2024 (7) TMI 729 - HC - Income Tax

Assessee wins as unexplained investment addition under section 69A deleted due to genuine export sales

Pr. Commissioner of Income Tax Versus Arun Malhotra.

Pr. Commissioner of Income Tax Versus Arun Malhotra. - [2025] 475 ITR 217 Issues Involved:1. Deletion of addition in block assessment proceedings.2. Validity of block assessment proceedings under Section 158BC.3. Right to cross-examine witness and its implications.4. Applicability of Section 69A of the Income Tax Act.5. Deduction under Section 80HHC of the Income Tax Act.Issue-wise Detailed Analysis:1. Deletion of Addition in Block Assessment Proceedings:The Tribunal deleted the addition of Rs. 5,23,78,058/- in the block assessment proceedings. The High Court examined whether the Tribunal was correct in its decision. The Tribunal concluded that the export sales were genuine, the proceeds were received through banking channels, and there was no material evidence to rebut these findings. The High Court upheld the Tribunal's decision, noting that the factum of exports and the reflection of export proceeds in the books of account were established.2. Validity of Block Assessment Proceedings under Section 158BC:The High Court scrutinized the initiation of block assessment proceedings under Section 158BC. It held that the initiation depends on facts at the initial stage and not on the final outcome. The Tribunal's findings that no evidence was found during the search to indicate bogus transactions were deemed incorrect and legally unacceptable. The High Court emphasized that the Tribunal failed to consider the clear factual matrix recorded by the Assessing Officer and Commissioner (Appeals).3. Right to Cross-examine Witness and Its Implications:The Tribunal's decision to ignore the statement of Chander Prakash Sachdeva due to the lack of cross-examination was a significant issue. The High Court noted that the Tribunal should have examined the reasons for the witness's refusal to cross-examine and its implications. The Tribunal observed that the principles of natural justice require a fair procedure, and the absence of cross-examination could not invalidate the statement if the witness was threatened. The High Court stressed the need for corroborative evidence and thorough examination of surrounding facts.4. Applicability of Section 69A of the Income Tax Act:The Tribunal concluded that Section 69A was not applicable as the export proceeds were recorded in the books of account and received through banking channels. The High Court agreed, noting that the Tribunal found no material evidence to disprove the exports or indicate undisclosed income. The Tribunal's findings that the purchases were genuine and made through banking channels were upheld.5. Deduction under Section 80HHC of the Income Tax Act:The Tribunal allowed the deduction under Section 80HHC, noting that the Auditor's Report was admitted and examined by the Commissioner (Appeals). The High Court upheld this decision, emphasizing that the export proceeds were received through banking channels and the Auditor's Report was properly verified. The Tribunal's reliance on relevant case law to support the deduction was deemed appropriate.Conclusion:The High Court dismissed the appeal, finding no substantial question of law arising from the Tribunal's judgment. The Tribunal's conclusions on the genuineness of exports, the applicability of Section 69A, and the allowance of deduction under Section 80HHC were upheld. The High Court emphasized the importance of corroborative evidence and adherence to principles of natural justice in the assessment proceedings.