Gujarat High Court
Principal Commissioner Income Tax-2, ... vs Surat Metlon Pvt.Ltd on 13 June, 2022
Author: A.J.Desai
Bench: A.J.Desai, Bhargav D. Karia
C/TAXAP/264/2022 ORDER DATED: 13/06/2022
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 264 of 2022
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PRINCIPAL COMMISSIONER INCOME TAX-2, SURAT
Versus
SURAT METLON PVT.LTD.
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Appearance:
MRS KALPANAK RAVAL(1046) for the Appellant(s) No. 1
for the Opponent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE A.J.DESAI
and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
Date : 13/06/2022
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE A.J.DESAI)
1. Revenue has preferred this tax appeal under section 260A of the Income Tax Act, 1961 (For short "the Act, 1961") for the assessment year 2007-2008 challenging the judgment and order dated 27.08.2019 passed by the Income Tax Appellate Tribunal, Surat Bench, Surat (For short "the Tribunal").
2. Following substantial questions of law are proposed by the Revenue :
"(1) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT has erred in not appreciating the additions on account of undisclosed profit and unaccounted investment in undervalued goods, were based on admissible evidence of admittance before DRI in statement for under invoicing of imports, though Page 1 of 8 Downloaded on : Sat Dec 24 18:42:58 IST 2022 C/TAXAP/264/2022 ORDER DATED: 13/06/2022 later retracted, disregarding the judgment of Hon'ble Supreme Cout in Surjeet Singh Chhabra Vs. Union of India [1997 (89) ELT 646(SC)] holding that confession, though retracted, is an admission and binding?
(2) Whether in the facts and in law circumstances of the case, the Hon'ble ITAT erred in not following Hon'ble Rajasthan High Court in case of Banna Lal Jat Constructions Pvt.Ltd v/s.
ACIT upheld by Hon'ble Supreme Court (Reported in 2019 (106) Taxmann.com 128) that once the statement is available, the onus is on the assessee to disprove such statement?
(3) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT has erred in law in upholding the order of CIT(A) deleting the additions of unaccounted investment and gross profit unlawfully ignoring the investigation in course of survey u/s 133A on 10/03/2008 amongst other details?
(4) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT erred in deleting additions of unaccounted investment and estimation of Gross Profit, whereas they have confirmed additional income to the tune of Rs. 40,00,000/- disclosed during survey u/s 133A and offered in the return by the assessee and when the basis of impugned addition and disclosure in survey were onset of facts.
(5) Whether on the facts and in law, the Hon'ble ITAT was justified in dismissing the appeal of Revenue without considering the fact that the Assessee itself submitted for addition on account of unexplained investment basing upon the peak theory?"
3. Brief facts of the case are that the respondent- assessee company is engaged in the business of import of metalized polyester film/yarn and manufacturing of imitation Jari/Kasab and Badla.
4. On receipt of information from DRI, Surat that Page 2 of 8 Downloaded on : Sat Dec 24 18:42:58 IST 2022 C/TAXAP/264/2022 ORDER DATED: 13/06/2022 the assessee had undervalued imported goods of Rs.4,32,54,882/- during the assessment year 2007-2008, the case of the assessee was reopened and the Assessing Officer vide order dated 29.10.2010 passed under section 143(3) of the Act, 1961 read with section 147 of the Act, 1961 determined the total income of assessee at Rs.77,66,939/- by making addition under the head of unaccounted investment (peak) at Rs.22,39,196/- and Estimation of Gross Profit on account of unaccounted purchases at Rs.11,77,461/-.
5. Being aggrieved the assessee preferred appeal before the CIT(Appeals), Surat. CIT (Appeals) deleted the additions made by the Assessing Officer and allowed the appeal of the assessee vide order dated 5.7.2011.
6. The Revenue preferred appeal before the Tribunal. The Tribunal by impugned judgment and order, after considering rival submissions and facts and evidence on record, dismissed the appeal holding as under :
"7. We have heard the rival submissions and perused the relevant material on record. We find that the AO has made addition based on the information received from DRI wherein it was alleged that the assessee has imported goods from M/s. Brightext Corporation of Japan, which were undervalued by the assessee. However, we observe that the AO has not made any independent enquiries, and solely relied on the information received Page 3 of 8 Downloaded on : Sat Dec 24 18:42:58 IST 2022 C/TAXAP/264/2022 ORDER DATED: 13/06/2022 from custom authorities and treated the undervaluation of imported goods as an unaccounted investment and thereby made peak addition on account of the same. Further, the AO also made a Gross Profit addition by treating the said unaccounted purchases as sales made by the assessee in cash and thereby estimating the gross profit and made the addition accordingly. However, we find that the Ld.CIT(A) has deleted the said addition by observing that the AO has made addition solely on the basis of information from Customs Authorities and the statement of Shri Pragnesh Jariwala director of the assessee company, made before DRI. Further, the deponent has retracted from the said statement. Therefore, the addition made based on information from Customs Authorities, without making any independent enquiries is not tenable in law. Hence, the Ld. CIT (A) has rightly deleted the same. We, further, note that the Ld.CIT(A) has also supported his view by placing reliance in the case of Vinod Solanki (Civil Appeal No. 7407 of 2008] wherein the Honourable Supreme Court held that evidence brought on record by way of admission statement or confessional must be substantially corroborated by the other independent and cogent evidences. The Honourable Gujarat High Court in the case of Narendra Chandulal alias Babubhai Badgai [Tax Appeal No.370 of 1999] also expressed the similar view. We further observe that Hon'ble Custom, Excise 8s Service Tax Appellate Tribunal, Mumbai Bench [CESTAT] in the case of the assessee in Appeal No.C/899-901/09 vide Order No.A/865 14-86516/16/CB dated 17.03.2016 (PB-8 to 34) has allowed the appeal of the assessee by holding that the allegation of undervaluation of imported goods did not establish and directed the Customs Authority to grant the refund of customs duty collected by them. We also note that the Assistant Commissioner of Customs, CRC-I, JNCH, N.S. III dated 14.02.2018(PB-1 to 7) has passed an order granting the refund of Page 4 of 8 Downloaded on : Sat Dec 24 18:42:58 IST 2022 C/TAXAP/264/2022 ORDER DATED: 13/06/2022 customs duty/ penalty etc. recovered from the assessee on the alleged undervaluation of impugned imported goods, on which the AO has made an addition on account of peak investment and gross profit which are challenged in this appeal before us. In view of these facts and circumstances, we are of the Considered view that when the very basis on which the addition was made by the AO is stands deleted by the CESTAT in appeal by the assessee, therefore, the addition based on their information does not survive hence, the issue is covered in favour of the assessee. In view of the foregoing discussions and findings, we hold that the impugned order is unsustainable in law and therefore, Ld.CIT(A) has rightly deleted the above additions made on account of unaccounted investment and gross profit. In view of this, the Ground Nos. 1 and 2 of the appeal of the Revenue are therefore dismissed."
7. Learned advocate Ms. Raval for the appellant- Revenue submitted that the Tribunal failed to consider that the assessee has undervalued the imported goods during the year under consideration and the Assessing Officer has made the additions on the basis of the information received from DRI and therefore, the assessee was rightly held to have paid for the imported goods outside the books of accounts. It was further submitted that the Assessing Officer has rightly held that the assessee has carried on sales on cash over and above sums as disclosed in the books of accounts. It was submitted that the Tribunal failed to consider that in the present case a survey action under section 133A of the Act, 1961 was carried out on 10.3.2008 Page 5 of 8 Downloaded on : Sat Dec 24 18:42:58 IST 2022 C/TAXAP/264/2022 ORDER DATED: 13/06/2022 wherein the assessee company had disclosed an amount of Rs. 40,00,000/- as unaccounted income for the assessment year 2007-2008. Learned advocate Ms. Raval would submit that during the course of survey, assessee itself admitted that it had made unaccounted investment during the years under consideration and therefore, the Assessing Officer has rightly estimated the gross profit @ 3.2% for the assessment year 2007-2008 for making addition.
8. We have considered the submissions canvassed by the learned advocate for the Revenue and have perused the orders passed by the CIT(Appeals) as well as the Tribunal wherein concurrent findings of fact are recorded by both the authorities for deleting the addition made by the Assessing Officer holding that the Assessing Officer has not mentioned any independent investigation carried out by him which leads to finding of making addition and further the Assessing Officer simply relied upon the information received from the Customs authority regarding the search action conducted by the officers of the DRI. It is held by both the authorities below that the Assessing Officer has committed an error by solely relying on information received from the customs authority and treated the undervaluation of the imported goods as unaccounted investment and thereby making peak addition on account of the same. It was further Page 6 of 8 Downloaded on : Sat Dec 24 18:42:58 IST 2022 C/TAXAP/264/2022 ORDER DATED: 13/06/2022 held that the Assessing Officer also made addition of Gross Profit by taking such unaccounted purchase as sale made by the assessee in cash without making any independent inquiry. It was observed by both the authorities that the Assessing Officer has solely relied upon the information from the Customs authority and statement of Pragnesh Jariwala - Director of the assessee-company made before DRI which was retracted later on.
9. The Tribunal has also considered the fact of the appeal being allowed by the Custom, Excise & Service Tax Appellate Tribunal, Mumbai Bench in case of assessee holding that the allegation of undervaluation of imported goods was not established and therefore, directed the Customs Authority to grant the refund of customs duty collected by them. It was observed by the Tribunal that when the very basis on which the addition was made by the Assessing Officer stands deleted by the CESTAT in appeal preferred by the assessee, the addition based on their information does not survive and hence, the CIT(Appeals) has rightly deleted the addition on account of unaccounted investment and Gross profit.
10. In view of above, we are of the opinion that in the facts and circumstances of the case when there are concurrent findings of fact arrived at Page 7 of 8 Downloaded on : Sat Dec 24 18:42:58 IST 2022 C/TAXAP/264/2022 ORDER DATED: 13/06/2022 by both the authorities below, there is no infirmity in the impugned order passed by the Tribunal so as to give rise to any question of law much-less substantial question of law as proposed or otherwise.
11. The appeal filed by the Revenue therefore, stands dismissed.
(A.J.DESAI, J) (BHARGAV D. KARIA, J) RAGHUNATH R NAIR Page 8 of 8 Downloaded on : Sat Dec 24 18:42:58 IST 2022