SIRAIGO PHARMA PVT.LTD., Jaipur V. DCIT, Jaipur

ITA 1010/JPR/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5583 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 26-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MEENA CIT DR DHK
• Keywords: Gross profit estimation; Income from undisclosed sources; Search and seizure; Period of limitation; Additional evidence; Time period of passing order
• Section: 143(3); 153A; 154

Judgement Text

ITA NO. 1010/JP/2013 DCIT, CENTRA L CIRCLE- 3 JAIPUR VS. M/S. SIRAIGO PHARMA (P) LT D., 1 VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE:SHRI R.P.TOLANI, JM & SHRI VIKRAM SINGH YADA V, AM VK;DJ VIHY LA-@ ITA NO. 1010/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2006-07 M/S. SIRAIGO PHARMA (P) LTD. B-18, SARDAR PATEL MARG, CHOMU HOUSE, JAIPUR CUKE VS. THE DCIT CENTRAL CIRCLE- 3 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAICS 2958 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 945/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2006-07 THE ACIT CENTRAL CIRCLE- 3 JAIPUR CUKE VS. M/S. SIRAIGO PHARMA (P) LTD. B-18, SARDAR PATEL MARG, CHOMU HOUSE, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAICS 2958 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 1011 & 1012/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 & 2009-10 M/S. SIRAIGO PHARMA (P) LTD. B-18, SARDAR PATEL MARG, CHOMU HOUSE, JAIPUR CUKE VS. THE DCIT CENTRAL CIRCLE- 3 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAICS 2958 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI VIJAY GOYAL, CA AND SHRI GULSHAN AGARWAL, CA JKTLO DH VKSJ LS@ REVENUE BY : SHRI M.S. MEENA, CIT -DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 05/01/2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 13 /01/2016 ITA NO. 1010/JP/2013 DCIT, CENTRA L CIRCLE- 3 JAIPUR VS. M/S. SIRAIGO PHARMA (P) LT D., 2 VKNS'K@ ORDER PER R.P. TOLANI, JM:- THIS IS A SET OF APPEALS FILED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2006-07, 2008-09 AND 2009-10 AND CROSS APPEAL BY TH E REVENUE FOR THE ASSESSMENT YEAR 2006-07 AGAINST THREE SEPARATE ORDE RS OF THE LD. CIT(A) DATED 1-10-2013. SINCE THE ISSUES RAISED IN THE APP EALS ARE COMMON, THEREFORE, THE SAME ARE BEING DISPOSED OFF THROUGH A CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2.1 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE HAS NOT PRESSED GROUND NOS. 1 AND 2 OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2006- 07. HENCE, THE SAME ARE DISMISSED BEING NOT PRESSED . 3.1 GROUND NO. 3 OF ASSESSEE AND CORRESPONDING REVE NUE GROUND FOR THE ASSESSMENT YEAR 2006-07 IS AS UNDER:- ASSESSEE GROUND NO.3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE TRADING ADDI TION OF RS. 14,60,764/- OUT OF RS. 29,74,480/- MADE BY THE AO B Y CONFIRMING THE GROSS PROFIT RATE OF 50% ON DECLARED SALES OF RS. 1 ,51,37,197/- AS AGAINST 60% APPLIED BY THE AO AND 40.35% DECLARED B Y THE ASSESSEE. REVENUES SOLITARY GROUND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN REDUCING THE GROSS PROF IT RATE OF 60% APPLIED BY THE AO TO 50% AND THEREBY ALLOWING R ELIEF OF ITA NO. 1010/JP/2013 DCIT, CENTRA L CIRCLE- 3 JAIPUR VS. M/S. SIRAIGO PHARMA (P) LT D., 3 RS. 15,14,076/- WITHOUT SUBSTITUTING THE REASONS FO R ALLOWING SUCH RELIEF DESPITE THE FACT THAT SHE HAS ALREADY C ONFIRMED THE REJECTION OF BOOK PROFIT AND BOOKS OF ACCOUNT. 4.1 THE COMMON GROUNDS OF THE ASSESSEE FOR THE ASSE SSMENT YEARS 2008- 09 AND 2009-10 ARE AS UNDER:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT( A) ERRED IN REFUSING TO ENTERTAIN THE ADDITIONAL EVIDENCE BY REJECTING APPL ICATION U/R 46A DESPITE CALLING A REMAND REPORT FROM THE LD. AO . 