EASTERN PRODUCE CO Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THIS Tax Case Appeal is filed under Section 260 A of the income Tax Act, 1961, at the instance of the assessee against the order of the income-Tax Appellate Tribunal dated 29. 11. 2002. The above appeal came up before this Court and this Court admitted the appeal on 14. 10. 20 03 and formulated the following substantial questions of law:

(2.) THE facts relating to the above questions of law are as under:-The assessee is a partnership firm engaged in the business of export of musical instruments made of red sanders wood and granite. A search under section 132 of the Income-tax Act took place on 24. 1. 98 in the case of shri. M. Chidambaram, one of the partners of the above firm. No cash or jewellery was seized from the said Chidambaram. During the course of the search, a sworn statement was recorded from the said Chidambaram that he had exported granite to Italy to the tune of Rs. 4,31,309/- on 19. 7. 96 and on 2. 4. 97, he had exported musical instrument parts to the tune of rs. 16,61,391/ -. Further he had also given a detailed statement showing other exports as under:- <FRM>JUDGEMENT_434_TLMAD0_2006Html1.htm</FRM> The above transactions reported by Sri Chidambaram in his sworn statements had been examined. It was found that the export of Rs. 4,31,309 /- on 19. 07. 1996 was the same transaction noted as involving Rs. 4,27,469/- in the tabular statement mentioned above. Similarly, the transaction of Rs. 16,61,391/- made on 02. 04. 1997 was the same transaction for the amount of Rs. 16,64,099/-mentioned in the tabular statement. The difference was on account of bank charges. Hence the overall export to be considered for assessment were the three transactions mentioned in the tabular statement. During the course of the hearing, Sri Chidambaram furnished copies of invoices involving the above three transactions. It was found that all these transactions had been made in the case of the firm M/s. Eastern Produce Company in which he is a partner. Hence, any income arising out of these transactions had to be assessed in the hands of M/s. Eastern Produce Company only. In consequent to the search in the case of Sri. Chidambaram, notice under Section 158 BD was issued to the firm and served on 22. 10. 98. In response to this notice, the assessee firm furnished return of income for the block period from 1. 4. 87 to 24. 1. 98 admitting 'nil' income. The assessing officer completed the assessment by including the undisclosed income for the assessment year 96-97 at Rs. 50,405/-and for the broken period from 1. 4. 97 to 24. 1. 98 at Rs. 3,41,140/-, totalling to Rs. 3 ,91,545/ -. While completing the assessment, the assessing officer disallowed the deduction claimed under Section 80 HHC of the Act and also estimated the income on the basis of the other assessee doing the same business of exporting musical instruments.

(3.) AGGRIEVED by the order of the Assessing Officer, the assessee filed an appeal before the Commissioner of Income-tax (Appeals), who dismissed the appeal and confirmed the order of the Assessing Officer. Aggrieved by the same, the assessee again went on appeal to the Income Tax Appellate Tribunal. The Appellate Tribunal also dismissed the appeal and confirmed the orders of the lower authorities.