Mankind Pharma Ltd., New Delhi V. ACIT, Ghaziabad

ITA 1390/DEL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6355 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 02-02-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 08-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C ROSS OBJECTIONS
• Assessee Lawyers: AND A CROSS APPEAL FILED
• Section: 37(1)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH:E NEW DELHI BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER & SMT. BEENA PILLAI, JUDICIAL MEMBER I.T.A .NO. 1390/DEL/2013 (ASSESSMENT YEAR-2010-11) MANKIND PHARMA LTD. 236, OKHLA INDUSTRIAL ESTATE, PHASE-III, NEW DELHI. AAACM9401C VS ACIT, CENTRAL CIRCLE, GHAZIABAD. I.T.A .NO. 2136/DEL/2013 (ASSESSMENT YEAR-2010-11) DCIT, CENTRAL CIRCLE CGO COMPLEX-1, HAPUR CHUNGI ROAD, GHAZIABAD. VS MANKIND PHARMA LTD. 236, OKHLA INDUSTRIAL ESTATE, NEW DELHI. AAACM9401C I.T.A .NO. 2138/DEL/2013 (ASSESSMENT YEAR-2008-09) DCIT CENTRAL CIRLCE CGO COMPLEX-1, HAPUR CHUNGI ROAD, GHAZIABAD. VS MANKIND PHARMA LTD. 236, OKHLA INDUSTRIAL ESTATE, NEW DELHI. AAACM9401C CO .NO. 149/DEL/2013 (IN ITA NO. 2138/DEL/2013) (ASSESSMENT YEAR-2008-09) MANKIND PHARMA LTD. 236, OKHLA INDUSTRIAL ESTATE, NEW DELHI. AAACM9401C VS DCIT CENTRAL CIRLCE CGO COMPLEX-1, HAPUR CHUNGI ROAD, GHAZIABAD. 2 I.T.A .NO. 2137/DEL/2013 (ASSESSMENT YEAR-2009-10) DCIT CENTRAL CIRLCE CGO COMPLEX-1, HAPUR CHUNGI ROAD, GHAZIABAD. VS MANKIND PHARMA LTD. 236, OKHLA INDUSTRIAL ESTATE, NEW DELHI. AAACM9401C & CO .NO. 157/DEL/2013 (IN ITA NO. 2137/DEL/2013) (ASSESSMENT YEAR-2009-10) MANKIND PHARMA LTD. 236, OKHLA INDUSTRIAL ESTATE, NEW DELHI. AAACM9401C VS DCIT CENTRAL CIRLCE CGO COMPLEX-1, HAPUR CHUNGI ROAD, GHAZIABAD. ORDER PER BENCH : THESE ARE GROUP OF APPEALS FILED BY THE REVENUE, C ROSS OBJECTIONS BY THE ASSESSEE AND A CROSS APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEARS 2008-09, 2009-10 & 2010-11. 2. AT THE OUTSET THE LD. AR SUBMITTED AS UNDER; GROUND NOS. 1 TO 3 OF THE DEPARTMENTAL APPEALS BEIN G ITA NO. 2138, 2137 & 2136/DEL/2013 AND GROUND NO. 1 OF CROS S OBJECTIONS FILED BY THE ASSESSEE IN 149 & 157/DEL/2 013 ASSESSEE BY SH. RAJ KUMAR GUPTA, CA SH. SUMIT GOEL, CA DEPARTMENT BY NONE DATE OF HEARING 15/02/2016 DATE OF PRONOUNCEMENT 15/03/2016 3 RELATES TO THE DISALLOWANCE OF EXPENSES INCURRED ON ACCOUNT OF PAYMENT MADE TO DOCTORS FOR SALES PROMOTION. GROUND NO. 4 OF THE DEPARTMENTAL APPEALS IN 2138 & 2137, GROUND NO. 5 OF DEPARTMENTAL APPEAL IN ITA NO. 2136 AND GROUND NO. 2 OF THE CROSS