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE TRADING ADDITION OF RS. 20,60,396 (A.Y. 2008- 09) AND RS. 92,638/- (A.Y. 2009-10) BY DISALLOWING THE LOSS CLAIMED BY THE APPELLANT. 5.1 AT THE TIME OF HEARING FOR THE ASSESSMENT YEAR 2006-07, THE ASSESSEE HAS APPLIED FOR ADMISSION OF ADDITIONAL GROUND UNDE R RULE 11 WHICH READS AS UNDER:- THE ASSESSMENT ORDER PASSED U/S 153A READ WITH SECTION 143(3) OF THE I.T. ACT IS BAD IN LAW, VOID AB-INITIO UNABATED, NO ADDITION COULD HAVE BEEN MADE IN THE A BSENCE OF ANY INCRIMINATING MATERIAL 6.1 DURING THE COURSE OF HEARING, THE LD. AR CONTEN DS THAT DUE TO DISPUTES AMONGST DIRECTORS AND THE ASSESSEE BEING LOSS MAKIN G UNIT COULD NOT PRODUCE THE BOOKS OF ACCOUNT DURING ORIGINAL ASSESSMENT PRO CEEDINGS. CONSEQUENTLY, THE ASSESSMENT WAS FRAMED BY THE AO BY ESTIMATING T HE PROFITS. DURING THE ITA NO. 1010/JP/2013 DCIT, CENTRA L CIRCLE- 3 JAIPUR VS. M/S. SIRAIGO PHARMA (P) LT D., 4 COURSE OF ALLEGED SEARCH, NO INCRIMINATING MATERIAL WAS FOUND IN SEARCH ASSESSMENT U/S 153A OF THE ACT. THE AO MERELY REVIE WED HIS EARLIER ASSESSMENT ORDERS AND ONLY INCREASED THE ESTIMATION OF GP% WHICH WAS ALREADY SCRUTINIZED BY HIM IN ORIGINAL ASSESSMENT. THE GP% HAS BEEN PARTLY REDUCED BY LD. CIT(A). 6.2 BY NOW IT IS A SETTLED LAW THAT ADDITION IN THE CASE OF UNABATED ASSESSMENT CANNOT BE MADE WITHOUT INCRIMINATING MAT ERIAL WHICH IS NOT FOUND DURING THE COURSE OF ALLEGED SEARCH. FOR THIS PROPOSITION, THE LD. AR RELIED ON THE ORDER OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF JAI STEEL (INDIA) VS. ACIT (2013) 88 DTR 1 (RAJ.). IT I S PLEADED THAT ADDITIONAL GROUND IS PURELY LEGAL IN NATURE AND DESERVES TO BE ADMITTED IN VIEW OF THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN TH E CASE OF JAI STEEL (INDIA) VS. ACIT (SUPRA). 6.3 THE LD. DR IS HEARD, WHO OPPOSED THE ADMISSION OF ADDITIONAL GROUND ON THE GROUND THAT THIS ISSUE WAS NOT RAISED BEFORE ANY LOWER AUTHORITIES. 6.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD ON THE ISSUE OF ADMISSION OF AD DITIONAL GROUND WHICH IS PURELY LEGAL IN NATURE AND THE PROPENSITY IS GOING TO THE ROOT OF THE ADDITION. RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE SUPR EME COURT IN THE ITA NO. 1010/JP/2013 DCIT, CENTRA L CIRCLE- 3 JAIPUR VS. M/S. SIRAIGO PHARMA (P) LT D., 5 CASE OF NTPC LTD. 229 ITR 283, ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ADMITTED. 7.1 ADVERTING TO MERITS LD. COUNSEL CONTENDS THAT I TAT JAIPUR HAS ALREADY ADJUDICATED GP ESTIMATION AND RELATED ISSUES WHILE DECIDING THE ASSESSEES APPEAL FOR AY 2007-08 ARISING FROM SAME SEARCH PROC EEDINGS, BY ORDER IN ITA 910/JP/2012 DTD. 23-4-2015, HOLDING IN THIS BEH ALF AS UNDER: 4. NOW THE ASSESSEE AS WELL AS THE REVENUE ARE IN A PPEALS BEFORE US. THE LD. A.R. FOR THE ASSESSEE HAS SUBMITTED THAT NO INCRIMINATING DOCUMENTS WERE FOUND DURING THE COURSE OF SEARCH. T HE SCOPE OF ASSESSMENT U/S 153A OF THE ACT IS LIMITED TO SOME I NCRIMINATING DOCUMENTS/EVIDENCE FOUND AS A RESULT OF SEARCH. THE ASSESSEE FILED ITS REGULAR RETURN U/S 139(1) OF THE ACT ON 31/10/2007 AND NOTICE OF SELECTION FOR SCRUTINY U/S 143(2) OF THE ACT COULD BE ISSUED LATEST BY 30/09/2008, WHICH WAS NOT ISSUED IN THE CASE OF ASSESSEE. THERE FORE, THE ASSESSMENT OF ASSESSEE IS DEEMED AS COMPLETED U/S 143(1) OF THE A CT. AFTER THE ASSESSMENT DEEMED COMPLETED U/S 143(1) OF THE ACT F OR THE YEAR, THE DEPARTMENT CARRIED OUT