Ita/575/2007 Of The Commissioner Of Income Tax v. Lv{/S. M.s. International Ltd

$-14 to 17* IN THE HIGH COURT OF DELHI AT NEW Reserved on:.30't' August, 20I2% Date of Decision: 28th September, 2012+ tTA139412009COMMISSIONER OF INCOME TAX .... AppellantVERSUSlv{/S. M.S. INTERNATIONAL LTD. .... Respondent+ tT[2t0l2007+ tT[t47l2007COMMISSIONER OF INCOME TAX .... AppellantVERSUSM.S. SHOES EAST LTD. .... Respondent+ tTA57512007COMMISSIONER OF INCOME TAX .... AppellantVERSUSPEARL INTERCONTINENTAL LTD. .... RespondentPresent: Mr. Kamal Sawhney, [Sr. Standing Counsel ][for ][Revenue ][in ] Nos.999l20 06, 210 /2007, 57 [5 ]/2007 [and ][1 ][47 ][12007 ][.]Mr. Sanjeev Sabharwal, Sr. [Standing ][Counsel ][with Mr. ][Puneet]Gupta, Jr. Standing Counsel [with Ms. ][Gayatri Verma, ][Adv. in]ITA No.139412009. Mr. Pavan Sachdeva, respondent [in ][person ][in ][all ][matters.] ITA Nos. r39 412009, 21012007, [57 ][5 12007 ][& ][| ][47 ][12007] Page I of2 Signature Not Verified CORAM: MR. JUSTICE S. RAVINDRA BHATMR. JUSTICE R.V. EASWAR l. 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 tlHIt\ Vl *&.dC.ir: [EAswAR)]JUDGE il,-'.*w*(s. RAVTNDRA BHAT)JTJDGE ITA Nos. 139 412009, 21012007, 57 5 12007 & | 47 12007 t $-13 to [17]* IN TIIE HIGH COURT OF DELHI AT Reserved on:.30't' August, 2012% Date of Decision: 2Btt' September, September, r- rTA99912006+ ITAt394l2009COMMISSIONER OF-INCOME TAX ... AppellantVERSUSI\,{/S. M.S. INTERNATIONAL LTD..... Respondent+ tTA2I0l2007+ YTAt47,Ji07COMMISSIONER OF INCOME TAX.... AppellantVERSUSM.S. SHOES EAST LTD. ... Respondent+ ITAs75l2007COMMISSIONER OF INCOME TAX ..'. AppellantVERSUSPEARL INTERCO-NTINENTAL LTD. Respondent Reserved on:.30't' August, 2012Date of Decision: 2Btt' September, September, 2012 Present: Mr. Kamal Sawhney, [Sr. ][Standing Counsel ][for'Revenue ][in ] Nos. 9 9 9/20 0 6, 21 0 12007, [57 ][5 ][12007 ][and ][| ][47 ][12007 ][.]M'. Sanjeev Sabharwal, Sr. Standing [Counsel ][with ][Ml' ][Puneet]Gupta, Jr. Standing Counsel with [Ms. ][Gayatri Vernta, ][Adv. in]ITA No.139412009. Mr. Pavan Sachdeva, respondent [in ][person ][in ][all ][matters.] Page I of15 tT A 999 12006, [21 0 ][12007, ][57 ][5 ][/2007, ][| ][39 4 ][12009 ][& ][r ][47 ][n007] CORAM:MR. JUSTICE S. RAVINDRA BHATMR. JUSTICE R.V. EASWAR 1. Whether Reporters of local papers may be allowed to see the [judgmerit?] 2. To be 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 Incorne Tax Act, 1961 [(hereinafter ]refered [to ][as ]['the ]Act'). [The]ITA Nos.99912006, 139412009,27012007 and 57512007, though thdy relate to [three]different assessees, involve a conuron question, namely, whether the assessee wastigtrt'iy held by the Incorne Tax Appellate Tribunal [(rereinafter ]refened to [as ]['the]+Tribunal') to be entitled tb the deduction under Section 80HHC of the Act. ITANo.147/2007 involves the question of [penalty ]imposed on the [assessee ]under Section271(I)(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 taken 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., [(hereinafter ]referred to as 'MSIL' or ['the ][assessee').]The brief facts giving rise to the appeal may be noted. [The ][assessee ][was incorporated]on 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 ][yeal ][ended]on 31.03.1993, which is [practically ]first [year ]of [its ][operation, ][it ][filed ][a ][return ][of]income on30.12.1993 declaring a total income of{2,5701-. Inthe teturn, [the ][assessee.]claimed deduction of {6,48,92,5491- under Section 80HHC. Included in [this ][was ][a]deduction of {6,05,43 ,6271- in respect of [export ][of ][synthetic ][rubber ][sole ][sheets ][to ][iWs.] tT A 99 9 I 2006, 210 12007, [57 ][5 ]D007, [139 ][4 ][12009 ][& ][| ][47 ][/2007] Taj AI I(haleej General Trading Company of Dubai Qrereinafter [referred ][to ][as ]['Taj' of]'TAKGT'). It would appear that there was a search [under Section ][132 ][of ][thqAct ][of]the 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 ][and]exported; and in league with the importer, money taken out [of ][India through ][hmtala]route was being brought in as export [proceeds. ]It is not [clear ]from [the ][assessment]oid., as to whether, and if so, what were the documents or [materials ][seized ][during the]search, but suffice to note that in the [course ]of the [assessment ][proceedings ][the]assessing offrcer communicated with the Directorate of Revenue Intelligence [(DRI) ][in]response to which a letter dated 01.12.1995 was received. Along with [the ][letter, ][a]statement dated 28.12.1994 wds also received by [the ][assessing ][officer, which ][was ][that]of one Sheikh 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 here. Suffice to note that the Streikhstated that he was a partner of Taj and that he has never heard of MSIL frorn whom hisfirm was supposed to have imported 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 letter.written by Taj, that flre letler did not contain any specifications which [was ][quite]unusual for an order of irnport, that he has seen [a ]list of [155 ][shipping ][consignments]sent by MSIL between 16.03.1993 and 1I.03.1994 for [a ]total FOB [value ]of US $10,615,392, that he was not aware of any such shipping [consigrunent ][imported ][by ][Taj]. into Dubai and that the name [of ][Taj ][has been ][misused ][in ][the documents. ][On flre ][basis]of this letter, the assessing officer wrote to MSIL [and ]sought its [explanation. ][The]assessee by letter dated 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 | 2006, 210 12007, s7 5 12007, r39 [4 ]I 2009 & [| ][47 ][12007] 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]fi'om the banker of Taj in Dubai. rT A 999 | 2006, 210 12007, s7 5 12007, r39 [4 ]I 2009 & [| ][47 ][12007] 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]fi'om the banker of Taj in Dubai. 3. The assessing officer [was ][not ][satisfied ][with ][the ][assessee's ][reply. It ][would]appeEr 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 ][statement ][of ][the ][Sheikh ][iir]whiclr 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, [flrat ][it ][was ][not ][swom ][to ][before an Oath ][Commissioner,]that the original was not [available, that ][the ][statement ][was ][not ][collected tlu'ough ][any]government agency, etc. In its earlier [letter ][dated ][27.IL1995, ][the ][assessee ][had ][stated]to the assessing officer that [the ][Sheikh was ][upset ][with ][the ][assess.ee'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 ][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 ][flre ][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 ][firm ][in ][the ][narle ][of ][Taj]Al Khaleej General [Trading ][Co. ][was ][existing ][in ][Dubai-] LT A 999 | 200 6, 2r0 [12007, ][s7 ][s ][| ][2007, ][r39 ][4 12009 ][&- ][| ][47 ][12007] I )r iii) The Prop.of the firm was SheikJr Suad [Bin ][Abdullah ][Rashid ][Al]Nuaimi. rv) When contacted Sh. Sheikh [Suad ][Bin ][Abdullah ][Rashid ][Al ][Nuaimi]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 co1'ecr and that he issued [the ][same ][as ][per the ][advice tenderbd ][by ][his ][legal]consultant. 4. In the light of the aforesaid [facts ][the ][assessing ][officer ][held that ][there ][weie ][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 {6,05,46,1971- ][which ][consisted ][of ][the]returned income of 72,570/- [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 ][weie ][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 {6,05,46,1971- ][which ][consisted ][of ][the]returned income of 72,570/- [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 ][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 ][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.] rT A 9 99 12006, [21 o ]t2007, [57 5 ][12007, ][| 39 ][4 ][/2009 ][& ][| ][47 ] [2007] Page 5 of 15 I 6. In giving effect,to the order of [the ]CIT [(Appeals), ][the ][assessing ][officer ][on]t0.02.I999 granted an opportumty to MSIL [to ][produce ][the ][Sheikh.and also ][issued]srunmons 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 apiear pursriant to the srmrmons [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 ][offi.cer, ][however, in ][the fresh order]of assessment passed on 31.03.1999 [under Section ][i43(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 21.11.2001. In [brief, ][he ][held ][that ][in ][view of ][the]inquiries conducted, it was evident that flre [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 sout'ces". 8. The assessee, aggrieved by the [above ][order ][of ][the ] [(Appeals), ][prefered ][a]further appeal to the Tribunal [which, ][on ][a ][consideration ][of ][the entire ][conspectus ][of ][the]facts and the evidence, held [as ][follows: ][-] The incorne tax authorities had [disallowed the ][assessee's ][claim ][only'on](i) the basis of the statement of [the ][Sheikh ][made ][on28.12.7994 ][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] 8. The assessee, aggrieved by the [above ][order ][of ][the ] [(Appeals), ][prefered ][a]further appeal to the Tribunal [which, ][on ][a ][consideration ][of ][the entire ][conspectus ][of ][the]facts and the evidence, held [as ][follows: ][-] The incorne tax authorities had [disallowed the ][assessee's ][claim ][only'on](i) the basis of the statement of [the ][Sheikh ][made ][on28.12.7994 ][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] IT A 999 12006, [210 12007, ][s7 ][s ][D007, ][1 ][39 ][4 ][| ][2009 ][& ][| ][47 ][12007] ' ll 'rr <14,4001- from which goods of the [value ][of {11 ][to ][72 ][crores ][camot ][be]manufactured. In coming [to ][this ][conclusion, ][the ][assessing ][officer ][hirs ][ignored]the evidence adduced by the [assessee ][that ][it ][was getting the ][work ][done ][through]job work undertaken by its sister concerns. , Citl' 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' ][flie ][entire ][goods.were]manufactured by it.manufactured by it. (iv) Neither the assessee nor the assessing officer [could ][succeed ][in]producing the Sheikh for fruther exarnination [on ][his statements. However, ][the]assessee has been able to lead sufficient [documentaly ][evidence ][to ][show that]the exports were genuine. This included [the ][following: ][-] "f . Original Bank Certificate from ANZ [Grindlays Bank, ][Dubai,]UAE showing bills received by [the ]bank [and ][drawn ][on ][M-5. ][Taj ][Al]Khaleej General Trading Coy [By ][the ][assessee ][after ][being ][paid ][by ][the]bank.UAE showing bills received by [the ]bank [and ][drawn ][on ][M-5. ][Taj ][Al]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 [credit ][limit ]for [M.S' ][Tai ] [Khaleei]by ["Export ]Credit Gaurantee [Corporation of ][India" ][a ][Govt. ][of India]Undertaking.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).]the ["Duty ]Entitlement Exemption [Certificate" ][(DEEC ][Book).] . 5. Bank certificatefor export [realization.] 6. Exchange control declarationfrom [kBI.] 7. Exchange conttol declarationfrom [RBI.] B. Attested Customs shipping bill [certiflting exports."] rr A 999 t 2006, 21 0 12007, [s7 ][s 12007,'t ][39 ][4 | ][2009 ][&. ][1 ][47 ][12007] i' ' The assessee was also [able ][to ][adduce ][the ][following ][filther ][documents](v) in support of its claim before [the ] [(Appeals): ][-] "Q) Courier receipt of [contmunication dispatched ][by] . TAKGT tO ITO. (2) Applicationfor VISA of Pm,van 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 ][Fuii](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]Ev er gr e en Jap an CorP [or ][ation.] (7) BiIt of entry for Home [consumption ][No.243I/92-93]dated 29.10.92. BilI No.11402 dt. 9.11.92 of Ms. N.G. Bhanushali [&](S) Co. cldaring agents [regarding clearing ][of ][goods ]from [Bombay]Port. bl Goods receipt (GR) copy [No.5889 ][and ][5B9l ][dated]7.11.92 of lt[/s Haryana [Golden ][Transport ]for [dispatch ][of]goods fi'om Bombay to Delhi. (10) Transport bilI No.HGT/DLH/392 dt. [16.11.92 ][and]HGT/DLI'I/389 dt. 16.11'92 [of ][lttI/s ][Haryana ][Golden ][Transport'] Invoice No.92R-912 dated 17.9.92 of [IUI/s ][Fuii](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]Ev er gr e en Jap an CorP [or ][ation.] (7) BiIt of entry for Home [consumption ][No.243I/92-93]dated 29.10.92. BilI No.11402 dt. 9.11.92 of Ms. N.G. Bhanushali [&](S) Co. cldaring agents [regarding clearing ][of ][goods ]from [Bombay]Port. bl Goods receipt (GR) copy [No.5889 ][and ][5B9l ][dated]7.11.92 of lt[/s Haryana [Golden ][Transport ]for [dispatch ][of]goods fi'om Bombay to Delhi. (10) Transport bilI No.HGT/DLH/392 dt. [16.11.92 ][and]HGT/DLI'I/389 dt. 16.11'92 [of ][lttI/s ][Haryana ][Golden ][Transport'] Octroi ReceiPts.(11) Q2) [Invoice No.MI/I0 ][dated ][16.10.92 ][drav'n ][in ][favour ][of]Itt/s Vilchuda Overseas [Corporation ]for [export ][of ][iB00]Synthetic rubber Sheets., [GR. No.AB ][479852.] (13) Bitt of tading dated 23.12.92 [issued ][by ][Mitsui ][O-S.K'] ' Lines ltd. against invoice No.M 1/10. Page 8 of 15 rT A 999 t 200 6, [2l ] [12007, ][57 ][5 ][12007, 139 ][41 ][2009 ][& ][1 ][47 ] [2007] t' Q4) [Customs ][shipping ][Bill ][No.5974 dated ][17.12-92.] (15) Invoice No.MI/68 dated 21.1.93 for [export ]of [1400]Synthetic Rubber Sheets. GRNo.AB [395116.] (16) BiII of 'lading No.APLU 004411973 dated [29.3-93]. issued by American President [Lines Ltd.] (17) Customs Shipping Bill No.9452 dated [22.1.93.] (IS) Duty Exntption Entitlement Certificate Book Issuedandmaintainedby Deptt. of Revenue [(Customs), ][Govt. ][of ][India]Bearing Serial No.055526, [containing ][particulars of ][DEEC']value of the imports Licence 3.20 [crores ][(Advance Licence),]Assessee's Commitment tp export [goods ]of [that ][value,]particulars of exports ntade." (vi) In addition to the above the assessee also [produced ][evidence ][to ][show]that the remittances for the export sale [were received ][from ][Dubai- ][through]banking channels which [has ]been [overlooked ][by ][the ][assessing ][officer.] ("ii) The income tax authorities have.ignored [the fact ][that ][the ][assessee ][had]exported sirnilar goods to other foreign buyers [which ][have not ][been ][doubted ][by]them. Fur{her, the Sheildr had stated [that ]Taj [was ][not only ][importing'frorn]MSIL but also from its sister [concerns.] 9. With [regard ][to the ][statements ][of the ][Sheikfi, 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 ][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 ][difficulties ][were removed that ][the] LT A [ggg ]l20o 6, 2r o t2007, [s7 ][5 t2007, ][1 ][39 ][4 ][t ][2009 ][& ][| ][47 t2007] '-rl! -+ 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: ][-] LT A [ggg ]l20o 6, 2r o t2007, [s7 ][5 t2007, ][1 ][39 ][4 ][t ][2009 ][& ][| ][47 t2007] '-rl! -+ 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: ][-] "11. According to the assessee, the statement [dated ][28.12.94 ][by ][the]Sheikh denying the purchases f'om [the ][assessee ][was made on the ][basis]of a contplaint lodged by the [hostile ][business ][rival of ][the ][assessee]company, namely IuI/s. Gujarat Apar Polynters [ltd. ][with ][the ][Minister ][of]Commerce and on the strength of that [conzplaint enquiries ][were]initiated by the Government and, [therefore, ][under ][pressure ][the ][Sheikh]made that statement to avoid serious trouble. [However, when ][these]contplications were removed, the Sheikh agreed [to ][make statentent ][to]bring out the true facts denying [his ][previous ][statement. ][stating ][the]circurnstances under which that statement was [made and ]fullyaccepting the export sales made to him by [the ][assessee contpany.]Along with his statement an [annexure was ][also ][appended ][detailing ][the]documentary evidence to support [the ]factum of [imports ][made ][by ][the]firnr [of ][the ][Sheikh ]from [the ][assessee ][company. ][The ][assessee ][also]claims that the copy of this statement was [also directly ]ft*rd [by ][the]Sheikh to the AO and also [enclosing the entire docuntentary ][evidence]forwarded [it ][by ][sending ][another ][copy ][through ][courier ][to ][the ] [The]Sheikh 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 aII the .orders sent by [the ][assessee ][and its ][other]companies were placed by TAKGT [and ][that ][the ][assessee ][and ][is ][other]group companies have not all 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 ] 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 its lawyer and that the [statement ][does ][not ][have ][any]authenticity at all. The Sheikh furtlrcr [admitted ][that the ][telephone]number and the P.O. number [given on the ][order ]form [placedwith ][M.S.]group were being used by TAKGT. Further [that ][no ][dues ][against ][any]bills were to be paid and that all [the ][payments have ][already ][been]made from his accounts in A & Z Gribndlays Banh [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] rT A 999 1 2006, 210 12007, [57 ][s ][12007, ][1 ][39 ][4 ][1 ][2009 ][& ][r ][47 ][12007] il t' rT A 999 1 2006, 210 12007, [57 ][s ][12007, ][1 ][39 ][4 ][1 ][2009 ][& ][r ][47 ][12007] il t' placed with M.S. Group were [genuine. ]It [means ][that ][the Sheikh ][in ][his]subsequent declaration and [the ]ffidavit, [the ][genuineness ][of which ][has]also been accepted and [communicated ][to ][the Additional ][Director]General Foreign Trade by [the ][Consul.ate ][General ][of India ][in ][their]'letter dated 12.5.97 placed at, pages 58 & 59 of the paper book of theassessee, 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 foreignffilrs and as the ffidavit dt. 13.1.97 has beenIegalized by Dubai Chamber of Commerce [and Industry, which ][has]also been enclosed by ual Ministry [of ]foreign [Affairs ][and as ][the]ffidavit [dt. ][13.1.97 ][has ][been ][legalized ][it ][ntay have ][to ][be ][considered ][as]authentic." 10. With reference to the [aforesaid submissions ][of ][the ][assessee, ][the ][Tribunal]onined as follows: - "We are of the opinion that in case [the ]AO [was ][relying ][upon ][the]statement of the Sheikh [dated 28.12.94 ][the opportunity should ][also]have been afforded to the [assessee ][to ][cross examine the Sheikh ][and in]the absence of santg no reliance [could ][also ][be ][placed ][on ][such]statement. Further, [the ][second ][statemeni made ][by ][the ][Sheikh, ]ftillyretracting from the earlier statentent [made ][by ][htm also ][of ][cource]cannot be safely relied upon because [the ] [is ][deprived ]front [the]opportunity of cross [examining ][the ][Sheikh ][as ][he ][did not ][choose to]appear for this purpose. As [regards the ]ffidnit [of ][the ][Sheikh in]support of his retraction front [the ][statement ][made ][earlier ][dated]28.12.94, adrnitting the export [purchases ][ntadefrom ][the ][assessee ][and]the payments being made [through banking ][channels as ][clainted ][by ][the]assessee, the Consulate General of [India's ][office ][in ][the letter ][to]additional Director of Foreign [Trade has confirnted the ][genuineness]of the ffidcwit of the Sheikh, [onwhich ][the ][signature of ][the ][Sheikhwere]Iegalized the ffidavit was [registered ][by ][the ][Dubai ][chamber ][of]Comrnerce & 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 [ntade ][by ][the ][Sheikh, ][but, ][at ][the]same time is would [also ][not ][be ]fair [on ][the ][part ][of tax authorities re ][the]ffid.avit, for [contradicting ][which neither ][is ][been ntade ][nor ][any]evidence has been brought [the ][department. ][Fact ][remains ][that ][when] rr A 999 | 2006, 210 I 2007, [s7 ][5 ] [2007, ][139 ][41 ][2009 ][&. ][| ][47 ][12007] ri.. the assessee from the documentary [evidence is able ][to ][prove ][the ][export]sales made by it to the Sheikh's [compqny ][TAKjT, ][Dubai, ][and ][having]received the arnount of {6,05,43,627/- [as ][remittance ]for [the ][san1e,]through banking channel of Dubai in the Indian [Bank ][the export ][sales]made by the assessee cannot be disbelieved [on ][the ][solitary ][statement]of the Sheikh made earlier on [28.12.94, ][when ][the ][sanxe ][was]subsequently retracted by [the ]Sheikh [himself ][in ][a ][duly ][authenticated]afidavit."sales made by it to the Sheikh's [compqny ][TAKjT, ][Dubai, ][and ][having]received the arnount of {6,05,43,627/- [as ][remittance ]for [the ][san1e,]through banking channel of Dubai in the Indian [Bank ][the export ][sales]made by the assessee cannot be disbelieved [on ][the ][solitary ][statement]of the Sheikh made earlier on [28.12.94, ][when ][the ][sanxe ][was]subsequently retracted by [the ]Sheikh [himself ][in ][a ][duly ][authenticated]afidavit." '11.After dxarnining the documentary [evidence placed ][by ][the ][assessee ][the ][Tribunal]held that there was no basis [to ][disbelieve ][the ][entir" ][do"r.,*dntary ][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 ][the ][deduction claimed ][under]Section 80HHC. The Tribunal also deleted [the ][addition ][of ][the ][amount ][of]< 6,0 5,43,627 / [t ]as' lncome from other [s ][ources".] t2. 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 the deduction under [Section ][80HHC ][in ][respect ][of ][flre exports ][made ][to ][Taj]which were disbelieved. The [export ][proceeds ][were ][assessed ][as ]["income frorn ][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 ][conceahnent ][of ][income.]The penalty was cancelled by [the ]Tribunal [since ][it ][had ][deleted ][the ][addition ][madb]rurder the head "income from other [sources" and alsb ][allowed the ][assessee's ][claim ][for]deduction under Section 80HHC. '13. The contention of the standing [counsel ][for ][the ][Revenue ][is,that ][tlr.e ][finding ][of]the Tribunal in all the cases is [perverse ][as ][it ][has ][overlooked the ][first ][staternent ][of ][flre]Sheikir made on28.12.1994 [andhas given undue weightage ][to ][the ][retraction ][and ][to ][flre] tT A 9 99 | 2006, 210 12007, [57 5 ][12007, ][| 39 4 ][12009 ][&. ][1 ][47 ][120Q7] ' .'.i\. , I \/s affidavit datdd 13.01.1997 which was filed by fie [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 ][bhsis ][of ][the]evidence adduced.before the income [tax ][authorities ][including ][copious ][documentary]evidence and has not dhosen 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],afFrdavit [dated 13.0I.1997 ][contained the ][truth ][and should be ][believed. ][It ][is ][contended]that there is nothing brought on record to [show that flre ][findings ][of ][the ][Tribunal ][are]perverse,. 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 ][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 ][auflrorities ][in ][both ][the]rounds of the proceedings [as ]also before [the ][Tribunal. ][The Tribunal ][has ][taken note ][of]every item of evidence, including [the three 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 ][governmental]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 staternents of [the ]Sheikh [and has ][preferred ][to ][accept ][the]retraction, supported later by [the affidavit ][dated ][13.01.1997 ][swom ][to ][by him ][before]the Indian Consulate at Dubai. No [material ][has been ][brought on record ][or ][in ][the].cogrse of the proceedings before the Tribunal to throw any doubt on the credibility ofthe affidavit swom to before the Indian [Consulate ][in ][Dubai. ][The ][Sheikh ][was neither]produced by flre 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] tr A 999 12006, [21 ]0 12007, [57 ][5 ][12007, ][1 ][39 ][4 ][| ][2009 ][& ][| ][4',1 ][12007] Page 13 of 15 ,/ I T, ' "/ 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]1ot, 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 frndings of the Tribunal [are ][essentially ][findings ][of ][fact ][and ][they ][caunot ][be]subjected to the criticism ofbeing [unreasonable ][or ][perverse ][or ][irrational. ][It ][has been]lretd by the Supreme Court [in ][Sree ][Meenakshi ][MiUs ][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]aitack 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]migltt not, on the materials, [have come ][to ][the same ][conclusion ][if ][it ][had]the power to substitute [its ][own ][judgtnent. ][In ][Great ][Western ][Railway]' Co. v- Bater(I), Lord Atkinson [observed: ][-] "Their [(Commissioners) determinations ][of ][questions ][of]purefact are not to be disturbed, any [nrore ][than are ][the]findings [of ][a ][jury, ][unless ][it ][should appear ][that ][there]was no evidence before [them upon ][which ][they, ][as]reasonable men, could conte [to ][the ][conclusion to which]they have come: and this, [even ][though ][the ][Court ][of]neview would on the [evidence ][have ][conxe ][to ][a]conclusion entir ely dffir [ent ]fr om [theirs."] To the same effect areithe observations [of ][the ][Supreme ][court ][in ][CIT v. Daulat ][Ram]Rawatmull, [(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 que.stions of pure fact arrived at by the Tribunalare not to be disturbed by [the ]High [Court ][on ][a ][reference unless ][it] )hs To the same effect areithe observations [of ][the ][Supreme ][court ][in ][CIT v. Daulat ][Ram]Rawatmull, [(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 que.stions of pure fact arrived at by the Tribunalare not to be disturbed by [the ]High [Court ][on ][a ][reference unless ][it] )hs appears that [there ][was ][no ][evidence ][before ][the ][Tr-ibunal upon ][whi,ch]ttiy, o, a reasonable [men, ][could ][come ][to ][the ][conclusion ][to ][which ][they]havecome;andthisisSo,eyenthoughtheHighCourtwouldontheevidence have [come ][to a ][conclusion ][entirely ][dffirent froyt ][thlt ][of ][tlt,]Tribunal. In [other words ][such ][a ]finding [can ][be ][reviewed ][only on ][th6]grotund 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]the assessees [were ][entitled ][to ][the ][deduction ][under Section ][80HHC ][of ][the ][Act ][in]respect of [flre 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.999/20 06, 739412009,21012006]and,57512007 [areanswered ][in ][the ][affirmative, ][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.147 12006). ][AIr ][the substantial ][questio's]of law are flius [answered ][in ][favour ][of ][the ][assessee. ][The ][apperiis ][of ][the ][Revenue ][are]accordingly [dismissed ][with ][no order ][as ][to ][costs'] tr,r "W1*,--< 6n.V. [EASwAR)]JT]DGE h*;*g-(s. RAVTNDRA BHAT)JUDGEJUDGE SEPTEMBER [28,2012] '* I