PACIFIC ORGANICS P.LTD, AMBERNATH V. JCIT RG 1, KALYAN

ITA 3443/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9021 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 05-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR RAIDR
• Assessee Lawyers: VIJAY MEHTAAR
• Keywords: Bogus purchase; Business income; Document seized; Accommodation entries; Documents seized
• Section: 40A(3); 153A; 10

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL IBENCH M UMBAI , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMB ER & RAVISH SOOD, JUDICIAL MEMBER ./3443/MUM/2015, /ASSESSMENT YEAR: 2011-12 PACIFIC ORGANICS PVT. LTD. N-4, ADDL., MIDC,ANANDNAGAR AMBERNATH (E)-420 501., PAN:AABCP 8168 Q VS. JCIT, RANGE 1 KALYAN.. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI SAURABH KUMAR RAI-DR ASSESSEE BY: SHRI VIJAY MEHTA-AR / DATE OF HEARING: 22.08.2017 / DATE OF PRONOUNCEMENT: 11.10.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) / PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED 19/03/2015,OF THE CIT(A )-2,THANE THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY,ENGAGED IN THE BUSI NESS OF MANUFACTURING OF CHEMICALS BROMIDE AND BROMINE ,FILED ITS RETURN OF INCOME ON 28/09/2011,DECLARING TOTAL INCOME AT RS. 80LAKHS.THE ASSESSING OFFICER (AO) COMPLETED THE AS SESSMENT U/S.143(3) OF THE ACT ON 05/ 02/2014,DETERMINING ITS INCOME AT RS.2.41 CRORES.TH E ASSESSEE HAD FILED REVISED GROUNDS OF APPEAL. BRIEF FACTS: 2. DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THA T PURCHASES REFLECTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE FROM CERTAIN PARTIES WERE NOT PROPERLY SUPPORTED WITH RELEVANT DOCUMENTS SUCH AS TRANSPORTATION BILLS,DELIVERY CHA LLANS AND GOODS RECEIVING NOTES. AN ACTION U/S.133A WAS CARRIED OUT AT THE BUSINESS PREMISES O F THE ASSESSEE. STATEMENTS OF THE MANAGING DIRECTOR OF THE COMPANY WERE RECORDED WHER EIN HE ADMITTED THAT PURCHASES WORTH RS. 1.61 CORRODES FOR THE YEAR UNDER CONSIDERATION WERE NOT GENUINE. THE AO OBSERVED THAT THE ASSESSEE HAD ONLY OPTED PURCHASE BILLS IN FORM OF ACCOMMODATION EMPTIES TO SUPPRESS THE INCOME, THAT GOODS WERE NEVER RECEIVED BY IT, THAT IT HAD DEBITED THE VALUE OF BOGUS PURCHASES IN ITS TRADING ACCOUNT. FINALLY HE MADE AN ADDITION OF RS.1,61,90,400/-TO THE TOTAL INCOME OF THE ASSESSEE. HE DID NOT ALLOW THE ASSESSEE TO CLAI M DEDUCTION OF THE SAID INCOME U/S.80 IB OF THE ACT. 2 2 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA). BEFORE HIM IT WAS ARGUED THAT DEDUCTION U/S. 80 IB WAS TYPE OF DEDUCTION UNDER CHAPTER VIA, THAT SAME WAS BASED ON INCOME FROM ELIGIBLE INDUSTRIAL UNDERTAKING, THAT IF ANY ADDITION WAS MADE TO THE B USINESS INCOME OF THE ASSESSEE SAME WOULD HELP TO BE DEEMED TO INCOME FROM BUSINESS OF THE UN DERTAKING,THAT SUCH INCOME WAS TO BE CONSIDERED WHILE WORKING OF DEDUCTION ALLOWABLE U/S .80 IB OF THE ACT. IT REFERRED TO THE CASE OF ALLIED INDUSTRIES (229 CTR 462) AND STATED THAT IT WAS MAINTAINING SEPARATE BOOKS OF ACCOUNTS TO FIND OUT PROFITS AND GAINS FROM INDUSTR IAL UNDERTAKING SEPARATELY ELIGIBLE FOR DEDUCTION U/S.80IB. IT ALSO FURNISHED DETAILS OF PU RCHASES MADE BY THE UNITS. IT WAS FURTHER ARGUED THAT MANUFACTURING WAS BEING CARRIED OUT THA T TWO PLACES I.E.BADALAPUR AND AMBERNATH, THAT THE BURGLAR PER UNIT WAS PERMANENTL Y REGISTERED AS SMALL SCALE INDUSTRIES, THAT IT HAD STARTED ITS COMMERCIAL PRODUCTION FROM AY.20 02-03, THAT THE ASSESSEE HAD CLAIMED DEDUCTION U/S.80 IB FOR 10 CONSECUTIVE YEARS FOR TH E PROFIT DERIVED FROM ELIGIBLE UNIT, THAT DISALLOWANCE WAS ADDED AS BUSINESS INCOME OF THE AS SESSEE,THAT IT WAS ENTITLED FOR DEDUCTION. AFTER CONSIDERING THE AVAILABLE MATERIAL, THE FAA H ELD THAT THE ADDITION MADE ON ACCOUNT OF ACCOMMODATION ENTRIES BY WAY OF INTRODUCING BOGUS P URCHASES HAD NOT BEEN CHALLENGED BY THE ASSESSEE, THAT THE ONLY DISPUTE WAS REGARDING G RANTING OF DEDUCTION U/S.80 IB OF THE ACT, THAT THE DEDUCTION IS NOT ALLOWABLE AS THE TRANSACT IONS WERE ONLY ACCOMMODATION ENTRIES, THAT THERE WAS NO BASIS FOR CONSIDERING THE SAME AS BUSI NESS RECEIPT, THAT INCOME ARISING ON ACCOUNT OF ADDITION OF ACCOMMODATION ENTRIES BY WAY OF INTRODUCING BOGUS PURCHASES COULD NOT BE CONSIDERED AS INCOME ELIGIBLE FOR DEDUCTION U/S.80 IB OF THE ACT,, THAT DEDUCTION WAS AVAILABLE FOR THE PROFITS DERIVED FROM THE BUSINESS ACTIVITIES,THAT IT WAS NOT ENTITLED FOR DEDUCTION.FINALLY, HE UPHELD THE ORDER OF THE AO. 4. DURING THE COURSE OF HEARING BEFORE US,THE AUTHORIS ED REPRESENTATIVE (AR) REFERRED TO THE REVISED GROUNDS AND RAISED THE ISSUE OF CONFIRMING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF ALLEGED ACCOMMODATION PURCHASES.WE FIND THAT DURING THE SURVEY PROCEEDINGS AND THE ASSESSMENT PROCEEDINGS, THE MANAGING DIRECTOR O F THE COMPANY HAD ADMITTED THAT PURCHASE THE TUNE OF RS. 1.61 CRORES WERE NOT GENUI NE, THAT IT WOULD PAY TAXES ACCORDINGLY BUY THE PEACE OF MIND.EVEN BEFORE THE FAA THE ISSUE OF BOGUS PURCHASE WAS NOT AGITATED. THUS,THE ASSESSEE HAD CONCEDED THE ADDITION MADE BY THE AO ON ACCOUNT OF ACCOMMODATION ENTRIES.IN OUR OPINION, ONCE THE ASSESSEE CONCEDES AN ISSUE BEFORE THE LOWER AUTHORITIES IT CANNOT AGITATE THE SAME BEFORE THE TRIBUNAL. THEREF ORE,WE HOLD THAT THE GROUND OF APPEAL IS NOT ARISING OUT OF THE ORDER OF THE FAA.HENCE,WE DI SMISS GROUND NUMBER ONE. 3 3 SECOND GROUND OF APPEAL IS ABOUT NOT A11OWING DEDUC TION U/S.80 IB OF THE ACT IN RESPECT OF INCOME FROM THE ELIGIBLE UNIT.THE AR RELIED UPON TH E CASES OF GEM PLUS JEWELLERY INDIA LTD (330 ITR175)SURYA MERCHANTS LTD.(387ITR105).THE DEP ARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PRODUCE THE MATERIAL BEFORE US. WE FIND THE MD OF THE COMPANY HAD ADMITTED THAT THE ASSESSEE HAD O BTAINED FICTITIOUS BILLS WORTH RS. 1.61 CRORES, THAT THE AO HAD INCREASED THE INCOME OF THE ASSESSEE TO THAT EXTENT, THAT THE AO HAD DENIED THE BENEFIT OF SECTION 80 IB TO THE ASSESSEE WITH REGARD TO ENHANCED THE INCOME.WE FIND IN THE CASE OF GEM PLUS JEWELLERY INDIA LTD.( SUPRA) THE HONBLE BOMBAY HIGH COURT HAD DEALT WITH SIMILAR ISSUE.IN THAT MATTER BEFORE THE HONBLE COURT WAS AS TO WHETHER THE TRIBUNAL WAS JUSTIFIED IN DIRECTING THE AO TO GRANT THE EXEMPTION U/S.10A OF THE ACT ON THE ASSESSED INCOME,WHICH WAS ENHANCED DUE TO CERTAIN D ISALLOWANCE.DECIDING THE MATTER,THE HONBLE COURT HELD THAT THE CONTENTION OF THE REVEN UE THAT IN COMPUTING THE DEDUCTION U/S. 10A,THE ADDITION MADE ON ACCOUNT OF THE DISALLOWANC E OUGHT TO BE IGNORED,CANNOT BE ACCEPTED.IT WAS FURTHER OBSERVED THAT NO STATUTORY PROVISION TO THAT EFFECT HAVING BEEN MADE, THE PLAIN CONSEQUENCE OF THE DISALLOWANCE MADE BY T HE AO MUST FOLLOW. 5.1. WE WOULD ALSO LIKE TO REFER TO THE CASE OF SURYA MA CHINE LTD.(SUPRA).IN THAT MATTER THE ASSESSEE HAD FURNISHED A RETURN OF INCOME FOR THE A Y.2005-06,DECLARING INCOME OF RS.34, 89,935/-AFTER CLAIMING DEDUCTION OF RS.41,83,813 U/ S.80-IB OF THE ACT.INITIALLY THE CLAIM WAS ALLOWED BY THE AO.A SEARCH WAS CARRIED OUT ON THE P REMISES OF THE COMPANY AND CERTAIN INCRIMINATING DOCUMENTS WERE SEIZED.THE AO FOUND FR OM THE SEIZED DOCUMENTS THAT THERE WAS AN UNDISCLOSED INCOME OF RS. 5,68,80,271/-.ACCO RDINGLY, THE AO ISSUED A NOTICE U/S. 153A PURSUANT TO WHICH THE ASSESSEE FURNISHED A RET URN DECLARING INCOME OF RS.94,91,330/- AFTER CLAIMING A TOTAL DEDUCTION WHICH INCLUDED EXP ENSES OF RS. 3,99,61,041/- AND RS.60,27, 367/-,U/S. 80-IB OF THE ACT. THE AO DISALLOWED THE CLAIM AS THE ASSESSEE FAILED TO SATISFY THE CONDITION SET OUT IN SUB-SECTION (7) OF SECTION 80- IA OF THE ACT SINCE THE AUDIT REPORT WAS NOT SUBMITTED WITH THE RETURN WHICH WAS FILED.HE ALSO M ADE A DISALLOWANCE OF RS. 54,52,697/- ON THE GROUND THAT THE ASSESSEE HAD MADE CASH PAYMENT OF RS. 2,72,63,485/-CONTRARY TO THE PROVISIONS OF SECTION 40A(3) OF THE ACT.THE TRIBUNA L HELD THAT THE AUDIT REPORT FOR THE ENHANCED CLAIM HAD BEEN FURNISHED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS TOGETHER WITH THE PROFIT AND LOSS ACCOUNT AND BALANCE-SHEET DULY VERIFIED BY THE ACCOUNTANT.THE REQUIREMENT OF FILING THE AUDIT REPORT WAS MERELY D IRECTORY. IN REGARD TO THE DISALLOWANCE U/S. 40A(3),THE TRIBUNAL OBSERVED THAT SINCE THE DISALLO WANCE WAS DIRECTLY RELATABLE TO THE PROFIT, 4 4 THE BENEFIT OF DEDUCTION UNDER SECTION 80-IB OF THE ACT WAS TO BE ALLOWED. ON APPEAL THE HONBLE ALLAHABAD HIGH COURT HELD AS UNDER: .THAT THE AUDIT REPORT WAS FILED BEFORE PASSING O F THE ASSESSMENT ORDER. HENCE THE REQUIREMENT UNDER SECTION 80-IB WAS SATISFIEDTHAT THE ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80-IB IS ALLOWABLE IN RESPECT OF DISA LLOWANCE UNDER SECTION 40A(3) MADE ON THE UNDISCLOSED INCOME DECLARED IN CONSEQUENCE OF THE S EARCH. CONSIDERING THE ABOVE AND FOLLOWING RATIO OF TUDOR ANITTING WORKS (P. LTD) (46) TAXMANN.COM 390, WE ARE OF THE OPINION THAT THE ORD ER OF THE FAA CANNOT BE ENDORSED AND THE ASSESSEE IS ENTITLE FOR DEDUCTION CLAIMED BY IT U/S.80IB OF THE ACT.SECOND GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS PA RTLY ALLOWED ORDER PRONOUNCED IN T HE OPEN COURT ON 11 TH OCTOBER,2017. 11 , 2017 SD/- SD/- ( (( ( /RAVISH SOOD) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 11.10.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR I BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI. DATE INITIALS INITIAL 1. DRAFT DICTATED ON-DICTATION SHEETS ATTACHED/DIR ECT ON PC 22/8/17 2. DRAFT PLACED BEFORE AUTHOR 22/8/17 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5. APPROVED DRAFT COMES TO THE SR.PS 6. KEPT FOR PRONOUNCEMENT 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 1 1/10/2017 8. DATE ON WHICH FILE GOES TO THE A.R. FOR SIGNATUR E OF THE ORDER 9. DATE OF DISPATCH OF THE ORDER