Bombay H.C : There is no material to hold that the difference between the duty assessed by the Customs Department under s. 30(b) of the Sea Customs Act and the contract price shown by the assessee in the contract resulted in any additional income liable to income-tax to the assessee in the face of the finding of ‘proven underinvoicing’ by the assessee, given by the Supreme Court

High Court Of Bombay : Nagpur Bench

CIT vs. Central Provinces Manganese Ore Co. Ltd.

Section 256(2)

Asst. Year 1953-54

J.P. Devadhar & B.P. Dharmadhikari, JJ.

IT Appln. No. 47 of 1995

18th April, 2007

Counsel Appeared :

A.S. Jaiswal, for the Applicant : K.P. Dewani, for the Respondent.

JUDGMENT

J.P. Devadhar, J. :

This application filed by the Revenue under s. 256(2) of the IT Act, 1961 was admitted on 21st April, 1998 on the following questions of law :

“1. Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that there is no material to hold that the difference between the duty assessed by the Customs Department under s. 30(b) of the Sea Customs Act and the contract price shown by the assessee in the contract resulted in any additional income liable to income-tax to the assessee in the face of the finding of ‘proven underinvoicing’ by the assessee, given by the Supreme Court ?

Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the ‘proven underinvoicing’ was not deliberate or intentional ?

Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that no variation to the book results could be made merely on the basis of the notional value fixed by the customs authorities under s. 30(b) of the Sea Customs Act, for the purpose of customs duty in face of the clear finding by the Supreme Court that the assessee’s ‘proven underinvoicing’ ?

Whether on the facts and in the circumstances of the case, the Tribunal was justified in not holding that in the absence of complete books of account and the sales agreements, the AO could not carry out any effective scrutiny of the returns ?

Whether on the facts and in the circumstances of the case, the Tribunal was justified in not holding that the only legitimate course open to the Department was to determine the assessee’s income on a fair and reasonable basis by adopting the concluded sale price determined by the Customs Department of Government of India and the admission of the assessee that the figures in the loose sheets could not be co-related with the figures appearing in the balance sheet or P&L a/c ?”

The assessment year involved herein is asst. yr. 1953-54.

The assessee is a non-resident company having its office in London. The assessee derives income mainly from export of manganese ore. The original assessment for asst. yr. 1953-54 was completed under s. 23(3) of the IT Act, 1922 on the basis of the P&L a/c and balance sheet submitted along with the return of income. Sometime in the year 1958, the customs authorities had initiated proceedings against the respondent/assessee on the ground that the exports of manganese ores effected by the assessee were lesser than the market price which was in contravention of the Customs Act. During the pendency of the said proceedings, the AO initiated reassessment proceedings for asst. yr. 1953-54 by issuing notice under s. 148 of the IT Act, 1961 on 20th March, 1970. The assessee challenged the said notice by filing a writ petition before this Court, and the same was dismissed. Thereupon, the assessee filed an appeal before the apex Court and the apex Court dismissed the appeal by holding that the conditions precedent for initiating proceedings under s. 147 of the Act, were complied with. However, the apex Court noted that the assessee’s income has to be determined on the basis of price received by it for the goods exported. Thereafter, in the assessment proceedings, the AO without making any further enquiry sought to make additions on the basis of the amount computed by the authorities under the Customs Act for payment of customs duty and made additions accordingly to the extent of Rs. 44.07 lakhs being the difference in the invoice value and market value of the goods computed by the customs authorities. On appeal filed by the assessee, the CIT(A) confirmed the additions made by the AO. Aggrieved by the aforesaid order, the assessee filed further appeal before the Tribunal and the Tribunal set aside the order of CIT(A) and deleted the additions made by the AO. The Tribunal held that in the present case, there is no evidence on record to show that the assessee has earned any income more than what was reflected in the books of account maintained by the assessee. Since the reference application filed by the Revenue against the order of the Tribunal was rejected, the present application is filed by the Revenue under s. 256(2) of the IT Act, 1961. In the present case, it is not in dispute that the AO has made additions only on the basis of the market price determined by the customs authorities under the Customs Act. Admittedly, there is no evidence on record to show that the assessee had recovered any amount in excess of invoice issued. The fact that the customs authorities have taken the market value of the exported goods for the purpose of customs duty could not be a ground to make additions in the case of the assessee unless there was any material to show that the assessee had in fact received more amount than what was shown in the invoices/bills. Admittedly, there is no material on record to show that the assessee had received amounts in excess of what is reflected in the books of account.

The grievance of the Revenue that the assessee has failed to produce books of account, has been rejected by the Tribunal by upholding the contention of the assessee that it was not possible for them to produce the books relating to financial year 1952-53 in the year 1970. In any event, at no point of time the Revenue has found that the books maintained by the assessee were incorrect. In this view of the matter, the findings recorded by the Tribunal are based on appreciation of facts and the decision of the Tribunal in rejecting the reference application cannot be faulted.

9. Accordingly, the reference application is dismissed. Rule discharged. No cost.

[Citation : 296 ITR 217]

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