DCIT 6 (3)(2), MUMBAI V. M/S KILITCH HEALTHCARE INDIA LTD, MUMBAI

ITA 120/MUM/2020

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1701 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 03-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GURBINDER SINGH
• Keywords: Bogus purchase; Depreciation; Tax effect; Set aside
• Section: 143(3); 22

Judgement Text

ITA NO. 120/MUM/2020 A.Y. 2011 - 12 DCIT 6(3)(2) VS. M/S KILITCH HEALTHCARE INDIA LTD. 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI S. RIFAUR RAHMAN (ACCOUNTANT MEMBER) AND SHRI RAVISH SOOD (JUDICIAL MEMBER) ITA NO.120/MUM/2020 (ASSESSMENT YEAR: 2011 - 12) DCIT 6(3)(2) ROOM NO. 576, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 VS. M/S KILITCH HEALTHCARE INDIA LTD,, 902, B GODREJ COLISEUM, OFF EASTERN EXPRESS HIGHWAY, SION EAST, MUMBAI - 22 PAN NO. AAACN7796H (REVENUE) (ASSESSEE) ASSESSEE BY : SHRI YOGESH THAR, A.R REVENUE BY : SHRI GURBINDER SINGH, D.R DATE OF HEARING : 2 9 /06/2021 D ATE OF PRONOUNCEMENT : 30 /06/2021 ORDER PER RAVISH SOOD, J.M: THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 12, MUMBAI, DATED 10.09 .2019, WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O U/S 143(3) R.W.S 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT), DATED 22.11.2018 FOR A.Y. 2011 - 12 . THE REVENUE HAS ASSAILED THE IMPUGNED ORDER ON THE FOLL OWING GROUNDS BEFORE US: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN DELETING THE ADD ITION OF BOGUS PURCHASES OF RS. 12,13,802/ - AS GENUINE PURCHASES. 2. THOU GH THE TAX EFFECT IN THIS IS RS 3,75,064, HOWEVER, THIS APPE AL IS FILED BECAUSE IT IS COVERED BY EXCEPTION MENTIONED IN PARA 10 OF THE CBDT CIRCULAR NO. 3/2018 DATED 11.07.2018 AS SUBSEQUENTLY CLARIFIED BY BOARD LETTER DATED 20.08.2018 VIDE NO. 279/MIS./142/2007 - ITJ(PT.). 3. THE APPELLANT PRAYS THAT THE ORDER OF T HE LD. CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ITA NO. 120/MUM/2020 A.Y. 2011 - 12 DCIT 6(3)(2) VS. M/S KILITCH HEALTHCARE INDIA LTD. 2 2. BRIEFLY STATED, THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PHARMACEUTICALS HAD FILED ITS RETURN OF INCOME FOR A.Y. 2011 - 12, DECLARING AN INCOME OF RS.1,71,94,660/ - . ORIGINAL ASSESSMENT WAS FRAMED BY THE A.O VIDE HIS ORDER PASSED U/S 143(3) AT AN INCOME OF RS.2,11,60, 660/ - . SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM THE DGIT (INV.),MUMBAI, THAT THE ASSESSEE AS A BENEFICIARY HAD OBTAINED BOGUS P URCHASE BILLS OF RS.17,17,258/ - ITS CASE WAS REOPENED U/S 147 OF THE ACT. 3. DURING THE COURSE OF THE ASSESSMENT P ROCEEDINGS, IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE HAD CLAIMED TO HAVE MADE PURCHASES AMOUNTING TO RS.17,17,258/ - FROM THE FOLLOWING 7 TAINTED PARTIES: SR. NO. NAME OF THE PARTIES PAN AMOUNT OF