ITO, New Delhi V. M/s LA-Chem Pharmaceuticals Pvt. Ltd., New Delhi

ITA 1278/DEL/2011

• Counselvise Citation: 127820114 RSA 2011
• Duration Of Justice: 4 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 07-01-2015
• Assessment Year: 1997-1998
• Appeal Filed On: 11-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAURAV DUDEJA
• Keywords: Bogus purchase; Opportunity of being heard; Cost of acquisition; Reassessment proceedings
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D NEW DELHI) BEFORE SHRI I.C. SUDHIR AND SHRI J.S. REDDY ITA NO.1278/DEL/2011 ASSESSMENT YEAR : 1997-98 INCOME-TAX OFFICER, VS. LA-CHEM PHARMACEUTICALS PV T. LTD. WARD 4(3), 10/351, SUNDER NAGAR, NEW DELHI. PASHCHIM VIHAR, NEW DELHI (PAN: AAACL2369N ) (APPELLANT) (RESPONDENT) REVENUE BY: SHRI GAURAV DU DEJA, SR. DR ASSESSEE BY: SHRI MUKESH KOH LI, CA DATE OF HEARING : 07 .01.2015 DATE OF PRONOUNCEMENT: 26 .03.2015 ORDER PER I.C. SUDHIR: JUDICIAL MEMBER THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER ON THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED CIT(APPEALS) IS ERRONEOUS & CONTRARY TO FACTS AND LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDI TION OF RS.1,14,95,416 MADE ON ACCOUNT OF UNEXPLAINED STOCK OF FINISHED GOODS. 2.1 THE LEARNED CIT(APPEALS) IGNORED THE FINDING RECORD ED BY THE A.O. AND THE FACT THAT THE ASSESSEE DID NOT FILE TH E REQUISITE 2 EVIDENCE DURING THE COURSE OF REASSESSMENT PROCEEDI NG DESPITE HAVING BEEN PROVIDED WITH AMPLE OPPORTUNITIES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDI TION OF RS.28,80,609 MADE ON ACCOUNT OF SHORTAGE OF FINISHE D GOODS AND RAW MATERIAL. 3.1 THE LEARNED CIT(APPEALS) IGNORED THE FINDING RECORD ED BY THE A.O. AND THE FACT THAT THE ASSESSEE DID NOT FILE TH E REQUISITE EVIDENCE DURING THE COURSE OF REASSESSMENT PROCEEDI NG DESPITE HAVING BEEN PROVIDED WITH AMPLE OPPORTUNITIES. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDI TION OF RS.19,88,487 MADE ON ACCOUNT OF MODVAT TO BE RESERV ED FOR BOGUS PURCHASES. 4.1THE LEARNED CIT(APPEALS) IGNORED THE FINDING REC ORDED BY THE A.O. AND THE FACT THAT THE ASSESSEE DID NOT FILE TH E REQUISITE EVIDENCE DURING THE COURSE OF REASSESSMENT PROCEEDINGS DESPI TE HAVING BEEN PROVIDED WITH AMPLE OPPORTUNITIES. 2. HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY T HE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MATERIAL AVAILA BLE ON RECORD AND THE DECISIONS RELIED UPON. 3. GROUND NO.1 IS GENERAL IN NATURE, HENCE, DOES NO T NEED INDEPENDENT ADJUDICATION. 