SEARCH AND SEIZURE OPERATION S ON 27/08/2008. IN SEARCH, NO ANY INCRIMINATING DOCUMENTS WAS FOUND TO VISUALIZE UNDERSTATEMENT OF PROFIT. CONSEQUENT TO THIS SEARCH AND SEIZURE ACCOUNT, NOTICE U/S 153A OF THE ACT WAS ISSUED FOR ALL THE Y EARS ON 19/02/2009. THE HONBLE JURISDICTIONAL HIGH COURT HAS ANALYSED THE PROVISIONS OF SECTION 153A OF THE ACT IN DETAIL IN THE CASE OF JAI STEEL (INDIA) VS. ACIT (2013) 88 DTR (RAJ.) 1. THUS THE LAW AS ENVISAGED BY THE HON BLE JURISDICTIONAL HIGH COURT IS THAT IF NO INCRIMINATING MATERIAL HAS BEEN FOUND, THEN NO ADDITION CAN BE MADE IN THE ASSESSMENT COMPLETED U/ S 153A, WHICH HAS BEEN AWAITED. HE FURTHER RELIED ON THE FOLLOWING CA SE LAWS:- (I) ITAT JODHPUR 308/JD/2013, 22 ND JULY, 2013 93 DTR (JD)(TRIB) 1. (II) MARIGOLD MERCHANDISE (P) LTD. VS. DCIT, ITAT D ELHI ITA NOS. 2666 & 2667/DEL/2013, 27 TH DECEMBER, 2013 (2013) 38 CCH 050 DEL TRIB. (III) GURINDER SINGH BAWA VS. DCIT (2012) 28 TAXMAN .COM 328. (IV) KUSUM GUPTA VS. DCIT, ITA NO. 4873/DEL/2009, ( 2005-06). ITA NO. 1010/JP/2013 DCIT, CENTRA L CIRCLE- 3 JAIPUR VS. M/S. SIRAIGO PHARMA (P) LT D., 6 (V) MFG AUTOMOBILES LTD. VS. ACIT ITA NOS. 4212 & 4213/DEL/2011 (ITAT DELHI). (VI) TARANNUM ZAFAR KHAN VS. ACIT, ITA NOS. 5888 TO 5890/MUM/2009. (VII) VEE GEE INDUSTRIAL ENTERPRISES VS. ACIT ITA N O. 1/DEL/2011 & ITA NO. 2/DEL/2011 (ITAT DELHI). (VIII) ITA NOS. 1153 TO 1159/HYD/2012 MIR MAZHARUDD IN, 24/01/2013 (ITAT HYDERABAD). (IX) ASHA KATARIA ITA NOS. 3105, 3106 AND 3107/DEL/ 2011 20/05/2013 (ITAT DELHI). (X) NATVAR PARIKH & CO PVT. LTD. VS. DCIT (ITAT MUM BAI) ITA NO. 2143/MUM/2009. HE FURTHER ARGUED THAT THE LD CIT(A) HAS ADMITTED T HE ADDITIONAL EVIDENCE FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. NO DEFECTS IN THE BOOKS OF ACCOUNT HAD BEEN POINTED OUT BY THE ASSESSING OF FICER EXCEPT NOT MAINTAINING THE STOCK REGISTER. THE BOOKS OF ACCOUN T WERE AUDITED BY THE C.A. UNDER THE INCOME TAX ACT AS WELL AS THE COMPAN IES ACT. THE AUDITORS HAVE NOT MADE ANY QUALIFICATION IN THEIR AUDIT REPO RT AND HAVE REPORTED THAT THE P&L ACCOUNT FIRST GIVE A TRUE AND FAIR VIE W OF THE PROFIT OF THE COMPANY. THE PURCHASE AND SALES ARE VERIFIABLE AND PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES IN MOSTLY. THE HONBL E RAJASTHAN HIGH COURT IN THE CASE OF MALANI RAMJIVAN JAGANNATH VS. ACIT (2009) 316 ITR 120 HAS HELD THAT WHERE OPENING STOCK, PURCHASE, SA LES AND CLOSING STOCK FIGURES ARE SUFFICIENT TO JUDGE THE CORRECT INCOME OF THE ASSESSEE AND WHEN THERE IS NO DISPUTE ABOUT THE SALE AND PURCHASE, NO N-MAINTENANCE OF STOCK REGISTER LOST ITS SIGNIFICANCE SO FAR AS ARRIVING A T GP IS CONCERNED. WHEN ALL THE DATA AND ENTRIES MADE IN THE TRADING ACCOUN T WERE NOT FOUND TO BE INCORRECT IN ANY MANNER, THERE COULD NOT HAVE BEEN ANY OTHER RESULT EXCEPT WHAT HAS BEEN SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNT. THE LD AR FURTHER DRAWN OUR ATTENTION ON BUSINESS RESULTS FRO M A.Y. 2005-06 TO 2007- 08 AND ARGUED THAT DURING THE YEAR, NOT ONLY SALE B UT GP HAS INCREASED FROM 40.35% TO 44.79%. THE SALES HAVE INCREASED MOR E THAN DOUBLE FROM A.Y. 2005-06. THE ASSESSEE HAS BEEN DEALING IN MEDI CINE AND G.P. MARGIN IN EACH KIND OF MEDICINES REMAINS DIFFERENT. THERE IS THROAT CUT COMPETITION IN THE MEDICINE BUSINESS, THEREFORE, HE PRAYED TO D ELETE THE ADDITION CONFIRMED BY THE LD CIT(A). HE FURTHER ARGUED THAT ON NON MAINTENANCE OF STOCK REGISTER, THE BOOK RESULT CANNOT BE REJECTED U/S 145(3) OF THE ACT FOR WHICH HE RELIED UPON THE DECISION IN THE CASE OF CI T VS. JAS JACK ELEGANCE EXPORTS 324 ITR 95 (DELHI), THEREFORE, REJECTION OF BOOK RESULT U/S 145(3) ITA NO. 1010/JP/2013 DCIT, CENTRA L CIRCLE- 3 JAIPUR VS. M/S. SIRAIGO PHARMA (P) LT D., 7 OF THE ACT IS NOT JUSTIFIED. HE FURTHER RELIED UPON THE FOLLOWING CASE LAWS ON THIS ISSUE:- (I) HARIDASH PARIKH VS. ITO 113 TTJ 274 (ITAT JODH PUR). (II) AVDESH PRATAP SINGH ABDUL REHMAN & BROS VS. CI T (SUPRA) (III) ASHOK REFRACTORIES PVT. LTD. VS. CIT (2005) 2 79 ITR 475 (CAL). (IV) ST TERESAS OIL MILLS VS. STATE OF KERALA 76 I TR 365 (KER.). HE FURTHER CLARIFIED THAT THERE WAS MISTAKE IN THE ORDER OF THE LD CIT(A), WHICH HAS BEEN RECTIFIED BY THE LD CIT(A), THEREFOR E, HE FILED THE REVISED FORM NO. 36. 5. AT THE OUTSET, THE LD. D.R. HAS VEHEMENTLY SUPPO RTED THE ORDER OF ASSESSING OFFICER. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. DURING TH E COURSE OF SEARCH, NO INCRIMINATING DOCUMENTS WERE FOUND AND SEIZED. THE LD ASSESSING OFFICER REJECTED THE BOOK RESULT FOR NON-PRODUCING OF THE S TOCK REGISTER BUT VARIOUS COURTS HAS HELD THAT NON-MAINTAINING OF STOCK REGIS TER OR NOT PRODUCING THE STOCK REGISTER BEFORE THE ASSESSING OFFICER IS NOT SUFFICIENT GROUND TO REJECT THE BOOK RESULT U/S 145(3) OF THE ACT. FURTHER, THE ASSESSEE COMPANY IS IN MANUFACTURING OF MEDICINE WHERE DRUG CONTROL ACT AL SO APPLICABLE. ACCORDING TO THAT ACT ALSO, HE HAS TO MAINTAIN VARI OUS RECORDS IN COMPLIANCE OF THAT ACT. IT IS A FACT THAT NO ADVERS E COMMENT HAD BEEN GIVEN BY THE ASSESSING OFFICER ON ACCOUNT OF ANY DISCREPA NCY IN MANUFACTURING OF MEDICINES ON THE BASIS OF SEARCH MATERIAL OR ANY OT HER INQUIRY MADE BY HIM. THEREFORE, THE LOWER AUTHORITY IS NOT JUSTIFYI NG IN RECEIVING BOOKS U/S 145(3) OF THE ACT. 6.1 THE LD ASSESSING OFFICER ESTIMATED THE G.P. BY APPLYING 60% RATE OF TOTAL TURNOVER WHEREAS THE ASSESSEE HAS SHOWN G. P. DURING THE YEAR 44.79%, WHICH HAS INCREASED REASONABLY FROM THE PRE CEDING YEAR ON INCREASE SALE. THE LD CIT(A) HAS APPLIED G.P. RATE @ 48% AND REDUCED THE TOTAL ADDITION TO THE TUNE OF RS. 4,99,081/- BY REC TIFYING THE ORDER U/S 154 READ WITH SECTION 250 OF THE ACT. THE FINDING BASED ON PAST HISTORY AND NOT SUBMITTING THE STOCK REGISTER BEFORE THE ASSESSING OFFICER BUT NO SOLID REASONS HAVE BEEN ASSIGNED BY THE LD CIT(A). BOTH T HE LOWER AUTHORITIES HAVE NOT POINTED OUT ANY DEFECT IN THE BOOKS OF ACC OUNT. THE BOOKS OF ACCOUNT HAS BEEN AUDITED UNDER THE INCOME TAX AS WE LL AS COMPANIES LAW. THE CASE LAW RELIED BY THE LD AR IN THE CASE OF MAL ANI RAMJIVAN JAGANNATH VS. ACIT (SUPRA) OF THE HONBLE JURISDICTIONAL HIGH COURT IS SQUARELY APPLICABLE. AS PER INCOME TAX LAW, IN SECTION 2 (12 A) BOOKS OF ACCOUNT ITA NO. 1010/JP/2013 DCIT, CENTRA L CIRCLE- 3 JAIPUR VS. M/S. SIRAIGO PHARMA (P) LT D., 8 INCLUDES LEDGERS, DAY-BOOKS, CASH BOOKS, ACCOUNT-BO OKS AND OTHER BOOKS, WHETHER KEPT IN THE WRITTEN FORM OR AS PRINT-OUTS O F DATA STORED IN A FLOPPY, DISC, TAPE OR ANY OTHER FORM OF ELECTRO-MAGNETIC DA TA STORAGE DEVICE. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. JAC K ELEGANCE EXPORTS (SUPRA) HAS HELD THAT NO PROVISION EITHER IN THE AC T OR IN THE RULES REQUIRING AN ASSESSEE CARRYING BUSINESS OF NATURE, TO MAINTAIN THE STOCK REGISTER AS A PART OF ITS ACCOUNT HAS BEEN BROUGHT TO NOTICE. THE OTHER CASE LAWS REFERRED BY THE ASSESSEE ON REJECTION OF BOOK AND MAINTENANCE OF STOCK REGISTER ARE ALSO SQUARELY APPLICABLE. THUS, WE HOLD THAT THE ADDITION CONFIRMED BY THE LD. CIT(A) IS NOT JUSTIFIED. 