OBJECTIONS FILED BY THE A SSESSEE IN 149 & 157/DEL/2013, RELATES TO ADDITION ON ACCOUNT OF ROYALTY RECEIVABLE BY THE ASSESSEE. FOR THE SAKE OF CONVENIENCE, THESE APPEALS ARE DISPOSED OFF TOGETHE R; 3. THE LD. DR HAS FILED AN APPLICATION, REQUESTING FOR YET ANOTHER ADJOURNMENT, ON THE GROUND THAT THESE APPEALS ARE T O BE ARGUED BY CIT(D/R). IT IS PERTINENT TO MENTION AT THIS STAGE THAT, THESE APPEALS WERE LISTED ON 17/12/2015, WHEREIN THE LD. DR HAD F ILED A SIMILAR ADJOURNMENT APPLICATION. THIS APPLICATION WAS STRON GLY OBJECTED TO THE LD. AR, ON THE GROUND THAT THE ISSUES ARE COVER ED. CONSIDERING THE REQUEST THE BENCH ADJOURNED THE APPEALS FOR 02/ 02/2016. ON THIS DATE ALSO THE REVENUE FILED AN APPLICATION FOR ADJOURNMENT ON THE GROUND THAT THE CIT(DR) IS ON LEAVE. THERE IS N O INFORMATION AS TO WHO IS THE CIT(DR) ENTRUSTED TO ARGUE THE CASE, WHEN THE LEAVE WAS TAKEN AND FOR HOW LONG. HOWEVER THE BENCH ADJOU RNED THE BUNCH OF CASES TO 11.02.2016. ON THIS DAY ALSO THE CI T (DR) WAS NOT READY. THE LD.AR OBJECTED TO THE ADJOURNMENT AS THE GROUNDS OF THE CASE WAS COVERED. WHEN THE BENCH WANTED TO PROC EED EX PARTE, BOTH PARTIES SOUGHT SHORT ADJOURNMENT AND THE CASE WAS FIXED ON15.02.2016. THERE HAS BEEN NO EFFORT ON BEHALF OF THE DEPARTMENT TO MAKE ARRANGEMENT FOR APPOINTING A CIT(DR), TO AR GUE THESE MATTERS. FOR THE LAST COUPLE OF WEEKS, THE BENCH HA S BEEN 4 ADJOURNING MATTERS AS THE DEPARTMENT IS OFTEN UNABL E TO MAKE AN ALTERNATIVE ARRANGEMENT FOR THE CIT(DR), WHO IS TO ARGUE THESE CASES. LAST WEEK, THE BENCH COLLAPSED ON A COUPLE O F DAYS DUE TO ADJOURNMENT APPLICATIONS FILED BY THE REVENUE. WE HAD MADE IT CLEAR ON THOSE DAYS THAT, WE WILL NOT ALLOW SUCH ST ATE OF AFFAIRS TO CONTINUE. 3.1. BOTH PARTIES WERE INFORMED THAT NO FURTHER ADJ OURNMENTS WILL BE GIVEN IN THESE CASES, AS THESE HAVE BEEN COMING UP FOR HEARING FROM PAST 3 YEARS. THE CASES WERE ADJOURNED TO 15.0 2.2016. COPIES OF THE CASE LAW RELIED UPON BY THE ASSESSEE WERE GI VEN TO THE DR. 3.2. AGAIN TODAY THE REVENUE CASUALLY FILES AN APPL ICATION FOR ADJOURNMENT. THE LD.AR, SUBMITTED THAT THESE MATTER S ARE COVERED BY THE ORDERS OF THE COORDINATE BENCHES OF THIS TRI BUNAL, AND HENCE THE CASES MAY BE PROCEEDED WITH. UNDER THESE CIRCU MSTANCES, WE REJECT THE ADJOURNMENT APPLICATION FILED BY THE LD. DR TODAY AND TAKE UP THESE MATTERS FOR BEING DISPOSED OFF ON MER ITS. 4. GROUND NOS. 1 TO 3 OF 2138, 2137 & 2136/DEL/2013 AN D GROUND NO. 1 OF CO NOS. 149 & 157 FOR A.Y. 2008-09, 2009-10 AND 2010-11 . 