3 4. GROUND NOS. 2, 2.1, 3, 3.1,4 AND 4.1 : THE BASIC FACTS ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANU FACTURING OF BASIC DRUGS AND PHARMACEUTICALS. DURING THE YEAR, THE ASS ESSEE FILED ITS RETURN OF INCOME AT RS.26,697 AND THE ASSESSMENT ORDER UNDER SEC. 143(3) OF THE INCOME-TAX ACT, 1961 WAS PASSED ON 29.2.20000 DETER MINING THE TOTAL INCOME AT RS.56,700. THEREAFTER, NOTICE UNDER SEC. 148 OF THE ACT WAS ISSUED ON 15.3.2002 AND ASSESSMENT WAS REFRAMED UNDER SEC. 147/143(3) OF THE ACT ON 31.3.2003 DETERMINING THE TOTAL INCOME AT RS.1,6 4,21,220 AFTER MAKING THE FOLLOWING ADDITIONS OF : 1. RS.1,14,95,416 ON ACCOUNT OF EXCESS UNEXPLAINED FINISHED GOODS/RAW-MATERIAL; 2. RS.28,80,609 ON ACCOUNT OF SHORTAGE OF FINISHED GOODS/RAW MATERIAL, AND 3. RS.19,88,497 ON ACCOUNT OF MODVAT CLAIMED ON BO GUS PURCHASES. 5. AGGRIEVED WITH THE ASSESSMENT ORDER, THE ASSESSE E PREFERRED APPEAL BEFORE THE LEARNED CIT(APPEALS) AND THE LEARNED CIT (APPEALS) VIDE HER ORDER DATED 18.12.2003 ALLOWED THE APPEAL. THE LEAR NED CIT(APPEALS) DELETED ALL THE ADDITIONS MENTIONED ABOVE. THE REVE NUE PREFERRED APPEAL AGAINST THE SAID ORDER BEFORE THE ITAT AND THE ITAT VIDE ITS ORDER DATED 4 03.10.2007 RESTORED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WITH THE FOLLOWING OBSERVATIONS: 11. IN GROUND NO.2 THE REVENUE HAS CHALLENGED THE DELETION OF RS.1,14,95,416 ON ACCOUNT OF EXCESS UNEXPLAINED FIN ISHED GOODS/RAW- MATERIAL, RS.28,80,609 ON ACCOUNT OF SHORTAGE OF FI NISHED GOODS/RAW- MATERIAL AND RS.19,88,497 ON ACCOUNT OF MODVAT CLAI MED ON BOGUS PURCHASES. . 16. WE HAVE CAREFULLY CONSIDERED THE ENTIRE MATERI AL ON RECORD AND THE RIVAL SUBMISSIONS. ON GOING THROUGH THE ORDER O F THE ASSESSING OFFICER, IT IS FOUND THAT HE HAS NOT EXAMINED THE M ATERIAL COLLECTED DURING SURVEY CONDUCTED BY THE INCOME-TAX DEPARTMEN T. SIMILARLY THE ASSESSING OFFICER HAS HIMSELF NOT MADE INDEPENDENT INQUIRY AND MOSTLY PLACED RELIANCE ON THE MATERIAL UNEARTHED BY THE CENTRAL EXCIDE DEPARTMENT OR THE MATERIAL ASCERTAINED FROM THE SET TLEMENT COMMISSION. SO FAR AS THE PROCEEDINGS BEFORE THE SE TTLEMENT COMMISSION ARE CONCERNED, THEY RELATED TO ASSESSMEN T YEARS 1995-96 AND 1996-97 AND NOT TO ASSESSMENT YEAR 1997-98. THE REFORE, THE MATERIAL RELEVANT TO ASSESSMENT YEAR 1997-98 WAS NO T SUBMITTED BY THE ASSESSEE BEFORE THE SETTLEMENT COMMISSION. AT THE T IME OF HEARING IT WAS INFORMED THAT THE PROCEEDINGS BEFORE THE SETTLE MENT COMMISSION HAVE NOT BEEN FINALIZED. IT WAS ALSO INFORMED THAT THE PROCEEDINGS INITIATED ON ACCOUNT OF SEARCH CONDUCTED BY THE CEN TRAL EXCISE DEPARTMENT HAVE ALSO NOT BEEN FINALIZED. THE CONTEN TION OF THE LEARNED AR WAS THAT AT THE TIME OF SURVEY, ENTIRE S TOCK WAS AVAILABLE BUT THE ASSESSING OFFICER HAS NOT CONSIDERED THE SA ME. 5 18. IN VIEW OF THE ABOVE FACTS AND PARTICULARLY O N ACCOUNT OF THE FACT THAT IN THIS MATTER WHILE PASSING ORDER UNDER SEC. 143/148 OF THE ACT, THE ASSESSING OFFICER HAS HIMSELF NOT MADE ANY EFFECTIVE INVESTIGATION IN RELATION TO EXCESS STOCK OR SHORT STOCK AND IN RELATION TO OTHER ASPECTS OF THE MATTER NOR HE EXAMINED THE BOO KS OF ACCOUNT AND DOCUMENTS PERTAINING TO SURVEY. IT IS ALSO TO BE PO INTED OUT THAT PROCEEDINGS BEFORE THE SETTLEMENT