of2 'T.,t'l $^i13 to 17* IN TIIE HIGII COURT OF DELHI AT Reserved on:.30't' August, 2012% Date of Decision: 2Bt" Septentber, 2012+ 1TA99912006+ tTAL394l2009COMMISSIONER OF INCOME TAX ... AppellantVERSUSM/S. M.S. INTERNATIONAL LTD..... Respondent+ ITA2L0|2007+ ITAI47|2007COMMISSIONER OF INCOME TAX .... AppellantVERSUSM.S. SHOES EAST LTD..... Respondent+ ITA575/2007COMMISSIONER OF INCOME TAX .... Appellant ' VERSUSPEARL INTERCONTINENTAL LTD. .... Respondent. Present: Mr. Kamal Sawhney, Sr. [Standing Counsel ][for ][Revenue ][in ] Nos. 999/20 06, 2I0 /2007, 57 [5 ]/2007 md [1 ][47 ]/2007 [.]Mr. Sanjeev Sabharwal, Sr. Standing [Counsel ][with Mr. ][Puneet]Gupta, Jr. Standing Counsel with Ms. [Gayatri ][Vetnta, ][Adv. in]ITA No.139412009.Mr'. Pavan Sachdeva, respondent in [person ][in ][all ][matters.] tTA 999|2006,2|012007, [s7512007, ][|394|2009 &. ][|4712007] CORAM:MR. JUSTICE S. RAVINDRA BHATMR. JUSTICE R.V. EASWAR 1. Whether Reportdrs of local papers may be allowed to see the [judgrnent?] 2. To be referred to the Repofters or not? y 3. Whether the [judgment ]should be reported in the Digest? Y R.V. EASWAR,.I.: Since all the appeals involve a conrmon issued and were heard together, theyare'disposed of by a common [judgment. ]The appeals have been filed by the CIT underSection 260A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). TheITA Nos.99912006, 139412009,21012007 and 57512007, though thdy relate to threedifferent assessees, involve a common question, namely, whether the assessee wasrightly held by the Income Tax Appellate Tribunal (hereinafter refened to as 'theTribunal') to be entitled to the deduction under Section 80HHC of the Act. ITANo.74712007 involves the question of penalty imposed on the assessee under Section271(l)(c) of the Act and the question of law is whether the Tribunal was right incancelling the penalty. This appeal is consequential to the fate of ITA No.210/2007. Since all the appeals involve a conrmon issued and were heard together, theyare'disposed of by a common [judgment. ]The appeals have been filed by the CIT underSection 260A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). TheITA Nos.99912006, 139412009,21012007 and 57512007, though thdy relate to threedifferent assessees, involve a common question, namely, whether the assessee wasrightly held by the Income Tax Appellate Tribunal (hereinafter refened to as 'theTribunal') to be entitled to the deduction under Section 80HHC of the Act. ITANo.74712007 involves the question of penalty imposed on the assessee under Section271(l)(c) of the Act and the question of law is whether the Tribunal was right incancelling the penalty. This appeal is consequential to the fate of ITA No.210/2007. 2. The ITA No.999/2006 is talcen as the lead matter. The appeal relates to theassessment year 1993-94. The respondent-assessee is a public limited company byname M.S. International Ltd., (heleinafter referred to as 'MSIL' or 'the assessee').The brief facts giving rise to the appeal rnay be noted. The assessee was incorporatedon 06.06.1991. Its business was to manufacture and export synthetic rubber solesheets. In respect of the assessment year 1993-94, relevant to the previous year endedon 31.03.1993, which is practically first year of its operation, it filed a return ofincome on 30.12.1993 declaring a total income of 72,5701-. In the return, the assesseeclaimed deduction of 76,48,92,5491- under Section 80HHC. Included in this was adeduction of {6,05,43 ,6271- in respect of export of synthetic rubber sole sheets to lWs. IT A 999 | 200 6, 2t 0 I 2007, s7 [s ]I 2007, 139 [4 ]/ 2009 & [1 ][47 ][12007] n IT A 999 | 200 6, 2t 0 I 2007, s7 [s ]I 2007, 139 [4 ]/ 2009 & [1 ][47 ][12007] n Taj Al Khateej General Trading Qrereinafter [referred ][to ][as ]['Taj' ][of].Company [of ][Dubai ]'TAKGT'). It would appear that [there ][was ][a ][search ][under Section ] [of ][the ][Act ][of]the assessee group of companies on 29.06.1994 on the basis of information [that ][the]assessee is indulging in over [pricing ]its [exports and ]in [order ][to ][honour ][the ][export]commitment substandard [goods ]were being [purchased ]from [the ][domestic rnarket ][and]"exported; and in league with the importer, money taken out of India through hawalaroute was being brought in as export [proceeds. ]It [is not ][clear ][from ][the ][assessment]order as to whether, and if so, what were the documents or materials [seized ][during ][the]search, but suffice to note that in the coruse of the assessment [proceedings ][the]assessing officer communicated with the Directorate of Revenue Intelligence [(DRI) ]inresponse to which a letter dated 01.12.1995 was received. Along with [the letter, ][a]statement dated 28.12.1994 was also received by the assessing officer, which [was ][that]of one Sheikh Suad Bin Abdullah Rashid Ai Nuaimi, President of the EconomicDgpartrnent, PO Box No.870, Ajmen, U.A.E. The letter is reproduced in [the]assessrnent order and therefore is not reproduced here. Suffice to note that the Sheikhstated that he was a partner of Taj and that he has never heard of MSIL fi'om whom hisfirm was supposed to have imporled synthetic rubber sole sheets, [that ][he ][has ][never met]or heard of Pavan Sachdeva, one of the Directors of MSIL [and ][that the ]order said [to]have placed by Taj with MSIL by letter'dated 18.01.1993 for 10 [consignments ]of53077 rubber sheets for a total cost of US $ 10,615,380 [was ]not [actually ][a ][letter]written by Taj, that the letter did not contain any specifications which was [quite]unusual for an order of import, that he has seen a list of 155 shipping [consigrunents]sent by MSIL between 16.03.1993 and 11.03.1994 for [a ]total FOB [value ][of ].US $10,615,392, that he was not aware of any such shipping [consignment ][imported ][by ][Taj]into Dubai and flrat the name of Taj has been misused [in ][the ][documents. ][On the ][basis]of this letter, the assessing officer wrote to MSIL [and ]sought its [explanation. ][The]assessee by letter clated 27 .11.1995 submitted that the export orders [received ][from ][Taj]were submitted in original with the [application ][for ][license submitted ][to ][the Directorate] rT A 999 12006, 2r0 12007, 57 [5 ]| 2007, [13 ]9 [412009 ]&. [| ][47 ]/2007 General of Foreign Trade [(DGFT), ][tirat ][the ][synthetic rubber sole ][sheets ][wele ][in ][fact]exported to Taj and'the entire sale [proceeds ][were realised ][through Bank ][of ][Baroda]from the banker of Taj [in Dubai.] rT A 999 12006, 2r0 12007, 57 [5 ]| 2007, [13 ]9 [412009 ]&. [| ][47 ]/2007 General of Foreign Trade [(DGFT), ][tirat ][the ][synthetic rubber sole ][sheets ][wele ][in ][fact]exported to Taj and'the entire sale [proceeds ][were realised ][through Bank ][of ][Baroda]from the banker of Taj [in Dubai.] 3. The assessing offrcer was not [satisfied ][with ][the ][assessee's ][reply. It ][would]appear that the assessee had [also submitted replies ][to ][the ][DRI vide ][its ][letters ][dated]23.08.1995 and 01.12.1995. [The ][assessee ][also submitted ][a ][letter ][to ][the ][assessing]officer on 04.03.1996 attaching [a ][photocopy ][of ][another ][staternent ][of ][the ][Sheildr ][ih]which the Sheildr had withdrawn his [earlier ][statement ][dated ][28.12.1994. ][The]'assessing officer was not prepared to accept the retraction of the Sheikh for thereasons that it was undated, that'it [was ][not ][swom ][to ][before an Oath ][Commissioner,]that the origilal was not [available, that ][the ][statement ][was ][not ][collected ][tluough ][any]govelrment agency, etc. In its earlier letter [dated ][27.1I.I995, ][the ][assessee ][had ][stated]to the assessing officer that the Sheikh [was ][upset ][with ][the ][assessee's ][refusal ][to ][give]certain amount of discount [and ][that was the ][reason ][for ][his ][giving ][a ][statement on]28.12.1994 denying the imports. All [these submissions ][of ][the ][assessee ][were brushed]aside by the assessing offrcer for the [reasons stated ][above ][and ][also ][because ][he]suspected that the second [statement, ][retracting ][his ][earlier ][statemdnt, was issued ][at ][the]behest of the assessee. It [would ][also ][appear ][that ][the Assessing ][Officer ][had conducted]some inquiries through the enforcement [directorate regarding ][the ][genuineness ][of ][Taj]in Dubai and the letter [issued ][by ][the ][Sheikh ][on 28.72.1994. ][According ][to ][the]information received by [letter ][dated 08.01.1996 ][from the ][Consulate General ][of ][India,]Dubai the following was the [position: ][-] i) IWs. Taj Al Khaleej General [Trading ][Co. ][Dubai ][was ][not existing ][at ][the]time of verification i.e. June 1994. ii) However during the [period ]namely [Jan. 1993 ][a ][firm ][in ][the name ][of ][Taj]Al Khaleej General Trading [Co. ][was ][existing in Dubai.] iii) The Prop. of the firm [was Sheikh ][Suad ][Bin ][Abdullah ][Rashid ][Al]Nuairni. When contacted Sh. Sheikh [Suad ]Bin [Abdullah ][Rashid ][Al ][Nuaimi]iv) confirmed the issuance of [the letter ][dated ][28.12'94.] Sheikh Nuaimi informed [that ][the ][contents ][of ][the letter ][dated 28.12.94]v) ar.e correct and that he issued [the ][same ][as ][per the ][advice tendered ][by ][his ][legal]' consultant. 4. In the light of the aforesaid facts [the ][assessing ][officer ][held that ][there were ][no]exports made by the [assessee ][to ][Taj ][and ][no ][deduction ][under ][Section ][80HHC ][was]allowable. He accordingly [denied ][the. ][deduction. ][However, ][the ][amount ][of]<6,05,43,6271- was [treated ][as ][income ][of ][the ][assessee ][under ][the ][head ]["income from]other sources" since [the ][money had ][actually ][been received ][by ][the ][assessee. ][Thus the]total income of the [assessee ][was computed at {6,05,46,1971- ][which ][consisted ][of ][the]returned income of72,5701- [and ][the addition ][of ][{6,05,43,6271- ][as ]["income ][from ][other]sources". 4. In the light of the aforesaid facts [the ][assessing ][officer ][held that ][there were ][no]exports made by the [assessee ][to ][Taj ][and ][no ][deduction ][under ][Section ][80HHC ][was]allowable. He accordingly [denied ][the. ][deduction. ][However, ][the ][amount ][of]<6,05,43,6271- was [treated ][as ][income ][of ][the ][assessee ][under ][the ][head ]["income from]other sources" since [the ][money had ][actually ][been received ][by ][the ][assessee. ][Thus the]total income of the [assessee ][was computed at {6,05,46,1971- ][which ][consisted ][of ][the]returned income of72,5701- [and ][the addition ][of ][{6,05,43,6271- ][as ]["income ][from ][other]sources". 5. The assessee appealed to [the ] [(Appeals) ][who ][heard ][both the ][assessee ][as]well as assessing officer [and ][passed ][an ][order ][on ][79.03.1997. Before ][the ] (Appeals) the assessee adduced additional [evidence under ][Rule ][46A ][of ][the ][Income]Tax Rules, 1962 to show [remittances received ][from ][Taj through banking ][channels, ][for]purchase of raw material and manufacture [of ][goods ][as ][also evidence ][to ][show that the]goods were shipped to Dubai. The [additional ][evidence ][was ][admitted ][by ][the ] (Appeals) who eventuaily held [that ][since ][the ][assessment ][was ][made ][on the ][basis ][of ][a]single statement of [the ]Sheikh [who ][had retracted ][the ][statement ][and ][since ][the ][second]statement of the Sheikh filed [by ] [was ][not ][tested ][by ][cross-examination, ][the ][case]was required to be remanded [to ][the ][assessing ][officer ][to ][be ][examined and ][framed]afresh. He accordingly [remitted the matter ][to ][the ][assessing ][officer.] Page 5 of 15 rT A 999 / 200 6, 21 0 12007, [s7 ][5 ][/2007, ][r39 ][4 ][1 ][2009 ][& ][1 ][47 ][12007] tr It 6. In giving effect to [the order ][of ][the ] [(Appeals), ][the ][assessing ][officer ][on]10.02.1999 [granted ]an opportunity [to MSIL to ][produce ][the ][Sheikh.and also ][issued]summons to hirn under Section [131. ][He had ][also sent letters ][to ][the ][Sheikh ][on]24.02.1997 and25.03.1997 [which ][remained ][unansw.ered ][by ][the ][Sheikh. ][The ][Sheikh]also did not appear pursuant [to the ][summons issued ][under Section ][131 ][and, ][therefore,]he could not be examined or [cross-examined ][either ][by ][the ][assessing ][officer ][or ][by ][the]assessee. On 05.03.1999 [the ][assessee ][submitted ][the ][documents ][in ][its ][possession ][to]show that the exports were [genuine. ][The ][assessing ][officer, ][however, in ][the fresh order]of assessment passed on 31.03.1999 [under Section 143(3) ][read ][with ][Section 250 ][of ][the]Act, again held that the [exports ][to Taj ][were ][not ][bona ][fide, ][that ][the ][deduction ][under]Sectiol 80HHC was not [allowable ][and ][that ][the export ][proceeds have ][to ][be considered]as "incomg from other sources". 7. Against the fresh assessment order [the ][assessee ][filed ][an ][appeal ][to ][the ] (Appeals) who passed an order on 21 [. ][1 ][1 ][.200 ][1 ]. In [brief, ][he ][held ][that ][in ][view of ][the]inquiries conducted, it was evident [that the ][exports made ][by ] [were ][not ][genuine]and bonafide and, therefore, the assessing officer [was ][justified ][in ][not ][allowing]deduction under Section 80 HHC [and ][in ][assessing ][the ][amount under the ][head ]["illcome]from other sources". 8. The assessee, aggrieved by the above order of [the ] [(Appeals), preferred ][a]further appeal to the Tribunal [which, ][on ][a ][consideration ][of ][the ][entire ][conspectus ][of ][the]facts and the evidence, held [as ]follows: [-] The income tax authorities [hacl ][disallowed the ][assessee's ][claim only ][on](i) the basis of the statement of [the ]Sheikh [made ][on28.12.1994 ][and ][had ignored]the documentary evidence adduced by the [assessee ][showing export ][sale ][of]<11.47 crores. The assessing officer [had also held ][that the ][expenses on]electricity and water amorurted only [to ][<57,9811- ][and ][wages amounted ][only ][to] 8. The assessee, aggrieved by the above order of [the ] [(Appeals), preferred ][a]further appeal to the Tribunal [which, ][on ][a ][consideration ][of ][the ][entire ][conspectus ][of ][the]facts and the evidence, held [as ]follows: [-] The income tax authorities [hacl ][disallowed the ][assessee's ][claim only ][on](i) the basis of the statement of [the ]Sheikh [made ][on28.12.1994 ][and ][had ignored]the documentary evidence adduced by the [assessee ][showing export ][sale ][of]<11.47 crores. The assessing officer [had also held ][that the ][expenses on]electricity and water amorurted only [to ][<57,9811- ][and ][wages amounted ][only ][to] rT A 999 /2006, 210 /2007, [s7 ][s | ][2007, ][| ][39 ][4 ] [2009 ][&. ][1 ][47 ][12007] ,ta'. I <14,4001- from which [goods ]of [the ][value ][of {11 ][to ][12 ][crores ][carurot ][be]manufactffed. In [coming ][to this ][conclusion, ][the ][assessing ][officer ][has ][ignored]the evidence adduced by the [assessee ][that ][it ][was ][getting ][the ][work ][done ][ttu'ough]job work underlaken by its sister concerns. Since the assessee was [getting ][the ][job ][done ][thlough ][sister ][concerns, ][the](ii) fact that it possessed machinery [of only ][<2,72,2491- ][was ][irrelevant' ]['] The assessee did not [claim ][at ][any ][point that the ][entire ][goods.were](iiD rnanufactured by it. (iv) Neither the assessee nor the assessing officer [could ][succeed ][in]producing the Sheikh for finther [examination ][on ][his ][statements. However, ][the]assessee has been able to lead suffrcient [documentary ][evidence ][to ][show ][that]the exports were [genuine. ]This [included the ][following: ][-] "1. Original Bank Certificate from [Grindlays Bank, ][Dubai,]tlAE showing bills received by the bank and [drawn ][on ][M'5. ][Taj ][Al]Klyaleej General Trading Coy. By [the ][assessee ][after ][betng ][paid ][by ][the]bank. 2. Export orders confirmed by M.S. [Tai ][Al ][Khaleej-] 3. Original statentent showing.credit [limitfor ][M.S. ][Tai ][Al ][Khaleei]by ["Export ]Credit Gaurantee [Corporation of ][India" ][a ][Govt. ][of India]Undertaking. 4. Particulars of exports duly [endorsed ][by ][Customs ][authorities in]the ["Duty ]Entitlement Exemption Certificate" [(DEEC ][Book).] 5. Bank certificate for export [realization.] 6. Exchange control declarationfrom [RBI.] 7. Exchange control declarationfrom [RBI.] B. Attested Custonts shipping bill [certifuing exports."] ..,'..r (v) The assessee was [also able ][to ][addube ][the ][following ][further ][documents](v) in support of its claim before [the ] [(Appeals): ][-] "(1) Courier receipt of [communication dispatched ][by]TAKGT tO ITO. (2) Applicationfor VISA of Pawan Sachdeva' (3) A letter from TAKGT to the Consulate [General, ][Indian]Embassy, Dubai. (4) Letter from TAKGT to MS Internationhl [Ltd., ][Delhi]giving details. of order placed by [them'] Invoice No.92R-912 dated [17.9.92 ][of ][IUI/s ][Fuji](5) Chemicals Development [Do. ][(sic') ][Ltd., ][TolEo ]for [import ][of]16.8 MT of Synthetic Rubber. (6) Bill of lading No.A6-65245A [dated ][28-9-92 ][issued ][bv]EvergreenJapanCorporation. , (7) Bill of entry for Home consumption [No.243l/92-93]dated 29.10.92. (S) BiIl No.lI402 dt. [g.ILg2 ]of A[/s. N-G. [Bhanushali ][&]Co. clearing agents [regarding ][clearing ][of ][goods ]from [Bonfiay]Port. (9) Goods r.eceipt (GR) copy No'5889 [and ][5B9I ][dated]7.11.92 of Ms Haryana [Golden ][Transport ]for [dispatch ][of]goods from Bombay to Delhi. (10) Transport bill No.HGT/DLH/392 [dt. ][16.11'92 ][and]HGT/DLI-I/389 dt. I6.I1.92 [of ][A,I/s ][Haryana ][Golden Transport.] . (11) Octroi Receipts. (12) Invoice No.MI/IO dated 16.10.92 [drm,vn ][in ]favour [of]Iutr/s Vikhuda Overseas [Corporation ]for [export ][of ][3800]Synthetic rubber Sheets., [GR. ][No.AB ][479852.] Q3) [BilI ][of ][lading ][dated 23.12.92 issued ][by ][Mitsui ][O.S.K.]Lines ltd. against [invoice ][No.M ][1/10'] (14) Customs shipping Bill No.5974 dated 17.12.92. (S) BiIl No.lI402 dt. [g.ILg2 ]of A[/s. N-G. [Bhanushali ][&]Co. clearing agents [regarding ][clearing ][of ][goods ]from [Bonfiay]Port. (9) Goods r.eceipt (GR) copy No'5889 [and ][5B9I ][dated]7.11.92 of Ms Haryana [Golden ][Transport ]for [dispatch ][of]goods from Bombay to Delhi. (10) Transport bill No.HGT/DLH/392 [dt. ][16.11'92 ][and]HGT/DLI-I/389 dt. I6.I1.92 [of ][A,I/s ][Haryana ][Golden Transport.] . (11) Octroi Receipts. (12) Invoice No.MI/IO dated 16.10.92 [drm,vn ][in ]favour [of]Iutr/s Vikhuda Overseas [Corporation ]for [export ][of ][3800]Synthetic rubber Sheets., [GR. ][No.AB ][479852.] Q3) [BilI ][of ][lading ][dated 23.12.92 issued ][by ][Mitsui ][O.S.K.]Lines ltd. against [invoice ][No.M ][1/10'] (14) Customs shipping Bill No.5974 dated 17.12.92. Q5) [Invoice ][No.MI/68 dated ][21.1.93 ][for ][export ][of ][1400]Synthetic Rubber Sheets. GRNo.AB [395116.] (16) Bill of ['lading ]No.APLU 004411973 dated 29'3.93issued by American President [Lines Ltd.] (17) Customs Shipping Bill No.9452 dated 22.1.93. (15) Duty Exmption Entitlentent Certificate Book. Issuedand maintained by Deptt. of Revenue [(Customs), ][Govt. ][of ][India]Bearing Serial No.05 [5526,' ][containing ][particulars of ][DEEC']value of the imports Licence fl.20 [crores ][(Advance Licence),]Assessee's Commitment to export [goods ]of [that ][value,]particulars of exports made." (vD ['In ]addition to the above flre assessee also produced evidence to showthat the remittances for the [export ][sale ][were ][received ][from ][Dubai-tluough]banking charrnels which [has ]been [overlooked ][by the ][assessing ][officer.] ("ii) The income tax authorities have_ignored [the ][fact ][that ][the ][assessee ][had]exported similar [goods ]to other foreign [buyers ][which ][have ][not ][been ][doubted ][by]them. Further, the Sheikh had [stated ][that ][Taj ][was ][not only ][importing from]MSIL but also fi'om its sister concerns. 9. With regard to the statements [of the ][Sheikh, the ][Tribunal ][found ][that ][in ][the ][first]statement dated 28.12.1994, [he ][had ][denied ][making ][any ][purchases ][from ][MSIL. ][Tliis]was sought to be explained by [the ][assessee ][before the ][Tribunal ][on ][the ][ground ][that ][it]was given at the behest of [h4/s. ][Gujarat ][Apar Polymer ][Ltd., ][a ][business ][rival ][which ][had]complained to the Ministry of Commerce [on the ][basis ][of which inquiries ][were ][initiated]by the government and this had [put ][pressrue ][on ][the ][Sheikh ][who ][wanted ][to ][dissociate]himself from the [assessee. ][It ][was ][only ][when ][the ][difficulties ][were removed that ][the] IT A. 999 /2006, 2t0 [12007, ][s7 ][5 ][| ][2007, ][r39 ][4 ][12009 ][& ][| ][47 ][12007] 4.II Sheikh came forward to make [a ][statement ][retracting ][his ][earlier statement. ][The]Tribunal has noted the [assessee's ][submission ][in ][para ][1 ][1 ][of ][its ][order ][as ][follows: ][-] IT A. 999 /2006, 2t0 [12007, ][s7 ][5 ][| ][2007, ][r39 ][4 ][12009 ][& ][| ][47 ][12007] 4.II Sheikh came forward to make [a ][statement ][retracting ][his ][earlier statement. ][The]Tribunal has noted the [assessee's ][submission ][in ][para ][1 ][1 ][of ][its ][order ][as ][follows: ][-] *ll. According to the [assessee, ][the statement ][dated 28.12.94 ][by ][the]Sheikh denying [the ][purihases ]from [the ][assessee ][was made on the ][basis]of a complaint lodged by the [hostile ][business ][rival of ][the ][assessee]company, namely A[/s. Gujarat [Apar Polymers ltd. ][with ][the ][Minister ][of]Commerce and on the [strength ][of ][that ][complaint ][enquiries ][utere]initiated by the Government [and, therefore, ][under ][pressure ][the Sheikh]made that statement to avoid serious [trouble. ][However, when ][these]contplications were remoyed, [the Sheikh ][agreed ][to ][make statement ][to]bring out the true facts [denying ][his previous ][statentent ][stating ][the]circwnstances under which [that ][statement ][was ][ntade and ]fullyaccepting the export sales [made ][to ][him by ][the ][assessee ][conxpany.]Along with his statement an [annexure was ][also ][appended ][detailing ][the]documentary evidence to support [the ]factum [of ][imports ][made ][by ][the]firm [of ][the ][Sheikh ]from [the ][assessee ][company. ][The ][assessee ][also]claints that the copy of [this ][statement ][was ][also ][directly ]fo*ud [by ][the]Sheikh to the AO and also [enclosing the entire docuntentary ][evidence]forwarded [it ][by sending ][another ][copy ][through ][courier ][to ][the ][AO. ][The]Sheitch also filed an ffidavit, [which has ][been ][authenticated ][by]Ministry of Foreign Affairs Sharjah [as ][well ][as ][by ][Dubai ][Chamber ][of]Commerce and Industry. In [this ]ffidavit. [Sheikh ][Rasheed ][has ][clearly]admitted that all the orders sent [by ][the ][assessee ][and its ][other]cornpanies were placed by TAKGT [and ][that ][the ][ossessee ][and ][is ][other]group companies have not all misused [the name ][of ] [company.]In this very ffidavit, the Sheikh further [slated that ][all ][the ][orders ][were]placed by the representative of his [company, ][TAKGT, ][in ][Dubai ][and]that he was aware of all [the imports ][of ][every ][kind ][done ][by ] from [the ][assessee's ][group. ][Further, ][in ][the ][ffidavit, ][the ][sheikh]explained that the statentent [dated ][28.12.94 ][was ][made ][by hint ][on ][the]decett practiced by the representatives [of ][lt[/s. ][Guiarat ][Apart ][Polymer]Ltd. and its lawyer and [that the ][statement ][does ][not ][have ][any]authenticity at all. The Sheikh further [admitted ][that the ][telephone]number and the P.O. [number given on the order ]form [placedwith ][M.S.]group were being used by TAI(GT. [Further that ][no ][dues ][against ][any]bills were to be paid and that [all ][tlrc payntents have ][already ][been]made from his accounts in A [& Z ][Gribndlays Bank, ][Deira, ][Dubai']There was a coy of [another declaration ]from [Sheikh ][Rasheed ][which]was dated and also authenticated [by ][Dubai ][Chamber ][of ][Conmterce]and Industry, which repeats [the same ][story to ][the ]ffict [that ][the ][orders] -T, -T, placed with M.S. Group [were ][genuine. ][It ][nxeans ][that ][the ][Sheilch ][in ][his]-subsequent 'been declaration and the ffidavit, the genuineness of which hasalso accepted and communicated [to ][the Additional ][Director]General Foreign Trade by [the ][Consul.ate ][General ][of ][Indta ][in ][their]letter dated 12.5.97 [placed ][at, ][pages ][58 ][& ][59 of ][the ][pqper ][book ][of ][the]essessee, ntentioned [that ][the ][letter ][dated 28.12.94 ][was not ][registered,]whereas, his subsequent ffidavits [were ][registered and ][in ][the ]ffidavitdated 13.1.97 his signature [have ][been ][legalized ][by ][Dubai ][chamber ][of]Comrnerce and Industr"y, which [has ][also ][been enclosed ][by ] Ministry of foreign Affairs [and as the ]ffidavit [dt. ][13.1.97 has ][been]Iegalized by Dubai [Chamber ][of ][Commerce ][and Industry, which ][has]also been enclosed by [Ministry ][of ]foreign [Affairs ][and as ][the]ffidavit [dt. ] [3. ] [.97 ][has ][beert ][legalized ][it ][may have ][to ][be ][considered ][as]authentic." tr 10. With reference [to ][the ][aforesaid submissions ][of ][the ][assessee, ][the ][Tribunal] opined as follows: [-] ,,we are of the opinion that in case the Ao was relying upon thestatement 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 sante no reliance [could ][also ][be ][placed ][on ][such]Statement. Further, [the ]second [statement ][made ][by ][the ][Sheikh, ]fullyretracting from the earlier [statement ][made ][by ][him ][also ][of ][course]cannot be safely relied [upon ][because ][the ][AO is ][deprived ]front [the]opportunity of cross [examining ][the sheikh as ][he ][did not ][choose ][to]support "ipear [for ]of [this ]his [purpose. ]retraction [As ]f'om [regards the ][the ][statement ][ffidavit ][made ][of ][the ][earlier ][Sheikh in][dated]' 2t.12.94, admitting [the export ][purchases madefi"om the ][assessee ][and]the payments being [made ][through banking ][channels as ][clainrcd ][by ][the]orrirrrr, the Consulate General [of ][India's ]ffice [in ][the letter ][to]additional Director of Foreign [Trade has confirmed the ][genuineness]of the ffidavit of [the ][Sheikh, ][onwhichthe ][signature of ][the ][Sheikhwerb]Ibgattzid the ffidavit [was ][registered ][by ][the Dubai ][Chamber ][of]Commerce & Industry [and ][has ][also ][been endorsed ][by ][the ] Ministry of Foreign Affairs. In [these ]facts [it ][ntay ][not ][be ][safe ][to rely]- upon the unauthenticated [statement ][made ][by ][the ][Sheikh, ][but, ][at ][the]same time is would [also ][not ][be ]fair [on ][the ][part ][of ][tax ][authorities re ][the]ffidavit, for [contradicting ][which ][neither ][is ][been ][made ][nor ][any]iutdrntu has been brought [the ][departntent. ][Fact ][remains ][that ][when] the assessee front the documentary [evidence is able ][to ][prove ][the ][export]sales made by ft rc the Sheikh's [company ][TAKGT, ][Dubai, ][and having]received the amount of {6,05,43,627/- [as ][remittance ]for [the ][sante,]through banking channel [of ][Dubai in ][the ][Indian ][Bank ][the export ][sales]made by the assessee [pdnnot ]be [disbelieved on the ][solitary ][statenxent]of the Sheikh made earlier on [28.12.9.4, ][when ][the ][sanxe ][v'as]subsequently retracted by [the ]Sheikh [himself ][in a ][duly ][authenticated]ffidavit."sales made by ft rc the Sheikh's [company ][TAKGT, ][Dubai, ][and having]received the amount of {6,05,43,627/- [as ][remittance ]for [the ][sante,]through banking channel [of ][Dubai in ][the ][Indian ][Bank ][the export ][sales]made by the assessee [pdnnot ]be [disbelieved on the ][solitary ][statenxent]of the Sheikh made earlier on [28.12.9.4, ][when ][the ][sanxe ][v'as]subsequently retracted by [the ]Sheikh [himself ][in a ][duly ][authenticated]ffidavit." 11. After exarnining the documentary [evidence placed ][by the ][assessee ][the ][Tribuiral]held'that there was no [basis ][to ][disbelieve ][the ][entire ][documentary evidence ][rnerely]because of the statement [of ][the Sheikh ][made ][on28.12.I994. ][The ][Tribunal ][finally ][held]that the tax authorities were not [justified ]in [treating ][the ][export ][sale rnade ][by ][the]assessee to Taj, Dubai as non-genuine [and ][in ][refusing ][the ][deduction claimed ][under]Section 80HHC. The Tribunal [also ][deleted ][the ][addition ][of ][the ][amount ][of]<6,05,43,627I- as "income from [other sourcas".] lZ. Similar orders were [padsed ][in ][the ][case ][of MSIL for ][the ][assessment ][year ][1994-]95. In the case of M.S. [Shoes ][East ][Ltd. ][and ][the ][case ][of ][Pearl ][Intercontinental ][Ltd. ][also]the Tribunal took the same view; [It ][may ][be ][noted that ][in ][these ][cases ][also ][the ][assessees]had claimed the deduction under Section [80HHC in ][respect ][of ][the exports ][made ][to ][Taj]which were disbelieved. The [export proceeds'were ][assessed ][as ]["income ][from ][other]sources". In the case of M.S. [Shoes ][East ][Ltd., the ][assessing ][officer ][also imposed ][a]penalty of {59,58,588/- under Section [271(l)(c) ][of ][the ][Act ][for'concealment of ][income.]The penalty was cancelled by [the ][Tribunal ][since ][it ][had ][deleted ][the ][addition ][madb]'under the head "income fi'om other sources" and [also ][allowed the ][assessee's ][claim ][for]deduction under Section 80HHC. 13. The contention of the standing [counsel ]for [the ][Revenue ][is ][that the ][finding ][of]the Tribunal in all the cases [is ][perverse ][as ][it ][has ][overlooked the ][first ][statetnent ][of ][the]Sheikh made on28.12.1994 [andhas given undue weightage ][to ][the ][retraction ][and ][to ][the] rT A 99 [g ]/ 200 6, [210 ]12007, [57 ][5 ][/2007, ][139 ][41 ][2009 ][& ][1 ][47 ][| ][2007] affidavit dated 13.0I.1997 [which ][was ][filed ][by the ][assessee ][in ][the ][course ][of ][the ][fresh]assessment proceedings. The [contention ][of ][the ][assessee, ][who ][appeared ][ttu'ough its]Managing Director, is that [the Tribunal ][has taken ][the ][decision on the ][basis ][of ][the]evidence adduced before the [income ][tax ][authorities ][including ][copious ][documentary]evidence and has not chosen [to ][go ][only by ][the ][first ][statement ][made ][by the ][Sheikh. ]['He]further pointed out that the Tribunal [has ][refered ][to ][all ][the three ][statements ][of ][the]Sheikh and has held, on [a proper ][appreciation ][of ][them, that the retraction ][and ][the]affidavit dated 13.01.1997 contained [the ][truth ][and should ][be ][believed. ][It ][is ][contended]that there is nothing brought on record [to ][show that ][the findings ][of ][the ][Tribunal ][are]perverse,. nor was there any inherent [irnprobability ][in ][the ][evidence ][adduced ][by ][the],assessee in [order that the conclusion ][of ][the ][Tribunal ][may be ][criticized ][as ][irrational.] 14. On a fair reading of [the ][order ][of ][the Tribunal, ][we ][are ][unable ][to ][say ][that ][its]appreciation of the evidence is [contrary ][to ]law. [We ][have ][already ][adverted ][to ][the]documentary evidence which was [placed before the ][income tax authorities ][in ][both ][the]rounds of the proceedings [as ][also ][before the ][Tribunal. ][The Tribunal ][has ][taken note ][of]every itern of evidence, including [the ][tluee ][statements ][of the Sheikh. ][It ][has ][preferred]to rest its decision on the [overwhelming ][documentary ][evidence ][adduced ][by ][the]assessee to prove the [exports ][which ][included ][correspondence ][with ][the ][goverrunental]authorities, their approvals, etc. None of [the ][documentary evidence ][has ][been]impeached or sought to be [discredited ][on behalf ][of ][the Revenue. ][The ][Tribunal ][has]also taken due notice of the statements [of ][the ][Sheikh ][and has ][preferred ][to ][accept ][the]retraction, supported latel by [the affidavit ][dated ][13.01.1997 ][swoln ][to ][by ][him ][before]the Indian Consulate at Dubai. [No ][material ][has been ][brought on record ][or ][in ][the]course of the proceedirigs [before the ][Tribunal to ][throw ][any doubt ][on ][the ][credibility ][of]the affidavit sworn to before the [Indian ][Consulate ][in ][Dubai. ][The ][Sheikh ][was neither]produced by the assessing officer [nor ][by ][the ][assessee ][and ][he was ][not ][subjected ][to ][any]examination or cross-examination [by ][flre ][income ][tax ][authorities. ][It ][is ][in ][these] circumstances that the Tribunal [has ][chosen ][to ][accept ][the ][retraction ][of ][the ][Sheikh,]supported by the affidavit. [Added ][to ][this ][is ][the fact that ][there ][was ][copious]documentary evidence [in ][support ][of ][the ][exports. The ][decision taken ][by ][the ][Tribunal ][is]not, in ow opinion, vulnerable [to ][the ][charge ][that ][it ][has ][been ][arrived ][at ][by ][ignoring]relevant material or [evidence or ][by taking ][into ][account ][irrelevant ][evidence or material.]The findings of the [Tribunal ][are ][essentially ][findings ][of ][fact ][and ][they ][cannot ][be]subjected to the criticism ofbeing [unreasonable ][or ][perverse ][or ][irrational. ][It ][has been]held by the Supreme Court [in ][Sree ][Meenakshi ][Mills ][Ltd. v. CIT, ][(1957) ][31 ] [28 ][as]-foilows: ,,.....1t has been held on the corresponding provisions in the EnglishIncome-tax statutes that [a ]finding [on ][a ][question of ]fact [ts ][open ][to]attack as erroneous in [law ][only ][if it ][is not supported ][by ][any ][evidence,]or if it is unreasonable [and ][perverse, but that where there is ][evidence]to ionsider, the decision [of ][the ][Tribunal ][is ]final [even ][though ][the ][Court]might not, on the materials, [have ][conte ][to ][the ][same ][conclusion ][if ][it ][had]the power to substitute [its ][own ][judgment. ][In ][Great ][Western ][Railway]Co. v. Bater(l), Lord Atkinson [observed: -]Income-tax statutes that [a ]finding [on ][a ][question of ]fact [ts ][open ][to]attack as erroneous in [law ][only ][if it ][is not supported ][by ][any ][evidence,]or if it is unreasonable [and ][perverse, but that where there is ][evidence]to ionsider, the decision [of ][the ][Tribunal ][is ]final [even ][though ][the ][Court]might not, on the materials, [have ][conte ][to ][the ][same ][conclusion ][if ][it ][had]the power to substitute [its ][own ][judgment. ][In ][Great ][Western ][Railway]Co. v. Bater(l), Lord Atkinson [observed: -] "Their (Commissioners') determinations [of ][questions ][of]pure fact are not to be disturbed, [any more ][than are ][the]' rtndings [of ][a ]iury, [unless ][it ][should appear ][that ][there]was no evidence before [thent upon ][which ][they, ][as]reasonable men, could [come ][to ][the ][conclusion to which]they have conxe: and this, [even ][though ][the ][Court ][of]Review would on' [the ][evidence ][have ][come ][to ][a]conclusion entir ely dffir [ent ]f' [om ][theirs'"] "Their (Commissioners') determinations [of ][questions ][of]pure fact are not to be disturbed, [any more ][than are ][the]' rtndings [of ][a ]iury, [unless ][it ][should appear ][that ][there]was no evidence before [thent upon ][which ][they, ][as]reasonable men, could [come ][to ][the ][conclusion to which]they have conxe: and this, [even ][though ][the ][Court ][of]Review would on' [the ][evidence ][have ][come ][to ][a]conclusion entir ely dffir [ent ]f' [om ][theirs'"] To the same effect [areithe ][obseniations ][of ][the ][Supreme ][court ][in ] [v. ][Daulat ][Ram]Rawatmull, [(1973) ][87 ] [349: ]['] ".....Before dealing with the facts of [this ][case, ][we ][may ][advert ][to ][the]principles which should [govern ][the decisions ][of ][the ][court in ][such ][lilce]-coses. Findings on questions of pure fact arrived at by the Tribunalare not to be disturbed by [the ][High ][Court on ][a ][reference unless ][it]principles which should [govern ][the decisions ][of ][the ][court in ][such ][lilce]-coses. Findings on questions of pure fact arrived at by the Tribunalare not to be disturbed by [the ][High ][Court on ][a ][reference unless ][it] ('" appears that [there ][w'as ][no ][evidence ][before ][the ][Tribunal ][upon ][whi-ch]as [a reasonable ][rnen, ][could ][come ][to ][the ][conclusion ][to ][which ][they]they, havecome;andthisisso,sventhoughtheHighCourtwouldontheevidence have [come ][to ][a ][conclusion ][intirely dffirent from ][that of ][tle]Tribunal. In [other words ][such ][a ]finding [can ][be ][reviewed ][only on ][the]there [is ][no eviden"u ][io ][trpport ][it ][or ][that ][it ][is ][perverse""'"]ground that 14. we [are, ][therefore, ][satisfied that ][the ][Tribunal ][committed ][no ][ellor ][in holding that]the assessees [were ][entitled ][to ][the ][deduction ][under ][section 80HHC ][of ][the ][Act ][in]respect [of the export ][of ][goods ][to ][Taj ][and ][that the ][assessing ][officer ][was not ][justified ][in]the [export ][proceeds ][not ][as business ][income ][but ][as ]["income ][from ][other]assessing sources". [The ][substantial questions ][of law ][in ] [No'999/2006,139412009'21012006]and 57512007 [arcanswered ][in ][the ][affirmative, ][in ][favour of the ][assessee ][and against ][the]Revenue. The [Tribrural was also ][right ][in ][cancelling ][the ][pen4tty ][imposed ][on ][the]assessee iws. [M. ][s. ][shoes ][East ][Ltd. ][(ITA ][No.14712006). ][All ][the substantial ][questions]of law are [thus ][answered ][in ][favour ][of ][the ][assessee' ][The ][appeals ][of ][the ][Revenue ][are]accordingly [dismissed ][with ][no order ][as ][to ][costs'] ' t,illU"-n-< ,'(R.V.EASwAR)JUDGE (S. RAVINDRA [BHAT)]JUDGE SEPTEMBER28,2ol2 hs Page 15 of15 rr A, [gg9 ]12006, [2t ][0 ][12007, ][57 ][5 ][l2o}7, ][139 ][4 ][| ][2009 ][& ][| ][47 ][| ][2007]