4.1. THE ISSUE TAKEN UP BY THE REVENUE IN THESE GRO UNDS ARE REGARDING THE DELETION OF DISALLOWANCE OF EXPENSES , INCURRED BY THE ASSESSEE TOWARDS SALES PROMOTION. DURING THE YEAR U NDER CONSIDERATION, THE ASSESSEE HAD INCURRED CERTAIN EX PENSES ON PAYMENT TO THE DOCTORS, AND FOR RENOVATION OF THEIR HOSPITALS/CLINICS ETC. DIRECTLY FOR SALES PROMOTION. THE ASSESSING O FFICER OBSERVED THAT THE AMOUNT SPENT BY THE ASSESSEE WAS PROHIBITE D BY LAW AND, 5 THEREFORE, DISALLOWED THE SAME AS PER EXPLANATION 1 TO SECTION 37(1) OF THE ACT. THE LD. ASSESSING OFFICER ALSO OBSERVE D THAT THE PAYMENT WAS CONTRARY TO THE GUIDELINES ISSUED BY MCI WHICH CAME IN THE YEAR 2002 AND THE SAME WAS AMENDED BY NOTIFICATION IN THE GAZETTE DATED 10/12/2009. 4.2. AGGRIEVED BY THE ORDER OF THE LD. ASSESSING OF FICER THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) RELYING UPON THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. PANDIT VISHWANATH SHARMA REPORTED IN 316 IT R 419 (ALL) AND THE DECISION OF ITAT AHMEDABAD IN THE CASE OF L IFE SIGHT SURGICALS P. LTD. VS. DCIT (TTJ)(AHD.)(UO) (27), DE LETED THE ADDITIONS IN ALL ASSESSMENT YEARS VIDE SEPARATE ORDERS. THE L D.CIT(A) HAS ALSO RELIED UPON THE CBDT CIRCULAR DATED 01/08/2012, WHI CH WAS CONSEQUENT TO THE AMENDMENT MADE BY MCI REGULATIONS VIDE GAZETTE NOTIFICATION DATED 10/12/2009. THE LD. CIT (A) HELD THAT THE SAID CIRCULAR ISSUED BY THE CBDT IS PROSPECTIVE IN NATURE AND WOULD BE APPLICABLE FROM ASSESSMENT YEAR 2013-14 ON WARDS. HE ALSO HELD THAT THE MCI REGULATIONS AS AMENDED ON 10 /12/2009 WOULD BE APPLICABLE TO DOCTORS IN RESPECT OF ANY PA YMENTS RECEIVED BY THEM FROM PHARMACEUTICAL COMPANIES, AFTER 10/12/ 2009 AND THAT THE EARLIER REGULATION OF MCI DO NOT WARRANT D ISALLOWANCES U/S 37(1 ) FOR THE PERIOD PRIOR UPTO 10/12/2009. HE SU BMITTED THAT SINCE THE PERIOD UNDER CONSIDERATION IN ALL THE ASS ESSMENT YEARS WERE MUCH BEFORE THE SAID DATE I.E. ON 10/12/2009, EXPENDITURE MADE DURING THE YEARS UNDER CONSIDERATION, CANNOT B E DISALLOWED BY INVOKING PROVISION OF SECTION 37(1) VIDE EXPLANA TION 1. 6 4.3. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE R EVENUE IS IN APPEAL BEFORE US. 4.4. BEFORE US, THE LD. AR SUBMITTED THAT THE CODE OF MEDICAL ETHICS REGULATIONS, 2002 AS STOOD BEFORE AMENDMENT DATED 1 0/12/2009 DID NOT PROHIBIT THE DOCTORS FROM ACCEPTING PAYMENT S FROM PHARMA COMPANIES. HE SUBMITTED THAT THE ASSESSING OFFICER HAS ABSTRACTED CHAPTER VI OF THE SAID REGULATION WHICH HAS BEEN RE PRODUCED AT PAGES 8 TO 9 OF THE ASSESSMENT ORDER, WHICH