COMMISSION AND CE NTRAL EXCISE DEPARTMENT ON THE BASIS OF WHICH THE ASSESSING OFFI CER HAS INITIATED PROCEEDINGS, HAVE NOT REACHED ANY FINAL CONCLUSION AND THEREFORE, THE POSITION IS NOT CLEAR. UNDER THESE CIRCUMSTANCES, I N OUR OPINION, IT WILL BE PROPER IF THE MATTER IS PROPERLY EXAMINED AND AL L RELEVANT ASPECTS RELATING TO VARIOUS ADDITIONS MADE AND DELETED ARE THOROUGHLY CONSIDERED. IN FACT, THE AT THE TIME OF HEARING, BO TH THE PARTIES AGREED TO SUCH A COURSE. HENCE WE SET ASIDE THE FINDINGS OF T HE LEARNED CIT(APPEALS) IN DELETING THE ADDITIONS AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO DECIDE IT AFRE SH AFTER EXAMINING THE ENTIRE RELEVANT MATERIAL IN THE LIGHT OF OBSERVATIO NS AS MADE ABOVE. WHILE DOING SO, THE ASSESSING OFFICER SHALL GIVEN D UE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 6. IN COMPLIANCE OF THE ORDER OF THE ITAT, REPRODUC ED HEREINABOVE, THE ASSESSING OFFICER HAS REPEATED THE SAME ADDITIONS W HICH HAVE BEEN DELETED BY THE LEARNED CIT(APPEALS). AGAINST THIS ACTION OF THE LEARNED CIT(APPEALS), THE REVENUE IS IN APPEAL BEFORE THE I TAT. 6 7. IN SUPPORT OF THE GROUNDS, THE LEARNED SR. DR RE FERRED THE ASSESSMENT ORDER IN SUPPORT OF HIS CONTENTIONS THAT DESPITE AD EQUATE OPPORTUNITY, THE ASSESSEE DID NOT BOTHER TO FURNISH THE REQUIRED DET AILS, BOOKS OF ACCOUNT ALONG WITH SUPPORTED BILLS AND VOUCHERS SO AS TO PR OVE THAT THE FINDINGS OF THE CENTRAL CUSTOMS &EXCISE DEPARTMENT WITH REGARD TO THE GLARING DISCREPANCIES RELATING TO STOCK INVENTORIES WERE FA LLS. NEITHER ANY FRESH FACTS/EVIDENCES HAVE BEEN BROUGHT ON RECORD NOR THE DETAILS CALLED FOR WERE FURNISHED. THE ASSESSING OFFICER WAS THUS JUSTIFIED IN REPEATING THE SAME ADDITIONS MADE EARLIER IN THE ASSESSMENT FRAMED UND ER SEC. 147/143(3) OF THE ACT. HE SUBMITTED THAT THE THERE WERE CERTAIN DISC REPANCIES IN STOCK AS TAKEN BY EXCISE AUTHORITIES AND SUBSEQUENTLY AGAIN BY THE INCOME-TAX DEPARTMENT. 8. THE LEARNED AR ON THE OTHER HAND TRIED TO JUSTIF Y THE FIRST APPELLATE ORDER QUESTIONED BY THE REVENUE. HE SUBMITTED THAT DESPITE DIRECTIONS OF THE ITAT IN THIS REGARD, THE ASSESSING OFFICER HAS NOT EXAMINED ITS CASE INDEPENDENTLY FROM THE CASE OF THE CENTRAL EXCISE D EPARTMENT. HE REITERATED THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE BEFO RE THE LEARNED CIT(APPEALS). HE SUBMITTED FURTHER THAT THE DETAILS OF STOCK WERE SUBMITTED TO THE ASSESSING OFFICER VIDE LETTER DATED 17.12.20 08 AND SOME DETAILS WERE ALSO SUBMITTED ON 8.12.2008 BUT THE ASSESSING OFFIC ER HAS NOT GIVEN ANY FINDING ON THOSE DETAILS AND HAS SIMPLY REPEATED TH E ADDITION MADE ON EARLIER 7 OCCASION IN THE ASSESSMENT FRAMED UNDER SEC. 147/14 3(3) OF THE ACT. THE LEARNED AR ALSO REFERRED PAGE NO. 116 OF THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE WHICH IS THE COPY OF THE ORIGINAL ASSE SSMENT FRAMED UNDER SEC. 143(3) ON 29.2.2000, WHEREIN IT HAS BEEN NOTED BY T HE ASSESSING OFFICER THAT THE DETAILS AS WELL AS BOOKS OF ACCOUNT WERE PRODUC ED AND EXAMINED ON TEST- CHECK-BASIS. THE LEARNED AR SUBMITTED FURTHER THAT WHILE MAKING THE ASSESSMENT IN COMPLIANCE OF THE ORDER OF THE ITAT A FRESH, THE ASSESSING OFFICER HAS PASSED THE ORDER IN HASTE WITHIN 20 DAY S WITHOUT CARRYING OUT ANY INDEPENDENT INVESTIGATION. 9. HAVING GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW, ORDER OF THE ITAT AND MATERIAL AVAILABLE ON RECORD, WE FIND SUBS TANCE IN THE GRIEVANCE OF THE ASSESSEE THAT THE ASSESSING OFFICER HAS NOT MAD E ANY INDEPENDENT VERIFICATION OF THE RELEVANT MATERIAL IN THE LIGHT OF THE OBSERVATIONS MADE BY THE ITAT. THE ITAT HAD NOTED THAT THE ASSESSING OFF ICER WHILE PASSING THE ORDER UNDER SEC. 143(3)/148 OF THE ACT HAS HIMSELF NOT MADE ANY EFFECTIVE INVESTIGATION IN RELATION TO EXCESS STOCK OR SHORT STOCK AND IN RELATION TO OTHER ASPECTS OF THE MATTER NOR HE EXAMINED THE BOOKS OF ACCOUNT AND DOCUMENTS PERTAINING TO SURVEY. THE ASSESSING OFFICER HAS NOT BOTHERED TO COMMENT UPON THE DETAILS WHICH HE HAS MENTIONED AS FILED BY THE ASSESSEE ON 08.12.2008 IN PART. IN THE ORIGINAL ASSESSMENT DATE D 29.02.2000 FRAMED 8 UNDER SEC. 143(3), IT HAS BEEN MENTIONED BY THE ASS ESSING OFFICER THAT THE ASSESSEE HAD FILED DETAILS AND THE BOOKS OF ACCOUNT AS CALLED FOR WHICH WERE EXAMINED ON TEST-CHECK BASIS. IN THE ASSESSMENT FRA MED UNDER SEC. 147/143(3) OF THE ACT ON 31.3.2003, THE ASSESSING O FFICER HAD NOTED THAT IN THE REASSESSMENT PROCEEDINGS, THE ASSESSEE HAS FILE D PART OF THE BOOKS, WHICH HAVE BEEN DULY CONSIDERED BY HIM. THUS, THE ASSESSI NG OFFICER WHILE PASSING THE ORDER ON 31.3.2003, AND THE ASSESSMENT ORDER DATED 30.12.2008 IN QUESTION HAS NOT MENTIONED AS TO WHAT WERE THOSE DETAILS FILED BY THE ASSESSEE STATED TO BE IN PART AND WHAT HE HAD FOUND AFTER EXAMINING THOSE DETAILS. THE LEARNED CIT(APPEALS) HAS REPRODUCED TH E FOLLOWING SUBMISSIONS OF THE ASSESSEE MADE BEFORE HIM AGAINST THE ASSESSMENT ORDER IN QUESTION: THE A.O. MADE ADDITIONS MERELY ON THE FINDINGS OF CENTRAL EXCISE DEPARTMENT. THE A.O. HAS NOT CHECKED ANY RECORD. TH ERE WAS NEITHER EXCESS FINISHED GOODS NOR EXCESS RAW MATERIAL ON TH E DATE OF SEARCH OR EVEN DURING THE YEAR UNDER CONSIDERATION. HAD THERE BEEN ANY EXCESS STOCK THEN SURVEY WOULD HAVE BEEN CONVERTED INTO SE ARCH BY THE INCOME-TAX DEPARTMENT WHICH DID NOT HAPPEN. THE INC OME-TAX DEPARTMENT DID NOT FIND ANY IRREGULARITY IN STOCK. HENCE ADDITION MADE BY THE A.O. ON THE FINDINGS OF CENTRAL EXCISE DEPAR TMENT IS TOTALLY ILLEGAL. THERE WAS ALSO NEITHER SHORTAGE OF FINISHED GOODS N OR SHORTAGE OF RAW MATERIAL ON THE DATE OF SEARCH OR EVEN DURING THE Y EAR UNDER 9 CONSIDERATION. HAD THERE BEEN ANY SHORTAGE OF FINIS HED GOODS OR RAW MATERIAL THEN PROFIT ON THE SHORT GOODS WOULD HAVE BEEN THE INCOME OF THE COMPANY INSTEAD OF WHOLE AMOUNT OF SHORTAGE. WE WISH TO SUBMIT THAT THE APPELLANT COMPANY HAS DE CLARED BOGUS CREDITORS OF RS.1,30,21,922 BEFORE THE HONBLE SETT LEMENT COMMISSION AND DURING THE VDIS. WHEN THE APPELLANT DECLARED TH E CREDITORS BOGUS IT MEANS IT DECLARED BOGUS PURCHASES AND BOGUS MODV AT CLAIMED ON THAT PURCHASES. MODVAT IS THE EXCISE DUTY LEVIED ON PURCHASE COST. THE VALUE OF CREDITORS = PURCHASE COST+ EXCISE DUTY (MODVAT). WHEN CREDITORS ARE DECLARED BOGUS WHEN IT IS WRONG TO MA KE ADDITION OF MODVAT SEPARATELY. 10. THE LEARNED CIT(APPEALS) HAS DELETED THE ADDIT IONS MAINLY ON THE BASIS THAT THE BOOKS OF ACCOUNT AND DOCUMENTS PERTA INING TO SURVEY WERE NOT EXAMINED BY THE ASSESSING OFFICER AS PER DIRECTIONS OF THE ITAT AND HAS SIMPLY FOLLOWED THE FINDINGS MADE IN THE ASSESSMENT ORDER WHICH WAS PASSED UNDER SEC. 147/143(3) OF THE ACT ON 31.3.200 3. HE HAS THEREAFTER FOLLOWED HIS PREDECESSORS ORDER AND DELETED THE AD DITIONS ON THE BASIS THAT THE FACT AND CIRCUMSTANCES OF THE CASE REMAINED UNC HANGED IN THE REFRAMED ASSESSMENT ORDER DATED 30.12.2008. THE LEARNED CIT( APPEALS) HAS ALSO REPRODUCED HIS PREDECESSORS ORDER WHEREIN IT HAS B EEN MENTIONED THAT THE BOOKS OF ACCOUNT WERE PRODUCED BEFORE THE ASSESSING OFFICER DURING THE 10 COURSE OF ASSESSMENT AS WELL AS REASSESSMENT PROCEE DINGS; IN THE COURSE OF ASSESSMENT PROCEEDINGS, ALL THE INFORMATION AND DOC UMENTS CALLED FOR BY THE ASSESSING OFFICER WERE FURNISHED; THE BOOKS OF ACCO UNT WERE AUDITED BY A FIRM OF CHARTERED ACCOUNTANTS AND THEIR REPORT WAS UNQUALIFIED, FULL QUANTITY TALLY OF RAW-MATERIAL, FINISHED GOODS ETC. WAS MAIN TAINED; THE TOTAL TURNOVER DECLARED FOR THE YEAR HAS BEEN ACCEPTED AS CORRECT BY THE ASSESSING OFFICER; COMPLETE BOOKS OF ACCOUNT AND VOUCHERS FOR PURCHASE S, SALES AND EXPENSES WERE MAINTAINED; THE PURCHASES WERE MADE FROM THE D EALERS REGISTERED WITH THE SALES-TAX DEPARTMENT AND THEY WERE PAID FOR BY ACCOUNT PAYEE CHEQUES AND THE APPELLANTS BANK ACCOUNT CORROBORATED THIS, ETC. IN ABSENCE OF CONDUCTION OF ITS INDEPENDENT INVESTIGATION BY THE ASSESSING OFFICER IN THE MATTERS, AS DIRECTED BY THE ITAT, WE ARE THUS OF TH E VIEW THAT THE LEARNED CIT(APPEALS) WAS JUSTIFIED IN DELETING THE ADDITION S IN QUESTION. THE SAME IS UPHELD. THE GROUNDS ARE ACCORDINGLY REJECTED. 11. IN RESULT, THE APPEAL IS DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 26 .03.201 5 SD/- SD/- ( J.S. REDDY ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 26 /03/2015 MOHAN LAL 11 COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR DATE DRAFT DICTATED ON COMPUTER 26.03.2015 DRAFT PLACED BEFORE AUTHOR 26.03.2015 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 26.03.20 15 APPROVED DRAFT COMES TO THE SR.PS/PS 31.03.2015 KEPT FOR PRONOUNCEMENT ON 26.03.2015 FILE SENT TO THE BENCH CLERK 31.03.2015 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.