PALEPU PHARMA P.LTD, CHENNAI V. ACIT CENTRAL CIRCLE-3(1), Chennai

ITA 2072/CHNY/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 5466 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2016-2017
• Appeal Filed On: 11-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Principle of natural justice

Judgement Text

आयकर अपीलीय अिधकरण ’डी’ Ɋायपीठ चेɄई मŐ। IN THE INCOME TAX APPELLATE TRIBUNAL“D” BENCH, CHENNAI BEFORE SHRI C.M. GARG, JM & SHRI ARUN KHODPIA, AM आयकर अपील सं./ITA No.2072/Chny/2019 (िनधाŊरण वषŊ / Assessment Year : 2016-2017) M/s Palepu Pharma Pvt. Ltd., No.1, Lalitha Sadan, Ramachandra Road, Mylapore, Chennai-600004 Vs The ACIT, Central Circle-3(1), Chennai PAN No. : AAECP 3911 A (अपीलाथŎ /Appellant) .. (ŮȑथŎ / Respondent) िनधाŊįरती की ओर से /Assessee by : Shri Arjunraj, CA राजˢ की ओर से /Revenue by : Shri Dr. S.Palanikumar, CIT सुनवाई की तारीख / Date of Hearing : 23/02/2022 घोषणा की तारीख/Date of Pronouncement : 31/03/2022 आदेश / O R D E R Per C.M.Garg, JM : This is an appeal filed by the revenue against the order of the CIT(A)-19, Chennai, dated 28.05.2019 for the assessment year 2016-2017. 2. The sole ground in this appeal for adjudication is that as to whether the ld. CIT(A) was correct and justified in upholding the addition made by the AO of Rs.54,44,672/- on account of based on the cash found in excess of the cash book balance and based on the sworn statement of Shri Rajeev N. Narayan under the head income ITA No.2072/Chny/2019 2 from other sources in the computation of taxable total income without assigning proper reasons and justification. 3. Ld. Counsel of the assessee submitted that the first appellate authority has erred in sustaining the impugned addition on the basis of cash found and seized in excess of the cash book balance and the sworn statement of Shri Rajeev N.Narayan under the head income from other sources as he failed to appreciate that the assessment of the cash found as excess/unaccounted cash was wrong, erroneous, unjustified, incorrect and non sustainable in law and ought to have appreciated that the details of advance received for supply of goods from National Pharma Delhi, the details of goods sold on 29.02.2016 against the advance monies received including the details of VAT payments and ledger entries were completely overlooked and brushed aside, thereby vitiating double taxation of such amount in the computation of taxable total income. 4. Ld. Counsel vehemently pointed out that the ld. CIT(A) placed reliance on the confirmation given by M/s National Pharma without giving an opportunity to the assessee to cross-examine despite a request made vide letter dated 21.05.2019 should be reckoned as bad, erroneous and unsustainable in law. Ld. Counsel also pointed out that the CIT(A) appreciate that the reliance placed on unverifiable examination of M/s National Pharma was wrong, ITA No.2072/Chny/2019 3 erroneous, unjustified, incorrect and not sustainable in law. It was also pointed out by the ld. Counsel before us that the CIT(A) wrongly recorded the findings in para 6.5 of the impugned order without assigning proper reasons and justification. Further the ld. Counsel submitted that the CIT(A) failed to appreciate that there was no proper opportunity given before passing of the impugned order and any order passed in violation of the principles of natural justice would be nullity in law. Ld. Counsel also drew our attention towards para 5 of the assessment order and submitted that the assessee has submitted copies of invoices which show that goods ere sold on 29.02.2016 to M/s National Pharma against the advance money received, which was found and seized during the the search and seizure operation. Ld. Counsel also submitted that the assessee received the amount of Rs.21,882/- is not reflecting in the books relates to cash received from the salesman after closing the transactions as on 04.01.2016 and in respect of balance amounts, the assessee had received an advance from M/s National Pharma, Delhi for supply of goods and the same was offered to tax during the assessment year under consideration already as part of sales. The assessee during the course of assessment proceedings also placed on record the VAT payment ledger monthly return filed with the appropriate authorities, details of invoices raised to fortify the above ITA No.2072/Chny/2019 4 stand. Further the ld. Counsel submitted that the action of AO in making addition sole on the ground that the assessee had not filed the confirmations from the respective party without making any further enquiry and brushing aside the voluminous evidence placed by the assessee is erroneous and bad in the eyes of law. Ld. Counsel also drew our attention to para 6.1 to 6.6 of the first appellate order and submitted that on receiving information from M/s Palepu Pharma Pvt. Ltd., the CIT(A) observed that National Pharma, Delhi has not dealt with the assessee during the year under consideration and all the details as per its accounts are nil only, which was duly confronted to the assessee vide letter dated 30.04.2019, which was replied by the assessee and the reply of the assessee has been reproduced by the ld. CIT(A) in para 6.3 of its order, however, ld. Counsel submitted that the information submitted by M/s National Pharma Pvt. Ltd. Is not reliable as it has shown transactions with this entity that are backed by bills. The assessee has contested that the letter is filed by that entity in a printed format and thus not reliable and pleaded for further investigation and requested for cross examination in view of the decision of the Hon’ble Supreme Court in the case of Andaman Timber Industries in Civil Appeal No.4228/2006, dated 02.09.2015. Ld. Counsel submitted that without considering the explanation of the assessee, ITA No.2072/Chny/2019 5 documentary evidence filed by the assessee and without allowing cross objection of the owner/partner of National Pharma Pvt. Ltd., Delhi, the addition cannot be sustained on whims and fancies, therefore, the same may kindly be deleted. 5. On careful consideration of rival submissions, first of all, we note that from para 5 of the assessment order, we clearly observe that the AO has noted that the assessee has submitted the copies of invoices to show that goods were sold on 29.02.2016 against the advance money received. From the relevant para 6.1 of the first appellate order, we also found that the ld. CIT(A) had called information from M/s National Pharma, Delhi u/s.133(6) of the Act and in reply M/s informed the AO that M/s National Pharma, Delhi has neither made any purchases nor any transaction during the period under consideration i.e. 01.04.2015 to 30.06.2016. Ld. Assessee’s Representative has placed vehemently reliance on the request letter of the assessee vide dated 21.05.2019, which has been reproduced by the ld. CIT(A) in para 6.4 of the first appellate order, wherein the assessee has contested the letter received by the ld. CIT(A) from M/s National Pharma on 26.04.2019 and the assessee requested ld. CIT(A) to allow opportunity to cross-examine the competent person/partner/director of M/s National Pharma, Delhi on the strength of decision of the Hon’ble Supreme Court in the case ITA No.2072/Chny/2019 6 of Andaman Timber Industries in Civil Appeal No.4228/2006, dated 02.09.2015. But this request and contention of the assessee was dismissed by the ld. CIT(A) by observing that it was bounden duty of the assessee to explain the cash found and it did not do so and did not itself submit the confirmation of the cash from whom it claimed the cash was received and there was no direct evidence of having received cash from National Pharma. Ld. AR strenuously contended that from para 5.6 of the assessment order, it is clear that the assessee has produced the VAT payment, ledger entries, copies of the invoices which shows that goods were sold by the assessee to M/s National Pharma on 29.02.2016 against the amount advance money which was received in cash and found and seized during the search and seizure operation and the AO without doubting, pointing any discrepancy or defect or diminishing such self speaking evidence proceeded to confirm the addition only on the strength of reply letter of M/s National Pharma (received by the ld. CIT(A) on 26.04.2019). Ld. AR also pointed out that despite specific and categorically request of assessee through letter dated 21.05.2019, the CIT(A) dismissed the prayer of assessee for allowing cross examination on the authorized person/partner/director of M/s National Pharma, Delhi, proceeded to confirm the addition on the ground based on his own surmises and conjectures and even the ld. ITA No.2072/Chny/2019 7 CIT(A) has also not doubted or dismissed the documentary evidence filed by the assessee in the form of sale invoices, VAT payment, ledger entries of M/s National Pharma, which was also filed before the AO as well as before the CIT(A). Therefore, in view of the above factual position, we are inclined to hold that despite a specific request by the assessee to allow cross examination, ld. CIT(A) denied the same without any cogent justification and valid reason which is a clear violation of proposition rendered by the Hon’ble Supreme Court in the case of Andaman Timber Industries (supra). Therefore, we hold that the ld. CIT(A) was not correct in confirming the addition made by the AO keeping aside the evidence submitted by the assessee in the form of sales vouchers, VAT payment evidence, ledger entries, etc. only on the strength of reply letter received by him on 26.05.2019 from M/s National Pharma, Delhi without allowing cross examination to the assessee on the said letter/reply of M/s National Pharma. Therefore, respectfully following the proposition laid down by the Hon’ble Supreme Court, we are compelled to hold that the addition confirmed by the ld. CIT(A) is not sustainable and the observations and findings recorded by the CIT(A) are hit by the proposition rendered by the Hon’ble Supreme Court in the case of Andaman Timber Industries (supra). ITA No.2072/Chny/2019 8 Accordingly, we allow the appeal of the assessee and direct the AO to delete the addition. 6. In the result, appeal filed by the assessee is allowed. Order pronounced as per Rule 34(4) of the ITAT Rules,1963 on 31/03/2022. Sd/- (ARUN KHODPIA) Sd/- (C.M.GARG) लेखा सद˟ /ACCOUNTANT MEMBER Ɋाियक सद˟ / JUDICIAL MEMBER Chennai; िदनांक Dated 31/03/2022 Prakash Kumar Mishra, Sr.P.S. आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant- 2. ŮȑथŎ / The Respondent- 3. आयकर आयुƅ(अपील) / The CIT(A), 4. आयकर आयुƅ / CIT 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, Chennai / DR, ITAT, Chennai 6. गाडŊ फाईल / Guard file.