ACIT, Rewari V. M/s. Bharti Health Care Ltd., Rewari

ITA 1193/DEL/2010

• Counselvise Citation: 119320114 RSA 2010
• Duration Of Justice: 2 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 26-07-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 17-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J S AHLAWAT
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH B BB B : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND SHRI SHRI SHRI SHRI A.D.JAIN A.D.JAIN A.D.JAIN A.D.JAIN, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA NO. ITA NO. ITA NO. ITA NO.1322/DEL/2010 1322/DEL/2010 1322/DEL/2010 1322/DEL/2010 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2005 2005 2005 2005- -- -06 0606 06 M/S CAPSUGEL HEALTHCARE M/S CAPSUGEL HEALTHCARE M/S CAPSUGEL HEALTHCARE M/S CAPSUGEL HEALTHCARE LIMITED, LIMITED, LIMITED, LIMITED, (FORMERLY BHARTI HEALTHCARE (FORMERLY BHARTI HEALTHCARE (FORMERLY BHARTI HEALTHCARE (FORMERLY BHARTI HEALTHCARE L LL LIMITED), IMITED), IMITED), IMITED), 21, JONIAWAS, 21, JONIAWAS, 21, JONIAWAS, 21, JONIAWAS, DHARUHERA, DHARUHERA, DHARUHERA, DHARUHERA, DISTRICT REWARI, DISTRICT REWARI, DISTRICT REWARI, DISTRICT REWARI, HARYANA. HARYANA. HARYANA. HARYANA. PAN : AAACB6447R. PAN : AAACB6447R. PAN : AAACB6447R. PAN : AAACB6447R. VS. VS. VS. VS. ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE REWARI, CIRCLE REWARI, CIRCLE REWARI, CIRCLE REWARI, HARYANA. HARYANA. HARYANA. HARYANA. (APPELLANT) (RESPONDENT) ITA NO. ITA NO. ITA NO. ITA NO.1193/DEL/2010 1193/DEL/2010 1193/DEL/2010 1193/DEL/2010 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2005 2005 2005 2005- -- -06 0606 06 ASSISTANT COMMISS ASSISTANT COMMISS ASSISTANT COMMISS ASSISTANT COMMISSIONER OF IONER OF IONER OF IONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE REWARI, CIRCLE REWARI, CIRCLE REWARI, CIRCLE REWARI, HARYANA. HARYANA. HARYANA. HARYANA. VS. VS. VS. VS. M/S CAPSUGEL HEALTHCARE LIMITED, M/S CAPSUGEL HEALTHCARE LIMITED, M/S CAPSUGEL HEALTHCARE LIMITED, M/S CAPSUGEL HEALTHCARE LIMITED, (FORMERLY BHARTI HEALTHCARE (FORMERLY BHARTI HEALTHCARE (FORMERLY BHARTI HEALTHCARE (FORMERLY BHARTI HEALTHCARE LIMITED), LIMITED), LIMITED), LIMITED), 21, JONIAWAS, 21, JONIAWAS, 21, JONIAWAS, 21, JONIAWAS, DHARUHERA, DHARUHERA, DHARUHERA, DHARUHERA, DISTRICT REWARI, DISTRICT REWARI, DISTRICT REWARI, DISTRICT REWARI, HARYANA. HARYANA. HARYANA. HARYANA. PAN : AAACB6447R. PAN : AAACB6447R. PAN : AAACB6447R. PAN : AAACB6447R. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANIL BHALLA, CA. REVENUE BY : SHRI J.S.AHLAWAT, SR.DR. ORDER ORDER ORDER ORDER PER G. PER G. PER G. PER G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VP VPVP VP : : : : ITA NO.1322/DEL/2010 (ASSESSEES APPEAL) : ITA NO.1322/DEL/2010 (ASSESSEES APPEAL) : ITA NO.1322/DEL/2010 (ASSESSEES APPEAL) : ITA NO.1322/DEL/2010 (ASSESSEES APPEAL) :- -- - GROUND NO.1 OF THE ASSESSEES APPEAL READS AS UNDE R:- ITA-1322 & 1193/DEL/2010 2 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE AC TION OF THE LEARNED ASSESSING OFFICER IN DISALLOWING THE CL AIM OF REJECTION OF SALE AMOUNTING TO RS.33,20,645/- ALLEG EDLY ON THE GROUND THAT THE REASONS FOR GOODS REJECTED HAVE NOT BEEN MENTIONED BY THE CUSTOMERS ON THEIR RESPECTIVE BILLS/VOUCHERS DESPITE THE FACT THAT THE SAME WERE CONFIRMED BY ALL THE PARTIES BY MENTIONING THE SAME ON THEIR REJECTION INVOICE ISSUED IN TERMS OF RULE 3(4 ) OF THE EXCISE ACT, 1944. 2. AT THE TIME OF HEARING BEFORE US, IT IS STATED B Y THE LEARNED COUNSEL THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF HARD GELATINE CAPSULE SHE LLS TO PHARMACEUTICAL COMPANIES. DURING THE YEAR UNDER CO NSIDERATION, THE GROSS SALES OF THE ASSESSEE COMPANY WERE ` 30.18 CRORES, OUT OF WHICH, ` 42.41 LAKHS WAS THE SALES RETURNED. THUS, THE NET SALES WERE ` 29.76 CRORES. THAT THE PERCENTAGE OF SALES RETURNED WAS 1.40. THAT IN THIS LINE OF BUSINESS, RETURN OF SOME GOODS IS QUITE COM MON. THAT BECAUSE OF BRITTLENESS, DENTING PROBLEM, LOOSE CAPSULE BODY , BAD JOINTS, INCORRECT SIZE ETC., PART OF THE GOODS SOLD IS REJE CTED AND RETURNED BY THE BUYERS WHO ARE ALL PHARMACEUTICAL COMPANIES. T HAT ENTIRE REJECTION IS SUPPORTED BY DEBIT NOTES AND DISPATCH ADVICE OF THE CUSTOMER. THAT THE RETURNED CAPSULES WERE DULY ENT ERED IN FORM NO.RG 23A MAINTAINED AS PER EXCISE RULES. THAT THE RETURNED CAPSULES WERE UTILIZED FOR THE PURPOSE OF REPROCESSING. IT WAS ALSO POINTED OUT BY THE LEARNED COUNSEL THAT THE PERCENTAGE OF SALES RETURNED DURING THE YEAR UNDER CONSIDERATION WAS MUCH LOWER THAN TH E PRECEDING THREE YEARS. THAT IN ALL THE PRECEDING THREE YEARS, THE REVENUE HAS ACCEPTED THE SALES RETURNED IN THE ORDER PASSED UND ER SECTION 143(3). ITA-1322 & 1193/DEL/2010 3 HE, THEREFORE, SUBMITTED THAT THERE WAS NO JUSTIFIC ATION FOR DISALLOWANCE OF SALES RETURNED. 3. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW AND STATED THAT THE ONUS IS UPON THE ASSESSEE TO ESTABLISH THAT THE GOODS WERE ACTUALLY RETURNED. T HE ASSESSEE HAS NOT FURNISHED THE CONFIRMATION FROM THE BUYERS. THAT T HE LEARNED CIT(A) HAS SPECIFICALLY ASKED THE ASSESSEE TO PRODUCE THE CONFIRMATION OF ALL THE PARTIES. HOWEVER, THE ASSESSEE PRODUCED THE CO NFIRMATION OF SEVEN PARTIES AND THOSE CONFIRMATIONS WERE ALSO NOT UP TO THE MARK BECAUSE THE ASSESSEE HAD WRITTEN THE LETTER WHICH W AS RETURNED DULY SIGNED BY THOSE PARTIES. HOWEVER, THERE WAS NO SEP ARATE CONFIRMATION GIVEN BY THOSE PARTIES. HE, THEREFORE, SUBMITTED T HAT THE ORDER OF LEARNED CIT(A) IS QUITE FAIR AND REASONABLE AND THE SAME SHOULD BE UPHELD. 4. IN THE REJOINDER, IT IS STATED BY THE LEARNED CO UNSEL THAT THE ASSESSEE HAS ALREADY DISCHARGED THE ONUS OF PROVING THE RETURN OF GOODS. THAT GOODS RETURNED IS DULY SUPPORTED BY DE BIT NOTES ISSUED BY THE CUSTOMERS WHO ARE PHARMACEUTICAL COMPANIES. TH AT ON RECEIPT OF THE GOODS AND SUCH DEBIT NOTES, THE GOODS ARE ENTER ED IN THE STOCK REGISTER MAINTAINED IN FORM NO.RG 23A OF EXCISE RUL ES AND IN THE BOOKS OF ACCOUNTS, SALES ACCOUNT IS DEBITED BY CRED ITING TO THE CUSTOMERS ACCOUNT. THUS, THE RECEIPT OF GOODS IS D ULY PROVED FACTUALLY AS WELL AS BY DOCUMENTARY EVIDENCE I.E. DEBIT NOTES . HE, THEREFORE, SUBMITTED THAT THE ADDITION MADE BY THE ASSESSING O FFICER BY DISBELIEVING THE SALES RETURNED IS NOT JUSTIFIED AN D THE SAME SHOULD BE DELETED. ITA-1322 & 1193/DEL/2010 4 5. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. THE COM PARATIVE POSITION OF SALES AND SALES RETURNED OF THE PRECEDING THREE YEARS IS AS UNDER:- ASSESSMENT YEAR GROSS SALES SALES RETURN % NET SALES COPY OF ASSTT. ORDER PAGE NO. 2002-03 233,871,000 3,899,000 1.66 229,972,000 1-6 2003-04 261,663,000 5,072,000 1.93 256,591,000 7-14 2004-05 296,440,000 6,212,000 2.09 290,228,000 15-20 2005-06 301,841,000 4,241,000 1.40 297,600,000 -- 6. FROM THE ABOVE CHART, IT IS EVIDENT THAT IN AY 2 002-03, THE PERCENTAGE OF SALES RETURNED WAS 1.66%, IN AY 2003- 04, IT INCREASED TO 1.93% AND IN AY 2004-05, IT FURTHER INCREASED TO 2. 09%. THAT IN ALL THE ABOVE THREE YEARS, THE ASSESSMENT WAS COMPLETED UND ER SECTION 143(3) AND THE REVENUE HAS ACCEPTED THE SALES RETUR NED. THOSE ASSESSMENTS HAVE NOT BEEN REOPENED. THAT FOR THE Y EAR UNDER CONSIDERATION, THE SALES RETURNED HAS REDUCED TO 1. 4% OF THE SALES. WHEN THE PERCENTAGE OF SALES RETURNED IN THE YEAR U NDER CONSIDERATION IS LOWER THAN THE PRECEDING THREE YEARS, THERE WOUL D BE HARDLY ANY JUSTIFICATION FOR DENYING THE SAME SPECIALLY WHEN I N THE EARLIER THREE YEARS, COMPARATIVELY MORE SALES RETURNED WERE ACCEP TED AS GENUINE. THE BUSINESS OF THE ASSESSEE IS MANUFACTURING AND S ALE OF GELATINE CAPSULES. THE SALES ARE MADE TO PHARMACEUTICAL COM PANIES. IN THIS LINE OF BUSINESS, SOME REJECTION IS ALWAYS POSSIBLE AND, IN FACT, THE REVENUE ITSELF HAD ACCEPTED THE REJECTION AND CONSE QUENTLY THE SALES RETURNED OF AROUND 2% IN THE PRECEDING THREE YEARS. THIS YEAR, REJECTION/SALES RETURNED IS ONLY 1.4%. THAT THE SA LES RETURNED IS DULY SUPPORTED BY DEBIT NOTES OF THE CUSTOMERS AND THE S AME IS ALSO ENTERED IN THE DAY-TO-DAY STOCK REGISTER MAINTAINED IN FORM NO.RG 23A. IN OUR OPINION, WITH THESE FACTS, THE ASSESSEE HAS PRIMA FACIE ITA-1322 & 1193/DEL/2010 5 DISCHARGED THE ONUS OF PROVING THE SALES RETURNED. IF THE REVENUE HAD ANY DOUBT ABOUT THE CORRECTNESS OF THE SALES RETURN ED BY THE ASSESSEE COMPANY, IT COULD HAVE MADE DIRECT ENQUIRY FROM THE CUSTOMERS. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS PRODUCED ALL B ILLS AND VOUCHERS AND DETAILS OF SALES RETURNED BEFORE THE ASSESSING OFFICER. ALL THE BUYERS ARE PHARMACEUTICAL COMPANIES WHOSE NAMES AND ADDRESSES WERE DULY AVAILABLE WITH THE ASSESSING OFFICER. TH EREFORE, IF THE ASSESSING OFFICER HAD ANY DOUBT ABOUT THE CORRECTNE SS OF THE ASSESSEES CLAIM, HE COULD HAVE VERIFIED THE SAME F ROM THE CUSTOMERS. SO FAR AS THE ONUS UPON THE ASSESSEE IS CONCERNED, IN OUR OPINION, IT STANDS DISCHARGED BY WAY OF DEBIT NOTES OF THE CUST OMERS AND ALSO THE GOODS HAVING BEEN ENTERED IN THE STOCK REGISTER AND THE ENTRY OF SALES RETURNED MADE IN THE ASSESSEES BOOKS OF ACCOUNT. WE HAVE ALSO NOTICED THAT THE PERCENTAGE OF THE SALES RETURNED I S LOWER THAN THE PRECEDING THREE YEARS WHICH WAS ACCEPTED BY THE REV ENUE IN THE ORDER PASSED UNDER SECTION 143(3). IN VIEW OF THE ABOVE, WE DO NOT FIND ANY JUSTIFICATION FOR ADDITION MADE BY THE ASSESSING OF FICER REJECTING THE SALES RETURNED. THE SAME IS DELETED AND GROUND NO. 1 OF THE ASSESSEES APPEAL IS ALLOWED. 7. GROUND NO.2 OF THE ASSESSEES APPEAL READS AS UN DER:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER REGARDING COMMISSION PAID AMOUNTING TO RS.8,15,150/ - PAID FOR OBTAINING CORPORATE BANK GUARANTEE PAID TO M/S BHARTI TELETECH LIMITED BY WRONGLY APPLYING THE PRO VISIONS OF SECTION 40(2)(B) OF THE INCOME TAX ACT, 1961. ITA-1322 & 1193/DEL/2010 6 8. AT THE TIME OF HEARING BEFORE US, THE LEARNED CO UNSEL FAIRLY ADMITTED THAT IN AY 2004-05, THE IDENTICAL ISSUE CA ME UP BEFORE THE ITAT. THE ITAT, VIDE ORDER DATED 9 TH FEBRUARY, 2010 PASSED IN ITA NO.445/DEL/2009 & 309/DEL/2009, SET ASIDE THE MATTE R TO THE FILE OF THE LEARNED CIT(A) FOR FRESH ADJUDICATION. IN THE YEAR UNDER APPEAL, THE LEARNED CIT(A) HAS ONLY FOLLOWED HIS OWN ORDER FOR AY 2004-05. IN VIEW OF THE ABOVE, RESPECTFULLY FOLLOWING THE DECISION O F ITAT IN ASSESSEES OWN CASE FOR AY 2004-05 CITED SUPRA, WE SET ASIDE T HE MATTER TO THE FILE OF LEARNED CIT(A) TO BE READJUDICATED AFRESH A S PER THE DIRECTION OF THE ITAT IN AY 2004-05. ITA NO.1 ITA NO.1 ITA NO.1 ITA NO.1193 193 193 193/DEL/2010 ( /DEL/2010 ( /DEL/2010 ( /DEL/2010 (REVENUES REVENUES REVENUES REVENUES APPEAL) : APPEAL) : APPEAL) : APPEAL) :- -- - 9. THE ONLY GROUND RAISED BY THE REVENUE IN ITS APP EAL READS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE A DDITION OF RS.1372211/- MADE ON ACCOUNT OF CORPORATE OFFICE EXPENSES IGNORING THE FACT THAT M/S BHARATI TELE TE CH LTD. IS A SEPARATE LEGAL ENTITY AND THERE IS NO DIRECT N EXUS BETWEEN M/S BHARATI TELE TECH LTD. AND M/S BHARATI HEALTH CARE LTD. 10. THE LEARNED DR POINTED OUT THAT IN AY 2004-05 I N THE CASE OF THE ASSESSEE, THIS ISSUE ALSO CAME UP BEFORE THE ITAT A ND THE ITAT, VIDE ORDER DATED 9 TH FEBRUARY, 2010 CITED SUPRA, SET ASIDE THIS MATTER TO THE FILE OF THE CIT(A). THAT IN THE YEAR UNDER APPEAL, THERE IS NO INDEPENDENT FINDING BY THE CIT(A) BUT HE SIMPLY FOL LOWED HIS OWN ORDER FOR AY 2004-05. WE, THEREFORE, RESPECTFULLY FOLLOW ING THE DECISION OF ITAT FOR AY 2004-05, SET ASIDE THIS MATTER TO THE F ILE OF LEARNED CIT(A). ITA-1322 & 1193/DEL/2010 7 LEARNED CIT(A) IS DIRECTED TO READJUDICATE THE SAME AS PER THE DIRECTION OF THE ITAT GIVEN VIDE ITS ORDER CITED SU PRA. NEEDLESS TO MENTION THAT WHILE READJUDICATING THE ISSUE, HE WIL L ALLOW ADEQUATE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE AS WE LL AS OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 9 TH AUGUST, 2012. SD/- SD/- ( (( (A.D.JAIN A.D.JAIN A.D.JAIN A.D.JAIN) )) ) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMB MEMB MEMB MEMBER ERER ER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 09.08.2012 VK. COPY FORWARDED TO: - 1. ASSESSEE : M/S CAPSUGEL HEALTHCARE LIMITED, M/S CAPSUGEL HEALTHCARE LIMITED, M/S CAPSUGEL HEALTHCARE LIMITED, M/S CAPSUGEL HEALTHCARE LIMITED, (FORMERLY BHARTI HEALTHCARE LIMITED), (FORMERLY BHARTI HEALTHCARE LIMITED), (FORMERLY BHARTI HEALTHCARE LIMITED), (FORMERLY BHARTI HEALTHCARE LIMITED), 21, JONIAWAS, DHARUHERA, DISTRICT REWARI, 21, JONIAWAS, DHARUHERA, DISTRICT REWARI, 21, JONIAWAS, DHARUHERA, DISTRICT REWARI, 21, JONIAWAS, DHARUHERA, DISTRICT REWARI, HARYANA. HARYANA. HARYANA. HARYANA. 2. REVENUE : ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, C CC CIRCLE REWARI, IRCLE REWARI, IRCLE REWARI, IRCLE REWARI, HARYANA. HARYANA. HARYANA. HARYANA. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR