The ACIT,(OSD)-I,Range-4, Ahmedabad V. Marck Biosciences Ltd., Ahmedabad

ITA 2360/AHD/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0253 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-12-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 19-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAHUL KUMAR
• Assessee Lawyers: S N DIVETIA
• Keywords: Unexplained cash credit; Source of fund
• Section: 43B; 143(3); 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE SHRI G.G. CUPTA, VP AND SHRI A. MOHAN ALANK AMONY, AM) ITA NO.2360/AHD/2010 A. Y.: 2001-02 THE A. C. I. T., (OSD)-I, RANGE-4, NAVJIVAN TRUST BUILDING, OFF. ASHRAM ROAD, AHMEDABAD VS MARCK BIOSCIENCES LTD., 5 TH FLOOR, HERITAGE PLAZA, OFF. ASHRAM ROAD, AHMEDABAD P. A. NO. AABCM 0366 P (APPELLANT) (RESPONDENT) APPELLANT BY SHRI RAHUL KUMAR, SR. DR RESPONDENT BY SHRI S. N. DIVETIA, AR DATE OF HEARING: 04-12-2012 DATE OF PRONOUNCEMENT:15-02-2013 O R D E R PER A. MOHAN ALANKAMONY: THIS APPEAL IS PREFERRED BY THE REVENUE AGGRIEVED BY THE ORDER OF THE LEARNED C IT(A)-XX, AHMEDABAD IN APPEAL NO. CIT(A)- XX/302/2009-10 DATE D 16-04-2010, FOR THE ASSESSMENT YEAR 2001-02 PASSED U/S 250 READ WITH SECTION 143(3) AND 147 OF THE IT ACT. 2. THE REVENUE HAS RAISED FOUR GROUNDS IN ITS APPEA L, WHEREIN GROUNDS NO. 3 AND 4 ARE GENERAL IN NATURE AND DO NO T SURVIVE FOR ADJUDICATION. THE CRUX OF THE SURVIVING ELABORATE G ROUNDS NO.1 AND 2 OF THE APPEAL OF THE REVENUE ARE REPRODUCED HEREIN FOR REFERENCE: 1. THE LD. CIT(A) HAS ERRED IN LAW ON FACTS IN DEL ETING THE ADDITION OF RS.46,20,541/- MADE BY THE ASSESSING OF FICER U/S. 68 OF THE ACT, BEING UNEXPLAINED CASH CREDIT R ECEIVED FROM AMERICAN MANNEQUIN CO. ITA NO.2360/AHD/2010 (AY- 2001-02) ACIT (OSD)-I, RANGE 4, AHMEDABAD VS MARCK BIOSCIENC ES LTD. 2 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.29,54,941/- MADE BY THE A. O . UNDER SECTION 43B OF THE ACT, HOLDING THAT SINCE TH E PAYMENTS WERE MADE BEFORE FILING OF RETURN OF INCOM E, THEY WERE ALLOWABLE. 3. THE ASSESSEE, A LIMITED COMPANY ENGAGED IN THE B USINESS OF MANUFACTURING OF IV FLUIDS FILED ITS RETURN OF INCO ME FOR THE ASSESSMENT YEAR 2001-02 ON 30-10-2001 DECLARING TOT AL LOSS OF RS.1,90,89,652/- AND SUBSEQUENTLY FILED ITS REVISE D RETURN ON 20-10- 2002 DECLARING LOSS AT RS.2,66,37,785/-. THE LEARN ED AO ISSUED NOTICE U/S 148 OF THE ACT ON 31-03-2008 AFTER DULY RECORDING THE REASONS AND THE ASSESSEE VIDE ITS LETTER DATED 26-0 8-2008 SUBMITTED THAT THE RETURN FILED BY THE ASSESSEE ON 20-10-2002 MAY BE TREATED TO HAVE BEEN FILED IN RESPONSE THERE TO. THEREAFTER, T HE LEARNED AO VIDE LETTER DATED 27-08-2008 HAD GIVEN THE REASONS OF RE OPENING TO THE ASSESSEE AGAINST WHICH THE ASSESSED DID NOT RAISE A NY OBJECTION. LATTER ON, THE LEARNED AO SERVED NOTICE U/S 143(2) OF THE ACT ON THE ASSESSEE ON 03-09-2008 AND FINALLY PASSED ASSESSMEN T ORDER U/S 143(3) READ WITH SECTION 147 OF THE IT ACT ON 08-12 -2008 DETERMINING TOTAL ASSESSED INCOME OF THE ASSESSEE AT RS.