MARBLE MEN Vs. CIT

JUDGEMENT

(1.) IN the present writ petition, notice issued under section 148 of the Income Tax Act, 1961 (hereinafter referred to as the Act), for the assessment year 1997 -98 has been challenged.

(2.) THE petitioner is a dealer engaged in the business of handicraft items and marble goods in the city of Agra. It caters to the need of foreign tourists, who visit the city. The goods are sold against foreign exchange. While taking the goods out of the country, it requires customs clearance at the airport, The petitioner claimed benefit of special deduction under section 80HHC of the Act in respect of the turnover and profit of counter sales made against convertible foreign exchange to the foreign tourists. The assessing authority in the original assessment order accepted the claim and granted deduction. However, he issued notice under section 148 of the Act seeking to withdraw the deduction granted to the petitioner under section 80HHC of the Act.

(3.) IT is not in dispute that notice under section 148 of the Act has been issued only to withdraw the deduction granted to the petitioner under section 80HHC of the Act in respect of the counter sales made against foreign exchange. A Division Bench of this court in the case of Ram Babu and Sons v. Union of India and Anr. : [1996]222ITR606(All) has held that benefit of special deduction under section 80HHC is available in respect of the counter sales effected against convertible foreign exchange if the goods are taken out of the country and the transaction is subjected to customs clearance. The aforesaid view has been approved by the Honble Supreme Court in the case of CIT v. Silver Arts Palace : [2003]259ITR684(SC) . Since the view taken by this court in the case of Ram Babu and Sons and Anr. (supra) has been approved by the Hon'ble Supreme Court in the case of CIT v. Silver and Arts Palace (supra) and this court has taken a view that even the counter sales made against foreign exchange and which are subjected to customs clearance, is entitled for deduction under section 80HHC of the Act, there cannot be any reasonable belief upon which the assessment year can form the opinion that any income has escaped assessment to tax or any deduction has been wrongly allowed so as to fall under section 147 of the Act and thus, only on that ground if the notice has been issued, it cannot be sustained and is liable to be quashed. It may be mentioned here that the view taken by this court, has been approved by Hon'ble Supreme Court in Silver and Arts Palace (supra). This is an additional reason that the notice cannot be sustained.