NO WHER E MENTIONS DEALINGS OF DOCTORS WITH PHARMA COMPANIES. HE SUBM ITTED THAT IT WAS ONLY AFTER THE AMENDMENT VIDE NOTIFICATION DATE D 10/12/2009 (PLACED AT PAGE 11 OF THE PAPER BOOK), THAT MCI PRO HIBITED DOCTORS FROM ACCEPTING ANY MONEY FROM PHARMACEUTICAL COMPAN IES. 4.5. HE FURTHER REFERRED TO THE CBDT ISSUED A CIRCU LAR NO. 5/2012 (F.NO. 225/142/2012-ITA.II) M, DATED 1 ST AUGUST, 2012, AS MCI AMENDED THE INDIAN MEDICAL COUNCIL (PROFESSIONAL CO NDUCT, ETIQUETTE AND ETHICS) REGULATIONS, 2012 ON 10/12/20 09 IMPOSING A PROHIBITION ON THE MEDICAL PRACTITIONER AND THEIR P ROFESSIONAL ASSOCIATIONS FROM TAKING ANY TRAVEL FACILITY, HOSPI TALITY, CASH OR MONETARY GROUND FROM THE PHARMACEUTICAL AND ALLIED HEALTH SECTOR INDUSTRIES. THE LD. AR SUBMITTED THAT THE CBDT CIR CULAR IS DATED 1 ST AUGUST, 2012 AND, THEREFORE, THE SAME WOULD BE APP LICABLE AFTER 1 ST AUGUST, 2012 ONLY. HE SUBMITTED THAT SINCE THE PE RIOD UNDER CONSIDERATION IN ALL THESE APPEALS ARE PRIOR TO THE DATE OF 1 ST AUGUST, 2012, THE DISALLOWANCE CANNOT BE MADE UNDER THE FAC TS AND CIRCUMSTANCES OF THE CASE. HE FURTHER ARGUED THAT THE CIRCULAR IS NOT BINDING ON THE ASSESSEE AND ARGUED THAT THE ASS ESSEE HAS 7 INCURRED EXPENSES FOR THE PURPOSE OF ITS BUSINESS A ND AS LONG AS THERE IS NO LAW PROHIBITING THE EXPENDITURE, NO DIS ALLOWANCE CAN BE MADE. HE RAISED A NUMBER OF OBJECTIONS ON THIS ISS UE, WHICH WE WOULD BE DEALING WITH, WHEREVER REQUIRED. THE LD. A R PLACED HIS RELIANCE UPON THE DECISION OF COORDINATE MUMBAI BEN CH IN THE CASE OF SYNCOM FORMULATIONS INDIA LTD. VS. DCIT IN ITA N O. 6429 AND 6428/MUM/2012, IN SUPPORT OF HIS PREPOSITION THAT T HE SAID CBDT CIRCULAR DATED 1.08.2012, CANNOT BE RETROSPECTIVELY APPLIED. 5. WE HAVE PERUSED THE PAPER BOOK PLACED BEFORE US, SUBMISSIONS AND THE JUDGMENTS RELIED UPON BY THE ASSESSEE. AT THE OUTSET, WE DO NOT FIND ANY INFIRMITY WITH THE FINDINGS OF THE LD. CIT(A) WHICH IS SUPPORTED BY THE JUDGEMENT OF THE JURISDICTIONAL HI GH COURT. THE DECISION OF THE COORDINATE BENCH OF MUMBAI IN SYNCO M FORMULATIONS INDIA LTD. (SUPRA) VIDE ORDER DATED 23 /12/2015 GOES FURTHER TO SUPPORT THE ARGUMENT OF THE ASSESSEE THA T NO DISALLOWANCE CAN BE MADE OF THE EXPENDITURE PRIOR T O 1.08.2012. WE FIND THAT THE DISALLOWANCE HAS BEEN MADE BY THE LD. ASSESSING OFFICER, RELYING UPON THE CBDT CIRCULAR DATED 1 ST AUGUST, 2012. THE SAID CIRCULAR CANNOT BE APPLIED TO THE YEARS UN DER CONSIDERATION AS IT HAS BEEN ISSUED FROM 1 ST AUGUST, 2012, WHICH IS RELEVANT FOR ASSESSMENT YEAR 2013-14. THE