(-) 1,9 0,62,303/- WHEREIN HE HAD MADE ADDITION OF RS.46,20,541/- U/S 68 OF THE ACT ON ACCOUNT OF UNEXPLAINED SHARE APPLICATION MONEY AND RS.29,54,941/- BY DISALLOWING ASSESSEES CLAIM FOR EXPENSES PERTA INING TO EARLIER YEARS U/S 43B OF THE ACT. 4. GROUND NO.1:- DELETING THE ADDITION OF RS.46,20,541/- MADE ON ACCOUNT OF UNEXPLAINED CASH CREDIT RECEIVED FRO M AMERICAN MANNEQUIN CO. THE LEARNED AO OBSERVED THAT DURING THE RELEVANT ITA NO.2360/AHD/2010 (AY- 2001-02) ACIT (OSD)-I, RANGE 4, AHMEDABAD VS MARCK BIOSCIENC ES LTD. 3 ASSESSMENT YEAR THE ASSESSEE RECEIVED RS.46,20,541/ - AS SHARE APPLICATION MONEY FROM AMERICAN MANNEQUIN CO. BY R EMITTANCE TO THE ASSESSEE ON 29-03-2001. THE LEARNED AO TREATED THIS TRANSACTION AS NOT GENUINE DUE TO THE FOLLOWING REASONS:- (I) M/S. AMERICAN MANNEQUIN INC. CO. HAD DIRECTLY TRANSFERRED THE MONEY TO THE ASSESSEE WITHOUT ANY P RIOR CORRESPONDENCE REGARDING ISSUE OF SHARES PRIOR TO PASSING RESOLUTION IN THIS REGARD BY THE ASSESSEE COMPANY ON 28-03-2002 WHICH IS EVIDENT FROM THE LET TER OF THE AFORESAID COMPANY DATED 15-12-2001. (II) THE ASSESSEE COMPANY HAD NOT FOLLOWED THE PROC EDURE FOR ISSUE OF THESE SHARES AMOUNTING TO RS.53,26,160 /- AS PER GUIDANCE ISSUED BY THE RESERVE BANK OF INDIA. (III) THE ASSESSEE DID NOT SUBMIT FORM NO.5 AND FOR M NO.23 PURSUANT TO MANDATORY PROVISIONS OF SECTION 192 OF THE COMPANIES ACT, 1952 WITH REGARD TO ALLOTMENT OF SHA RES TO FOREIGN COMPANIES. (IV) DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE DID NOT PRODUCE ANY EVIDENCE SUCH AS LEDGER FOLIO NUMBER, S HARE CERTIFICATE NUMBERS, ALLOTMENT LETTER ETC. REGARDIN G ISSUE OF EQUITY SHARES TO ESTABLISH GENUINENESS OF THE TRANSACTION. 4.1 THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFOR E THE LEARNED CIT(A) WHO IN TURN DIRECTED THE LEARNED AO TO DELET E THE ADDITION MADE U/S 68 OF THE ACT. 4.2 AGGRIEVED BY THIS ORDER OF THE LEARNED CIT(A), THE REVENUE IS IN APPEAL BEFORE US. ITA NO.2360/AHD/2010 (AY- 2001-02) ACIT (OSD)-I, RANGE 4, AHMEDABAD VS MARCK BIOSCIENC ES LTD. 4 5. BEFORE US, THE LEARNED DR SUPPORTED THE ORDER OF THE LEARNED AO. ON THE OTHER HAND THE LEARNED AR RELIED ON THE ORDER OF THE LEARNED CIT(A) AND FURTHER SUBMITTED THAT THIS ISSU E IS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY T HE ORDER OF THE ITAT AHMEDABAD B BENCH DATED 31-07-2008 PASSED IN THE CASE OF DCIT, CIRCLE-4 VS MARK PARENTERALS (I) LTD. ACCORDI NGLY, THE LEARNED AR PRAYED THAT THE ORDER OF THE LEARNED CIT(A) DELE TING THE ADDITION MADE BY THE LEARNED AO MAY BE SUSTAINED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE REVENUE ALONG WITH THE MATERIALS PRODUCED BEFOR E US. ON PERUSAL OF THE RECORDS, WE FIND THAT AS POINTED OUT BY THE LEARNED AR, THE DEPARTMENTAL APPEAL ON SIMILAR GROUND WITH RESPECT TO THE SHARE APPLICATION MONEY RECEIVED FROM AMERICAN MANNEQUINE CO. HAS BEEN DISMISSED BY ITAT AHMEDABAD B BENCH IN THE C ASE OF DCIT VS MARK PARENTERALS (I) LTD. AS AFORESAID CITED SUP RA FOR THE ASSESSMENT YEAR 2002-03 IN FAVOUR OF THE ASSESSEE. THE LEARNED DR BEFORE US COULD NOT CONTROVERT TO THE SUBMISSION OF THE LEARNED AR. THE RELEVANT PORTION OF THE AFORESAID ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2002-03 DATED 31-07-2008 PASSED IN ITA NO.2646/AHD/2006 ON THE SAME ISSUE, CITED SUPRA IS REPRODUCED HEREIN BELOW FOR REFERENCE: 8. WE HAVE HEARD BOTH THE SIDES AND CONSIDERED THE IR RIVAL SUBMISSIONS. REQUISITE INGREDIENTS REQUIRED TO BE S ATISFIED TO CLAIM RELIED UNDER SECTION 68 HAVE BEEN ESTABLISHED BY THE ASSESSEE, AS THE CIT(A) ON APPRECIATION OF FACTS AN D MATERIAL ON RECORD FOUND THAT ALL THE RELEVANT DOCUMENTS AND EVIDENCES IMPORTANT FOR ISSUANCE OF SHARES ON PRIVATE PLACEME NT AND ITA NO.2360/AHD/2010 (AY- 2001-02) ACIT (OSD)-I, RANGE 4, AHMEDABAD VS MARCK BIOSCIENC ES LTD. 5 RECEIPT OF SHARE APPLICATION MONEY WERE PLACED BEFO RE THE AO. MOREOVER, IDENTITY, ROUTING OF FUNDS THROUGH BANKIN G CHANNELS AND COMPLIANCE OF LAW HAVE ALSO BEEN MADE OUT. APAR T THAT RECEIPT OF FUNDS THROUGH AUTOMATIC CHANNELS IS ALSO NOT DISPUTED. ONUS CAST ON THE ASSESSEE TO PROVE ITS CA SE HAS BEEN DISCHARGED AND THERE IS NO REASON TO MAKE A CO NTRARY VIEW. GRIEVANCE OF THE DEPARTMENT THAT ASSESSEE HAS NOT COMPLIED WITH REQUIREMENT OF THE VARIOUS RELATED LA WS WHICH IS NOT APPEARED TO BE TRUE. NATURE AND SOURCE OF FUNDS HAVE BEEN EXPLAINED TO THE AO WITH DOCUMENTARY EVIDENCES, WHI CH HAVE NOT BEEN FULLY APPRECIATED BY THE AO TO ARRIVE AT A LOGICAL CONCLUSION. NOTHING ON RECORD TO SUGGEST THAT THE I MPUGNED TRANSACTION OF SHARES ARE SHAM OR BOGUS AND/OR SIMP LE PAPER TRANSACTIONS, AND AMOUNT TO HAWALA TRANSACTION, THE REFORE, THE FINDINGS OF THE CIT(A) CANNOT BE SAID TO BE ERRONEO US AND PERVERSE. THE CASE LAWS CITED BY THE LEARNED DR ARE OF NO HELP, AS THEY REVOLVE AROUND ISSUES OF IDENTITY AND CREDI T WORTHINESS OF THE PARTIES, WHICH ARE NOT THE ISSUE IN THE PRES ENT CASE. IN THIS VIEW OF THE MATTER, WE FIND NO REASON TO INTER FERE IN THE ORDER OF THE CIT(A) ON THIS ISSUE, WHICH IS UPHELD. 7. BY FOLLOWING THE AFORESAID ORDERS OF THE CO-ORD INATE BENCH CITED SUPRA, WE HEREBY DISMISS THIS GROUND OF APPEA L OF THE REVENUE. 8. GROUND NO.2:- D ELETING THE DISALLOWANCE OF RS.29,54,941/- MADE BY THE A. O. UNDER SECTION 43B OF THE ACT. THE LEARNED AO OBSERVED FROM THE STATEMENT OF THE TOTAL INCOME OF THE ASSESSEE THAT THE ASSESSEE HAD CLAIMED DEDUCTION ON ACCOUNT OF IN TEREST PAYMENT MADE OF RS.40,78,870/- AND RS.10,55,071/- TO GIIC ON ACTUAL PAYMENT BASIS U/S 43B OF THE ACT. THE LEARNED AO F URTHER OBSERVED FROM THE ANNEXURE 9 TO 3 CD REPORT SUBMITTED BY THE ASSESSEE THAT THESE AMOUNTS PERTAINED TO EARLIER YEAR. FROM THE ANNEXURE 9 TO 3 CD REPORT THE LEARNED AO FURTHER OBSERVED THAT OUT OF RS.40,78,870/- AND RS.10,55,071/- AN AMOUNT OF RS.29,54,941/- WAS PAID AFTER THE ITA NO.2360/AHD/2010 (AY- 2001-02) ACIT (OSD)-I, RANGE 4, AHMEDABAD VS MARCK BIOSCIENC ES LTD. 6 END OF FINANCIAL YEAR 2000-01. THEREFORE, THE LEARN ED AO WAS OF THE VIEW THAT AS PER THE PROVISIONS OF SECTION 43B, THE SE EXPENSES SHOULD HAVE BEEN CLAIMED IN THE ASSESSMENT YEAR 2002-03. H ENCE, THE LEARNED AO ADDED THE AMOUNT OF RS.29,54,941/- TO TH E INCOME OF THE ASSESSEE. 8.1 WHEN THE MATTER CREPT IN APPEAL BEFORE THE LEAR NED CIT(A), THE LEARNED CIT(A) DIRECTED THE LEARNED AO TO DELETE TH E AFORESAID ADDITION. WHILE DOING SO, THE LEARNED CIT(A) OBSERV ED IN PARA 5.1 AND 5.2 OF HIS ORDER AS UNDER: 5.1 THE AO NOTICED FROM THE STATEMENT OF TOTAL INC OME THAT THE ASSESSEE HAS CLAIMED DEDUCTION ON ACCOUNT OF IN TEREST PAYMENT OF RS.40,78,870/- AND RS.10,55,071/- ON PAY MENT BASIS U/S. 43B. THE FOLLOWING SUMS WERE PAID AFTER THE END OF FY 2000-01: DATE AMOUNT 12.04.2001 RS.1200000 24.04.2001 RS.699870 24.04.2001 RS.100130 12.05.2001 RS.500000 19.05.2001 RS.454941 TOTAL RS.29549941 THUS, THESE SUMS WERE PAID AFTER THE EXPIRY OF FY 2 000- 01 AND AS THE LIABILITY FOR THESE EXPENSES WAS INCU RRED IN A PREVIOUS YEAR EARLIER THAN 2000-01 AND THE CLAIM OF RS.29,54,941/- IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5.2 AGAINST THE ABOVE ADDITION, THE APPELLANT HAS S UBMITTED AS UNDER: ITA NO.2360/AHD/2010 (AY- 2001-02) ACIT (OSD)-I, RANGE 4, AHMEDABAD VS MARCK BIOSCIENC ES LTD. 7 ASSESSING OFFICER ITSELF SAYS THAT AMOUNT IS PAID IN THE MONTH OF APRIL, 2001 AND MAY 2001 AS PER THE PROVIS IONS OF 43B AMOUNT TO BE PAID UPTO THE DUE DATE OF FILING RETUR N OF INCOME, IF THE ASSESSEE HAS NOT PAID UP TO THE DATE OF FILING OF RETURN, AMOUNT IS TO BE DISALLOWED U/S. 43B. ASSESSEE HAS P AID THE WHOLE AMOUNT IN THE MONTH OF APRIL 2001 AND MAY 200 1. PAYMENT MADE TO GIIC IS PAYABLE IN THIS PERIOD AS P ER THE TERMS AND CONDITIONS OF THE GIIC. THEREFORE, PAYMEN T MADE IN THE NEXT YEAR UPTO THE DUE DATE OF FILING IS ALLOWA BLE. I HUMBLY REQUEST YOU TO DECIDE THE APPEAL ON MERIT. AS PER SECTION 43B OF THE ACT, ANY SUM PAYABLE BY T HE ASSESSEE AS INTEREST ON ANY LOAN OR BORROWINGS FROM ANY PUBLIC FINANCIAL INSTITUTION OR A STATE FINANCIAL CORPORAT ION OR A STATE INDUSTRIAL INVESTMENT CORPORATION IN ACCORDANCE WIT H TERMS AND CONDITIONS OF THE AGREEMENT GOVERNING SUCH A LO AN OR BORROWING HAS TO BE ALLOWED ON ACTUAL PAYMENT. SINC E, THE APPELLANT HAS PAID THE INTEREST BEFORE THE DUE DATE OF FILING OF THE RETURN, THE DISALLOWANCE AND ADDITION MADE BY T HE AO IS NOT JUSTIFIED. THE SAME IS HEREBY DIRECTED TO BE DELETE D. 9. BEFORE US, THE LEARNED DR SUPPORTED THE ORDER OF THE LEARNED AO AND PRAYED FOR SUSTAINING THE SAME. ON THE OTHER HAND, THE LEARNED AR RELIED ON THE ORDER OF THE LEARNED CIT(A ) AND PLEADED THAT HIS ORDER MAY BE UPHELD. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE THE ORDERS OF THE REVENUE AUTHORITIES ALONG WITH THE MATERIALS PR ODUCED BEFORE US. ON PERUSAL OF THE ANNEXURE AND LEDGER ACCOUNT AS ON 31-03-2002 IT REVEALS THAT THE ASSESSEE HAD PAID THE ACCRUED INTE REST ON ITS BORROWINGS FROM GIIC WHICH IS A STATE INDUSTRIAL IN VESTMENT CORPORATION BEFORE THE DATE OF FILING OF ITS RETURN OF INCOME WHICH THE LEARNED AO FAILED TO APPRECIATE AND BY WRONGLY INVO KING THE PROVISION OF SECTION 43B OF THE ACT MADE THE ADDITION RS.29,54,941/-. THE ITA NO.2360/AHD/2010 (AY- 2001-02) ACIT (OSD)-I, RANGE 4, AHMEDABAD VS MARCK BIOSCIENC ES LTD. 8 LEARNED CIT(A) ON PROPER APPRECIATION OF THE FACTS OF THE CASE AS WELL AS THE PROVISIONS OF SECTION 43B OF THE ACT HAD DIR ECTED THE LEARNED AO TO DELETE THE ADDITION SO MADE BY THE LEARNED AO . FROM THE ABOVE DISCUSSIONS, WE FIND NO JUSTIFICATION TO INTE RFERE WITH THE FINDINGS OF THE LEARNED CIT(A). WE UPHOLD HIS FINDI NGS AND HEREBY DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 11. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15-02-2013 SD/- SD/- (G. C. GUPTA) VICE PRESIDENT (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANTA DEKA/ LAKSHMIKANTA DEKA/ LAKSHMIKANTA DEKA/ LAKSHMIKANTA DEKA/- -- - COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHME DABAD 1. DATE OF DICTATION: -DIRECT ON COMPUTER 16-01-1 3/24-01-13 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 24-01-2013 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: