Punjab-Haryana High Court
National Legguard Works vs Cit (Appeals) And Anr. on 22 September, 2006
Equivalent citations: (2007)207CTR(P&H)581
Bench: Adarsh Kumar Goel, Rajesh Bindal
JUDGMENT
1. This appeal has been preferred by the assessee under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), against the order passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar in I. T. A No. 343/ASR/2001 for the assessment year 1999-2000, proposing the following substantial questions of law:
(i) Whether, on the facts and circumstances of the present case, the action of the authorities below in restricting the deduction under Section 80HHC of the Income Tax Act, 1961, on its own presumption is legally sustainable in the eyes of law ?
(ii) Whether the action of the Tribunal in confirming that stock surrendered under survey is income from other sources and not eligible for deduction under Section 80HHC claimed by the appellant/assessee without appreciating the ratio of the judgments laid down by the appellant/assessee in its correct perspective, is legally sustainable in the eyes of law ?
2. The facts noticed in the order of the Tribunal are that the assessee filed a return declaring its income of Rs. 6,67,850 on 29-12-1999. The case was selected for scrutiny as a survey operation under Section 133A of the Act was conducted on 20-3-1999. The assessee is a manufacturer and exporter of sports goods and during the year it had made sales of Rs. 87.28 lakhs on which a gross profit of 45.23 per cent. was reflected as against the gross profit of 45.12 per cent. on sales of Rs. 1.06 crores in the last year. At the time of survey on 20-3-1999, the survey party found that the stocks physically available at the premises of the assessee were excess by Rs. 11,97,809 as compared to the stocks reflected in the books of account. In order to cover the above discrepancy, the assessee offered to disclose an additional income of Rs. 12 lakhs over and above the normal business income to be taxed for the assessment year under consideration. This income is duly reflected in the profit and loss account and thereby a net profit of Rs. 51,16,053 was declared. However, while. working out the deduction under Section 80HHC of the Act, the entire amount of Rs. 51,16,053 has been shown as profits of the business and profits derived from export of goods to which Section 80HHC of the Act applies. The benefit available under Sub-section (3) of Section 80HHC of the Act has been worked out at Rs. 50,49,304.
3. Vide questionnaire dated 11-9-2000, the assessee was asked to explain why the deduction under Section 80HHC of the Act be not disallowed on income surrendered at the time of survey as the same is not export income and does not fulfil the conditions under Section 80HHC of the Act. The assessee in his reply dated 5-12-2000, submitted that the surrender of Rs. 12 lakhs made by him over and above his normal business income represents business income since this is on account of stock surrendered during the survey operations at the business premises on 30-2-1999. Stocks were calculated by applying fix GP whereas during the year under consideration the GP was higher. Miscellaneous income which represents excess stocks is eligible for deduction under Section 80HHC of the Act since it is business income.
4. The assessing officer did not accept the stand of the assessee and held that the excess stocks available at the premises were not recorded in the books of account on which deduction under Section 80HHC of the Act was being claimed. Mere surrender by the assessee at the time of survey, on excess stock being found did not entitle the assessee to deduction under Section 80HHC of the Act, which was available only in respect of income derived from the export. This view was upheld by the Commissioner (Appeals) as well as the Tribunal. The Tribunal noticed that the assessee failed to offer any explanation for the difference in the stocks and in such a situation, the assessee was not eligible to claim deduction under Section 80HHC of the Act without showing facts necessary for claiming the said deduction.
5. The only contention raised by learned Counsel for the assessee is that once the assessee had surrendered the amount as business income, the burden of proving that income of the assessee was from local trading was on the revenue and it should have been presumed that the income represented exports, the assessee being an export-oriented unit.
6. Reliance has been placed on a judgment of the Calcutta High Court in CIT v. Margarets Hope Tea Co. Ltd. , wherein cash credit appearing in the books of the assessee was ordered to be treated as income from tea business.
7. We are unable to accept this submission. Deduction under Section 80HHC of the Act is available only on showing fulfilment of the conditions specified therein and there could be no presumption that surrender made on account of unexplained stocks represented export income. The assessee was unable to give any explanation. There could be no presumption that the additional amount surrendered represented income from exports. Deduction under Section 80HHC of the Act can be claimed only on showing facts which make the assessee eligible for the deduction. The burden to prove these facts was on the assessee and not on the revenue.
8. The judgment relied upon is on its own facts and not in respect of claim for deduction under Section 80HHC of the Act. In any case, from the facts of the present case, the assessee cannot be held to be entitled to claim income surrendered as a result of unexplained stocks as income from exports.
9. Accordingly, we do not find that any substantial question of law arises in the appeal.
10. The appeal is dismissed.