YEARS UND ER CONSIDERATION BEFORE US ARE 2008-09, 2009-10 & 2010 -11. THE HONBLE JURISDICTION HIGH COURT OF ALLAHABAD IN TH E CASE OF CIT VS. PT. VISHWANATH SHARMA REPORTED IN (2008)216 CTR 281 , HAS HELD AS FOLLOWS: 8 A DISTINCTION HAS ALREADY BEEN MADE BY THE AUTH ORITIES WHILE ALLOWING DEDUCTION TO THE ASSESSEE IN RESPECT TO CO MMISSION WHICH THE ASSESSEE HAS PAID TO PRIVATE DOCTORS SINCE IN T HEIR CASE, THE PAYMENT OF COMMISSION CANNOT BE SAID TO BE AN OFFEN CE UNDER ANY STATUTE BUT IN RESPECT TO GOVERNMENT DOCTORS SUCH P AYMENT COULD NOT HAVE BEEN ALLOWED AS IT IS AS OFFENCE UNDER THE STA TUTES AS STATED ABOVE. 5.1. THE JURISDICTIONAL HIGH COURT HAS APPROVED THE FINDING OF THE AUTHORITY THAT THE PAYMENTS MADE TO PRIVATE DOCTORS CANNOT BE DISALLOWED UNDER SECTION 37(1) OF THE ACT BY RELYIN G UPON THE GUIDELINES OF MCI ISSUED IN THE YEAR 2002. RESPECTF ULLY, FOLLOWING THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT AS WE LL AS THE DECISION OF THE COORDINATE BENCH IN SYNCOM FORMULATIONS INDI A LTD. (SUPRA), WE TO THE EXTENT CONFIRMED BY THE LD. CIT(A). 5.1. WE, THEREFORE, UPHOLD THE ORDER OF THE LD. CIT (A). ACCORDINGLY, THE GROUND NOS. 1 TO 3 OF THE DEPARTMENTAL APPEALS IN ITA NO. 2138, 2137 AND 2136 AND GROUND NO. 1 OF CROSS OBJECTION F ILED BY THE ASSESSEE IN CO NO. 149 & 157 FOR ASSESSMENT YEARS U NDER CONSIDERATION ARE BEING DISPOSED OFF IN LIEU OF THE ABOVE DISCUSSION. 6. GROUND NO. 4 OF DEPARTMENTAL APPEALS BEING 2138, 2137 & 2136 AND GROUND NO. 2 OF CROSS OBJECTIONS BEING 149 & 157 FOR A.Y. 2008-09, 2009-10 AND 2010-11 . 6.1. THE NEXT COMMON ISSUE IN THE APPEALS FILED BY THE REVENUE AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE IS W HETHER ANY 9 ADDITION IN TOTAL INCOME OF THE ASSESSEE COULD BE M ADE ON ACCOUNT OF NOTIONAL ROYALTY FROM M/S RELAX PHARMACEUTICAL. 6.2. THE LD. ASSESSING OFFICER HAS OBSERVED THAT M/ S RELAX PHARMACEUTICALS (A SISTER CONCERN OF THE ASSESSEE) SHOULD HAVE PAID ROYALTY TO THE ASSESSEE FOR MANUFACTURING, MEDICINE S ON BEHALF OF THE ASSESSEE. DURING THE ASSESSMENT PROCEEDINGS, T HE LD. ASSESSING OFFICER TREATED CERTAIN AMOUNT AS DEEMED TO BE RECE IVABLE BY ASSESSEE AS ROYALTY IN THE HANDS OF THE ASSESSEE. THE LD. ASSESSING OFFICER HAS ADDED THESE AMOUNTS IN THE CASE OF THE ASSESSEE, ON PROTECTIVE BASIS. 