Ita/210/2007 Of The Commissioner Of Income Tax v. Nfis. M.s. International Ltd

$-14 to 17* IN TIIE I{IGH COI]RT OF DELHI AT NEW DELHI Reserved on:,30't' August, 2012Date of Decision: 2&n September, 2012 %+ tT41394t2009 + COMMISSIONER OF INCOME TAX .... AppellantVERSUSNfiS. M.S. INTERNATIONAL LTD. .... Respondent+ ITA2t0t2007+ tT[l47t2007COMMISSIONER OF INCOME TAX .... AppellantVERSUSM.S. SHOES EAST LTD. .... Respondent+ tTA575t2007COMMISSIONER OF INCOME TAX .... AppellantVERSUSPEARL INTERCONTINENTAL LTD. .... Respondent PEARL INTERCONTINENTAL LTD. Present: Mr. Kamal Sawhney, Sr. Standing Counsel for Revenue in ITANos. 999/20 0 6, 210 12007, 57 5 12007 and | 47 12007 . Mr. Sanjeev Sabharwal, Sr. Standing Counsel with Mr. PuneetGupta, Jr. Standing Counsel with Ms. Gayatri Verma, Adv. inITA No.139412009. Mr. Pavan Sachdev4 respondent in person in all matters. ITA Nos. 139412009, 21012007, 57 5 12007 & 1 47 12007 Page I of2 CORAM:MR. JUSTICE S. RAVINDRA BHATMR. JUSTICE R.V. EASWAR 1. Whether Reporters of local [papers ]may be allowed [to ][see ][the ][judgment?] 2. To be referred to the Reporters or not? 3. Whether the [judgment ]should be [reported in the Digest?] R.V. EASWAR. J.: For order see ITA No.999/2009. SEPTEMBER 28, 2012hs Irtl.v\ -r-r.(n.v:EASwAR)JUDGE Il*l*$rrt(s. RAVINDRA BHAT)JUDGE ITA Nos. 139412009, 21012007, [57 5 ][12007 ]& [| ][47 ][12007] Page2 of2 d $-13 [to ][17]* IN THE HIGH COURT OF DELHI AT Reserved on:.30tt' August, 2012%Date of Decision: 28t" September,.20I2+ rTA99912006+ ITAl394l2009COMMISSIONER OF INCOME TAX ... AppellantVERSUSiWS. M.S. INTERNATIONAL LTD. .... Respondent+ ITA2r0l2007+ ITAt47l2007COMMISSIONER OF INCOME TAX .... AppellantVERSUSM.S. SHOES EAST LTD..... Respondent+. ITA57512007. COMMISSIONER OF INCOME TAX .... AppellantVERSUSPEARL INTERCONTINENTAL LTD. .... RespondentPresent: Mr. Karnal [Sawhney, Sr. Standing Counsel ][for ][Revenue ][in ] Nos.999/20 06,21012007 , [57 ][512007 and ][14712007 ][.]Mr. Sanjeev Sabharwal, Sr. [Standing Counsel ][with ][IUr. ][Puneet]Gupta, Jr. Standing Counsel with Ms. [Gayatri Verma, ][Adv. ][in]ITA No.139412009.Mr'. Pavan Sachdeva, respondent [in ][person ][in ][all ][matters.]rtr ITA [gggt2006,21012007,57512007,139412009 ][&14712007 ]Page l of 15: 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 refered to the Reporters or not? )) 3. Whether flre [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 referred to as 'the Act'). TheITA Nos.99912006, 139412009,21012007 and 57512007, though they relate to threedifferent assessees, involve a common question, namely, 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.I47/2007 involves the question of penalty imposed on the assessee under Section271(1)(c) of the Acd and the question of law is whether the Tribunal was right incancelling flre penalty: This appeal is consequential 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 referred to as 'the Act'). TheITA Nos.99912006, 139412009,21012007 and 57512007, though they relate to threedifferent assessees, involve a common question, namely, 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.I47/2007 involves the question of penalty imposed on the assessee under Section271(1)(c) of the Acd and the question of law is whether the Tribunal was right incancelling flre penalty: This appeal is consequential to the fate of ITA No.210/2007. 2. The ITA No.999l2006 is taken as the lead matter. The appeal relates to theassessment year 1993-94. The respondent-assessee is a public limited company byirame 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 of the assessment year 1993-94, relevant to the previous year endeddn 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 <6,48,92,549/- under Section 80HHC. Included in this was adeduction of {6,05,43 ,627/- in respect of export of synthetic rubber sole sheets to iWs. 7n 7n 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 ][of]the assessee group of companies on 29.06.1994 [on the basis ][of ][infonnation ][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 ][market ][and]exported; and in league with the importer, money [taken out ][of ][India ][throu ][gh ][hawala]route 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 offrcer communicated with the Directorate of Revenue [Intelligence ][(DRI) ][in]response to which a letter dated 0I.12.1995 was received. [Along ]with [the ][letter, ][a]statement dated 28.12.1994 was also received by [the ][assessing ][offtcer, which ][was ][that]of one Sheikh Suad Bin Abdullah Rashid Al Nuaimi, [President ][of ][the ][Economic]Depaftment, PO Box No.870, Ajmen, U.A.E. The letter is [reproduced ]in [the]assessment order and therefore is not reproduced here. Suffice [to ][note that ][thb ][Sheikh]stated that he was a partner of Taj and that he has never heard [of ] [from whom ][his]firm was supposed to have imported 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 ][of]53077 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 irnport, 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 ] [$]10,615,392, that he was not aware of [any such ][shipping ][consignment ][imported by ][Taj]into 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. ][The]assessee by letter dated 27.I1.1995 submitted [that ][the ][export ][orders received ][from ][Taj]were subrnitted in original with the appliqation for [license submitted ][to ][the Directorate] nl 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. nl 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. 3. 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 ][dated]23.08.1995 and 0l .12.1995.- The [assessee ][also ][submitted ][a ][letter ][to ][the ][assessing]officer on 04.03.1996 attaching [a ][photocopy ][of ][another ][statement ][of ][the ][Sheilch ][iir]which tlre Sheikh had withdrawn his [earlier ][statement ][dated ][28.12.1994. ][The]assessing officer 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, [that ][the ][statement ][was ][not ][collected ][tluough ][any]government agency, etc. In its earlier letter dated 27.11.1995, [the ][assessee ][had ][stated]to the assessing officer that [the ]Sheil<h [was upset ][with ][the ][asgessee'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 flrese submissions [of ][the ][assessee ][were brushed]aside by the assessing officer for the [reasons stated ][above ][and ][also ][because ][he]suspected that the second statement, [retracting ][his ][earlier ][statement, 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 ][28.12.1994. ][According ][to ][the]information received by letter [dated 08.01.1996 ][from the ][Consulate General ][of ][India,]Dubai the following was the [position: ][-] 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 ][finn ][in ][the name ][of ][Taj]Al Khaleej General Trading [Co. was ][existing in Dubai.] rr A 999 I 2006, [2 ]l0 12007, [57 ][s 12007, 139 ][4 | ][2009 ][& ][| ][47 ][12007] I )t/ iil) The Prop. of the firm was sheikh [Suad ][Bin ][Abdullah ][Rashid ][Al]Nuaimi. When contacted Sh. Sheikh [Suad ][Bin ][Abdullah ][Rashid ][Al ][Nuaimi]rv) confrmed the issuance of [the ][letter ][dated ][28-12.94-] Sheiklr 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. 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]<6,05,43,627/- 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 t6,05,46,1971- ][which ][consisted ][of ][the]returned income of 72,5701- [and ][the addition of ][{6,05,43 ],627/- [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]<6,05,43,627/- 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 t6,05,46,1971- ][which ][consisted ][of ][the]returned income of 72,5701- [and ][the addition of ][{6,05,43 ],627/- [as ]["income ][from ][other]sources". 5. The assessee appealed to [the ]CIT [(Appeals) ][who ][heard ][both the ][assessee ][as]well as assessing ofFrcer [and ][passed ][an ][order ][on ][19.03.1997. ][Before ][the ] (Appeals) the assessee adduced additional [evidence under ][Rule ][464 ][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 eventually held [that ][since ][the ][assessment ][was ][made ][on the ][basis ][of ][a]single statement of the Sheikh [who ][had retracted ][the ][staternent and since ][the ][second]statement of the Sheiklr fited [by ] [was ][not ][tested ][by ][cross-examination, ][the ][case]was required to be [remanded ][to ][the ][assessing ][offtcer ][to ][be ][examined and ][fi'amed]afresh. He accordingly remitted [the matter ][to ][the ][assessing ][officer.] Page 5 of l5 tT A 999 t 200 6, [21 ][0 ][12007, ][57 ][5 ][12007, ][r39 ][412009 ][&. ][| ][47 ][12007] I 6. In giving effect to the order of [the ]CIT [(Appeals), ][the ][assessing ][ofhcer ][on]10.02.1999,granted an opportunity [to MSIL to ][produce ][the ][Sheildr.and also ][issued]sunmons to him under Section 131. [He ][had ][also sent ietters ][to ][the ][Sheikh ][on]24.02.1997 and 25.03.1997 which remained [unanswered ][by the ][Sheikh. ][The ][Sheikh]also did not appeal pursirant 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 ][offlcer, ][however, ][in ][the fresh order]of assessment passed on 31.03.1999 [under ][Section ][143(3) ][read ][with ][Section 250 ][of ][the]Abt, 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 ]frled [an ][appeal ][to ][the ] (Appeals) who passed an order on 21.11.2001. 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), prefened ][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 ][on28.72.1994 ][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] tTA 999/2006,21012007 , [s7 ][512007 ], [139412009 ][& ][14712007] o l' 8. The assessee, aggrieved by the [above ][order ][of ][the ] [(Appeals), prefened ][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 ][on28.72.1994 ][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] tTA 999/2006,21012007 , [s7 ][512007 ], [139412009 ][& ][14712007] o l' . <14,4001- from which goods of the value of tl I to 12 [crores ][cannot ][be]manufactured. In coming to this conclusion, the [assessing ][officer ][has ][ignored]the evidence adduced by the assessee that it was [getting ][flre ][work ][done ][through]job work undertaken by its sister concerns. (ii) Since the assessee was [getting ]the [job ]done [through ][sister ][concerns, ][the]fact that it possessed machinery of only [<2,72,2491- ][was ][irrelevant. ]['] (iii) The assessee did not claim at any point that the entire [goods.were]manufactured by it. (iv) Neither the assessee nor the assessing officer could [succeed ][in]producing the Sheikh for further examination on his statements. However, [the]assessee has been able to lead sufficient documentary [evidence ][to ][show ][that]the exports were genuine. This included the following: [-] "1. Ortginal Bank Certificate fronz ANZ Grindlays Bank [Dubai,]UAE showing bills received by'the bank and [drawn ]on [M.S. Tai ] Khaleej General Trading Coy. By the [assessee ]after being [paid ]by [the ]bank. . 2. Export orders confirmed by M.S. Taj Al Khaleej. 3. Original statement showing uedit limitfor M.S. [Tai ]Al [Khaleei]by ["Export ]Credit Gaurantee Corporation of Indta" [a ][Govt. of ][India]Undertaking.by ["Export ]Credit Gaurantee Corporation of Indta" [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 RBL7. Exchange control declarationfrom RBI.8. Attested Customs shipping bill certifying [exports."]the ["Duty ]Entitlement Exemption Certificate" [(DEEC ][Book).]5. Bank certificate for export realization.6. Exchange control declarationfrom RBL7. Exchange control declarationfrom RBI.8. Attested Customs shipping bill certifying [exports."] I .T\ ,/ D{ (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 to ITO. (2) Applicationfor VISA of Pawarn Sachdeva. (3) A letter fi'orn TAKGT to the Consulate General, [Indian]Embassy, Dubai. (4) Letter from TAKGT to MS Internationhl Ltd., [Delhi]giving details of order placed by them' (5) Invoice No.92R-912 dated 17.9.92 of Ms FujiChemicals Developntent Do. [(sic.) ][Ltd., ][Tolgto ]for [import ][of]16.8 MT of Synthetic Rubber. (6) BilI of lading No.A6-65245A dated 28-9-92 [issued ][by]Ev er gr e en Jap an C o rp or [at ]ion. (7) BilI of entry for Home copsumption No.243l/92-93dated 29.10.92. BtlI No.11402 dt. 9.11.92 of luI/s. N.G. Bhanushali &(s) Co. clearing agents regarding [clearing ][of ][goods ]from [Bontbay]Port. (9) Gooils receipt (GR) copy No.5889 and 5B9I [dated]7.11.92 of IvI/s Haryana Golden [Transport ]for [dispatch ][of]goodsf'om Bombay to Delhi. (10) Transport bilt No.HGT/DLII/392 dt. I6.iI-92 [and]HGT/DLI-I/389 dt. 16.1 1.92 of [A,I/s ][Haryana ][Golden ][Transport.] (11) Octroi Receipts. (12) Invoice No.MI/I0 dated 16.10.92 drawn in favour ofArI/s Vikhuda Overseas Corporation for [export ][of ][3800]Synthetic rubber Sheets., GR. [No.AB ][479852.] (6) BilI of lading No.A6-65245A dated 28-9-92 [issued ][by]Ev er gr e en Jap an C o rp or [at ]ion. (7) BilI of entry for Home copsumption No.243l/92-93dated 29.10.92. BtlI No.11402 dt. 9.11.92 of luI/s. N.G. Bhanushali &(s) Co. clearing agents regarding [clearing ][of ][goods ]from [Bontbay]Port. (9) Gooils receipt (GR) copy No.5889 and 5B9I [dated]7.11.92 of IvI/s Haryana Golden [Transport ]for [dispatch ][of]goodsf'om Bombay to Delhi. (10) Transport bilt No.HGT/DLII/392 dt. I6.iI-92 [and]HGT/DLI-I/389 dt. 16.1 1.92 of [A,I/s ][Haryana ][Golden ][Transport.] (11) Octroi Receipts. (12) Invoice No.MI/I0 dated 16.10.92 drawn in favour ofArI/s Vikhuda Overseas Corporation for [export ][of ][3800]Synthetic rubber Sheets., GR. [No.AB ][479852.] (13) Bill of lading dated 23.12.92 issued by Mitsui O.S.K.Lines ltd. against invoice No.M [1/10.] (14) Custonts shipping BiII No.5974 dated 17.12.92.(15) Invoice No,MI/68 dated 21.1.93 for export of 1400Synthetic Rubber Sheets. GR No.AB [3951 ][16.] (16) Bill of {ading No.APLU 00441197i dated 29.3.93issued by American President Lines Ltd. (17) Customs Shipping BiIl No.9452 dated 22.1.93. (IS) Duty Exmption Entitlement Certificate Book. Issuedand 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" (vi) In addition to the above the assessee also produced evidence to showflrat the remittances for the export sale were received from [Dubai'tluough]banking channels which has been overlooked by [the ][assessing ][offtcer.] ("iD The income tax authorities have.ignored the fact that the [assesseb ]hadexported similar goods to other foreign buyers which [have not ][been ][doubted ][by]thern. Further, the Sheildr 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 ][fi'om ][MSIL. ][This]was sought to be explained by the [assessee ]before [the ][Triburial ][on ][the ][glound 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].,!V [th" ][government ][and ][this ][had.put ][pressure on ][the ][Sheikh ][who ][wanted ][to ][dissociate]himself from the assessee. It [was ]only [when ][the ][difficulties ][were removed that ][the] tT A 999 I 2006, 21 0 12007, [57 5 ]12007, [139 ][4 I ][2009 ][&. ][r ][47 ][12007] Sheikh 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: ][-] tT A 999 I 2006, 21 0 12007, [57 5 ]12007, [139 ][4 I ][2009 ][&. ][r ][47 ][12007] Sheikh 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 ]from [the ][assessee ][was made on the ][basis]of a complaint lodged by [the hostile ][business ][rival ][of ][the ][assessee]company, namely IuI/s. Gujarat Apar Polymers [ltd. ][with ][the ][Minister ][of]Commerce and on the strength of that [contplaint ][enquiries ][were]initiated by the Government and, therefore, under [pressure ][the ][Sheilch]made that statement to avoid serious trouble. [However, when ][these]complications were removed, the Sheikh'agreed [to ][make statement ][lo]bring out the true facts denying [his ][previous ][statement ][stating ][the]circumstances under which that statement was [made and ]fullyaccepting the export sales ntade to him by [the ][assessee ][company]Along with his statement an annexure was [also ][appended ][detailing ][the]documentary evidence to support [the ]factum of [intports ][made ][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]fonvarded [it ][by ][sending ][another ][copy ][through ][courier ][to ][the ][AO. ][The]Sheikh also filed an ffidavit, which [has ][been authenticated ][by]Ministry of Foreign ffiirs Shariah [as ][well ][as ][by ][Dubai ][Chamber ][of]Contmerce and Industry. In this ffidavit. Sheikh [Rasheed ][has ][clearly]admitted that all the orders sent by the [assessee ][and ][tts ][other]companies were placed by TAKGT [and ][that ][the ][ossessee ][and ][is ][other]group cornpanies have not aII misused the name 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 imports of [every ][kind ][done ][by ] front [the ][assessee's ][group. ][Further, ][in ][the affidavit, the ][sheikh]explained that the statement dated [28.12.94 was made by ][hint on ][the]deceit practiced by the representatives of [fuI/s. ][Guiarat ][Apart ][Polymer]Ltd. and its la'wyer and that the statement [does ][not ][have ][any]authenticity at all. The Shetkh further [admitted ][that the ][telephone]number and the P.O. ntmber [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 [the ][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 ][Commerce]and Industry, which repeats the same story [to ][the ]ffict [that ][the ][orders] IT A 999 12006, 21 0 12007, [s7 ][s ][D007, ][139 ][4 ][12009 ][& ][| ][47 12007] IT A 999 12006, 21 0 12007, [s7 ][s ][D007, ][139 ][4 ][12009 ][& ][| ][47 12007] , placed with M.S. Group were genuine. It means that the Sheikh in hissubsequent declaratton and the ffidmit, [the ][genuineness ][of which ][has]also been accepted and communicated to [the Additional ][Director]General Foreign Trade by tlTe Consulate [General ][of India ][in ][their]letter dated 12.5.97 placed at, [pages 58 ]& [59 of ][the ][paper ][book ][of ][the]assessee, mentioned that the letter [dated 28.12.94 ][was ][not ][registered,]whereas, his subsequent affidavits were registered [and ][in ][the ]ffidavitdated 13.1.97 his signature have been legalized by [Dubai ][Chamber ][of]Commerce and Industry, which has also [been enclosed ][by ] Ministry of foreign ffiirs and [os ][the ]ffidavit [dt. ][13.1.97 has ][been]legalized by Dubai Chamber of Commerce [and Industry, which ][has], also been enclosed by UAI Ministry of foreign [Affairs ][and as ][the]ffidavit [dt. ][Ii.1.97 ][has ][been ][legalized ][it ][may have ][to ][be ][considered ][as]' authentic." 10. With reference to the aforesaid [submissions ][of ][the ][assessee, ][the ][Tribunal]opirred as follows: -opirred as follows: - "We ore 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 ][ntade ][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]appear for this purpose. As regards [the ]ffidavit [of ][the ][Sheikh in]support of his retraction f'om the [statement ][made ][earlier ][dated]28.12.94, admitting the export [purchases ][madefi'om ][the ][assessee ][and]the payments being ntade through banking [channels as ][claimed ][by ][the]assessee, the Consulate General of India's ffice [in ][the letter ][to]additional Director of Foreign [Trade has confirnrcd the ][genuineness]of the ffidavit of the Sheikh, onwhich [the ][signature of ][the ][Sheikhwere]legalized 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 time is would also not [be ]fair [on ][the ][part ][of tax authorities re ][the]affidavit, for contradicting which neither is [been ][ntade ][nor ][any]evidence has been brought the [department. ][Fact ][remains ][that ][when] 1T A 999 12006, 2r0 12007, [57 ][s ][| ][2007, ][| 39 ][4 ] [2009 ][& ][A7 n007] Page Il of15 the assessee from the documentary evidence is able to prove the exportsales made by it to the Sheikh's company TAKGT, Dubai, and [having]received the amount of {6,05,43,627/- as remittance for the same,through banking channel of Dubai in the Indian Bank the export salessales made by it to the Sheikh's company TAKGT, Dubai, and [having]received the amount of {6,05,43,627/- as remittance for the same,through banking channel of Dubai in the Indian Bank the export salesmade by the assessee cannot be disbelieved on the solitary statementof the Sheikh.made earlier on 28.12.94, when the sanxe [was]subsequently retracted by the Sheikh himself in [a duly ][authenticated]affidavit." t .of the Sheikh.made earlier on 28.12.94, when the sanxe [was]subsequently retracted by the Sheikh himself in [a duly ][authenticated]affidavit." t . 11. After examining.the documentary evidence [placed ]by [the ][assessee ][the ][Tribunal]held that there was nlo basis to disbelieve the [entire ][documentary evidence merely]because of the statement of the Sheikh made on28.12.1994. The Tribunal [finally ][held]that the tax authorities were not [justified ]in treating the export sale [made ]by [the]assessee to Taj, Dubai as non-genuine and in refusing flre [deduction claimed ][under]Section 80HHC. The Tribunal also deleted the addition of the [amount ]of<6,05,43,627I- as "income from other sources". 12. Similar orders were passed in the case of MSIL for [the ][assessment ][yeu ][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(1)(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 S0HHC. 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 [staternent ][of ][the]Sheikh made on28.12.I994 [and,has ][given,-drr" ][weightage ][to ][the ][reiraction ][and ][to ][the] rr A 999 1200 6, 2r0 /2007, s7 [5 ]12Q07, [t39 ][4 | ][2009 ]& [1 ][47 /2A07] :\ affidavit dated 13.01.1997 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 ][the ][decision on the ][basis ][of ][the]evidence adduced before the income tax aulhorities [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 ihe]affrdavit dated 73.0I.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]peryerse,. nor was there any inherent improbability 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]rounds of the proceedings as also before the Tribunal. [The ][Tribunal ][has ][taken note ][of]every item 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 [conespondence ][with ][the ][govenrmental]authorities, their approvals, etc: None of the [docurnentary ]"vide.t"e [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 ][prefered to ][accept ][the]retraction, supported later by the affidavit [dated ][13.01.1997 ][sworn ][to ][by ][hirn ][before]the Indian Consulate at Dubai. No material [has been ][brought ][on ][record ][or ][in ][the]course of the proceedings before the Tribunal [to ][tluow ][any doubt ][on ][the ][credibility ][of]the affrdavit sworn to before the Indian Consulate in Dubai. [The Sheildl ][was neither].produced [by the ][assessing ][officer ][nor ][by ][the ][assessee and ][he ][was ][not ][subjected ][to ][any]examination or cross-examination by the [income ][tax ][authorities. ][It ][is ][in ][these] circumstances that the Tribunal has [chosen ][to ][accept ][the ][retraction ][of ][the ][Sheikh,]supported by the affrdavit. [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 ][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 of being [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 [provisiorts ][in ][the English]Income-tax statutes that a finding on [a ][question of ]fact [ts ][open ][to]attaclc 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 consider, 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 ][Ratlway.]Co. v. Bater(l), Lord Atkinson observed: [-] ' "Their (Comntissioners') determinations [of ][questions ][of]"Their (Comntissioners') determinations [of ][questions ][of]. pure fact are not to be disturbed, any more [than are ][the]find.ings [of ][a ][jury, ][unless ][it ][ihould ][appear ][that ][there]find.ings [of ][a ][jury, ][unless ][it ][ihould ][appear ][that ][there] was no evidence before them upon which [they, ][as]reasonable men, could come to [the ][conclusion to which]they have come: and this, even though the [Court ][of]Review would on the evidence have [conxe ]to [a]conclusion entir ely dffir ent fr om theirs."reasonable men, could come to [the ][conclusion to which]they have come: and this, even though the [Court ][of]Review would on the evidence have [conxe ]to [a]conclusion entir ely dffir ent fr om theirs." To the same effect arelthe observations of [the ][Supreme ][court ][in ][CITv. ][Daulat ][Ram]Rawatmull, (1973) 87 IIR 349 [-] I was no evidence before them upon which [they, ][as]reasonable men, could come to [the ][conclusion to which]they have come: and this, even though the [Court ][of]Review would on the evidence have [conxe ]to [a]conclusion entir ely dffir ent fr om theirs."reasonable men, could come to [the ][conclusion to which]they have come: and this, even though the [Court ][of]Review would on the evidence have [conxe ]to [a]conclusion entir ely dffir ent fr om theirs." To the same effect arelthe observations of [the ][Supreme ][court ][in ][CITv. ][Daulat ][Ram]Rawatmull, (1973) 87 IIR 349 [-] I ".....Before dealing with the facts of this [case, ][we ][may ][advert ][to ][the], principles which should govern the decisions of the court in such likecases. Findings on questions of [pure ]fact [arrived ][at ][by the ][Tribunal]are not to be disturbed by the High Court on [a ][reference unless ][it] t, appears that [there ][was no ][evidence ][before the ][.Tribunal ][upon ][yhlch]as a reasonable [men, ][could ][come ][to ][the ][conclusion to which ][they]nly, have come; [and ][this ][is ][so, ][even ][though ][the ][High ][court ][would on ][the]evidence have [come ][to ][a ][conclusion ][intirely dffirent from ][that ][of ]rytTribunal'Inotherwordssuchafindingcanbereviewedonlyonthethere [is ][no evidenrn ][io ][tupport ][it ][or ][that ][it ][is ][perverse""''.']ground that 14. We [are, ][therefore, ][satisfied that the ][Tribunal committed ][no error ][in holding that]the assessees [were ][entitled ][to ][the ][deduction ][under ][section 80HHC ][of ][the ][Act ][in]respect of [the ][exporl 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'999/20 06, ][139412009 ][' ][210/2006]and 51512007 [areanswered ][in ][the ][affinnative, ][in ][favour of the ][assessee ][and against ][the]Revenue. The [Tribunal was ][also ][right ][in ][cancelling ][the ][penalty ][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'] la 1y'4-.,n -< [',] 6n.V. [EASwAR)]JUDGE (s. RAVINDRA BHAT)JT]DGE SEPTEMBER28,2012hs Page 15 of15 LT A igg 12006, [210t2007,'s7 ][5 ][l2oo7, ][139412009 ][&' ][147 12007] trI('t