BOGUS PURCHASE 1. AKSHAR DISTRIBUTORS PVT. LTD. AAHCA6544M 2,55,398 2. DARSHAT TRADING PVT. LTD. AADCD1270D 2,98,584 3. RIDHI SALES CORPORATION AALFR3796F 1,05,560 4. EVERSHINE ENTERPRISES ARAPP3848C 1,62,240 5. MUKTA STEEL APWPD6626G 2,41,488 6. RAMDEV TRADING COMPANY AALFR4783L 4,75,488 7. BANJARA ENTERPRISES AGKPM3256C 1,78,500 AS THE ASSESSEE FAILED TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE AFORESAID PURCHASE TRANSACTIONS , THEREFORE, THE A.O VIDE HIS ORDER PASSED U/S 143(3) R.W.S 147, DATED 22.11.2018 DISALLOWED THE ENTIRE AMOUNT OF THE IMPUGNED PURCHASES OF RS. 17,17,258/ - . ACCORDINGLY, A.O VIDE HIS ORDER PASSED U/S 143(3) R.W.S 147, DATED 22.11.2018 ASSESSED THE INCOME O F THE ASSESSEE AT RS.2,28,77,920/ - . 4. AGGRIEVED, THE ASSESSEE ASSAILED THE ASSESSMENT ORDER BEFORE THE CIT(A). IT WAS OBSERVED BY THE CIT(A) THAT THE A.O HAD NOT PROPERLY CONSIDERED THE SUBMISSIONS THAT WERE MADE BY THE ASSESSEE BEFORE HIM. IT WAS OBSERVE D BY THE CIT(A) THAT THE ASSESSEE HAD INTER ALIA CLAIMED THAT IT HAD NOT MADE ANY TR ANSACTION WITH ONE OF THE PARTY , VIZ. M/S BANJARA ENTERPRISES. ON A PERUSAL OF TH E DETAILS FILED BY THE ASSESSEE THE CIT(A) FOUND THE AFORESAID CLAIM TO BE IN ORDER. AS SUC H, THE CIT(A) BEING OF THE VIEW THAT THE ASSESSEE COULD NOT BE FASTENED WITH AN ADDITION ON THE BASIS OF AN ITA NO. 120/MUM/2020 A.Y. 2011 - 12 DCIT 6(3)(2) VS. M/S KILITCH HEALTHCARE INDIA LTD. 3 UNVERIFIED STATEMENT OF A THIRD PARTY, THUS, VACATED THE ADDITION OF RS.1,78,500/ - THAT WAS MADE BY THE A.O QUA THE AFORESAID PARTY. AS REGARDS THE REMAINING PURCHASES, IT WAS OBSERVED BY THE CIT(A) THAT THE AMOUNT REFLECTED AGAINST ONE OF THE PARTY, VIZ. M/S RAMDEV TRADING COMPANY (RS.4,75,488/ - ) PERTAINED TO TWO TRANSACTIONS, VIZ. (I) BIL L OF RS.1,31,040/ - QUA PURCHASE OF STEEL SHEETS; AND (II) BALA NCE AMOUNT OF RS.3,44,448 / - THAT WAS BOOKED BY THE ASSESSEE UNDER THE HEAD, VIZ. REPAIRS AND MAINTENANCE ACCOUNT (RS.3,31,200/ - ) AND IN THE VAT ACCOUNT (RS.13,248/ - ) . AS REGARDS THE REMAINING PARTIES IT WAS OBSERVED BY THE CIT(A) THAT THE ASSESSEE HAD CLAIMED TO HAVE PURCHASE D STAINLESS STEEL SHEETS FROM THE STEEL TRADERS FOR OVERHAULING THE WATER TANK IN ITS PHARMACEUTICAL MANUFACTURING FACTORY , WHICH THEREIN AGGREGATED TO AN AMOUNT OF RS.11,48,375/ - AND VAT OF RS.45,935/ - . IT WAS OBSERVED BY THE CIT(A ) THAT WHILE FOR THE PURCHASES OF RS.11,48,375/ - WERE DEBITED BY THE ASSESSEE IN THE FIXED ASSETS A/C, THE AMOUNT OF RS.45,935/ - WAS DEBITED IN THE VAT ACCOUNT. IT WAS, THUS, OBSERVED BY THE CIT(A) THAT AN EXPENDITURE WHICH HAD NOT BEEN DEBITED BY THE AS SESSEE IN ITS PROFIT AND LOSS ACCOUNT COULD NOT HAVE BEEN DISALLOWED. IT WAS OBSERVED BY THE CIT(A) THAT THE ASSESSEE HAD CLAIMED DEPRECIATION OF RS.1,72,256/ - I.E @ 15% OF THE AMOUNT OF PURCHASES OF RS.11,48,375/ - THAT WERE BOOKED BY THE ASSESSEE UNDER THE HEAD F IXED ASSETS ACCOUNT. IN THE BACKDROP OF THE AFORESAID FACTS, IT WAS OBSERVED BY THE CIT(A) THAT INSOFAR THE PURCHASE OF STEEL SHEETS OF RS.3,44,448/ - (SUPRA) CLAIMED TO HAVE BEEN MADE FROM M/S RAMDEV TRADING COMPANY (SUPRA) AND DEBITED U NDER THE HEAD REPAIRS & MAINTENANCE ACCOUNT , WERE CONCERNED, IT COULD NOT BE CONCLUDED THAT NO SUCH PURCHASES WERE MADE BY THE ASSESSEE FOR OVERHAULING THE W ATER TANK IN ITS PHARMACEUTICAL MANUFACTURING FACTORY. AT THE SAME TIME, IT WAS OBSERVED BY THE C IT(A) THAT THE ASSESSEE HAD STATED THAT THE IMPUGNED PURCHASES OF RS.3,31,200/ - MADE FRO M M/S RAMDEV TRADING COMPANY MAY BE DISALLOWED. IT WAS FURTHER OBSERVED BY THE CIT(A) THAT CONSIDERING THE FACT THAT THE ASSESSEE HAD ONLY CLAIMED DEPRECIATION ON THE F IXED ASSET S OF RS.11,48,375/ - (SUPRA), THEREFORE, ONLY SUCH CLAIM OF DEPRECIATION COULD BE ITA NO. 120/MUM/2020 A.Y. 2011 - 12 DCIT 6(3)(2) VS. M/S KILITCH HEALTHCARE INDIA LTD. 4 DISALLOWED. ON THE BASI S OF HIS AFORESAID OBSERVATIONS THE CIT(A) UPHELD THE ADDITION QUA THE IMPUGNED PURCHASE TRANSACTIONS FROM THE AFOREMENTIONED 7 PARTIES TO T HE EXTENT OF RS.5,03,456/ - , VIZ. (I) DISALLOWANCE OF DEPRECIATION OF RS.1,72,256/ - ; AND (II) DISALLOWANCE OF PURCHASES CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM M/S RAMDEV TRADING COMPANY: RS.3,31,200/ - . ACCORDINGLY, THE CIT(A) PARTLY ALLOWED THE ASSE SSEES APPEAL. 5. AGGRIEVED, THE REVENUE HAS CARRIED THE MATTER IN APPEAL BEFORE US. AT THE THRESHOLD, IT WAS SUBMITTED BY THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) THAT THE CIT(A) HAD ERRED IN DELETING THE ADDITION OF BOGUS PURCHASE OF RS.12,1 3,802/ - . IT WAS SUBMITTED BY THE LD. D.R THAT THOUGH THE TAX EFFECT INVOLVED IN THE PRESENT APPEAL WAS RS.3,75,064/ - , HOWEVER, CONSIDERING THE EXCEPTION CARVED OUT IN P ARA 10 OF THE CBDT CIRCULAR NO. 3/2018, DATED 11.07.2018 AS SUBSEQUENTLY CLARIFIED BY THE BOARDS LETTER DATED 20.08.2018 VIDE NO. 279/M IS/142/2007 ITJ (PT.) THE PRESENT APPEAL WAS MAINTAINABLE. 6. PER CONTRA, THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R ) FOR THE ASSESSEE APPLICANT SUBMITTED THAT AS THE ADDITION QUA BOGUS PURCHASES HA D NOT BEEN MADE ON THE BASIS OF ANY INFORMATION RECEIVED FROM ANY EXTERNAL AGENCY, THEREFORE, EXCEPTION PROVIDED IN P ARA 10 OF THE CBDT CIRCULAR NO. 3/2018, DATED 11.07.2018 WOULD NOT COME INTO PLAY. IN ORDER TO DRIVE HOME HIS AFORESAID CLAIM THE LD. A.R HA D TAKEN US THROUGH THE RELEVANT OBSERVATIONS OF THE LOWER AUTHORITIES WHEREIN IT WAS CLEARLY MENTIONED THAT THE ADDITION WAS MADE ON THE BASIS OF THE INFORMATION RECEIVED FROM THE DGIT(INV.), MUMBAI. 7. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE MAY HEREIN O BSERVE THAT THE EXCEPTION CARVED OUT IN PARA 10(E) OF THE CBDT CIRCULAR NO.3/2018 (AS AMENDED ON 20.08.2018) IS QUA THE APPEALS FILED BY THE REVENUE WHERE ADDITION IS BASED ON INFORMATION RECEIVED FROM EXTERNAL SOURCES IN THE NATURE OF LAW ENF ORCEMENT AGENCIES SUCH AS CBI/ED/DRI/SFIP/ DIRECTORATE GENERAL OF GST INTELLIGENCE (DGGI) . FOR THE ITA NO. 120/MUM/2020 A.Y. 2011 - 12 DCIT 6(3)(2) VS. M/S KILITCH HEALTHCARE INDIA LTD. 5 SAKE OF CLARITY, WE MAY CULL OUT THE EXCEPTION CARVED OUT IN PARA 10(E) OF THE CBDT CIRCULAR NO. 3/2018 (AS AMENDED ON 20.8.2018), WHICH READS AS UNDER: 10. ADVERSE JUDGMENTS RELATING TO THE FOLLOWING ISSUES SHOULD BE CONTESTED ON MERITS NOTWITHSTANDING THAT THE TAX EFFECT ENTAILED IS LESS THAN THE MONETARY LIMITS SPECIFIED IN PARA 3 ABOVE OR THERE IS NO TAX EFFECT: - (A) TO (D) . (E) WHERE ADDITION IS BASED ON INFORMATION RECEIVED FROM EXTERNAL SOURCES IN THE NATURE OF LAW ENFORCEMENT AGENCIES SUCH AS CBI / ED / DRI / SFIO / DIRECTORATE GENERAL OF GST INTELLIGENCE (DGGI) . ADMITTEDLY , IT IS A MATTER OF FACT BORNE FR OM THE RECORDS THAT THE CASE OF THE ASSESSEE WAS REOPENED U/S 147 ON THE BASIS OF THE INFO RMATION RECEIVED FROM THE DGIT(I NV.), MUMBAI, THAT THE ASSESSEE AS A BENEFICIARY HAD OBTAINED BOGUS PURCHASE BILLS. ON A PERUSAL OF THE ASSESSMENT ORDER, WE FIND , THA T THE A.O HAD SPECIFICALLY STATED THAT HE HAD RECEIVED INFORMAT ION FROM THE DGIT(INV.), MUMBAI . I N THE BACKDROP OF THE AFORESAID FACTS, WE ARE OF THE CONSIDERED VIEW THAT AS THE VERY GENESIS FOR REOPENING THE CASE OF THE ASSESSEE AND THE MAKING OF IMPUGNED ADDITION /DISALLOWANCE WAS BASED ON THE INFORMATION RECEIVED FROM THE DGIT(INV.), MUMBAI, AND NOT ON THE BASIS OF ANY INFORMATION R ECEIVED FROM AN EXTERNAL SOURCE IN THE NATURE OF LAW ENFORC EMENT AGENCIES , VIZ. CBI/ ED/DRI/SFIP/ DIRECTORATE GENERAL GST INTELLIGENCE (DGGI), THEREFORE, AS STATED BY THE LD. A.R , AND RIGHTLY SO , THE EXCEPTION CARVED OUT IN PARA 10(E) OF THE CBDT CIRCULAR NO. 3/2018 (AS AMENDED ON 20.08.2018) WOULD NOT COME INTO PLAY. ACCORDINGLY, WE ARE OF THE CONSIDERED VIEW THAT AS TH E TAX EFFECT INVOLVE D IN THE PRESENT APPEAL FILED BY THE REVENUE IS LOWER THAN THAT CONTEMPLATED IN THE CBDT CIRCULAR NO. 17/2019, THEREFORE, THE APPEAL OF THE REVENUE IS NOT MAINTAINABLE. 8. RESULTANTLY, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRO NOUNCED IN THE OPEN COURT ON 30 .06.2021 S D/ - SD/ - S. RIFAUR RAHMAN RAVISH SOOD (ACCOUNT ANT MEMBER) ( JUDICIAL MEMBER) MUMBAI, DATE: 30 .06.2021 ITA NO. 120/MUM/2020 A.Y. 2011 - 12 DCIT 6(3)(2) VS. M/S KILITCH HEALTHCARE INDIA LTD. 6 PS: ROHIT COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR H BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR