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Judgment
PER MANISH AGARWAL, AM :
The present appeal is filed by Revenue against the order dated 19.06.2025 by Ld. Commissioner of Income Tax (A)-29, New Delhi [“Ld. CIT(A)”] in Appeal No. CIT(A), Delhi-9/10562/2018-19 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 30.12.2018 passed u/s 147/143(3) of the Act pertaining to Assessment Year 2011-12.
Brief facts of the case are that assessee company was incorporated on 05.06.1997 under the Companies Act, 1956. The assessee company was engaged in the business of trading in bullions, gold and diamonds. The return of income was filed on 22.09.2011, declaring total income of INR 7,60,130/-. The case of the assessee was re-opened u/s 147 of the Act on the basis of information available that there were unusual transactions including cash deposits into bank. During the course of assessment proceedings, the assessee explained the deposits as part of the sales made outside India as well as local sales. AO has referred the matter for valuation of goods exported by the assessee during the year under appeal who filed its report according to which as against the total export sales of INR 64,25,86,284/- made by the assessee during the year, the valuation has worked out the difference of INR 2,83,28,046/- on the value of goods exported and accordingly, the AO has held that the export sales made by the assessee was under value to this extent and made the addition of the same.
Against by the said order, the assessee filed appeal before Ld.CIT(A) who vide impugned order dated 19.06.2025, partly allowed the appeal of the assessee.
Aggrieved by the order of Ld. CIT(A), the Revenue filed appeal before Tribunal wherein all the grounds of appeal raised by the Revenue are with respect to the deletion of addition made by AO.
Before us, Ld. Sr. DR for the Revenue supported the order of the AO and submits that there were cash deposit in the bank account of the assessee and there were certain foreign credits which were explained as the utilization of the sale proceeds. Ld. Sr. DR submits that AO has sent the bills issued of the sales of diamonds & golds to the valuer who vide its report, pointed out that the sales made by the assessee was under-valued at INR 2,38,28,046/-. Ld. Sr. DR submits that sales price has been valued by approved valuer based on the quantity and description of goods exported therefore, such report deserves to be accepted and action of Ld. CIT(A) in deleting the addition be hold as bad in law and addition made by the AO be restored.
On the other hand, Ld.AR for the assessee submits that AO has not doubted the sales made where goods were exported out of India. He submits that every export is subject to verification by the custom officials where the value of the goods has been appraised by custom appraiser and further declaration to the valuation has been made by the assessee. Ld.AR submits that in none of the case, value of the goods exported was doubted by the custom authorities. Ld.AR submits that the goods were exported in the year 2010-11 whereas the approved valuer has made valuation of the sales in the year 2018 i.e. without physical inspecting of the goods. Ld.AR submits that the difference is of 3.7% which is within the tolerance range of [+][-] 5% that occurred on account of estimation without physical inspection of the goods. Ld.AR submits that Ld. CIT(A) after considering these facts, has deleted the additions which order deserves to be uphold.
Heard the contentions of both the parties at length and perused the material available on record. In the instant case, assessment was re-opened on the basis of the information received from the Investigation Wing which suggest that there might be some possibility of under valuation/over valuation of goods exported by the assessee. The AO based on such information has re-opened the assessment and refer the export sales made by the assessee for valuation to the approved valuer. It is observed that valuation has been done by the approved valuer on the basis of the sales bills and other particulars filed by the assessee, without physical inspection of the goods. It is a matter of fact that every export made out of India has been subjected to the physical verification by the custom authorities and valuation was done by an independent appraiser appointed by custom authorities who has examined the goods vis-a-vis the price declared by the export invoice has been verified. It is further observed that in none of the invoice issued by the assessee, any doubts raised by the custom authorities about the value of goods exported. Ld. CIT(A) after appreciating these facts while deleting the additions has made following observation in para 5 to 5.8 as under:-
Findings and Discussion:
5.“Ground Nos. 8 to 8.3: I have considered the facts and circumstances of the case. The present appeal has been filed by the appellant against assessment order dated 30.12.2018, passed u/s 147 of the Act, for the A.Y. 2011-12. In this assessment order, the AO has made addition of Rs. 2,38,28,046/- alleging under valuation of export-sales reported by the appellant on the basis of valuation report pursuant to reference made by the AO.
5.1The apprehension of underlying of sales was adopted by the AO on the basis of suggestion to verify the sale made by the Investigation Wing, which form the basis of initiation of impugned assessment proceedings u/s 147 through a notice u/s 148 of the Act, issued and served on 28.03.2018.
5.2On perusal of the assessment order, it is noted that the genuineness of sales was duly examined during the course of assessment proceedings. which was duly satisfied by the appellant and no adverse inference drawn in the assessment order. It is also noted that, while the AO alleged under valuation/invoices of sales, but the same was not backed with any tangible material suggesting under invoicing. The only basis was a suggestion from the Investigation Wing to verify under invoicing, but the same suggestion was also not based on any incriminating material giving to possession of the Investigation Wing.
5.3Thus, the entire allegation to be on the basis of surmises and conjectures. In order to support the aforesaid apprehension, the AO simply made a reference to the valuation officer, who has submitted to valuation reports expressing the under invoicing at Rs. 2,38,28,046/- which has been added to business income of the appellant in the impugned assessment order.
5.4The appellant has strongly disputed reopening of the assessment proceedings u/s 147 as also disputed the valuation made by the valuation officer.
5.5In my view, the present case do not warrant examination of the contents of valuation report, which has been disputed by the appellant on several grounds, reproduced supra.
5.6I find that the notional addition cannot be made to business income, much less on the basis of valuation, unless there is evidence on record suggesting receipts against undisclosed/under invoiced sales. In facts of the present case, has elaborately been point out that neither the Investigation Wing nor the AO had any evidence suggesting receipt of undisclosed income against sales by the appellant.
5.7In the absence of any evidence, assuming without admitting the valuation made by the valuation officer, the entire exercise of such valuation remains to be a notional exercise, which cannot be the basis of making addition to business income of the appellant.
5.8Accordingly, I do not find merit in the addition made by the AO, which is hereby deleted for aforesaid reasons. Since the addition is deleted on merits, the other ground raised by the appellant relating to validity of jurisdiction u/s 147 are rendered academic in nature.”
Before us, the Revenue has failed to controvert the specific finding given by the Ld. CIT(A) and it is also a matter of fact that valuation was done by the approved valuer based on the copies of bills supplied by the AO without having any physical verification of the goods. Further, the different is of 3.17% which is a tolerance limit of [+][-] 5% as it is a mere estimation which is done by the departmental approved valuer without physical inspection of the material/goods and therefore, we find no error in the order of Ld. CIT(A) in deleting the additions made. Accordingly, all the Grounds of appeal raised by the Revenue are dismissed.
In the result, appeal of the Revenue is dismissed.