6.3. AGGRIEVED BY THE ORDER OF THE LD. ASSESSING OF FICER THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) OBSERVED THAT IN THE CASE OF RELAX PHARMACEUTICAL, THE LD. A SSESSING OFFICER HAS MADE ADDITION ON SUBSTANTIVE BASIS THE SAME HAS BEEN DELETED BY THE THEN CIT(A) VIDE A SEPARATE ORDER DATED 07/0 2/2013. THE RELEVANT FINDINGS OF THE LD. CIT(A) IN THE CASE OF RELAX PHARMACEUTICALS ARE RECORDED AT PAGE 35 TO 36 OF TH E LD. CIT(A)S ORDER IN THE ASSESSEES CASE. TO AVOID REPETITION, THE SAME IS NOT REPRODUCED HEREWITH. THE LD. CIT(A) ACCORDINGLY DEL ETED THE SAID ADDITION MADE BY THE LD. ASSESSING OFFICER ON THE I SSUE OF ROYALTY. 6.4. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE R EVENUE IS IN APPEAL BEFORE. 7. THE LD. AR SUBMITTED THAT THE ADDITION HAS BEEN MADE ON PROTECTIVE BASIS AND THE SUBSTANTIVE ADDITION HAS B EEN DELETED IN THE HANDS OF RELAX INDUSTRIES WHICH SUPPLIES MANUFA CTURED MEDICINES TO THE ASSESSEE, AS THE MEDICINES WERE MA NUFACTURED 10 UNDER THE TRADE MARK AND BRAND NAME OF THE ASSESSEE AS PER THE AGREEMENT ENTERED INTO BETWEEN THE PARTY. THE LD. AR PLACED RELIANCE UPON THE DECISION OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y. 2004-05 AND 2007-08 IN ITA NO. 2140 A ND 2139/DEL/2013. 8. WE HAVE PERUSED THE RECORDS BEFORE US AND THE JU DGMENT RELIED UPON BY THE LD. AR. 8.1. WE FIND THAT THERE IS NO BASIS TO ASSUME THE R ECEIPT OF ROYALTY IN THE HANDS OF THE ASSESSEE FROM RELAX PHARMACEUTI CALS. THE LD. CIT(A) HAS DELETED THE ADDITION MADE ON ACCOUNT OF ALLEGED ROYALTY PAYMENT BY RELAX PHARMACEUTICALS OF THE SAME AMOUNT . FURTHER IN THE CASE OF THE ASSESSEE THERE IS NO EVIDENCE ON RE CORD TO SUPPORT SUCH AN ALLEGATION OF PAYMENT BEING RECEIVED BY THE ASSESSEE. IT IS OBSERVED FROM THE ORDER OF THE LD.CIT(A) THAT, EVEN IN THE REMAND REPORT CALLED FOR AT THE TIME OF APPELLATE PROCEEDI NGS IN RELAX PHARMACEUTICALS, THE A.O HAD ACCEPTED THAT THERE HA S BEEN NO INCRIMINATING MATERIAL OR INFORMATION FOUND DURING THE SEARCH THAT COULD SUGGEST THAT ANY ROYALTY HAS BEEN PAID TO THE ASSESSEE. 8.3. WE DO NOT FIND ANY INFIRMITY IN THE ADDITION B EING DELETED BY THE LD. CIT(A). RESPECTFULLY FOLLOWING THE ORDER D ATED 14/02/2014 OF THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR A.Y. 2004-05 & 2007-08, GROUND NO. 4 OF THE DEPARTMENTAL APPEALS I N ITA NO. 2138 & 2137 AND GROUND NO. 5 OF DEPARTMENTAL APPEAL IN I TA NO. 2136 ACE DISMISSED AND GROUND NO. 2 OF THE CROSS OBJECTI ONS IN CONSIDERATION ARE DISPOSED OFF IN LIEU OF THE ABOVE DISCUSSION. 11 9.GROUND NO. 4 IN ITA NO. 2136 . THIS GROUND RELATES TO THE GROUND FILED BY THE REVE NUE AGAINST THE DELETION OF GP ADDITION ON EXCESS STOCK. THE LD. AS SESSING OFFICER OBSERVED THAT THERE IS EXCESS STOCK INVENTORY FOUND DURING THE SURVEY. THE LD. ASSESSING OFFICER, ESTIMATED THE G ROSS PROFIT ON THE EXCESS STOCK AS THE SAME WILL RISE AS AND WHEN THE SALES TAKE PLACE. THE LD. ASSESSING OFFICER, THEREFORE, MADE AN ADDIT ION OF RS. 6,71,268/-AS GP PROFIT ON THE EXCESS STOCK AVAILABL E WITH THE ASSESEE. 9.1. AGGRIEVED BY THE ORDER OF THE LD. ASSESSING OF FICER THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHEREIN THE LD. CIT(A) RECORDED THAT THE ASSESSING OFFICERS THEORY OF LIK ELY SALE OF EXCESS STOCK AND ESTIMATION OF GP, IS BASELESS AND MEANING LESS. HE, THEREFORE, DELETED THE ADDITION MADE BY THE ASSESSI NG OFFICER ON GROSS PROFIT. 9.2. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE R EVENUE IS IN APPEAL BEFORE US. IT IS NOT A CASE THAT THE ASSESS ING OFFICER HAS FOUND ANY EVIDENCE OF UNRECORDED SALES MADE OUT OF SUCH EXCESS STOCK FOUND DURING THE. IT IS ONLY IN CASES, WHERE THERE IS DEFICIT IN PHYSICAL STOCK BALANCE, AS COMPARED TO BOOK STOCK B ALANCE, THAT THERE ARISES A PRESUMPTION OF UNRECORDED SALE, AND NOT VICE-VERSA. WE, THEREFORE, DO NOT FIND ANY INFIRMITY WITH THE O RDER OF THE LD. CIT(A) IN DELETING THE ADDITION MADE BY THE ASSESSI NG OFFICER. THIS GROUND OF REVENUE, THEREFORE, STANDS DISMISSED. 10. ASSESSEES APPEAL NO. 1390/DEL/2013 FOR A.Y. 2010-1 1 . GROUND NO. 1: THIS GROUND HAS BEEN RAISED BY THE ASSESSEE IN 12 RESPECT OF THE ADDITION MADE BY THE AO AND CONFIRME D BY THE LD. CIT(A) MADE ON ALLEGED EXCESS STOCK FOUND DURING TH E COURSE OF SURVEY. THE LD. ASSESSING OFFICER HAD OBSERVED THA T THE VALUE OF THE STOCK AT THE PREMISES OF THE ASSESSEE WORKED OUT BY THE SURVEY TEAM AT RS. 2,17,31,05,239/- AND THE VALUE OF THE S TOCK AS WORKED OUT BY THE ASSESSEE AS ON 09/10/2009 WAS RS. 48,17, 29,063/-. AFTER CALLING FOR AN EXPLANATION FROM THE ASSESSEE, THE LD. ASSESSING OFFICER, MADE AN ADDITION OF RS. 12,41,968/-U/S. 69 OF THE ACT. 10.1. AGGRIEVED BY THE ORDER OF THE LD. ASSESSING OFFICER THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) CONFIRMED THE ADDITIONS ON THE GROUND THAT THE ASSE SSEE WAS UNABLE TO RECONCILE THE QUANTITY OF STOCK AS SHOWN IN THE BOOKS. HE RECORDED THAT THE ASSESSEE HAS FAILED TO GIVE PRECI SE TALLY AS TO HOW THE STOCK INVENTORY AVAILABLE IN THE ASSESSMENT REC ORDS ARE TALLYING WITH THE STOCK RECORD MAINTAINED BY THE ASSESSEE. HE ALSO NOTED THAT THE INVENTORY OF EXCESS STOCK AS WORKED OUT BY THE LD. ASSESSING OFFICER WAS SIGNED AND ACCEPTED BY THE AS SESSEES REPRESENTATIVE WHICH TANTAMOUNT TO DIRECTLY ADMITTI NG THAT THERE WAS DISCREPANCY IN THE STOCK TO THE EXTENT OF RS. 1 2,41,986/-. 10.2. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE LD. CIT(A ). EVEN BEFORE US THE ASSESSEE IS UNABLE TO RECONCILE THE STOCK INVEN TORY. WE, THEREFORE, UPHOLD THE FINDINGS OF THE LD. CIT(A) AN D THE ADDITION MADE BY THE LD. ASSESSING OFFICER STANDS CONFIRMED. 13 11. GROUND NO.2 IN RESPECT OF GROUND NO. 2 IN THE ASSESSEES APPEAL WHICH RELATES TO ADDITION IN PART IN RESPECT OF THE EXPENDITURE DISALLOWED BY THE ASSESSEE U/S 37(1) READ WITH EXPL ANATION 1 OF THE ACT. THE LD. CIT(A) HAS RESTRICTED THE ADDITION TO AN EXTENT OF RS. 49,71,900/- VIZ-A-VIZ THE TOTAL ADDITION MADE BY TH E ASSESSING OFFICER AMOUNTING TO RS. 3,58,02,818/-. 11.1. THE BRIEF FACTS AND THE LEGAL BACKGROUND OF THE ISSUES UNDER CONSIDERATION HAS BEEN DEALT WITH AT LENGTH IN GROU ND NOS. 1 TO 3 OF DEPARTMENTAL APPEALS IN ITA NOS. 2138, 2137 & 2136 FOR ASSESSMENT YEARS 2008-09, 2009-10 & 2010-11. TO AV OID REPETITION OF THE SAME, WE RELY AND REFER TO THE DISCUSSIONS, MADE IN THE AFORESAID PARAGRAPH. IT IS OBSERVED FROM THE LD. C IT(A)S ORDER THAT THE PAYMENT MADE BY THE ASSESSEE DURING THE YEAR UN DER CONSIDERATION ARE IN TWO PARTS: - EXPENSES PAID FROM 01.04.2009 TO 09.12.2009 RS. 3 ,08,30,918/- (BEFORE MCI NOTIFICATION) EXPENSES MADE FROM 10.12.2009 TO 31.03.2010 RS. 49,71,900/- (AFTER MCI NOTIFICATION) 11.2. THE ISSUE BEFORE US A THE PAYMENT MADE AFTER THE MCI NOTIFICATION DATED 10/12/2009 BUT BEFORE THE CBDT C IRCULAR DATED 1 ST AUGUST, 2012. THE JUDGMENT OF THE COORDINATE MUMBA I BENCH IN THE CASE OF SYNCOM FORMULATION INDIA LTD. (SUPRA) W OULD BE SQUARELY APPLICABLE AND COVER THE ISSUE. RELYING U PON THE AFORESAID JUDGMENT IN SYNCOM FORMULATION (SUPRA) WE DELETE TH IS ADDITION CONFIRMED BY THE LD. CIT(A). 12. IN LIEU OF THE ABOVE FINDINGS IN RESPECT OF ALL THE ASSESSMENT YEARS UNDER CONSIDERATION THE DEPARTMENTAL APPEALS ARE DISMISSED 14 FOR ALL THE ASSESSMENT YEARS. ACCORDINGLY, THE CRO SS OBJECTIONS BEING 149 AND 157 FILED BY THE ASSESSEE STANDS INFR UCTUOUS. IN RESPECT OF THE APPEAL FILED BY THE ASSESSEE IN 1390 /DEL/2013 THE GROUNDS RAISED BY THE ASSESSEE STANDS PARTLY ALLOWE D. 12.1. IN THE RESULT, THE APPEALS FILED BY THE REVEN UE, ASSESSEE AND CROSS OBJECTIONS FILED BY THE ASSESSEEARE ACCORDING LY DISPOSED OFF. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 15.03. 2016 SD/- SD/- (J.S. REDDY) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 15/03/2016 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI