Ita/147/2007 Of Commissioner Of Income Tax Del v. Iv{/S. M.s. International Ltd

$-14 to 17* IN TI{E HIGH COURT OF DELHI AT N-EW DELHIReserved on:.30'h August, 2012% Date of Decision: 28t" September, 2012+ tT|t394t2009COMMISSIONER OF INCOME TAX .... AppellantVERSUSiv{/S. M.S. INTERNATIONAL LTD. .... Respondent+ tTA2I0t2007+ tTAL47t2007COMMISSIONER OF INCOME TAX .... AppeltantVERSUSM.S. SHOES EAST LTD..... Respondent+ tT4575t2007COMMISSIONER OF INCOME TAX .... AppellantVERSUSPEARL INTERCONTINENTAL LTD. .... RespondentPresent: Mr. Kamal Sawhney, Sr. Standing Counsel for Revenue in ITANos.999/20 0 6, 21 0 12007, 57 5 12007 and | 47 12007 . Mr. Sanjeev Sabharwal, Sr. Standing Counsel with Nft. PuneetGupta, Jr. Standing Counsel with Ms. Gayatri Verma, Adv. inITA No.139412009. Mr. Pavan Sachdev4 respondent in person in all matters. ITA Nos. 139 4 12009, 210 12007, 57 5 n007 & | 47 12007 Page I of2 CORAM: MR. JUSTICE S. RAVINDRA BHATMR. JUSTICE R.V. EASWAR 1. Whether Reporters of local papers may be allowed to see the [judgment?] 2. To be referred 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. ,lfllr\lfVl *t-<--t (R.v:EASwAR)JTIDGE SEPTEMBER28,2012hs (s. RAVnIDRA BHAT)JT'DGE ITA Nos. 139 412009, 21012007, 57 5 12007 & [| ][47 12007] Page2 of? I $-13 to [17]* IN THE HIGH COURT OF DELHI AT NEW Reserved on:. 30't' August, 2012% Date of Decision: 28tt' September, 2012r- ITA99912006+ ITAl394l2009' COMMISSIONER OF INCOME TAX ... AppellantVERSUSI\{/S. M.S. INTERNATIONAL LTD..... Respondent+ ITA2t0l2007+ TTAL47|2007COMMISSIONER OF INCOME TAX ..'- AppellantVERSUSM.S. SHOES EAST LTD..... Respondent+ ITAs75l2007 :,COMMISSIONER OF INCOME TAX .... AppellantVERSUSPEARL INTERCO-NTINENTAL LTD. .... RespondentPresent: Mr. Kamal Sawhney, [Sr. Standing Counsel ][for ][Revenue ][in ] Nos.999/2006,21012007 , 57512007 [pnd ][14712007 ][.]Mr. Sanjeev Sabharwal, Sr. Standing [Counsel ][with ][M'. ][Puneet]Gupta, Jr. Standing Counsel with Ms. [Gayatri ][Vetma, ][Adv. ][in]ITA No.139412009.Mr. Pavan Sachdeva, respondent in [person ]in [all ][rnatters.] Page I ofl5 lT A 999 I 2006, 2r0 D007, [s7 s ][12007, ][| 39 ][4 | ][2009 ][& ][| ][47 ][12007] \ CORAM:MR. JUSTICE S. RAVINDRA BHATMR. JUSTICE R.V. EASWAR 1 . Whether Reporters of local papers may be allowed to see the [judgment?] 2.Tobe referred to the Reporters or not? ) 3. Whether the [judgment ]should be reported in the Digest? Y R.V. EASWAR. J.: Since all the appeals involve a common 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 leferred to as 'the Act'). TheITA Nos.99912006, 139412009,21012007 and 57512007, though th6y relate to threedifferent assessees, involve a common question, narnely, whether the assessee wasrightly held by the Income Tax Appellate Tribunal (hereinafter refered to as 'theTribunal') to be entitled to the deduction under Section 80HHC of the Act. ITANo.14712007 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 consequentiai to the fate.of ITA No.210/2007. Since all the appeals involve a common 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 leferred to as 'the Act'). TheITA Nos.99912006, 139412009,21012007 and 57512007, though th6y relate to threedifferent assessees, involve a common question, narnely, whether the assessee wasrightly held by the Income Tax Appellate Tribunal (hereinafter refered to as 'theTribunal') to be entitled to the deduction under Section 80HHC of the Act. ITANo.14712007 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 consequentiai to the fate.of ITA No.210/2007. 2. The ITA No.999/2006 is taken as the lead matter. The appeal relates to theassessrnent year 1993-94. The respondent-assessee is a public limited company byname M.S. International Ltd., (hereinafter referred to as 'MSIL' or 'the assessee').The brief facts giving rise to the appeal may be noted. The assessee was incorporatedon 06.06.1991. Its business was to manufacture and export synthetic rubber solesheets. In respect offlre assessrnent 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 on30.I2.1993 declaring a total income of72,5701-. In the return, the assesseeclzrirned 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 IWs. Taj Al Khaleej General Trading Company of Dubai (hereinafter referred to as 'Taj' of'TAKGT'). It would appear that there was a search under Section 132 of the Act ofthe assessee group of companies on 29.06.1994 on the basis of information that the.assessee is indulging in over [plicing ]its [exports and ][in ][order ][to ][honour ][the ][export]commitment substandard goods were being purchased from the domestic market andexported; and in league with the importer, money taken out of India through hau,alaroute was being brought in as export proceeds. It is not clear from the.assessmentorder as to whether, and if so, what were the documents or materials seized during thesearch, but suffice to note that in the coruse of the assessment proceedings theassessing officer communicated with the Directorate of Revenue Intelligence (DRI) inresponse to which a letter dated 0I.I2.lgg5 was received. Along with the letter, astatement dated 28.12.1994 was also received by the assessing officer, which was thatof one Sheil<tr Suad Bin Abdullah Rashid Al Nuaimi, President of the EconomicDepartment, PO Box No.870, Ajmen, U.A.E. The letter is reproduced in theassessment order and therefore is not reproduced h6re. Suffice to note that the Sheikhstated that he was a parhrer of Taj and that he has never heard of MSIL from whom hisfirm was supposed to irave imBorted synthetic rubber sole sheets, that he has never metor heard of Pavan Sachdeva, one of the Directors of MSIL and that the order said tohave 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 letterwritten by Taj, that the letter did not contain any specifications which was quiteunusual for an order of irnport, that he has seen a list of 155 shipping consignmentssent 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 impofted by Tajinto Dubai and that the name of Taj has been misused in the documents. On the basis. of this letter, the assessing officer wrotg to MSIL and sought its explanation. Theassessee by letter dated 27.11.1995 submitted that the export orders received from Tajwere submitted in original with the application for license submitted to the Directorate 1 1 General of Foreign Trade [(DGFT), ][that ][the ][synthetic rubber sole ][sheets ][were ][in ][fact.]exported to Taj and the entire sale [proceeds ][were realised ][through Bank ][of ][Baroda]from the banker of Taj in Dubai. i [g.. ]The assessing officer was not satisfied with [the ][assessee's ][reply. ][It ][would]' appear that the assessee had also submitted replies to the DRI vide its letters dated23.08.1995 and 01.12.1995.. The assessee [also ][submitted ][a ][letter ][to ][the ][assessing]officer on 04.03.1996 attaclnng [a ][photocopy ][of ][another ][statement ][of ][the ][Sheiktr ][in]which the Sheikh had withdrawn his earlier statement [dated ][28.I2.1gg4. ][The]assessing offiter was not [prepared ][to ][accept ][the ][retraction ][of ][the ][Sheikh ][for ][the]reasons that it was undated, [that ][it ][was ][not ][sworn ][to ][before an Oath ][Commissioner,]that the original was not available, flrat the statement [was ][not ][collected through ][any]govenrment agency, etc. In its earlier letter dated [27 ][.11.1995, ][the ][assessee ][had ][stated]' appear that the assessee had also submitted replies to the DRI vide its letters dated23.08.1995 and 01.12.1995.. The assessee [also ][submitted ][a ][letter ][to ][the ][assessing]officer on 04.03.1996 attaclnng [a ][photocopy ][of ][another ][statement ][of ][the ][Sheiktr ][in]which the Sheikh had withdrawn his earlier statement [dated ][28.I2.1gg4. ][The]assessing offiter was not [prepared ][to ][accept ][the ][retraction ][of ][the ][Sheikh ][for ][the]reasons that it was undated, [that ][it ][was ][not ][sworn ][to ][before an Oath ][Commissioner,]that the original was not available, flrat the statement [was ][not ][collected through ][any]govenrment agency, etc. In its earlier letter dated [27 ][.11.1995, ][the ][assessee ][had ][stated]. to the assessing officer that [the ][Sheikh was ][upset ][with ][the ][assessee's ][rbfusal ][to ][give]certain amount of discount and that was [the ][reason ][for ][his ][giving ][a ][statement on]28.12.1994 denying the imports. these submissions [of ][the ][assessee ][were brushed]certain amount of discount and that was [the ][reason ][for ][his ][giving ][a ][statement on]28.12.1994 denying the imports. these submissions [of ][the ][assessee ][were brushed]'.. aside by the assessing offrcer for the reasons stated above and also because hesuspected,that the second statement, [retracting ][his ][earlier ][statement, was issued ][at ][the]behest of the assessee. It would also [appear ][that the Assessing ][OfFrcer ][had conducted]some inquiries through [the ][enforcement ][directorate regarding ][the ][genuineness ][of ][Taj]in Dubai and the letter issued by the Shdikh on [28.12.1994. ][According ][to ][the]suspected,that the second statement, [retracting ][his ][earlier ][statement, was issued ][at ][the]behest of the assessee. It would also [appear ][that the Assessing ][OfFrcer ][had conducted]some inquiries through [the ][enforcement ][directorate regarding ][the ][genuineness ][of ][Taj]in Dubai and the letter issued by the Shdikh on [28.12.1994. ][According ][to ][the]' information received by letter dated 08.01.1996 from the Consulate General of India,Dubai the following was the [position: ][-]information received by letter dated 08.01.1996 from the Consulate General of India,Dubai the following was the [position: ][-] i) lWs. Taj Al Khaleej General [Trading ][Co. ][Dubai ][was ][not existing ][at ][the]time of verification i.e. June t994.time of verification i.e. June t994. ii) However during the period nalely Jan. 1993 [a ]firm [in ][the name ][of ][Taj]Al Khaleej General Trading [Co. ][was ][existing in Dubai.]Al Khaleej General Trading [Co. ][was ][existing in Dubai.] Page 4 of l5 iii) The Prop. of the firm was Sheikh Suad Bin [Abdullah ][Rashid ][Al]Nualmr.Nualmr. When contacted Sh. Sheikh Suad Bin [Abdullah ][Rashid ][Al ][Nuaimi]iv) confirmed the issuance of the letter dated [28.12.94.]confirmed the issuance of the letter dated [28.12.94.] i) lWs. Taj Al Khaleej General [Trading ][Co. ][Dubai ][was ][not existing ][at ][the]time of verification i.e. June t994.time of verification i.e. June t994. ii) However during the period nalely Jan. 1993 [a ]firm [in ][the name ][of ][Taj]Al Khaleej General Trading [Co. ][was ][existing in Dubai.]Al Khaleej General Trading [Co. ][was ][existing in Dubai.] Page 4 of l5 iii) The Prop. of the firm was Sheikh Suad Bin [Abdullah ][Rashid ][Al]Nualmr.Nualmr. When contacted Sh. Sheikh Suad Bin [Abdullah ][Rashid ][Al ][Nuaimi]iv) confirmed the issuance of the letter dated [28.12.94.]confirmed the issuance of the letter dated [28.12.94.] Sheikh Nuaimi informed [that ][the ][contents ][of ][the letter ][dated 28.12.94]v) are correct and that he issued the same [as ][per the ][advice tendered ][by ][his ][legal]consultant.are 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 ][80I{HC ][was]aliowable. FIe 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 incorne of72,5701- and [the ][addition of ][T6,05,43 ],6271- [as ]["income ][from ][other]sources". 5. The assessee appealed to the CIT [(Appeals) ][who ][heard ][both the ][assessee ][as]well as assessing officer and [passed ][an ][order ][on ][19.03.1997. ][Before ][the ] (Appeals) the assessee adduced additional evidence [under ][Rule ][46A ][of ][the ][Income]Tax Rules, 7962to show remittances [received ][from Taj ][through banking chamels, ][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 eventually held that since the [assessment ][was ][made ][on the ][basis ][of ][a]single statement of the Sheil*r [who ][had retracted ][the ][statement and since ][the ][second]statement of the Sheikh filed by MSIL [was ][not ][tested ][by ][cross-examination, ][the ][case]was required to be remanded [to ][the ][assessing ][offircer ][to ][be ][examined and ][framed]afresh. He accordingly remitted the [matter ][to ][the ][assessing ][officer.] rT A 999 12006, [21 ]0 [1 ]2007, [s7 5 ][12007, ][r39 ][41 ][2009 ][& ][r ][47 ][12007] 6. In giving effect to the order of flre CIT [(Appeals), ][the ][assessing ][officer ][on]10.02.1999 granted an opportumty to MSIL to [produce ][the ][Sheikh.and also ][issued]sunmons to him under Section 131. He [had also ][sent letters ][to ][the ][Sheikh ][on]24.02.1997 and 25.03.1997 which remained [unanswered ][by ][the ][Sheikh. ][The ][Sheikh]also did not appear pursuant to the srunmons 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]Section 80HHC was not allowable and that [the ][export proceeds have ][to ][be considered]as "income 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 .2001. 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 ]["income]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 had 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]<1I.47 crores. The assessing officer had also held that the [expenses on]electricity and water amounted only to [<57,9811- and wages amounted ][only ][to] tr A 999 1200 6, 210 12007, [57 5 ][12Q07, ][1 ][39 ][4 I ][2009 ][& ][1 ][47 ][12007] <14,400/- from which [goods ]of [the ][value ][of ] [to ][12 ][clores ][cannot ][be]manufactured. Itr coming [to ][this ][conclusion, the ][assessing ][officer ][has ][ignored]the evidence adduced by [the ][assesdee ][that ][it ][was getting the ][work ][done ][through]job work undertaken by its sister concerns. Since the assessee was [getting ][the ][job ][done ][through ][sister ][concerns, ][the](iD fact that it [possessed ]machinery [of only ][<2,72,2491- ][was ][irrelevant. ]['] (iiD The assessee did not claim at any [point ][that the ][entire ][goods.were]manufactured by it. (iv) Neither the assessee nor the [assessing ][ofFtcer ][could ].succeed [in]producing the Sheikh for fruther examination [on ][his ][statements. However, ][the]assessee has been able to lead [sufhcient ][docurnentary ][evidence ][to ][show ][that"]the exports were [genuine. ]This [included the ][following: ][-] "1. Original Bank Certificate from ANZ [Grindlays Bank, ][Dubai,]UAE showing bills received by [the bank and ][drawn ][on M.S. Tai ][Al]Khaleej General Trading [Coy. ][By ][the ][assessee ][after ][being ][paid ][by ][the]bank' 2. Export orders confirmed by M.S. Tai [Al ][Khaleei.]3. Original statement showing [credit ][limit ]for [M.S. ][Tai ][AI l(haleej]by ["Export ]credit Gaurantee [corporation ][of ][India" ][a ][Govt. ][of India]Undertaking. 4. Particulars of exports duly [endorsed ][by ][Customs ][authorities in]the ["Duty ]Entittement Exemption Certificate" [(DEEC ][Book).]the ["Duty ]Entittement Exemption Certificate" [(DEEC ][Book).] 5. Bank certificate for export [realization.]6. Exchange control declarationfrom 7. Exchange control declarationfrom [RBI.]8. Attested Custorms shipping bill [certifying exports."]6. Exchange control declarationfrom 7. Exchange control declarationfrom [RBI.]8. Attested Custorms shipping bill [certifying exports."] tT A 999 t2006, [21 ][0 ][12007, ][57 ][5 ][n007, ][1 ][39 ][4 ][| ][2009 ][&. ][| ][47 ][n007] (v) The assessee was also [able ][to ][adduce ][the ][following ][further ][documents] in support of its claim before [the ] [(Appeals):] "(l) [-Courier ]receipt of communication [dispatched ][by]TAKGT td ITO. (2) Applicationfor VISA of Pmuan Sachdeva. (3) A letter from TAKGT to the Consulate [General, ][Indian]Entbassy, 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) Chemtcals Developntent 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 by]Ev er gr e en Jap an C [orP or ][ation.] (7) Bill of gntry for Home [conswnption ][No.2431/92-93]dated 29.10.92. (S) BilI No.11402 dt, 9.11.92 of [IUI/s. ][N'G' ][Bhanushali ][&]Co. clearing agents regarding [clearing ][of ][goods ]from [Bombay]Port. "(l) [-Courier ]receipt of communication [dispatched ][by]TAKGT td ITO. (2) Applicationfor VISA of Pmuan Sachdeva. (3) A letter from TAKGT to the Consulate [General, ][Indian]Entbassy, 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) Chemtcals Developntent 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 by]Ev er gr e en Jap an C [orP or ][ation.] (7) Bill of gntry for Home [conswnption ][No.2431/92-93]dated 29.10.92. (S) BilI No.11402 dt, 9.11.92 of [IUI/s. ][N'G' ][Bhanushali ][&]Co. clearing agents regarding [clearing ][of ][goods ]from [Bombay]Port. (9) Goods receipt (GR) copy No.5889 [and ][5891 ][dated]7.tl.g2 of lut/s Haryana [Golden ][Transport ]for [dispatch ][of]goodsfi'om Bombay to Delhi. : (10) Transpori bitl No.HGT/DLW3/2 [dt. ][16'11-92 ][and]HGT/DLW3B9 dt. [16.;/1.92 of ][A,t/s ][Haryana ][GoldenTransport,] (11) Octroi Receipts. (12) Invoice No.MI/I0 dated 16'10'92'drawn [in ]favour [of]Iuf/s Vikhuda Overseas [Corporation. ]for [export ][of ][jB00]Synthetic rubber Sheets., [GR. ][No.AB 479852'] .(13) Bilt of lading dated 23.12.92 issued bv Mitsui O.S.KLines ltd. against [invoice ][No.M ][1/10.] (14) Custonts shipping Bill No.5974 dated 17.12.92.(1, Invoice No.MI/68 dpted 21.1.93 for export of 1400Synthetic Rubber Sheets. GRNo.AB [3"95116.] (16) BilI of ['lading ]No.APLU 004411973 dated [29.3'93]issued by American President Ltnes Ltd. (17) Customs Shipping Bill No.9452 dated 22.1.93. (18) Duty Exynption Entitlement Certificate Book. [Issued]and maintained by Deptt. of Revenue [(Customs), ][Govt. ][of ][India]Bearing Serial No.055526, [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 the assessee also produced evidence to showthat the remittances for the export sale [were ][received ][from ][Dubai'through]banking channels which has been overlooked by [the ][assessing ][officer.] ("iD The incorre 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 from its sister concems. 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 ][fiom ][MSIL. ][This]was souglrt to be explained by the [assessee ]before [the ][Tribunal ][on the ground that ][it]was given at the behest of IWs. 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 ][pressure ]on [the ]Sheikh [who ][wanted ][to ][dissociate]himself from the assessee. It [was ]only [when ][the ][difFrculties were removed that ][the] rT A 999 | 2006, 21 0 | 2007, [57 ][5 ]n007, [r39 ][4 ][12009 ][& ] [n007] Sheildr came forward to make a statement retracting his [earlier statement. ][The]Tribunal has noted the assessee's submission [in ][para ][11 ][of its ][order ][as ][follows: ][-] rT A 999 | 2006, 21 0 | 2007, [57 ][5 ]n007, [r39 ][4 ][12009 ][& ] [n007] Sheildr came forward to make a statement retracting his [earlier statement. ][The]Tribunal has noted the assessee's submission [in ][para ][11 ][of its ][order ][as ][follows: ][-] *Il. According to the assessee, the statement [dated ][28.12.94 ][by ][the]Sheikh denying the purchases front the [assessee ][was made on the ][basis]of a complaint lodged by the hostile business [rival ]of [the ][assessee]company, namely IWs Gujarat Apar Polymers [ltd. ][with ][the ][Minister"of]Comnterce and on the strength of that [complaint ][enquiries ][were]initiated by the Government and, therefore, under [pressure ][the ][Sheikh]made that statement to avoid serious trouble. However, [when ][these]complications were removed, the Sheikh agreed to [make ]statement [to]bring out the true facts denying his [previous ][statement stating"the]circumstances under which that statement waE [made ][and ]fullyaccepting the export sales made to him by [the ][assessee conrpany.]Alongwith his statement an annexure was [also ][appended ][detailing ][the]documentary evidence to support the factum of inports [ntade ]by [the]firm [of ][the ][Sheikh ]from [the ][assessee ][company. ][The ][assessee ][also]claims that the copy of this statement was also [directly ]faxed [by ][the]Sheikh to the AO and also enclosing [the' ][entire documentary ][evidence]forwarded [it ][by ][sending ][another ][copy ][through ][courier to ][the ][AO. ][The]Sheikh also filed an ffidavit, which [has ]been [authenticated ][by]Ministry of Foreign Affairs Sharjah as well [as ]by [Dubai ][Chanfter ][of]Conrmerce and Industry. In this ffidavit. Sheikh [Rasheed ][has ][clearly]admitted that all the orders sent by [the ][assessee ][and its ][other]companies were placed by TAKGT and that the [assessee ][and ][is ][other]group companies hqve not all misused the nante of TAKGT company.In this very ffidavit, the Sheikhfurther slated [that ]all [the ][orders ][were]placed by the representative of his company, TAKGT, in Dubai [and]that he was aware of all the inzports of [every ][kind ][done ][by ] from [the ][assessee's ][group. ][Further, ][in ][the ]ffidavit, [the ][sheikh]explained that the statement dated 28.12.94 [was ][made ][by ][him on ][the]deceit practiced by the representatives of Ms [Gujarat ][Apart ][Polynter]Ltd. and tts 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 [placed with ][M.S.]group were being used by TAKGT. Further that [no ][dues ][against ][any]bills were to be paid and that all tlte [payments havq ][already ][been]made from his accounts in A & Z Gribndlays Banh [Deira, ][Dubai.]There waE a coy of another [declaration ]from [Sheikh ][Rasheed ][which]was dated and also authenticated by Dubai [chamber ][of ][commerce]and Industry, which repeats the same story [to ][the ]ffict [that ][the ][orders] placed with M.S. Group were genuine. It [means ][that ][the Sheikh ][in ][his]subsequent declaration and the ffidavit, [the ][genuineness ][of ][u,hich ][has]also been accepted and comntunicated to [the Additional ][Director]General Foreign Trade by the Consulate General of [India ][in ][their]Ietter dated 12.5.97 placed at, [pages ][58 ]& [59 of ][the ][paper ][boolc ][of ][the]assessee, mentioned that the letter dated [28.12.94 ][was not ][registered,]whereas, his subsequent ffidavits [were ][registered and ][in ][the ][affidavit]dated 13.1.97 his signature have been [legalized ][by ][Dubai ][Chamber ][of]Commerce and Industry, which has [also ][been ][enclosed ][by ] Ministry of foreign Affuirs and as [the ][affidavit ][dt. ][13,.1.97 ][has ][been]legalized by Dubai Chamber of Commerce [and Industry, which ][has]also been enclosed by UAI Ministry [of ]foryign [Affuirs ][and as ][the]ffidavit [dt. ][1i.1.97 ][has ][been ][legalized ][it ][moy have ][to ][be ][considered ][as]authentic." 10. With reference to the [aforesaid submissions ][of ][the ][assessee, ][the ][Tribunal]opined as follows: -opined as follows: - "We are of the opinion that in case the AO [was relying ][upon ][the]statem.ent of the Sheikh dated [28.12.94 ][the ][opportunity should ][also]have been affirded 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, ]fullyretracting 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]ippuo, 7or tiis purpose. As [regards the ]ffidavit [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 ][clainted ][by ][the],assessee, the Consulate General of India's ffice in thg letter toadditional Director of Foreign Trade [has confirmed the ][genuineness]of the ffidavit of the Sheikh, onwhich [the ][signature of ][the ][Sheikhwere]Iegalized the affidavit was registered by [the ][Dubai ][Chamber ][of]Commerce & Industry [and ]-has [also ][been endorsed ][by the ] 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 tinte is would [also ][not ][be ]fair [on ][the ][part ][of ][tax ][authorities re ][the]affidavit, for contradicting which neither is [been ][made ][nor ][any]evidence has been brought the [department. ][Fact ][remains ][that ][when] the assessee from the documentary evidence is able [to ][prove ][the ][export]sales made by it to thetsheikh's company TAKGT, Dubai, [and having]received the amount bf {6,05,43,627/- as remittance for [the ][sanze,]through banking channel of'Dubai in the Indian Bank [the export ][sales]made by the assessee bannot be disbelieved on the solitary statementof the Sheikh.made earlier on 28.12.94, when the [same ][was]subsequently retracted by the Sheikh himself iyt a duly [authenticated]affidavit." 11. After examining the documentary [evidence placed ][by ][the ][assessee ][the ][Tribunal]. [held that ][there ][was ][no ][basis ][to ][disbelieve ][the ][entire ][documentary ][.evidence ][merely]because of the statement of the Sheikh made [on28.72.1994. ][The ][Tribunal ][finally ][held]that flre tax authorities were not [justified ]in treating the [export ][sale made ][by ][flre]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]<6,05,43,627/- as "income from other sources". 12. Similar orders were passed 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 flre deduction uirder Section 80HHC in [respect ][of ][the exports ][made ][to ][Taj]which were disbelieved. The export proceeds were assessed [as ]["incorne ][from ][other]sources". In the case of M.S. Shoes East Itd., [the ][assessing ]officer [also ][imposed ][a]penalty of t59,58,588/- under Section 271(l)(c) of [the ][Act for ][concealment ][of ][income.]The penalty was cancelled by the Tribunal since it [had ][deleted ][flre ][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 [statement ][of ][the]Sheikh made on28.12.1994 [andhas given undue weightage ][to ][the ][retraction ][and ][to the] -l'r 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 [statement ][of ][the]Sheikh made on28.12.1994 [andhas given undue weightage ][to ][the ][retraction ][and ][to the] -l'r affrdavit 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 ][through ][its]Managing Director, is that the Tribunal [has taken ][flre ][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 ][referred ][to ][all ][the three ][statements ][of ][the]Sheikh and has held, on a [proper ]appreciation of [them, that the retraction ][and ][the]affidavit dated 13.0I.I997 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]peryerse,. nor was there any inherent improbabilif,/ in [the ][evidence ][adduced ][by ][the]assessee in order that the conclusion of the Tribunal [may be ][criticized ][as ][inational.] 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]Iounds [of ][the proceedings ][as ][also ][before the ][Tribunal. ][The ][Tribunal ][has ][taken note ][of]ievery item of evidence, including the three statements of the Sheikh. It has preferedto rest its decision on the overwhelming documentary [evidence ][adduced ][by ][the].assessee [to ][prove ][the ][exports ][which ][included ][correspondence ][with ][the ][governmental]'authorities, their approvals, etc. None of the documentary evidence has beenimpeached 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 later by the [affrdavit ][dated ][13.0I.1997 ][sworn ][to by him ][before]the Indian Consulate at Dubai. No material [has been ][brought ][on ][record ][or in ][the]course of the proceedings 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 flre assessing offrcer nor by [the ][assessee ][and ][he was ][not ][subjected ][to ][any]examination or cross-examination by [the ][income ][tax ][authorities. ][It ][is ][in ][these] Page l3 ofl5 rT A 999 I 2006, 2r0 12007, [57 ][5 ][12007, 139 ][41 ][2009 ][& ][| ][47 ][12007] 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 our opinion, vulnerable to the charge that it has been arrived at by ignoringreievant material or evidence or [by taking ][into ][account ][irrelevant ][evidence ][or ][material.]The fildings of the Tribunal [are ][essentially ][findings ][of ][fact ][and ][they ][cannot ][be]subjected to the ctiticism 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]follows: - 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 our opinion, vulnerable to the charge that it has been arrived at by ignoringreievant material or evidence or [by taking ][into ][account ][irrelevant ][evidence ][or ][material.]The fildings of the Tribunal [are ][essentially ][findings ][of ][fact ][and ][they ][cannot ][be]subjected to the ctiticism 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]follows: - ".....1t has been held on the corresponding [provisions ][in ][the English]Income-tax statutes that [a ]finding [on ][a ][question of ]fact [is ][open ][to]attack as etoneous in law onty [if it ][is not supported ][by ][any ][evidence,]' or if it is unreasonable [and ][perverse, but that where there ][is ][evidence]to consider, the decision of the Tribunal is final even though the Courtntight not, on the materials, have [come ][to ][the same ][conclusion ][if ][it ][had]the power to substitute [its ]own iudgnent. [In ][Great ][Western ][Railway]Co. v. Bater(I), LordAtkinson [observed: -] "Their (Commissioners') determinations [of ][questions ][of]pure fact are not to be disturbed, any more than [are ][the]Jindings [of ][a ][jury, ][unless ][it ][should appear ][that ][there]. was no evidence before [them upon ][whicfu ][they, ][as]reasonable nten, could come [to ][the ][conclusion to which]they have come: and this, even though the [Court ][of]Review would [.on ]the evidence have [come ]to [a]conclus ion entir ely dffirent fr [om ][their ][s."] To the same effect are;the [observations ][of ][the ][Supreme ][court ][in ] [v. ][Daulat ][Ram]Rawatnzull, (1973) 87 IFR 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 ][like]cases. Findings on [questions ][of pure ]fact [aruived ][at ][by the ][Tribunal]are not to be disturbed by [the ]High [Court on ][a ][reference unless ][it] tT A 999 12006, 21 0 [1 ]2007, [s7 ][s 12007, ][139 ][412009 ][& ][r ][47 ][12007] Page 14 of 15 f\ (- appears that [there ][was ][no ][evidence ][before the ]"Tr-ibunal [upon which]they, as a [reasonable men, ][could ][come ][to ][the ][conclusion to which ][they]have come; [and ][this ][is ][so, ][even ][though ][the ][High Cour!would ][on ][the]evidence have [conte ][to ][a ][conclusion ][intirely dffirent from ][that ][of ][the]Tribunal. In [other words ][such ][a ]finding [can ][be ][reviewed ][only ott ][the]ground that there [is no ][evidence ][to ][support ][it ][or ][that ][it ][is ][perverse ][""'"] 14.We are, therefore, [satisfied that the ][Tribunal committed ][no ][effor in holding that]theassessees 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 ]1n [the ][afftrmative, ][in ][favour of ][the ][assessee ][and against ][the]Revenue. The [Tlibunal ][was ][also ][right ][in ][cancelling ][the ][penalty ][imposed ][on ][the]assessee lws. 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'] ..nil' ' I t,, W\' "*-? "(R.V.EASWAR)JUDGE (s. RAVTNDRA [BrrAT)]JUDGE SEPTEMBERa&,2012hs Page 15 of [15]