M/s Hy-Grow Chemicals Pharmtek Private Limited, Hyderabad V. Asst.CIT, Circle-2(2), Hyderabad

ITA 1718/HYD/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2945 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 28-01-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 13-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M SITARAM
• Assessee Lawyers: A V RAGHURAM
• Keywords: Accommodation entries
• Section: 143(3); 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA.NO.1718/HYD/2013 ASSESSMENT YEAR 2003-2004 M/S. HY - GROW CHEMCIALS PHARMTEK P. LTD., SECUNDERABAD. PAN AAACH6012J VS. ACIT, CIRCLE 2(2) HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. A.V. RAGHURAM FOR REVENUE : MR. M. SITARAM DATE OF HEARING : 28.01.2016 DATE OF PRONOUNCEMENT : 05 .02.2016 ORDER PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y. 2003-04 AGAINST THE ORDER OF THE LD. CIT(A) IN CONFIRMING T HE PENALTY LEVIED BY THE A.O. UNDER SECTION 271(1)(C) OF THE I.T. ACT, 1961. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF BULK DRUGS, FILED ITS RETURN OF INCO ME ON 03.11.2003 ADMITTING TAXABLE INCOME OF RS.1,29,12,4 61. THE ASSESSMENT UNDER SECTION 143(3) WAS COMPLETED O N 27.12.2005 DETERMINING THE TOTAL INCOME OF RS.1,43,68,620. SUBSEQUENTLY, THE A.O. RECEIVED 2 ITA.NO.1718/HYD/2013 M/S. HY-GROW CHEMICALS PHARMTEK P. LTD., SECUNDERABAD. INFORMATION FROM DDIT (INV.) UNIT-1(3), MUMBAI THAT THERE WAS A SEARCH OPERATION UNDER SECTION 132 OF THE I.T . ACT ON 12.08.2004 IN THE CASE OF ONE MR. CHETAN SHAH WH O IS AN ENTRY OPERATOR AND DURING THE COURSE OF SEARCH I T CAME TO LIGHT THAT THE SAID MR. CHETAN SHAH FLOATED MANY PROPRIETARY CONCERNS WHICH ISSUED BOGUS BILLS TO VA RIOUS PARTIES. IT WAS FURTHER INFORMED THAT THE ASSESSEE HAD ISSUED DDS IN FAVOUR OF M/S. AMIT ENTERPRISES, ONE OF THE PROPRIETARY CONCERN OF MR. CHETAN P. SHAH ON INDIAN OVERSEAS BANK FOR A TOTAL SUM OF RS.17,63,784. ON T HE BASIS OF THE SAID INFORMATION, THE A.O. OPINED THAT ASSESSEE BY UTILISING THE SERVICES OF MR. CHETAN P. SHAH HAS BOOKED BOGUS EXPENDITURE TO AN EXTENT OF RS.17,63,784. IN VIEW OF THE SAME, A NOTICE UNDER S ECTION 148 OF THE ACT WAS ISSUED TO THE ASSESSEE ON 30.03. 2010. THE ASSESSEE FILED A LETTER DATED 20.05.2010 STATIN G THAT THE RETURN OF INCOME ALREADY FILED ON 03.11.2003 MA Y BE TREATED AS THE RETURN FILED IN RESPONSE TO THE NOTI CE UNDER SECTION 148 OF THE I.T. ACT AND ALSO SOUGHT THE REA SONS FOR REOPENING. ON RECEIPT OF REASONS FOR REOPENING OF T HE ASSESSMENT, ASSESSEE SUBMITTED THAT HE CANNOT PRODU CE ANY EVIDENCE IN RESPECT OF THE EXPENDITURE OF RS.17,63,784 CLAIMED IN THE P & L A/C SINCE NO DOCUMENTARY EVIDENCE IS IN THE POSSESSION OF THE COMPANY IN RESPECT OF THEIR CLAIM. THEREFORE, THE ASSESSEE EXPRESSED ITS NO OBJECTION FOR THE PROPOSED ADDITIO N OF THE EXPENDITURE AND THE ASSESSMENT WAS ACCORDINGLY COMPLETED BY MAKING THE ADDITION. THEREAFTER, THE A .O. INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)( C) OF 3 ITA.NO.1718/HYD/2013 M/S. HY-GROW CHEMICALS PHARMTEK P. LTD., SECUNDERABAD. THE I.T. ACT BY ISSUING A SHOW CAUSE NOTICE DATED 28.04.2011. 