Eastern Drug & Sanitary Product, Meerut V. Pr,CIT, Ghaziabad

ITA 1110/DEL/2022

• Counselvise Citation: [2024] 130 COUNSELVISE.COM (IT) 1785 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 13-02-2024
• Assessment Year: 2012-2013
• Appeal Filed On: 18-05-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T. JAMES SINGSON
• Assessee Lawyers: K. SAMPAT
• Keywords: Set aside; Reassessment proceedings; Corroborative evidences; Principle of natural justice; Search and seizure; Assessment record; Competent authority; Revision of order; Bogus
• Section: 147; 148; 143(3); 250; 263; 48

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘B’: NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA No.1110/DEL/2022 [Assessment Year: 2012-13] Eastern Drug & Sanitary Product, 770/1, Soti Ganj, Meerut C/o- R.K. Garg, Advocate T-314, Ganga Plaza, Meerut, Uttar Pradesh-250001 Vs PCIT, CGO Complex-1, Purani Hapur Chungi, Ghaziabad, Uttar Pradesh-201002 PAN: AABCD4163D Assessee Revenue Assessee by Shri K. Sampat, Adv. and Shri V. Rajakumar Adv. Revenue by Shri T. James Singson, CIT-DR Date of Hearing 14.02.2024 Date of Pronouncement 04.03.2024 ORDER PER AMIT SHUKLA, JM, The aforesaid appeal filed by the assessee is against order dated 29.03.2022, passed by the learned Principal Commissioner of Income Tax, Ghaziabad, in his revisionary jurisdiction under section 263 of the Income Tax Act, 1961 (hereinafter ‘the Act’) for Assessment Year 2012-13. 2. In the grounds of appeal, the assessee has raised following grounds:- ITA No.1110/Del/2022 2 “1. That under the facts and circumstances of the case, the Ld. CIT (A) has erred to hold that assessment order passed by DCIT, Circle- 1, Meerut u/s 147/143(3) dated 29.12.2019 was erroneous in so far as it was prejudicial to the interest of revenue. The finding of the Ld. PCIT is, therefore, arbitrary, unjust, uncalled for, illegal and against the facts of the case on the basis of which proceedings u/s 147 were initiated and assessment was framed. 2. That without prejudice of the ground no. 1 the Ld. PCIT has erred to hold that difference of turnover and credit in bank was not verified and payment made to Prateek and Pranav Chaudhary not enquired. Thus reopening of the case inserting so many other facts which were not the part of proceedings u/s 147, the invocation of section 263 is arbitrary, unjust, uncalled for, illegal and not based upon the reasons and finding of assessment.” 3. Brief facts of the case are that the assessee is engaged in manufacturing of bandages and purchase and sale of pharmaceuticals. The return of income was filed on 29.09.2012, declaring income of Rs.41,89,740/- and such return was subject to scrutiny and assessment was completed u/s 143(3) of the Act vide order dated 16.12.2014. Later on the assessee’s case was reopened under section 147 by issuing notice u/s 148 of the Act after recording the following ‘reasons’:- “This office has received investigation report from DDIT, (Investigation) Unit-1, Meerut. Assessee filed return of income amounting to Rs 41,89,740/ - on 28.09.2012 for A.Y. 2012-13. The case was selected for the scrutiny and the assessment was completed u/s 143(3) of the I.T. Act, 1961 on 28.03.2014 with income of Rs 46,97,710/-. In this case the fixed deposits were matured and transferred to A/c and gradually funds were withdrawal by transfer in favor of partners and their family members's accounts for business. The transaction pattern shows that accounts was credited by the clearing, demand drafts and got ITA No.1110/Del/2022 3 debited by the transfer, self-paid cheque, FD. Total funds deposited to 19.11.2011 amounted to Rs.16,69,37,373/ and total withdrawals between the same period amounted to Rs.21,65.55,758/-. Out of which Rs.18,29,15,469/- were by transfers. Total Rs.2,07,14,762/- were debited by cash withdrawls and total Rs.8,02,17,061/- were credited by Demand Drafts during the same period. It is relevant to compare the turnover as reflected in the Profit and Loss accounts of M/s Eastern Drugs & Sanitary products with that of credits as found in the bank statements in the name of M/s Eastern Drugs & Sanitary Products as mentioned in the para 4(supra). FYs Turnovers as reflected in the Profit & Loss accounts relating to M/s Eastern Drugs & Sanitary Credits as found in the bank statement cited in para 3 (supra) Difference between credits in bank statement and turnovers 2011- 12 15,52,95,406 Rs.24,12,41,176 Rs.8,59,45,770 Further it is noticed that the company has paid commission of Rs.8,90,108/ - & 9,11,490/ - on sales. Payments to Shri Prateek Chaudhary & Shri Pranav Chaudhary not commensurate with his returned income. The amount falls under the category of section 40(A)(2)(b) the name of Shri Prateck Chaudhary & Shri Pranav Chaudhary is not appearing in the tax audit report. Therefore, the deduction is allowed by the company excessive and thereby income has been reduced. Therefore, the income escaped assessment. In view of the above facts and findings, I have reason to believe that income chargeable to tax to the extent of Rs.8,77,47,368/- has escaped assessment within the meaning of section 147 of the Income Tax Act, 1961, for A.Y. 2012-13 on account of failure on the part of the assessee to disclose fully and truly al material facts necessary in the return of income. Therefore, I am satisfied that it is a fit case for issue of notice u/s 148 of the IT Act, 1961.” 4. Against the aforesaid reasons, assessee filed its objections before the AO, which has been placed in the paper book from pages ITA No.1110/Del/2022 4 8 to 9. Thereafter, on time to time, various queries were raised by the AO on which the assessee has submitted that earlier in this case assessment was completed u/s 143(3) of the Act vide order dated 16.12.2014 and the books of accounts were produced and examined at the time of original assessment proceedings. The assessee again furnished the books of accounts for verification. Further, in response to specific notice, the assessee has replied in the following manner:- 1. That copy of computation of income is enclosed, which is also available on assessment record in as much as assessment under this case was completed us 143(3) vide order dated 16.12.2014. 2. That books of account has been produced and examined at the time of original scrutiny, which are further produced for verification. 3. That your honor has observed in reasons recorded that as against the turnover at Rs.15,52,95,406/- there was a credit in bank at Rs. 8,59,45,770/- which resulted in suppression of income. This is the observation of the DDIT and not the finding of your honor in as much as assessee firm was carrying the business from last so many years and as per balance sheet of A.Y. 2011-12 the assessee had TDR of Rs.3,75,06,283/- and sundry debtors at Rs.5,52,55,441/- and other assets, whereas during the year under consideration the TDR were credited in bank which were encashed as per bank and there was old recovery of debtors of 5,52,55,441/- and other assets which has not been looked-at all by the Ld. DDIT and has not been considered by DDIT or by your honor by recording the reasons for reopening. 4. That as regards the commission of Rs. 8,90,108/- and 9,11,490/- the same was not given by the firm M/s Eastern Drug & Sanitary Products because as per list of commission the ITA No.1110/Del/2022 5 commission has been provided at Rs. 3,00,000/- each to Prateek and Prashant Chaudhary, the details of which are available on assessment record. 5. That without prejudice, it is also submitted that proceedings t/s 148 are not legal in as much as case has been reopened on the basis of reporting made by the DDIT and the Ld. AO without going through the assessment record and issuing a notice u/s 133(6) reopened the assessment. Firstly, in case of scrutiny u/s 143(3) no assessment could be, reopened after the expiry of 4 years if all material facts has been disclosed truly and fully. In case of the assessee assessment of not only 2012-2013 but also of 2011-12, 2010-11, 2008-09 etc have been completed u/s 143(3) and particularly the assessment of 2011-12 has been completed by the Joint Commissioner of Income Tax. Even during the year under consideration, as per assessment order itself, complete books of accounts, bank statement, comparative chart and all documents have been properly examined and gone through by the Ld. Asstt. Commissioner, Circle-1, Meerut and thus re-opening the assessment after 4 year is not legal. Besides the re-opening of the assessment simply of the third party/ADIT/DDIT or audit party is not legal unless otherwise the AO himself had gone through and examined the records and find anything which gives a reason to believe that income had escaped assessment.” 5. Further, in another reply, the assessee submitted reconciliation statement of the credit entries recorded in the bank account relating to the business activity of this year and contended that there is no income which has escaped assessment; and so far as commission paid to Prateek Chaudhary and Pranav Chaudhary at Rs.8,90,108/- and Rs.9,11,490/-, the same has not been paid by Eastern Drug and Sanitary Products but by Daffodils Pharmaceuticals Ltd. The commission of Rs.3,00,000/- each has been paid by the assessee to both ITA No.1110/Del/2022 6 of them as per the list of commission mentioned, which was furnished alongwith complete bank account. 6. Insofar as the reconciliation of bank account as per books of accounts, the assessee stated as under:- Debtors as on 31.03.2011 to be realized during the year under consideration, 55255441.00 Add : Turnover of the A.Y. 2012-2013 155295406.00 Total receivable in bank 210550847.00 Add: Old FDR and cash during A. Y. 12-13 37506283.00 Deduct: TDR & FDR as on 31.03.2012 11403033.00 Add 26103250.00 26103250.00 Total creditable in bank 236654097.00 Deduct: Unrealized Sundry Debtors 32375975.00 32375975.00 204278122.00 Add: New FDR purchased during the A. Y. 2012-13 and encashed in the same year 90501000.00 327155097.00 Deduct: Realization of Ughai and cash sales not credited in bank account 85913921.00 Net deposited in bank as per DDIT report 241241176.00 7. The Assessing Officer, after scrutinizing all the details had accepted the income declared by the assessee. The relevant observation on the issue, which was raised in the reasons recorded ITA No.1110/Del/2022 7 dealt in assessment order dated 30.12.2019 passed u/s 147/143 of the Act reads as under:- “During the course of assessment it was observed that the case reopened due to difference between credits in bank statements and turnovers of Rs.8,59,45,770/- and commission paid on sale of Rs.8,90,108/- and 9,11,490/-. In this regard assessee furnished the reply that books of accounts has been produced and examined at the time of original scrutiny, which are further produced for verification. During the examination of books of accounts it was recorded that as against the turnover at Rs. 15,52,95,406/- there was a credit in bank at Rs. 8,59,45,770/- which resulted in suppression of income. This firm carried the business from last so many years and as per balance sheet of A.Y 2011-12 the assessee had TDR of Rs. 3,75,06,283/- and sundry debtors at Rs. 5,52,55,441/- and other assts, where as during the year under consideration the TDR were credited in bank which were encashed as per bank and there was old recovery of debtors of Rs. 5,52,55,441/- and other assets. Besides this the commission of Rs. 8,90,108/- and 9,11,490/- the same was not given by the firm M/s Eastern Drug & Sanitary Products but by Daffodils Pharmaceuticals Ltd. The commission of Rs. 3,00,000/- each to Prateek and Prashant Chaudhary has been paid by M/s Eastern Drug and Sanitary Products during the A. Y 2012-13. It may not be out of place to mention that the completed copy of bank account were furnished during assessment proceedings as the case was completed u/s 143(3) vide order dated 28.03.2014. The assessee furnished bank reconciliation statement which proves that all the entries recorded in the bank are relating to the business activity of this and there is no income which has escaped to tax as per the Ld. DDIT at Rs. 8,59,45,700/-. ITA No.1110/Del/2022 8 Reconciliation of Bank as per books of accounts for A.Y. 2011- 12 & 2012-13 Debtors as on 31.03.2011 to be realized during the year under consideration, 55255441 Add : Turnover of the A.Y. 2012-2013 155295406 Total receivable in bank 210550847 Add: Old FDR and cash during A. Y. 2011-12 37506283 Deduct: TDR & FDR as on 31.03.2012 11403033 Add 26103250 Total creditable in bank 236654097 Deduct: Unrealized Sundry Debtors 32375975 204278122 Add: New FDR purchased during the A. Y. 2012-13 and encashed in the same year 90501000 Deduct: Realization of Ughai and cash sales not credited in bank account 85913921 Net deposited in bank as per DDIT report 241241176 4. After considering all facts and material available on record, the assessment completed on return income and the income of the assessee is computed as under:- Return income : Rs.41,89,740/- Assessed Total Income : Rs.41,89,740/- ITA No.1110/Del/2022 9 Assessment is completed on total income of Rs.41,89,740/- (Fourty One lacs Eighty Nine Seven Hundred Fourty Only) u/s 143(3) of I.T. Act, 1961 Credit of taxes already paid as per 26AS given. Tax and Interest u/s 234B234C/234D charged as applicable. Notice of demand and challan issued. 8. After completion of assessment in the aforesaid manner, learned PCIT in his revisionary jurisdiction u/s 263 of the Act, issued a show cause notice exactly on the same point on which the AO had raised query and the reasons were recorded. His first notice dated 02.03.2022 reads as under:- “2. From perusal of assessment record, for the year under consideration, following discrepancies/ errors have been noticed: 2.1 It is observed from the reconciliation statement from the Bank account and turnover during the F. Y. 2011-12 that Rs. 8,59,13,921/- was realized from Ughai and cash sales, which were not credited in Bank account. To substantiate his claim, opening & closing stock and cash, credit sales ledgers are not available on record. Further, there are no details in the form of ledger, corresponding entries of credit/cash receipts are not available on record regarding the realized and unrealized sundry debtors of Rs.5,52,55,441/, Rs.3,23,75,975/- as on 31/03/2011 and 31/03/2012 respectively. 3. In view of the above, the assessment order passed by the AO, Circle-1, Meerut is erroneous and prejudicial to the interest of revenue and may be cancelled or modified by invoking the provisions of section 263 of the Income Tax Act, 1961." 9. Thereafter, the assessee in response to this notice, filed written submission, which has been incorporated in the impugned order, wherein, he has given all the details as required stating that all the ITA No.1110/Del/2022 10 details of increase in cash receipts were duly explained before the Assessing Officer. 10. Thereafter, learned PCIT issued second notice u/s 263 of the Act dated 02.03.2022, which is also reproduced hereunder:- "Your case for A. Y. 2012-13 was subject to action u/s 147 of the IT Act, 1961, on the basis of an STR information that difference between credits in bank stalements and turnover is of Rs. 8,59,45,770/- reflected in Profit& Loss Account and commission paid on sale of Rs. 26,14,303/- and during financial year 2011- 12 relevant to A. Y.2012-13. Later on, the DCIT, Circel-1, Meerut completed the assessment vide order u/s 147/143(3) dated 29.12.2019 of the Income Tax Act, 1961on total returned income of Rs. 41,89,740/- . 2. From perusal of assessment record, for the year under consideration, following discrepancies/ errors have been noticed:- 2. 1 It is observed from in turnover shown in proft& Loss A/c and credit in bank A/cs during the F. Y. 2011-12 there is a difference of Rs. 8,59,45,770/-. From the perusal of reconciliation statement from the bank account and turnover the amount was shown realized from Ughai and cash sales, which were not credited in Bank account. To substantiate this difference, no supporting evidences on record are found. There are no details in the form of ledger, corresponding entries of credit/cash receipts are available on record regarding the realized and unrealized sundry debtors etc. It is also observed the AO did not examine the details submitted by the assessee through third party verification under the various provisions of the IT Act 1961, despite the fact mentioned in the report received from DDIT(Inv.), Meerut that the company was involved was involved in various unscrupulous activities related to infamous NRHM scam. 2.2 The company had also paid commission of Rs. 26,14,303/- on sales to to Various Parties including Sh. Prateek Chaudhary and Shri Pranav Chaudhary which were needed to be examined by the AO but he did not cross verify this fact. It is also seen that contradictory information, which was submitted by the assessee on different occasions during the assessment ITA No.1110/Del/2022 11 proceedings, are available on record. The AO did not confront these facts during the assessment proceedings. 2.3 Apart from above it is noted that certain payments i.e. commission, salary and other expenses were made to the related parties including Sh. Prateek Chaudhary and Shri Pranav Chaudhary and family members which were not reported by the Auditor u./s 40A (2)(b) of the Act. 2.4 Apart from above it also noted that various cash expenses were claimed by you in profit and loss account for which no supporting evidence furnished during assessment proceedings. 3. In view of the above, the assessment order passed by the AO, Circle-1, Meerut is erroneous and prejudicial to the interest of revenue and may be cancelled or modified by invoking the provisions of section 263 of the Income Tax Act, 1961. 4. Accordingly, you are hereby required to show cause as to why an appropriate order under section 263 of the Income-tax Act, 1961, may not be passed in your case in the light of the facts mentioned in the foregoing paragraphs. For this purpose you are hereby required to furnish your explanation, with documentary evidences in support of your contention, by way of complete books of accounts, bill, vouchers, registers & copies of bank statements etc., as maintained by you. Please note that in case of non compliance, it would be presumed that you have nothing to offer in this regard and necessary order shall be passed u/s 263 of the Income-tax Act, 1961, on the basis of material available on record." 11. In reply to show cause notice, the assessee again explained the same thing before him. 12. Learned PCIT in his order has referred to some report of Investigation Wing, which mentios that the assessee was involved in some NRHM scam, which was raided by CBI and the key persons namely Shri Surendra Chaudhary & Shri Narendra Chaudhary, were made accused. In the earlier investigation report dated 18.03.2019, CBI found that both these concerns supplied its product at high cost ITA No.1110/Del/2022 12 to government hospitals and after debiting bogus expenses and commission etc. siphoned off the money to pay the same in bribes etc. It was based on this detailed report, the Assessing Officer had reopened the case after recording the reasons to his belief that there was a difference of Rs.8,59,45,770/- between the turnover and credits in the bank account which was not reconciled. According to him, the Assessing Officer has not enquired these issues, which was the basis for reopening proceedings. Thereafter, learned PCIT also rejected the contention of the assessee that in the NRHM matter, government had made enquiries from all the dealers who were making the supply to government department but as far as the assessee’s concerned, there was no adverse material found or any adverse information at all. Further, learned PCIT has recorded some observation of Hon’ble Allahabad High Court in the case of M/s. Daffodills Pharmaceuticals vs State of UP in 8071 of 2015 on 24.04.2017, whereby Hon’ble Allahabad High Court dismissed the writ petition filed by that entity and also quoted some observations made by Hon’ble High Court and also in the in case of Surendra Chaudhary vs State of UP. These observations have been incorporated from pages 9 to 11 of the impugned order. Now solely, based on these observations, learned PCIT has held that the plea taken by the assessee that it has no relation with NRHM scam is not acceptable. For the sake of ready reference, the relevant portion of ITA No.1110/Del/2022 13 the order Hon’ble Allahabad High Court as incorporated by him is also reproduced:- “11. It is necessary to mention certain facts relating to CBI case, on the basis of which the order impugned was passed by the Competent Authority, It is alleged that with the intention to obtain maximum orders of medicine and equipment and obtain profit by way of fake supply to various persons. ShriSurendra and NarenderChaudhary, props M/s Daffodills Pharmaceuticals and M/s Eastern Drug & Sanitary Products in conspiracy with senior officers of Department of Health & Family Welfare, got CMO/CMO (FW) posted in various District by paying huge illegal gratification to Senior Officers, politicians and other public functionaries. The CMOs/ CMO (FW) once posted awarded maximum supply orders for various purchases of medicine, equipment and other items above Rs. 2.72 crore for respective District through their firms fluting all the norms of purchases, by splitting orders to bring them under their financial powers, obtaining bogus quotations, receiving fake supply, accepting spurious/sub standard drugs without proper batch number, expiry dates, creating false/bogus records at Distt level, Primary Health Centers and other Sub Centers. The FIR further says that the PE conducted about the then above mentioned CMOs revealed that they in conspiracy with the supplies ordered and received bogus supply of medicine and other items above 87 lacs (approx) from ShriSurender and ShriNarenderChaudhary, props M/s Daffodills Pharmaceuticals and M/s Eastern Drug & Sanitary products. The enquiry at the above said Distt disclosed that in the above said Distt medicines, medical and surgical equipments were allegedly purchases at very exorbitant rates which were found to be 4 to 5 times higher than the actual prevailing market rates for the same items from said firms and other companies. Also it was revealed during the enquiry that the said medicine and medical equipments were purchased on the basis of forged quotations of the forged letter heads of reputed companies and payments were received by opening bogus accounts in various banks." ITA No.1110/Del/2022 14 Further, in another matter related to M/s Daffodills Pharmaceuticals in the case of SurendraChaudhary vs. State of UP and another opposite Parties, Hon'ble Allahabad High Court (3 Jul, 2015) has rejected the application for quashing of the proceeding or the charge sheet. The same is reproduced hereunder- "This 482 application has been filed for quashing of the proceedings including the charge sheet filed against the applicant The allegations against the applicant are of having involved himself in the transaction of purchase of certain medicines at exorbitant prices. The allegations against the applicant in the charge sheet are as follows:- "The investigation has revealed that total three tenders were received from M/s. Unicure (India) Pharmaceuticals Pvt. Lid. NOIDA, M/s Daffodils Pharmaceuticals Lid, Meerut and M/s. Sudharshan Pharmaceuticals Pvt Ltd. Indore. It is revealed that the Tender of M/s Unicure (India) Pharmaceuticals Pvt Ltd, NOIDA! U.P is forged one Sh Abdul Mateen, the partner of the firm M/s Unicure Pharmaceuticals Pvt. Ltd was examined and he stated that he/his firm did not participate in the said tender and did not fill the tender and also did not allow/instructed anybody to apply submit the tender. The documents filed with the tenders belong to his firm and are genuine. Hence, the tender of M/s Unicure (India) Pharmaceuticals Pvt. Ltd, NOIDA is forged one. The investigation also revealed that two Drafts, each amounting Rs 20,000/- bearing No. 201967 and 201968 were issued on 7.2.2011 from ICIC/ Bank, Meerut in favour of Chief Medical Officer, F/W. Meerut from Current A/c No. 628505004795. The said A/c is in the name of M/s. Daffodills Pharmaceuticals Ltd, Meerut in ICICt Bank Raj Lok: Civil Lines, Meerut. The said Drafts were prepared on the written instruction of Sh. SurenderChoudhary, Director M's Daffodills Pharmaceuticals Lid. These Drafts were respectively used for the tenders of Ms. Unicure (India) Pharmaceuticals Pvt. Ltd. NOIDA and M/ Sudharshan Pharmaceuticals, Indore and Mis. Daffodills Pharmaceuticals, Meerut are hand in glove in submitted ITA No.1110/Del/2022 15 forged tender of Mix. Unicure Pharmaceuticals Pvt. Ltd. NOIDA More so the beneficiary of the tenders ure both the firms The Investigation revealed that Sh. Vijay Randhar Director, M/s Sudharshan Pharmaceuticals Pvt. Ltd. Indore got Licence on 7.1.2011 for manufacturing Folifer M Tablet (Iron 30 mg & Folic Acid 250 mcg) The licence was issued by the Licensing Authority Food & Drugs Administration Madhya Pradesh, Bhopal, It is seen that the amount of Rs. 15.12.000 was received by the CMO, F/W Meerut in December, 2010. The investigation also revealed that Sh. SurenderChoudhary, Director, Ms. Daffodills Pharmaceuticals Ltd. Meerut informed Sh. Vijay Randhar that IFA tablet will be purchased by the CMO, F/W Meerut Hence, Sh. Vijay Randhar applied and received the licence for supplying the IFA to the CMO, F/W, Meerut. The investigation revealed that M/s Sudharshan Pharmaceuticals Pvt. Ltd has not made any other sale to any other person authority except this sale of the IFA M/s. Sudharshan Pharmaceuticals Pvt. Ltd received Rs. 15.12 lacs, vide Six Demand Drafis (amounting Rs. 3,97,020/ dated 1.3.2011, Rs 4,75,373/- dated 1.3.2011 Rs 1,98,510 dated 3.3.2011, Rs. 99,255/- dated 4.3.2011 Rs. 3,34,281/- dated 11.3.2011, Rs. 7,561/- It is revealed in investigation that the bills on which the payments was sanctioned in the Office of Chief Medical Officer, Family Welfare, Meerut purportedly issued by M/s. Sudarshan Pharmaccuticals. Indore were not issued by them. The Iron Folic Acid lablets @ 5 paise per tablet by M/s. Sudarshan Pharmaceuticals, Indore to M/s. Daffodills Pharmaceuticals. Meerut and the forged bills of same hatch number were raised at the rate of paise 26 per tablet and payment for the same were received by MisSudarshan Pharmaceuticals, Indore from the CMO, FW, Meerut implying conspiracy of M/s. Sudarshan Pharmaceuticals, Indore and M/s Daffodills Pharmaceuticals, Meerut." A perusal of the same demonstrates the involvement of the applicant who is the proprietor of M/s Daffodills Pharmaceuticals und Ms. Eastern Drugs & Sanitary Products. The aforesaid allegations in the charge sheet are supported hy evidence that has ITA No.1110/Del/2022 16 been filed along with the charge sheet itself and has also been explained by the learned counsel for the C.B.I Learned counsel for the applicant submits that there was no sufficient evidence so as to prosecute the applicant and his alleged involvement is founded on facts which do not link him in any way with the offences alleged. Similar grounds had been taken by one Devendra Mohan in a 482 application filed before this Court and the same was considered in detail along with other co-accused of the NRHM scam. The said application was dismissed by a detailed judgment of a learned Single Judge of this Court reported in Devendra Mohan v CBI New Delhi 2013 (4) ADJ Page 620. On the arguments that have been advanced by Sri Sam Gopal the reasons given in the aforesaid judgment clearly apply The entire gamut of facts and the fact of misappropriating government funds resulting in the NRHM scam is clearly extended therein and therefore there is no occasion or any reason to quash the proceedings or the charge sheet against the applicant. For all the reasons given in the above mentioned judgment as well as the reasons stated hereinabove, no case is made out for quashing of the proceedings or the charge sheet The Application is misconceived and is accordingly rejected." 13. Thereafter, learned PCIT observed that when the books of accounts were asked by the Investigation Wing, the assessee claimed that the same is missing and at the same time, the assessee stated before the Assessing Officer that it had produced books of accounts during original assessment proceedings and also during reassessment proceedings. Thus, he held that it cannot be make out whether books of accounts were verified by the Assessing Officer at all and how the AO has verified the reconciliation statement and difference of Rs.8,59,30,921/- for the realization of payment of ITA No.1110/Del/2022 17 debtors i.e. government departments cannot be verified without ledgers. Further, though the assessee had furnished cash flow chart before the Assessing Officer on the issue of difference of bank deposit and turnover, however, he was of the opinion that the Assessing Officer did not reconcile the credits in the bank account and did not enquire upon the issues. He has many harped upon one aspect that the assessee was also one of the parties of NRHM scam, wherein, the Hon’ble High Court has also taken note of this fact and therefore there was lack of enquiry by the AO. Accordingly, he set-aside the entire assessment order to decide afresh after taking note of the observations and to carry out verification in this case after taking input from the CBI wing relating to this case and pass an appropriate order as per provisions of Income Tax Act. 14. Before us, the learned counsel for the assessee Mr. K. Sampat, after narrating the entire facts, submitted that each and every points raised by learned PCIT was rebutted and his para wise reply of the observation of the learned PCIT reads as under:- "Paras 4.1 & 4.2 - The NRHM scam had not named the Appellant and had no connection with the Appellant. That apart the Pr. CIT had relied upon the order of the Hon'ble Allahabad High Court dated 24.04.2017 in this regard. While so doing the Pr. CIT had ignored the judgment and order of the Supreme Court of India dated 13.12.2019 quashing that order of the Allahabad High Court. At the time of examination of the record by the Pr. CIT both the orders of the High Court and Supreme Court were on file. The ITA No.1110/Del/2022 18 operative part of the order of the Supreme Court is to be seen on page 48 of the Supplementary Paper Book. As to the other allegation of non-production of books of accounts Appellant had submitted that the same was done twice over - once during the initial assessment and later during the reassessment and in any case no error therein has been pointed out in the show cause notice. The difference between the turnover and the credits in the bank account as complained had been duly examined in the reassessment and after obtaining a reconciliation of the same, the AO accepted the contention of the Appellant. It was wrong on the part of the Pr. CIT to complain of no enquiry having been made on that issue. In a sense the order of the Pr. CIT is vacillatory in as much as at one place she alleges that the AO did not make any enquiry and at another she complains of the lack of enquiry. Both averments are contrary to facts. Para 4.3 - Both in the original assessment and in the reassessment the respective AOs have clearly mentioned about the production of the books of accounts during the proceedings. The complaint of the Pr. CIT in this regard is misconceived and untenable. The Appellant had also submitted reconciliation, cash flow chart and other relevant details in connection with the issues raised in assessment and also reassessment. The Pr. CIT had not pointed out any error in those statements and details much less any prejudice to the interest of the Revenue being caused thereby. Para 4.4 - The allegations with reference to the NRHM case have already been responded to in the reply to paras 4.1 & 4.2. Para 4.5 - The need for payment of commission for selling medicines to Govt. Departments has been explained year after year. In the assessments of the Appellant all such payments have also been accepted. Also the non-applicability of S.40(2) (b) of the Act has always been explained and upheld. ITA No.1110/Del/2022 19 The complaint in this regard by the Pr. CIT is of lack of enquiry which is contrary to facts. Relevant material in this regard is to be found on pages 8, 9, 11, 12 & 14 of the Paper Book. Those details were duly provided to the two AOs during the assessment and reassessment proceedings. Para 4.6 - Cash expenses claimed by the Assessee had all been examined. Accounts are audited. No discrepancy or qualification has been stated by the auditors. The Pr. CIT has also not pointed out any error. Paras 4.7, 4.8 & 4.9 - All enquiries have been made by the AOs on two occasions. The Ld. CIT had to identify the error in the order which she has completely failed to do." 15. Thereafter, the learned counsel for the assessee strongly relied upon the decision of the Tribunal in the case of Daffodils Pharmaceuticals Ltd., wherein, on exactly identical observations given by learned PCIT in order u/s 263 of the Act on the same date 29.03.2022, based on the order of the Hon’ble Allahabad High Court, this Tribunal vide order dated 19.09.2023 in ITA No.1148/Del/2022 has quashed the revision order. He further brought on record that the heavy reliance placed on the decision of Hon’ble Allahabad High Court by the learned PCIT is of no relevance, as he has failed to consider that later on that Hon’ble Supreme Court vide order dated 13.12.2019 had quashed and set-aside the order of the Hon’ble Allahabad High Court and its observations. This order has not been considered by learned PCIT, even though it was rendered much before passing of his order. Thus, the entire premise for setting aside ITA No.1110/Del/2022 20 the assessment order based on Hon’ble Allahabad High Court has no legs to stand. 16. On the other hand, learned Departmental Representative, after referring to various observations of the PCIT submitted that the Assessing Officer should have carried out proper enquiry/verification about issues on which, the reasons were recorded to which learned PCIT has pointed out in his order in the part of the Assessing Officer to carry out necessary verification. Thus, he strongly relied upon the order of the learned PCIT. 17. We have heard both the parties and perused the material placed on record and the finding of learned PCIT. Here in this case, original assessment was made u/s 143(3) of the Act vide order dated 28.02.2014, wherein, all the books of account, bills and vouchers, etc., pertaining to the turnover was duly produced and examined, which is mentioned in the first para of the original assessment order. The AO has also verified and examined the reasons for low gross profit rate and net profit rate and other items of profit & loss account and accordingly assessment was completed u/s 143(3) at income of Rs.46,97,710/- as against returned income of Rs.41,89,740/-. Thereafter, the assessee’s case was reopened under section 147 of the Act, based on some investigation report from DDIT, that there was a difference of turnover and credit in bank ITA No.1110/Del/2022 21 statement of Rs.8,59,45,770/- and also payment of commission of Rs.8,90,108/- and Rs.9,11,490/- to Shri Prateek and Prashant Chaudhary and that said amount was falls under section 40A(2)(b) of the Act. From the reply of the notices issued by the AO during assessment proceedings, as noted above, the assessee has given the entire explanation and reconciliation about the difference which has been noted by us in the foregoing paragraphs. Apart from that, the assessee has time and again given reconciliation of bank account as per books of accounts which have been incorporated in para 5 hereinabove. After considering these entire materials on record and submissions of the assessee, the learned Assessing Officer has accepted the explanation that the assessee was able to demonstrate the difference and reconciled each and every entry and explained the difference. The observation of the AO has also been incorporated above. 18. Now the learned PCIT, in his revisionary jurisdiction has tried to give a different angle by stating that the AO has failed to consider the books of accounts and accepted the reconciliation without verification. If that was the case, then learned PCIT himself should himself point out, what was the defect or error in the finding of the learned AO as well as explanation and material given by the assessee during the course of assessment proceedings. If the books of accounts have been produced in the original assessment ITA No.1110/Del/2022 22 proceedings and then again before the AO in reassessment proceedings and they have given a categorical observation and finding that the assessee has produced books of accounts and the details, which has been verified and examined, then saying that it was not produced before the Investigation Wing after gap of more than 10 years, then the finding of AO, both in the original assessment proceedings and reassessment proceedings cannot be believed, is bald allegation just because assessee stated before the Investigation Wing that books of accounts are not available at present. Does he contend to show that the AO’s observation and finding are wrong? 19. Here the only issue was, there was a difference of credit in the bank and the turnover of Rs.8,59,45,770/- and some commission paid to two persons. Once, that was reconciled and explained before the AO who has examined it and has even dealt with in his order, then there could not be case of lack of inquiry. The only basis of learned PCIT is reference to some NHRM scam and observation of the Hon’ble Allahabad High Court, which have been reproduced above. Thus, his entire edifice to set aside the assessment order is based upon the observation of the Hon’ble High Court and nothing else. If this was foundation of setting aside the assessment order, then this can no longer the basis, because the Hon’ble Supreme Court against the said very judgment of Hon’ble Allahabad High ITA No.1110/Del/2022 23 Court has reversed and set-aside the said observation of the Hon’ble Court. For the sake of ready reference, the concluding part of the judgment of the Hon’ble Supreme Court dated 13.12.2019 is reproduced hereunder:- “15. In the present case, even if one assumes that Surender Chaudhary, the accused in the pending criminal case was involved and had sought to indulge in objectionable activities, that ipso facto could not have resulted in unilateral action of the kind which the State resorted to- against Daffodils, which was never granted any opportunity of hearing or a chance to represent against the impugned order. If there is one constant lodestar that lights the judicial horizon in this country, it is this: that no one can be inflicted with an adverse order, without being afforded a minimum opportunity of hearing, and prior intimation of such a move. This principle is too well entrenched in the legal ethos of this country to be ignored, as the state did, in this case. 16. The High Court, in the opinion of this court, fell into error in holding that in matters of award of public contracts, the scope of inquiry in judicial review is limited. Granted, such jurisdiction is extremely circumscribed; no doubt the court had refused to grant relief to Daffodils against its plea of wrongful rejection of its tender. However, what the impugned judgment clearly overlooks is that the action of the state, not to procure indefinitely, on an assumption of complicity by Daffodils, was in flagrant violation of principles of natural justice. 17. Normally, this court would have quashed the Government of U.P.'s decision, and left it to grant a hearing to Daffodils, before taking any action. However, given that the impugned order of debarring (i.e. directive not to procure locally from Daffodills) was made over 4 years and 3 months ago, this court is of the opinion that it would be in the overall interest of justice that appropriate relief is granted. Accordingly, the said order of the Principal Secretary, Government of U.P. directing all ITA No.1110/Del/2022 24 concerned departments to desist from resorting to local purchase from the appellant is hereby quashed. The impugned judgment of the High Court is hereby set aside. The appeal is allowed in the above terms. No costs.” 20. Thus, in the light of Hon’ble Supreme Court judgment, all the observation made by the learned PCIT deserves to be quashed. 21. Apart from that, once the AO has carried out the necessary verification of the details which was his reason to believe and assuming jurisdiction under section 147 and has accepted the explanation, then learned PCIT could not have set-aside the assessment unless he himself founds any error or defect in such material or in explanation. Thus, we agree with the contention of the learned counsel for the assessee that once the entire order of the Hon’ble High Court has been reversed and set-aside by the Hon’ble Supreme Court, then the basis of setting aside itself does not stand. Accordingly, the order of the learned PCIT is quashed and the order of the AO is restored. ITA No.1110/Del/2022 25 22. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 04 th March, 2024. Sd/- Sd/- [M. BALAGANESH] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 04.03.2024 ff^ ff^ff^ ff^ Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi