2014 (9) TMI 210 - HC - Income Tax

Court dismisses writ petition challenging Income Tax Commissioner's order on deduction claim; anti-dated invoices not valid.

The court dismissed the writ petition challenging the Commissioner of Income Tax's order under Section 264, regarding the claim for deduction under ... Claim of benefit of deduction u/s 80HHC – Export of handicraft items – Held that:- The goods were not exported, before the cut of date, only invoices were prepared anti dated - the claim of the assesses is a colourable device to get the benefit u/s 80HHC of the Act - No benefit u/s 80HHC can be extended on the basis of invoice alone - To claim the benefit, export clearance certificate is must as per Customs Act, 1962 - any sale transaction will become part of turnover only after getting custom clearance and the whole transaction should get completed during the assessment year under consideration even the assessee is following the Mercantile System of Accounting – the action of the AO reducing the export turnover declared in the books of account filed by the assessee by the amount of bills for which bills lading were issued beyond the end of accounting year was found to be justified – the order of the Tribunal is upheld – Decided against Assessee. Issues:Challenge to the order passed by the Commissioner of Income Tax under Section 264 - Maintainability of writ petition against the order - Validity of claim for deduction under section 80-HHC based on anti-dated invoices - Application of Mercantile System of accounting for export sales - Requirement of export clearance certificate for claiming benefits under section 80HHC.Analysis:The writ petition was filed against the order passed by the Commissioner of Income Tax under Section 264 of the Income Tax Act, 1961. The dispute arose when the Assessing Officer re-casted the accounts of the assessee due to bills of lading being issued after the end of the accounting period relevant for the assessment year. The petitioner contended that they followed the Mercantile System of accounting, recording export sales based on the date of invoice, and claimed statutory benefits under section 80-HHC. The petitioner argued that the delay in issuing bills of lading was due to customs clearance procedures not under their control. However, the court found that the bills and invoices were anti-dated to claim benefits under section 80-HHC, which was impermissible.The court referred to previous judgments and emphasized that export clearance certificates are essential for claiming benefits under section 80-HHC. The court noted that the goods were not exported before the relevant cut-off date, and the invoices were prepared in an anti-dated manner. It was concluded that the petitioner's actions were a colorable device to obtain benefits under section 80-HHC. The court upheld the Assessing Officer's decision to reduce the export turnover declared in the books of accounts by the amount of bills issued beyond the accounting year end, as the entire transaction should be completed within the assessment year, even under the Mercantile System of Accounting.In light of the above analysis, the court dismissed the writ petition, finding it devoid of merit. The court upheld the lower authority's orders, stating that the reduction in export turnover by the Assessing Officer was justified. The court highlighted the importance of adhering to legal requirements for claiming deductions under section 80-HHC and the significance of completing export transactions within the relevant assessment year for tax benefits.