2.1. IN REPLY THERETO, THE ASSESSEE FILED A LETTER DATED 25 TH MAY, 2011, WHEREIN HE HAS STATED THAT THE ASSESSEE AGREED FOR THE ADDITION SINCE MATTER WAS O LD AND THE ASSESSEE DID NOT RETAIN THE RELEVANT EVIDENCE F OR EXPENDITURE INCURRED IN 2002-03 AND FURTHER THAT ASSESSEE DID NOT PREFER ANY APPEAL IN ORDER TO AVOI D PROTRACTED LITIGATION AS THE MATTER WAS OLD. THE A. O. WAS HOWEVER, WAS NOT CONVINCED WITH THE ASSESSEES CONTENTION AND HAS LEVIED THE MINIMUM PENALTY OF RS.6,48,190, AGAINST WHICH, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) WHO CONFIRMED THE ORDER OF TH E A.O. AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 3. THE LD. COUNSEL FOR THE ASSESSEE, MR. A.V. RAGHURAM, WHILE REITERATING THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW, SUBMITTED TH AT THE ASSESSEE HAD FILED ITS ABOVE EXPLANATION BEFORE THE A.O. BOTH DURING THE ASSESSMENT PROCEEDINGS AS WELL AS T HE PENALTY PROCEEDINGS AND THE ASSESSEES CONTENTION H AS NOT BEEN FOUND TO BE NOT BONAFIDE. HE HAS SUBMITTED THA T THE RELEVANT ASSESSMENT YEAR IS 2003-04 WHEREAS THE RE- ASSESSMENT PROCEEDINGS AND ALSO THE PENALTY PROCEED INGS WERE INITIATED IN THE YEARS 2010-11. HE HAS SUBMITT ED THAT ASSESSEE HAD NOT RETAINED THE RELEVANT DOCUMEN TS AS THE PERIOD OF SIX YEARS WERE ALREADY COMPLETED AND THE ADDITION WAS AGREED TO ONLY DUE TO HIS FAILURE TO P RODUCE 4 ITA.NO.1718/HYD/2013 M/S. HY-GROW CHEMICALS PHARMTEK P. LTD., SECUNDERABAD. NECESSARY EVIDENCE AND NOT BECAUSE THERE WAS ANY POSITIVE EVIDENCE ON RECORD IN THE POSSESSION OF TH E A.O. TO DEMONSTRATE THAT THESE WERE FICTITIOUS EXPENDITU RE CLAIMED BY THE ASSESSEE. HE HAS SUBMITTED THAT UNDISPUTEDLY THE AMOUNT WAS PAID BY WAY OF DDS AND THAT THE REVENUE HAS NOT BROUGHT ANY EVIDENCE TO SH OW THAT THE AMOUNT HAS BEEN REPAID TO THE ASSESSEE IN ANY OTHER FORM. THUS, ACCORDING TO HIM, THE PENALTY IS NOT LEVIABLE. 4. THE LD. D.R., ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, IT IS SEEN THAT THE ADDITION HA S BEEN MADE ONLY ON THE GROUND THAT ASSESSEE HAS NOT BEEN ABLE TO PRODUCE THE EVIDENCE IN FAVOUR OF THE PAYMENTS M ADE BY THE ASSESSEE BY WAY OF DDS TO THE PROPRIETARY CO NCERN OF MR. CHETAN P. SHAH I.E., AMIT ENTERPRISES. THERE IS NOTHING ON RECORD SUCH AS DOCUMENTS FOUND DURING TH E COURSE OF SEARCH IN THE CASE OF MR. CHETAN P. SHAH, TO SHOW THAT THE PAYMENTS MADE BY THE ASSESSEE WERE FICTITIOUS. THE ONLY EVIDENCE IN POSSESSION OF THE REVENUE WAS THAT MR. CHENTAN P. SHAH WAS IN THE BUSINESS OF ISSUING ACCOMMODATION ENTRIES. THERE IS NOTHING ON RECORD ALSO TO SHOW THAT ALL THE ENTRIES OF MR. CHE TAN P. SHAH INCLUDING THE ENTRIES PERTAINING TO THE ASSESS EE ARE FICTITIOUS. FURTHER, THE ASSESSEE HAS SUBMITTED HIS EXPLANATION THAT THE ASSESSEE IS NOT IN POSSESSION OF THE 5 ITA.NO.1718/HYD/2013 M/S. HY-GROW CHEMICALS PHARMTEK P. LTD., SECUNDERABAD. RELEVANT DOCUMENTS DUE TO PASSAGE OF TIME AND THIS HAS NOT BEEN FOUND TO BE FALSE BY ANY OF THE AUTHORITIE S BELOW. THE PENALTY UNDER SECTION 271(1)(C) OF THE I.T. ACT IS LEVIABLE WHERE THE ASSESSEE DOES NOT FILE HIS RETUR N OF INCOME OR DOES NOT FILE EXPLANATION TO THE SHOW CAU SE NOTICE FOR LEVY OF PENALTY OR WHERE THE EXPLANATION IS FOUND TO BE NOT BONAFIDE. NONE OF THESE CIRCUMSTANC ES EXIST IN THE CASE BEFORE US. IN VIEW OF THE SAME, W E ARE OF THE OPINION THAT THE PENALTY UNDER SECTION 271(1)(C ) OF THE ACT, IS NOT LEVIABLE IN THE CASE OF THE ASSESSEE IN THE ABSENCE OF ANY OF THE ABOVE CONDITIONS. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 05.02.2016. SD/- SD/- (B. RAMAKOTAIAH) (SMT. P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 05 TH FEBRUARY, 2016 VBP/- COPY TO 1. M/S. HY - GROW CHEMICALS PHARMTEK P. LTD., SECUNDERABAD. C/O. M/S. MAHESH, VIRENDER & SRIRAM, CHARTERED ACCOUNTANTS, 6-3-788/36 & 37A, AMEERPET, HYDERABAD. 2. ACIT, CIRCLE - 2(2), HYDERABAD. 3. CIT(A) - 3, HYDERABAD 4. CIT - 3, HYDERABAD 4. D.R. ITAT A BENCH, HYDERABAD 5. GUARD FILE