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2016 (5) TMI 19

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..... 0HHC - CIT(A) allowed the same on the ground that all the aforesaid conditions have been fulfilled by the assessee - Held that:- Now to avail the benefit under section 80HHC for the profit arising from the sale of the DEBT license the above said twin conditions needs to be satisfied. We accordingly find from the submission of the assessee that both the conditions have been fulfilled as provided in (a) and (b) of third proviso to section 80HHC of the Act. For the condition specified in clause (b) the assessee submitted that the Drawback credit attributable to custom duty was 35% in terms of Custom Tariff Heading 7018 and where as the DEPB entitlement was only 20%. We also find that the ld. DR has not brought anything contrary to the findings of the ld. CIT(A). In view of above we find no reason to interfere in the order of the ld. CIT(A). Therefore we dismiss the ground of Revenue. - ITA No. 959/Kol/2009 - - - Dated:- 20-1-2016 - N. V. Vasudevan, JM And Waseem Ahmed, AM For the Petitioner : Shri Uday Kumar Sarkar, JCIT SR.DR For the Respondent : Shri S M Surana, Adv ORDER Per Waseem Ahmed, Accountant Member This appeal by assessee is against the order of Com .....

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..... 8377; 38,235/- which were made in absence of any plausible evidence. Hence, the Ld. CIT(A) was not justified in allowing the same. 7. under the facts and circumstances of the case, the Ld. CIT(A) was not correct in allowing 90% of the sale proceeds of the DEPB license as allowable deduction u/s. 80HHC(3) as the conditions laid u/s 80HHC were not fulfilled for the claim. 2. First ground raised by Revenue is that Ld. CIT(A) erred in deleting the addition of ₹ 12,84,94,000/- made by Assessing Officer on account of inflated purchased. 3. The facts of the case are that assessee is a partnership firm engaged in manufacturing and exports business. During the year, assessee purchased goods from M/s Madho Prasad Mahabir Prasad glass beads and glass chatons. The necessary details of purchases are given as under : S.No. Goods description Quantity Rate Amount(Rs.) 1 Glass beads 19,266 Kgs. 6750/- ₹ 13,00,45,500/- 2 Glass chatons 25,000 dozens 30/- ₹ 7,50,000/- .....

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..... above documents furnished before me and also perused the assessment records wherein almost all the above said documents are available. I have also gone through the relevant facts of the appellant connected to enquiry made by the Customs Department. Some of the documents are available in the assessment records and some documents were furnished during appellate proceedings. It is noticed from the Custom's records that investigations are initiated against some exporters of Calcutta including the appellant and M/s Ramapati Exports and others on the basis of information about over valuation of exported goods of various exporters. Accordingly action was initiated both by the Customs Department and also the Special Investigation Branch (SIB) of the Customs Department during the relevant period of time. Show cause notices were issued to some exporters including the appellant alleging over valuation of the exported goods. In the case of M/s. Ramapati Exports who also purchased glass beads from M/s Madho Prasad Mahabir Prasad, the show cause notice issued was adjudicated upon by the Commissioner of Customs wherein he dropped the proceedings against all the notices. On appeal the Kol .....

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..... no over-invoicing could be proved by the department. The basis of downward revision of purchase price by the Assessing Officer was the report of customs which itself stands rejected after the order of the CESTAT value taken for exports i.e. US 162 or ₹ 7000/- per KG was found to be genuine. As the case of action of the Assessing Officer for treating Reducing the Purchase price of Glass Beads from ₹ 6750/- per KG to ₹ 100/- per KG was not tenable in law the action of Assessing Officer is also not tenable in law, unjustified illegal the same should be set aside. Further taking a value of 100 Per KG against a Sale Value of ₹ 7000/- per KG results in a Gross Profit of around 98% which is unrealistic, unreal imaginary. In the circumstances of our case, Judgement on similar facts the Order of the Assessing Officer as regards taking the purchase price to be ₹ 100/- per KG needs to be set aside.' The above argument of the appellant is also supported by another evidence by way of letter dt. 21.09.99 of Commissioner of Customs (Port), Kolkata addressed to Member (Customs) wherein it was commented that there was no over invoicing in the case .....

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..... :- '4. I came into contract with Shri L.K. Todi of M/s M.M. Export, who wanted to buy Glass Beads from me. I entered into an agreement with him to sell Glass Beds at local level ₹ 6,750- per kg. The Glass beads were hand cut and hand polished. 5. Between April, 1999 and May 1999, I sold and delivered 19260 Kg and 25000 Dozen of hand cut Glass Beads and decorated and Glass Chatons. Time to time I raised Bills upon M/s M.M. Export which were paid by M/s M.M. Export to me or my nominees. On few occasion I caused to deliver the goods through M/s Arawali Gems when the goods were required on urgent basis. The only deficiency pointed out by the AO is that Mr. Nirmal Kr. Sarswat did not appear on a subsequent day and that no transport evidence was produced corresponding to the purchase in question. In my opinion, this is not a conclusive test to arrive at the bogus/inflated nature of the purchasers without verifying the payments made by the banking channels. Moreover, the AO despite assessment details furnished could not cross verify from the assessment records available. Also the AO could not prove that the corresponding export sales were bogus and non-existing. .....

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..... aforesaid discussion we find that the assessee has made total purchase of the goods for an amount of ₹ 13,07,95,500.00 from M/s Madho Prasad Mahavir Prasad. Out of the total purchase the AO has disallowed the purchase expenses worth of ₹ 12,84,94,000.00 on the information gathered from the custom department that the assessee has overpriced the value of the export goods. However the CIT(A) has allowed the same by treating the transaction at the fair market value. We find that the AO in the instant case has disallowed the substantive purchase without making the substantive enquiry about the prevailing market price of the product in question. The AO also not considered the payment to the party which was made through the banking channel. The goods were exported after the custom clearance and the payment was realized in terms of convertible of foreign exchange. We also find from the report of the custom department that no over invoicing for the export of the goods was made. The ld. AR also drew our attention on pages 85 to 90 of the paper where the affidavit given by Mr. Nirmal Kumar Sarswata partner of M/s Madho Prasad Mahavir Prasad before the Ld. CHIEF METROPOLITAN MAGIS .....

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..... ect the A.O to delete this addition of ₹ 20,000/- 8. We have heard both the parties and perused the materials available on record. Before us the ld. AR submitted that the goods were purchased from the said party vide invoice no. MMP/NT/176 dated 25.6.1999 for ₹ 20,000/-. This transaction of purchase was interstate purchase so the form 42A was duly submitted to the Sales Tax Department. 9. We find from the aforesaid discussion that the AO has disallowed the purchase expenses due to non availability of the purchase bills. However the same has been allowed by the ld. CIT(A) after due verification of the necessary supporting evidence. Before us the ld. DR has not brought anything on record to controvert the finding of the ld. CIT(A), therefore we are confirming the order of the ld. CIT(A) and dismissed this ground of the Revenue. 10. Ground No.3 raised by Revenue is that Ld. CIT(A) has erred in deleting the addition made by AO for an amount of ₹ 3,51,117/- on account of inflating purchase from M/s Atul Enterprise. 11. During the year assessee claimed to have made purchase for an amount of ₹ 3,51,117/- from M/s Atul Enterprise. But the assessee fail .....

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..... I direct the AO to delete the addition of ₹ 3,15,117/- made towards purchase. Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us : 13. Before us the ld. AR submitted that all the payments for purchases were made through account payee cheque. The ld. AR produced the copy of the ledger of the party which is placed at page 178 of the paper book. The ld. AR also submitted that all the requisite details were submitted such as copies of invoice, ledger copy, payment details etc. before the AO during the time of the remand report. 14. We find from the aforesaid discussion that the AO disallowed the purchase due to non-production of the bill from the party, notice sent was unserved and non-availability of the present address of the party. But we find from the order of the ld. CIT(A), all the necessary details were furnished at the time of the remand report to the AO. The ld. DR. has also not brought anything on record to controvert the finding of the ld. CIT(A). In view of above we find no reason to interfere in the order of the ld. CIT(A). Hence this ground of Revenue appeal is dismissed. 15. Ground No.4 raised by Revenue in this appeal is that .....

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..... rted to over invoicing imported purchases. In view of the matter I am of the opinion that the addition made on account of cost deserved to be deleted. Therefore, I direct the AO to delete this addition of ₹ 37,27,578/- made towards purchase of silk. 18. Before us the ld. AR submitted that this is an import transaction and all the relevant documents such as all the 4 invoices of the party, Bill of entry of each import (4 Nos.), Bank certificate for the remittance of payment before the AO at the time of remand report. However the AO asked for the comparison of the import price of Silk with Indian price which the assessee failed to furnish being the unique item of purchase. 18.1 From the aforesaid discussion we find that the AO has disallowed the purchase of imported silk worth of ₹ 37,27,578.00 due to non production of the necessary supporting documents. But we find from the order of ld. CIT(A) that all the requisite details were furnished to the AO at the time of remand report. The ld. DR has not brought anything on record to controvert the findings of the ld. CIT(A). In view of above we find no reason to interfere in the order of the ld. CIT(A). Hence this groun .....

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..... come tax details of the company. However the AO has not conducted any enquiries based on the information given by the appellant. He should have enquired into the matter as the present whereabouts of the company has brought to the knowledge of the AO. The cessation or remission of liability depends on the factual position. Either the appellant company suo motu write off in its books or based on the confirmation given by the sundry creditors the cessation of the liability comes into picture. In this case there is neither remission nor cessation of liability. In the absence of any material evidence brought on record by the AO even at the remand report stage I decline to agree with the addition made on account of cessation of liability in the case of M/s ABN Laminators P. Ltd. Being aggrieved by this order of Ld. CIT(A) Revenue came in appeal before us. 22. Before us the ld. AR submitted that the liability towards the creditor is very much is appearing in the books of the assessee and it has not ceased to exist. For the non-service of notice the assessee submitted that liability in the books of the assessee has been appearing for more than 7 Years so apprehended for the change .....

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..... umentary evidence whatsoever produced by the appellant. Accordingly I direct the AO to restrict the addition to ₹ 28,796/- out of total disallowance of ₹ 52,046/-. As regards miscellaneous freight bills the appellant failed to produce any supporting evidence to justify the expenditure of ₹ 38,235/-. However taking into consideration the turnover of the company and circumstances, I direct the AO to disallow 20% of ₹ 38,235/- which in my opinion is reasonable enough to take care of any inflation in freight bills. This is because the Ld. AR brought to my notice that all these miscellaneous freight bills belong to local transport by way of cartage, hamaiil charges etc. Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us. 26. Before us the ld. AR demonstrated that the copies of the bills for an amount of ₹ 23,250.00 of M/s Natwar Parikh Industries towards freight charges were submitted before the AO at the time of remand report. The AO could have made enquiry under section 133(6) of the Act for establishing the genuineness of the expenses. Regarding the other freight expenses, the ld. AR submitted that the necessary details in .....

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..... The two conditions laid down u/s. 80HHC(3) with regard to the claim of 90% of sale proceeds of DEPB License are: i) The assessee should have an export turnover exceeding ₹ 10 crores during the previous year. ii) The assessee should have necessary and sufficient evidence to prove that: (a) He had an option to choose either the duty draw back or DEPB scheme ; and (b) The rate of draw back credit attributable to the Customs duty was higher than the rate of credit allowable under DEPB scheme. As contended by the appellant the two main conditions prescribed u/s. 80HHC(3) have been fulfilled by the appellant and accordingly the appellant is eligible to claim the deduction of 90% of the sale proceeds of the DEPB License in computing deduction u/s. 80HHC of the Act. iii. As regards the objection of the AO that para 7.14 pertains to import of gold/silver, I have perused the entire text of the Export and Import policy and it is very clear from the report that the AO misread the para 7.14 of the Handbook of procedures instead of para 7.14 of the Foreign Trade Policy. As contended, if the appellant's business activities are not eligible as per Export .....

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..... an option to choose either the duty drawback or the Duty Entitlement Pass Book Scheme, being the Duty Remission Scheme; and (b) The rate of drawback credit attributable to the customs duty was higher than the rate of credit allowable under the Duty Entitlement Pass Book Scheme, being the Duty Remission Scheme: Now to avail the benefit under section 80HHC for the profit arising from the sale of the DEBT license the above said twin conditions needs to be satisfied. We accordingly find from the submission of the assessee that both the conditions have been fulfilled as provided in (a) and (b) of third proviso to section 80HHC of the Act. The relevant Policy of the DEPB in terms of paragraph 7.14 of the Foreign Trade Policy notified u/s 5 of the Foreign Trade (Development Regulation) Act is set out herein below: For exporters not desirous of going through the licensing route, an optional facility is given under DEPB. The objective of Duty entitlement pass book scheme is to neutralize the incidence of customs duty on the import content of the export product. The neutralization shall be provided by way of grant of duty credit against the export product. Under the Duty Ent .....

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