7.2 SIMILARLY, OTHER FINDINGS OF FACTS ON THE SIMIL AR ISSUES HAVE BEEN ALSO DECIDED BY ITAT JAIPUR FOR AY 2005-06 IN ITA NO. 20 9/JP/2015 BY ORDER DTD. 26-6-2015 WHICH ALSO ARE RELATED TO SAME SEARC H ASSESSMENTS AND SUBSEQUENT PENALTY PROCEEDINGS BY FOLLOWING OBSERVA TIONS: .IT IS THUS EMPHATICALLY PLEADED THAT ASSESSEE H AS DEMONSTRATED THAT ITS ASSESSMENT HAD ATTAINED FINALITY DUE TO NON SERVICE OF NOTICE U/S 143(2) WITHIN LIMITATION PERIOD. ADMITTEDLY NEITHER ANY IN CRIMINATING MATERIAL WAS FOUND AS A RESULT OF SEARCH NOR IT IS RELIED ON BY LD. AO WHILE DISALLOWING THE LOSS; CONSEQUENTLY THE 153A ASSESSM ENT AND SUMMARY DISALLOWANCE OF LOSS IS VOID AB INITIO. HENCE THE I MPUGNED 153A ASSESSMENT AND ADDITION/ DISALLOWANCE OF LOSS IS NO T SUSTAINABLE IN LAW. ON THIS PLEA ALSO THE IMPUGNED PENALTY IS LIABLE TO BE DELETED. 2.4 LD. COUNSEL CONTENDS THAT ASSESSEE HAS SHOWN GP RAT E OF 62.85%, THERE IS NO FINDING OF LD AO IN ASSESSMENT ORDER THAT THE GP DECLARED BY THE ASSESSEE IS AT LOWER SIDE OR THE EXPENSES ARE INFLATED. RETU RN OF INCOME IS FILED ON THE BASIS OF BOOKS OF ACCOUNT AUDITED BY CHARTERED ACCO UNTANTS UNDER COMPANIES ACT AND INCOME TAX ACT I.E. BY INDEPENDENT STATUTOR Y AGENCIES AFTER DUE EXAMINATION HAVE GIVEN A STATUTORY CERTIFICATE THAT AUDITED RECORD GIVE A TRUE AND FAIR VIEW OF THE LOSS OF THE COMPANY. THE AUDIT ED ANNUAL ACCOUNTS SHOULD BE ACCEPTED AS EVIDENCE IN VIEW OF THE RATIO LAID D OWN BY HONBLE DELHI HIGH COURT IN THE CASE OF ADDL. CIT VS JAI ENGINEERING W ORKS LTD. (1978) 113 ITR 389, 391-2 (DEL), WHEREIN, HONBLE HIGH COURT HAS HELD THAT AUDIT REP ORT IS A RELIABLE EVIDENCE. IT IS FURTHER CONTENDED THAT: A. IT IS BY NOW SETTLED LAW THAT THE SCOPE OF THE ASSE SSMENT U/S 153A IS LIMITED TO INCRIMINATING DOCUMENTS/EVIDENCE FOUND AS A RESU LT OF SEARCH. IN SEARCH AND SEIZURE OPERATIONS ADMITTEDLY NO INCRIMINATING MATERIAL BELONGING TO THIS ASSESSEE WAS FOUND. IN ASSESSMENT ORDER, NO SU CH INCRIMINATING ITA NO. 1010/JP/2013 DCIT, CENTRA L CIRCLE- 3 JAIPUR VS. M/S. SIRAIGO PHARMA (P) LT D., 9 DOCUMENT IS RELIED TO DISALLOW THE LOSS. THERE IS N O FINDING OF THE AO AS REGARD DOCUMENT SHOWING UNACCOUNTED SALES OR PURCHA SES OR INFLATION OF EXPENSES OR ANY OTHER UNACCOUNTED INCOME. B. THE ASSESSEE FILED ITS REGULAR RETURN U/S 139(1) ON 8-10-2005 WHICH WAS PROCESSED U/S 143(1). NO NOTICE U/S 143(2) WAS ISSU ED TILL THE LAST DATE OF LIMITATION FOR ISSUE OF SUCH NOTICE I.E. 30.09.2006 . CONSEQUENTLY BY OPERATION OF THE PROVISIONS IMPUGNED ASSESSMENT FOR AY 2005-06 OF THE ASSESSEE STANDS ABATED. IN THESE CIRCUMSTANCES NOTI CE U/S 153A CANNOT BE ISSUED FOR AN ABETTED ASSESSMENT, MORE PARTICULARL Y WHERE NO INCRIMINATING DOCUMENTS AS A RESULT OF SEARCH ARE D ISCOVERED BY SEARCH & SEIZURE OPERATIONS ON 27-08-2008. C. RELIANCE IS PLACED ON THE DECISION OF HONBLE JURIS DICTIONAL HIGH COURT IN THE CASE OF JAI STEEL (INDIA) VS ASTT COMMISSIONER OF INCOME TAX (2013) 88 DTR (RAJ) 1 : (2013) 259 CTR (RAJ) 281 : (2013) 219 TAXMAN 223 (RAJASTHAN). ITAT JODHPUR BENCH RELYING ON THIS DEC ISION HAS ACCORDINGLY HELD IN THE CASE OF VISHAL DEMBLA VS DEPUTY COMMISS IONER OF INCOME TAX ITA 308/JD/2013; 22ND JULY, 2013 (2013) 93 DTR (JD) (TRIB) 1 (2013) 36 CCH 484 JODHTRIB (2014) 61 SOT 10 (JODHPUR)(URO). 2.5 IT IS CONTENDED THAT:- (I) ASSESSEE WAS SUFFERING CONTINUOUS LOSSES IN SUB SEQUENT YEARS ALSO AND ULTIMATELY, THE BUSINESS OPERATIONS OF THE ASSE SSEE WERE CLOSED. THEREFORE, THERE CAN BE NO DESIGN TO SHOW LOSS. BES IDES IN CASE OF DISALLOWANCE OF LOSS THERE IS NO LOSS TO THE REVENU E. RELIANCE IS PLACED ON HINDUSTAN STEELS LTD. VS. STATE OF ORISSA, 83 ITR 2 6 (SC). HONBLE APEX COURT HAS HELD THAT - PENALTY SHALL NOT BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. EVEN IF A MINIMUM PENALTY IS PRESC RIBED THE AUTHORITY SHALL EXERCISE THE DISCRETION JUDICIALLY AND ON CON SIDERATION OF ALL THE RELEVANT CIRCUMSTANCES; THE PENALTY SHOULD NOT BE I MPOSED WHEN THERE IS TECHNICAL OR VENIAL BREACH OF THE PROVISIONS. (II) SIMILARLY PENALTY CANNOT BE LEVIED MERELY ON THE GROUND THAT THE ASSESSEE HAS NOT FILED APPEAL AGAINST THE ADDITION, NOT FILING APPEAL DOES NOT MEAN THAT THE ISSUE IS NOT DEBATABLE. THE HONB LE KARNATKA HIGH COURT IN THE CASE OF CIT V MANJUNATH COTTON AND GIN NING FACTORY 2013- TIOL-536-HC-KAR/263 CTR 153 HELD THAT PENALTY IS NO T AUTOMATIC EVEN IF TAX LIABILITY IS ADMITTED MEANING THEREBY THAT NO A PPEAL AGAINST ORDER. FINDING IN ASSESSMENT ORDER WILL NOT OPERATE AS RES -JUDICATA IN PENALTY. (III) NO REASONS HAVE BEEN ASSIGNED FOR GROSSLY A ND SUMMARILY WIPING OUT THE ENTIRE LOSS. THUS IT IS A CASE OF ARBITRARY DISALLOWANCE AND NOT JUDICIOUS AND REASONABLE ESTIMATION OF INCOME. IN S UCH CASES OF GUESSWORK AND CONJECTURE BASED ESTIMATION PENALTY U /S 271(1) ( C ) CAN NOT BE LEVIED. ITA NO. 1010/JP/2013 DCIT, CENTRA L CIRCLE- 3 JAIPUR VS. M/S. SIRAIGO PHARMA (P) LT D., 10 (IV) RELIANCE IS PLACED ON FOLLOWING DECISIONS OF HONBLE RAJASTHAN HIGH COURT: - A) SHIV LAL TAK VS CIT [2001] 251 ITR 373 (RAJ) B) CIT VS HARSHVARDHAN CHEMICALS & MINERALS LTD [2003] 133 TAXMAN 320 (RAJ) 2.6 IN VIEW OF THE THESE SUBMISSIONS, IT IS PLEAD ED THAT THE ASSESSEE HAS NEITHER CONCEALED THE INCOME NOR FILED INACCURATE P ARTICULARS THEREOF, THEREFORE PENALTY U/S 271(1)(C) IS NOT IMPOSABLE IN THIS CASE. 2.7 LD. DR RELIED ON THE ORDERS OF LOWER AUTHORIT IES AND CONTENDS THAT LD. CIT(A) HAS HELD THAT FACTS OF THE ASSESSEES CA SE ARE DIFFERENT THAN AY 2007-08. ASSESSEE COULD NOT PROPERLY SUBSTANTIATE T HAT BOOKS OF ACCOUNTS WERE IN THE POSSESSION OF MR. BARMAN, THEREFORE, A PROPER INFERENCE HAS BEEN DRAWN THAT ASSESSEE DELIBERATELY FAILED TO PRO DUCE THE BOOKS. ADVERTING TO THE ASSESSEES PLEA ABOUT NO LOSS TO R EVENUE, IT IS CONTENDED THAT AFTER AMENDMENT IN SEC. 271(1) (C), PENALTY CA N BE IMPOSED EVEN IN CASES OF REDUCTION OF LOSSES. 2.8 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS E THE MATERIAL AVAILABLE ON RECORD. WE ARE OF THE VIEW THAT THIS I S NOT A FIT CASE FOR IMPOSITION OF PENALTY U/S 271(1) C ON FOLLOWING FAC TS, REASONING AND OBSERVATIONS: (I) IN ASSESSMENT ORDER, NO INCRIMINATING DOCUMENT IS ALLEGED TO BE DISCOVERED AS A RESULT OF SEARCH OR HAS BEEN RELIED ON BY AO IN ASSESSMENT ORDER TO DISALLOW THE LOSS. THERE IS NO FINDING OF THE AO ALLEGING ANY DOCUMENT SHOWING UNACCOUNTED SALES OR PURCHASES OR INFLATION OF EXPENSES OR ANY OTHER UNACCOUNTED INCOME. (II) ASSESSEES CONTENTION ABOUT NON SERVICE OF NOT ICE U/S 143(2) TILL THE LAST DATE OF LIMITATION HAS NOT BEEN REBUTTED. CONS EQUENTLY THE IMPUGNED ASSESSMENT STANDS DEEMED AS ABETTED. IN VIEW THEREO F THERE IS MERIT IN ASSESSEES PLEA THAT NOTICE U/S 153A CANNOT BE ISSU ED FOR AN ABETTED ASSESSMENT, BASED ON SEARCH & SEIZURE OPERATIONS ON 27-08-2008 WHERE NO INCRIMINATING DOCUMENTS AS A RESULT OF SEARCH AR E DISCOVERED. (III) RELIANCE IS PLACED ON THE DECISION OF HONB LE JURISDICTIONAL HIGH COURT IN THE CASE OF JAI STEEL (INDIA) VS ACIT (201 3) 259 CTR (RAJ) 281 AND IT IS BY NOW SETTLED LAW THAT THE SCOPE OF THE ASSESSMENT U/S 153A IS LIMITED TO INCRIMINATING DOCUMENTS/EVIDENCE FOUND A S A RESULT OF SEARCH. IN SEARCH AND SEIZURE OPERATIONS ADMITTEDLY NO INCR IMINATING MATERIAL BELONGING TO THIS ASSESSEE WAS FOUND. IT IS BY NOW SETTLED LAW THAT THE SCOPE OF THE ASSESSMENT U/S 153A IS LIMITED TO INCR IMINATING DOCUMENTS/EVIDENCE FOUND AS A RESULT OF SEARCH. ITA NO. 1010/JP/2013 DCIT, CENTRA L CIRCLE- 3 JAIPUR VS. M/S. SIRAIGO PHARMA (P) LT D., 11 (IV)THERE IS NO JUSTIFIABLE BASIS TO DISBELIEVE T HE ASSESSEES CONTENTION THAT THE BOOKS OF ACCOUNTS COULD NOT BE PRODUCED AS THEY WERE IN THE CUSTODY OF SHRI ATUL BURMAN WHO ALSO REPLIED THAT HE HAS LEFT THE COMPANY. BESIDES LD. CIT(A) IN AY 2007-08 HAS ENDORSED THE FACT OF D ISPUTES BETWEEN DIRECTORS AND ASSESSEES SUFFICIENT CAUSE IN NOT PR ODUCING THE BOOKS OF ACCOUNTS. (V) ASSESSEES CONTENTION THAT IN SEARCH ASSESSME NTS OF OTHER GROUP CASES WHICH WERE IN THEIR CONTROL, ALL THE DOCUMENT S AND BOOKS WERE DULY PRODUCED IS NOT REBUTTED. THERE IS NO REASON TO ASS UME AS TO WHY ASSESSEE WILL NOT PRODUCE THE BOOKS OF A LOSS MAKING CONCERN . THIS ALSO INDICATE THAT NON PRODUCTION OF BOOKS WAS NON DELIBERATE. (VI) LD. CIT(A) IN AY 2007-08 QUA THE NON PRODUCT ION OF BOOKS HAS GIVEN CLEAR FINDING OF FACT THAT THERE WAS DEFINITE LY SOME DISPUTE BETWEEN THE DIRECTORS ON THE ISSUE OF BOOKS OF ACCOUNT. THE CIRCUMSTANTIAL EVIDENCE AND FACTS INDICATE THAT THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FOR PRODUCTION OF BOOKS OF ACCOUNT. BASED ON THESE OBSE RVATION ADDITIONAL EVIDENCE WAS ADMITTED BY AN ORDER UNDER RULE 46A(1) . NO REASONS HAVE BEEN ASSIGNED AS TO HOW THE FACTS ARE DISTINGUISHAB LE IN THIS YEAR. (VII) EXCEPT NON PRODUCTION OF BOOKS, NO REASON O R BASIS WHATSOEVER HAS BEEN ASSIGNED BY AUTHORITIES BELOW IN DISALLOWI NG THE ENTIRE LOSS. THUS DISALLOWANCE IS BASED ON PURE GUESSWORK AND NOT ON ANY COGENT REASON. (VIII) HONBLE APEX COURT IN HINDUSTAN STEELS LTD. VS. STATE OF ORISSA, 83 ITR 26 (SC). HAS HELD THAT PENALTY SHALL NOT BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. EVEN IF A MINIMUM PE NALTY IS PRESCRIBED THE AUTHORITY SHALL EXERCISE THE DISCRETION JUDICIALLY AND ON CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES; THE PENALTY SHOULD NOT BE IMPOSED WHEN THERE IS TECHNICAL OR VENIAL BREACH OF THE PROVISIO NS. 2.9 IN CONSIDERATION OF ALL THE ABOVE FACTS, CIRC UMSTANCES, CASE LAWS AND CONTENTIONS, WE ARE OF THE VIEW THAT THERE IS N O JUSTIFICATION IN THE IMPOSITION OF PENALTY U/S 271(1)C IN THE INSTANT CA SE. THE SAME STANDS DELETED. 7.3 LD. COUNSEL CONTENDS THAT MOST OF THE ISSUES IN VOLVED IN THESE APPEALS ARE COVERED BY THE FINDINGS OF FACT DECIDED BY ITAT IN THESE ORDERS VIZ: 1. THE ASSESSE COMPANY WAS INCORPORATED ON 26-5-2004 A ND IS ENGAGED IN WHOLESALE TRADING, C/F AGENT OF MEDICINES AND PH ARMACEUTICALS. ITA NO. 1010/JP/2013 DCIT, CENTRA L CIRCLE- 3 JAIPUR VS. M/S. SIRAIGO PHARMA (P) LT D., 12 2. DESPITE INTENSIVE SEARCH OPERATIONS NO INCRIMINATIN G MATERIAL OR DOCUMENTS WERE FOUND DURING THE COURSE OF SEARCH OR ANY INQUIRY CONDUCTED IN THIS BEHALF. 3. NO ADDITION IN SEARCH ASSESSMENT CAN BE MADE IN SEA RCH ASSESSMENT UNLESS ANY INCRIMINATING MATERIAL IS FOUND DURING S EARCH BY RELYING ON JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF J AI STEEL AND HOST OF OTHER JUDGMENTS (SUPRA). 4. THERE WERE SERIOUS DISPUTES AMONGST MITTAL AND BURM AN GROUP OF DIRECTORS AND THE ACCOUNTS COULD NOT BE PRODUCED BY MITTAL GROUP IN ASSESSMENT PROCEEDINGS. IT HAS BEEN CLEARLY OBSERVE ED BY ITAT THAT A/C BOOKS WERE IN POSSESSION OF SHRI ATUL BURMAN. S UBSEQUENTLY THERE WAS A PATCH UP AND ASSESSE PRODUCED BOOKS OF ACCOUN T BY WAY OF ADDITIONAL EVIDENCE. 5. THERE IS NO JUSTIFICATION FOR LD. CIT(A) IN REFUSIN G TO ADMIT ADDITIONAL EVIDENCE DESPITE THE FACT REMAND REPORTS WERE CALLE D AND TO IGNORING THE FACT THAT IN SOME YEARS SAME BOOKS WERE ADMITTE D AS ADDITIONAL EVIDENCE AND NO DISCREPANCIES WERE INDICATED BY LD. AO. SIMILARLY LD. CIT(A) HAS GIVEN SELF-CONTRADICTORY FINDINGS IN SOM E YEARS BY HOLDING THAT A/C BOOKS COULDNT BE PRODUCED DUE TO SUFFICIE NT REASONS AND IN ITA NO. 1010/JP/2013 DCIT, CENTRA L CIRCLE- 3 JAIPUR VS. M/S. SIRAIGO PHARMA (P) LT D., 13 SOME YEARS HOLDING THAT THEY WERE DELIBERATELY NOT PRODUCED. BESIDES LD. AO IN REMAND REPORT HAS NOT RAISED SERIOUS ISSU E IN THIS BEHALF. 6. MERELY NON PRODUCTION OF DAY TO DAY STOCK REGISTER FOR VARIOUS INVENTORIES CANNOT BE BASIS FOR REJECTING THE BOOKS U/S 145(3). 7. VALID REASONS HAVE BEEN EXPLAINED FOR FLUCTUATION I N GP% FROM YEAR TO YEAR WHICH HAS BEEN ACCEPTED BY ITAT. 8. THE ADDITIONS IN QUESTIONS ARE NOT BASED ON ANY IN CRIMINATING MATERIAL, INQUIRY OR CROSS VERIFICATION BUT ON THE BASIS OF REVIEW OF EARLIER ASSESSMENT ORDERS. 9. LD. AO IN THE NAME OF REJECTING BOOKS RESULTS AND D ISTURBING GP% HAS ONLY ENDEAVORED TO WIPE OUT ONLY THE LOSSES RETURNE D BY THE ASSESSE. THUS THERE IS NEITHER ANY OBJECTIVITY NOR APPLICATI ON OF MIND IN UNDERTAKING THIS EXERCISE BY LD. AO. 10. DUE TO DUSPUTES THE ASSESSE REMAINED A LOSS MAKING CONCERN AND IS ULTIMATELY CLOSED DOWN WITHOUT AVAILING ANY CARRIED FORWARD LOSS. 7.4 LD. DR IS HEARD WHO SUPPORTED THE ORDERS OF LOW ER AUTHORITIES. 7.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. APROPOS THE ADDITIONAL LEGAL G ROUND RAISED BY THE ASSESSE FOR AY 2006-07 THAT SEARCH ASSESSMENT WAS A B INITIO VOID AS THE ORIGINAL ASSESSMENT REMAINED UNABATED CANNOT BE ACC EPTED IN AS MUCH AS THE ITA NO. 1010/JP/2013 DCIT, CENTRA L CIRCLE- 3 JAIPUR VS. M/S. SIRAIGO PHARMA (P) LT D., 14 143(3) ASSESSMENT IS COMPLETED AFTER SEARCH ONLY. A TECHNICAL GROUND COULD HAVE BEEN RAISED AS TO HOW THE ASSESSMENT U/S 143(3 ) CAN BE FRAMED WHEN 153A ASSESSMENT IS PENDING; BE THAT AS IT MAY SINCE NO SUCH GROUND IS RAISED THE ADDITIONAL GROUND DOES NOT HELP THE CAUSE OF TH E ASSESSE. HOWEVER IT HELPS THE ASSESSEES CASE FOR AY 2006-07 TO THE LIM ITED EXTENT THAT NO ADDITIONS IN THE SEARCH ASSESSMENT CAN BE MADE WHEN NO INCRIMINATING MATERIAL IS FOUND ON OR RELIED ON. CONSEQUENTLY, AD DITIONAL GROUND RAISED BY ASSESSEE IS DISMISSED WITH ABOVE OBSERVATIONS. 7.6 WE ARE OF THE VIEW THAT ALL THE CONTENTIONS RAI SED BY THE LD. COUNSEL FOR THE ASSESSEE HAVE BEEN ALREADY DECIDED BY US IN ASSESSEES OWN CASE AS REPRODUCED ABOVE. RESPECTFULLY FOLLOWING THESE CASE S, WE HOLD THAT ALL THE IMPUGNED ADDITIONS MADE IN THE CASE OF THE ASSESSE IN THE IMPUGNED ASSESSMENT YEARS ARE LIABLE TO BE DELETED. ACCORDIN GLY WE DELETE ALL THE IMPUGNED ADDITIONS IN THIS BEHALF. 8.0 IN THE RESULT ASSESSEES APPEAL FOR AY 2006-07 IS PARTLY ALLOWED AND FOR OTHER YEARS ALLOWED AND THAT OF REVENUE DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 /01/201 6. SD/- SD/- FOE FLAG ;KNO VKJ-IH-RKSYKUH (VIKRAM SINGH YADAV) (R.P.TOLANI) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER ITA NO. 1010/JP/2013 DCIT, CENTRA L CIRCLE- 3 JAIPUR VS. M/S. SIRAIGO PHARMA (P) LT D., 15 TK;IQJ@ JAIPUR FNUKAD@ DATED:- 13/01/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. SIRAIGO PHARMA (P) LTD. , JAIP UR 2. IZR;FKHZ@ THE RESPONDENT- THE DCIT, CENTRAL CIRCLE- 3/ THE ACIT, CENTRAL CIRCLE- JAIPUR 3. VK;DJ VK;QDRVIHY ) @ CIT(A) 4. VK;DJ VK;QDR@ CIT 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.1010/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR