The ACIT, Cir. 8, Ahmedabad V. Torrent Pharmaceuticals Ltd., Ahmedabad

ITA 3145/AHD/2003

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0450 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 05-11-2009
• Assessment Year: 1995-1996
• Appeal Filed On: 31-07-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHELLEY JINDAL
• Keywords: Reopening of assessment; Bogus purchase; Revised return; Reason to believe
• Section: 143(3); 80HH; 147; 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI T.K.SHARMA, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER DATE OF HEARING: 5.11.2009 DRAFTED ON:10.11.2 009 ITA NO.3145/AHD/2003 ASSESSMENT YEAR : 1995-1996 A.C.I.T. CIR.8, 4 TH FLOOR, A WING, AJANTA COMMERCIAL CENTRE, ASHRAM RD., AHMEDABAD. VS. TORRENT PHARMACEUTICALS LTD. TORRENT HOUSE, NR. DINESH HALL, ASHRAM RD. AHMEDABAD. PAN/GIR NO. : 31-069-CY-4175 (APPELLANT) .. (RESPONDENT) CROSS OBJECTION NO.174/AHD/2004 ASSESSMENT YEAR : 1995-1996 TORRENT PHARMACEUTICALS LTD. TORRENT HOUSE, NR. DINESH HALL, ASHRAM RD. AHMEDABAD. VS. A.C.I.T. CIR.8, 4 TH FLOOR, A WING, AJANTA COMMERCIAL CENTRE, ASHRAM RD., AHMEDABAD. PAN/GIR NO. : 31-069-CY-4175 (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI SHELLEY JINDAL CIT D.R. RESPONDENT BY: SHRI S.N.SOPARKAR WITH SHRI VARDIK CHOKSHI O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE REVENUE AND CROSS O BJECTION FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT (A)-XIV, AHME DABAD DATED 21.05.2003 IN APPEAL NO.CIT(A)XIV/ACIT CIR.8/59/03-04. I TA NO.3545/AHD/2003 WITH C.O.NO.174/AHD/2004 M/S.TORRENT PHARMACEUTICALS LTD. ASST.YEAR -1995-96 - 2 - 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILE D A RETURN OF INCOME FOR ASSESSMENT YEAR 1995-96 ON 31.11.1995 SHOWING INCOM E OF RS.12,40,87,170/-. THE INCOME WAS ASSESSED AT RS.31,71,48,620/- UNDER SECTION 143(3) ON 30.03.1996. THEREAFTER, THE LEARNED ASSESSING OFFIC ER ISSUED NOTICE UNDER SECTION 148 OF THE ACT ON 15.03.2002 AND REOPENED T HE ASSESSMENT FOR THE REASON THAT SEARCH UNDER SECTION 132 WAS CARRIED OU T IN THE CASE OF SHRI NIKUNJ K. SHAH AND SHRI JITENDRA K. SHAH ON 24.09.1997 AND IT WAS FOUND THAT THEY WERE ISSUING BOGUS BILLS TO VARIOUS PARTIES INCLUDING THE ASSESSEE ON A PRE NEGOTIATED COMMISSION. THEY HAVE ISSUED BOGUS BILLS OF APPROXIM ATELY RS.2 CRORES TO THE ASSESSEE. THE LEARNED ASSESSING OFFICER FURTHER NOT ED THAT THE ASSESSEE HAS DECLARED INCOME OF RS.1.50 CRORES UNDER THE VOLUNTAR Y DISCLOSURE OF INCOME SCHEME 1997 AGAINST THE DEALING WITH THE PARTIES FL OATED BY THE SHRI NIKUNJ K. SHAH AND SHRI JITENDRA K. SHAH FOR ASSESSMENT YEAR 1995-96 AND 1996-97 AND EARLIER YEARS. IN THE ASSESSMENT YEAR 1997-98, THE ASSESSEE FILED REVISED RETURN DECLARING AN INCOME OF RS.20 LACS AGAINST THE BOGUS TRANSACTIONS. THE LEARNED ASSESSING OFFICER FOUND THAT SHRI NIKUNJ K. SHAH HA S STATED THAT HE HAS ISSUED BILLS FOR RS.2 CRORES TO THE ASSESSEE AND ASSESSEE DECLAR ED INCOME OF RS.1.70 CORERS AND THEREFORE, THE DIFFERENCE AMOUNT OF RS.30 LACS INCOME HAD ESCAPE ASSESSMENT. 3. THE LEARNED ASSESSING OFFICER FRAMED ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT ON 31.03.2003, WHE REIN HE OBSERVED AS UNDER:- 12. THE ASSESSEE COMPANY WAS ASKED TO GIVE DETAILS OF THE TRANSACTIONS DONE WITH VARIOUS BOGUS CONCERNS OF SHRI NIKUNJ SHAH AND SHRI JITENDRA SHAH. IT IS SEEN THAT THE ASSESSEE COMPANY HAS DEBITED THE FOLLOWING PURCHASES IN ITS BOOKS. S. NO. NAME OF THE PARTY BOGUS PURCHASES DEBITED IN THE BOOKS 1. SHRIKANT ASSOCIATES 4,26,560 2. K.B.SALES CORPO RATION 12,62,012 3. MANCHAND ENTERPRISE 9,71,645 4. UNNATI SALES CORPORATION 4,40,000 5. MADHUKANT ENTERPRISE 3,52,800 TOTAL 34,53,026 I TA NO.3545/AHD/2003 WITH C.O.NO.174/AHD/2004 M/S.TORRENT PHARMACEUTICALS LTD. ASST.YEAR -1995-96 - 3 - 13. THE ABOVE MENTIONED 5 CONCERNS OF SHRI NIKUNJ S HAH AND SHRI JITENDRA SHAH ARE BOGUS CONCERNS, WHICH ARE INVOLVED IN ISSU ING BOGUS BILLS TO PARTIES IN EXCHANGE FOR COMMISSION. SHRI NIKUNJ SHAH AND SHRI JITENDRA SHAH HAD CREATED SEVERAL BOGUS/PAPER ENTITIES AND SEVERAL BANK ACCOU NTS IN THE NAMES OF THESE BOGUS ENTITIES WERE OPENED. ON RECEIPT OF CHEQUE FR OM CUSTOMERS LIKE THE ASSESSEE COMPANY, THE SAME WERE EITHER DEPOSITED IN THE BANK ACCOUNTS OR DISCOUNTED THROUGH OTHER IN-HOUSE ENTITIES. THE CAS H WAS WITHDRAWN AS SOON AS THE CHEQUES WERE CLEARED AND AFTER DEDUCTING BROKER AGE, CASH WAS RETURNED TO THE CUSTOMER. THIS MODUS OPERANDI WAS ACCEPTED BY S HRI NIKUNJ AND SHRI JITENDRA SHAH DURING THE COURSE OF THEIR STATEMENTS RECORDED ON 6.08.1997 AND 3.10.1997. THE ENTIRE BUSINESS OF SHRI NIKUNJ SHAH AND SHRI JITENDRA SHAH CONSISTED OF ISSUING BOGUS BILLS AND NO GENUINE TRA NSACTIONS WERE DONE. 14. IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE PURC HASES OF RS.34,53,026/- DEBITED BY THE ASSESSEE COMPANY IN ITS BOOKS OF ACC OUNTS ARE BOGUS PURCHASES AND THE ASSESSEE COMPANY CANNOT BE ALLOWED TO CLAIM THE SAME. THE BOGUS PURCHASES OF RS.34,53,026/- ARE HEREBY DISALLOWED A ND ADDED BACK TO THE INCOME OF THE ASSESSEE COMPANY. 15. HOWEVER, VIDE SUBMISSIONS DATED 30.01.2003, THE ASSESSEE COMPANY STATED THAT WITH A VIEW TO AVOID LITIGATION ON THIS ISSUE, IT HAS SUO MOTO OFFERED RS.40 LAKHS UNDER THE VOLUNTARY DISCLOSURE OF INCOM E SCHEME 1997 AS OTHER RECEIVABLES. THE ASSESSEE COMPANY FURTHER STATES T HAT THE SUM OF RS.34.53 LAKHS IS ADEQUATELY COVERED BY ITS DISCLOSURE OF RS.40 LA KHS FOR A.Y. 1995-96. 4. IN APPEAL BEFORE THE LEARNED COMMISSIONER OF INC OME TAX(APPEALS), THE ASSESSEE CHALLENGED THE REOPENING OF ASSESSMENT UND ER SECTION 147 OF THE ACT STATING THAT IT WAS AB-INITIO VOID AND DESERVES TO BE CANCELLED. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) WHILE DECIDING THIS GROUND OF APPEAL HELD AS UNDER:- 6. NOW GOING THROUGH THE ASSESSMENT ORDER AND ALSO THE SUBMISSIONS MADE BY THE APPELLATE COMPANY, THE REOPENING WAS MADE ON THE BASIS OF THE INFORMATION RECEIVED FROM THE STATEMENT OF ONE MR.N IKUNJ SHAH. THE STATEMENT WAS RECORDED ON 06.08.1997. COPY OF THE SAID STATEM ENT WAS NEVER MADE AVAILABLE TO THE ASSESSEE COMPANY. IT IS AN IMPORTA NT FACT THAT EVEN AFTER THROUGH INVESTIGATION NO ADDITION HAS BEEN MADE ON THIS SCORE. THE APPELLATE COMPANY HAS ALREADY DISCLOSED THE TRANSACTIONS WITH SAID MR. NIKUNJ SHAH AND MR. JITENDRA SHAH AND THERE ASSOCIATE CONCERN UNDER THE VDIS97. IT WAS EXPLAINED THAT UNDER THE VDIS97 THAT APPELLANT COM PANY ITSELF HAS PASSED NECESSARY ENTRIES IN THE BOOKS OF ACCOUNT AND HAS C OMMUNICATED SUCH ENTRIES TO THE ASSESSING OFFICER. IT WAS ALSO EXPLAINED TO ME THAT THIS COMMUNICATION MADE TO THE ASSESSING OFFICER AND TO THE CIT. THE COMMIS SIONER, AFTER VERIFICATION OF THE FACT THAT ALL THE CONDITIONS OF THE VDIS97 HAV E BEEN FULFILLED, HAS ISSUED A I TA NO.3545/AHD/2003 WITH C.O.NO.174/AHD/2004 M/S.TORRENT PHARMACEUTICALS LTD. ASST.YEAR -1995-96 - 4 - CERTIFICATE. THIS CERTIFICATE IS NOT ONLY BINDING I N NATURE, BUT CANNOT BE ALTERED OR AMENDED. THE FACT OF SUCH CERTIFICATE HAVING BEEN I SSUED, COUPLED WITH THE FACT THAT ALL INFORMATION WITH REGARD TO SUCH DISCLOSURE HAVING BEEN GIVEN TO THE ADIT AS WELL AS ACIT, MAKES IT VERY CLEAR THAT THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE THE MATERIAL FACTS. 7. IN VIEW OF THE ENTIRE AFORESAID FACTS ONE CANNOT TAKE A VIEW THAT THE INCOME HAS ESCAPED WITHOUT COMPARING SUCH INFORMATI ON AVAILABLE ON RECORD WITH THAT OF INFORMATION COLLECTED FROM MR. NIKUNJ SHAH AND OTHERS. EVEN OTHERWISE, IT IS AN ADMITTED FACT THAT NO ADDITION HAS BEEN MADE EVEN AFTER THOROUGH INVESTIGATION IN THE REASSESSMENT PROCEEDI NGS, AND THEREFORE, THE BASIS OF REOPENING DOES NOT EXIST; AND WHEN THE BASIS OF REOPENING DOES NOT EXIST, THE REOPENING IS REQUIRED TO BE QUASHED AND ACCORDINGLY , THE SAME IS HEREBY QUASHED. 5. BEING AGGRIEVED BY THE ORDER OF THE LEARNED COMMI SSIONER OF INCOME TAX(APPEALS) THE REVENUE IS IN APPEAL BEFORE US BY TAKING THE FOLLOWING GROUND AS GROUND NO.1 OF THE APPEAL:- 1. THE LD. CIT(A) HAS ERRED IN LAW IN QUASHING THE ASSESSMENT ORDER MADE UNDER SECTION 143(3) R.W.S. 147 OF THE ACT. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) WAS NOT JUSTIFI ED IN QUASHING THE ASSESSMENT AS THE LEARNED ASSESSING OFFICER WAS OF THE VIEW THAT AFTER THE DISCLOSURE MADE BY THE ASSESSEE IN THE VDIS VERIFICA TION OF THE FIGURES WAS REQUIRED BY THE LEARNED ASSESSING OFFICER. IF THE A SSESSING OFFICER, HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPE D ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, ASSESS OR REASSESS SUCH IN COME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSME NT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDING S UNDER THIS SECTION. 7. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSE SSEE ON THE OTHER HAND SUBMITTED THAT AS NO ADDITION WAS MADE TO THE INCOME OF THE ASSESSEE ON THE GROUND FOR WHICH REASONS WERE RECORDED FOR INCO ME HAVING ESCAPED I TA NO.3545/AHD/2003 WITH C.O.NO.174/AHD/2004 M/S.TORRENT PHARMACEUTICALS LTD. ASST.YEAR -1995-96 - 5 - ASSESSMENT, THE VERY BASIS OF REOPENING DOES NOT SUR VIVE AND CONSEQUENTLY THE ORDER PASSED ALSO DOES NOT SURVIVE. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. I N THE INSTANT CASE, ORIGINALLY ASSESSMENT FOR THE ASSESSMENT YEAR 1995-96 WAS COMP LETED UNDER SECTION 143(3) VIDE ORDER DATED 30.03.1998. THE ASSESSMENT W AS REOPENED BY ISSUANCE OF NOTICE UNDER SECTION 148 DATED 15.03.2002. THE R EASONS RECORDED FOR REOPENING OF ASSESSMENT WAS AS UNDER: - REASONS FOR BELIEF THAT INCOME HAS ESCAPED ASSESSME NT SEARCH UNDER SECTION 132 WAS CARRIED OUT IN THE CAS E OF SHRI NIKUNJ K. SHAH AND SHRI JITENDRA K. SHAH ON 24.09.1997. IT WAS FOUND T HAT SHRI NIJUNJ SHAH AND SHRI JITENDRA SHAH WERE ISSUING BOGUS BILLS TO VARIOUS P ARTIES, INCLUDING M/S TORRENT PHARMACEUTICALS LTD. ON A PRE-NEGOTIATED COMMISSION BASIS. IN ANSWER TO QUESTION NO.2 OF HIS STATEMENT DATED 6.08.1997, SHR I NIKUNJ K.SHAH HAS MENTIONED THAT THEY HAVE ISSUED BOGUS BILLS OF APPR OXIMATELY RS.2 CRORES TO M/S.TORRENT PHARMACEUTICALS LTD. AS PER SPECIFIC INFORMATION CALLED FOR FROM THE ASS ESSEE ON THIS ISSUE, IT HAS BEEN INFORMED THAT THE ASSESSEE HAS DECLARED AN INCOME OF RS.1.50 CRORES UNDER THE VOLUNTARY DISCLOSURE OF INCOME SCHEME, 19 97, AGAINST THE DEALING WITH THE PARTIES FLOATED BY SHRI NIKUNJ AND SHRI JITENDR A SHAH FOR THE A.Y.S 1995-96, 1996-97 AND EARLIER YEARS. FOR A.Y. 1997-98, REVISE D RETURN WAS FILED, DECLARING AN INCOME OF RS.20 LAKHS AGAINST THE BOGUS TRANSACT IONS. AS PER THE STATEMENT OF SHRI NIKUNJ SHAH, THE TOTAL QUANTUM OF BOGUS BILLS ISSUED TO M/S. TORRENT PHARMACEUTICALS AMOUNTED TO RS.2CRORES. THERE REMAI NS A DIFFERENCE OF RS.30 LACS BETWEEN THE TOTAL DECLARATIONS MADE BY THE ASS ESSEE AND THE QUANTUM GIVEN BY SHRI NIKUNJ SHAH IN HIS STATEMENT. THIS DI FFERENCE NEEDS VERIFICATION. THEREFORE, THERE IS REASON TO BELIEVE THAT INCOME EXCEEDING RS.1 LAKH HAS ESCAPED ASSESSMENT, FOR FAILURE ON PART OF THE ASSE SSEE TO DISCLOSE FULLY AND TRULY, ALL FACTS MATERIAL TO THE COMPUTATION OF ITS INCOME . (SMITI SAMANI) ASST. COMMISSIONER OF INCOME TAX DATE: 15/3/2002 CIR.8, AHMEDABAD. 9. A PERUSAL OF THE REASSESSMENT ORDER AS PASSED BY THE LEARNED ASSESSING OFFICER SHOWS THAT NO ADDITION WAS MADE IN RESPECT OF THE ISSUE WHICH WAS RECORDED FOR REOPENING OF THE ASSESSMENT. THE LEARN ED ASSESSING OFFICER FOUND THAT THE PURCHASES SHOWN BY SHRI N.K.SHAH & GROUP, WAS RS.34,53,026/- AS I TA NO.3545/AHD/2003 WITH C.O.NO.174/AHD/2004 M/S.TORRENT PHARMACEUTICALS LTD. ASST.YEAR -1995-96 - 6 - AGAINST WHICH THE ASSESSEE HAS ALREADY DECLARED INC OME OF RS.40 LACS UNDER VDIS SCHEME 1997 FOR THE YEAR UNDER CONSIDERATION AND TH EREFORE, NO ADDITION ON THIS POINT IS WARRANTED. HOWEVER, THE LEARNED ASSESSING OFFICER OBSERVED THAT DEDUCTION UNDER SECTION 80HH AND 80I ALLOWED EARLIE R TO THE ASSESSEE WAS ALLOWED IN EXCESS INASMUCH AS DEDUCTION UNDER SECTI ON 80HH AND 80I ARE NOT ALLOWABLE WITH REFERENCE TO INTEREST INCOME, COMMIS SION INCOME AND OTHER INCOME. THE LEARNED ASSESSING OFFICER ACCORDINGLY, COMPLETED REASSESSMENT BY PARTLY DISALLOWING DEDUCTION ALLOWED TO THE ASSESSE E UNDER SECTION 80HH AND 80I OF THE ACT. WE THUS, FIND THAT IN THE REASSESSMENT FRAMED, NO ASSESSMENT WAS MADE IN RESPECT OF WHICH THE LEARNED ASSESSING OFFI CER RECORDED HIS REASONS TO BELIEVE ABOUT INCOME ESCAPING ASSESSMENT. IN THE ABO VE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THE IMPUGNED REASSESSMENT ORDER WAS NOT VALID AND BAD IN LAW. PROVISIONS OF SECTION 147 READS AS UNDER:- IF THE ASSESSING OFFICER, HAS REASON TO BELIEVE TH AT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SS. 148 TO 153, ASSESS OR REASSESS SU CH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSME NT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDING S UNDER THIS SECTION,. THUS, IT IS OBSERVED THAT LEARNED ASSESSING OFFICER CAN ASSESS OTHER INCOME WHICH ESCAPED ASSESSMENT AND WHICH WAS NOTICED BY H IM DURING THE COURSE OF REASSESSMENT ALONG WITH THE INCOME WHICH HAS ESCAPE D ASSESSMENT FOR WHICH REASON TO BELIEVE WAS FORMED AND RECORDED UNDER SECT ION 148(2) OF THE ACT. OUR ABOVE VIEW FINDS SUPPORT FROM THE DECISION OF THE HON 'BLE RAJASTHAN HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SHRI RAM SINGH (2008) 306 ITR 343 (RAJ). WE THEREFORE, CONFIRMED THE ORDER OF THE LEA RNED COMMISSIONER OF INCOME TAX(APPEALS) QUASHING THE REASSESSMENT FRAMED BY TH E LEARNED ASSESSING OFFICER ON 31.03.2003. THUS, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 10. IN VIEW OF OUR ABOVE DECISION IN RESPECT OF GROUN D NO.1 OF THE APPEAL OF THE REVENUE, OTHER GROUNDS OF APPEAL TAKEN BY THE RE VENUE IN ITS APPEAL AND THE I TA NO.3545/AHD/2003 WITH C.O.NO.174/AHD/2004 M/S.TORRENT PHARMACEUTICALS LTD. ASST.YEAR -1995-96 - 7 - GROUNDS TAKEN BY THE ASSESSEE IN THE CROSS OBJECTIO N ALL HAVE BECOME INFRUCTUOUS, ACADEMIC IN NATURE REQUIRING NO ADJUDI CATION BY US. ACCORDINGLY, ALL ARE DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE AS WELL AS THE CROSS OBJECTION OF THE ASSESSEE BOTH ARE DISMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 13/11/2009. SD/- SD/- ( T.K. SHARMA ) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 13/11/2009 PREPARED AND COMPARED BY: PARAS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-XIV, AHMEDABAD. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD