Lincoln Pharmaceuticals Ltd., Ahmedabad V. The Dy.CIT.,(OSD)-1 Circle-4, Ahmedabad

ITA 3453/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8467 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-07-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 10-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUDIT NAGAL
• Assessee Lawyers: A C SHAH
• Keywords: Gift; Additional evidence

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./ ITA NO.3453/AHD/2015 / ASSTT. YEAR: 2011-12 LINCOLN PHARMACEUTICALS LTD. LINCOLN HOUSE B/H. SHYAM COMPLEX SCIENCE CITY ROAD SOLA, AHMEDABAD 380 060. PAN : AAACL 2711 N VS. DCIT (OSD)-1 CIRCLE-4 (NEW CIR.2(1)(2) AHMEDABAD. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI A.C. SHAH, AR REVENUE BY : SHRI MUDIT NAGAL, SR.DR ! / DATE OF HEARING : 17/07/2017 '#$ ! / DATE OF PRONOUNCEMENT: 12/09/2017 %& / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: ASSESSEE IS IN APPEAL AGAINST ORDER OF LD.CIT(A)2, AHMEDABAD DATED 5.11.2015 PASSED FOR THE ASSTT.YEAR 2011-12. 2. SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CI T(A) HAS ERRED IN CONFIRMING ADDITION OF RS.1,25,04,572/- WH ICH WAS ADDED BY THE AO BY MAKING A DISALLOWANCE OUT OF SALES PRO MOTION EXPENSES. ITA NO.3453/AHD/2015 2 3. THE ASSESSEE HAS MOVED AN APPLICATION FOR ADMISS ION OF ADDITIONAL EVIDENCE. COPY OF THE APPLICATION AND D OCUMENTS SOUGHT TO BE PRODUCED BY WAY OF ADDITIONAL EVIDENCE WERE SUPPLIED TO THE LD.DR. IN SUPPORT OF THE APPLICATI ON THE ASSESSEE HAS FILED AN AFFIDAVIT OF SHRI TEJAS MEHTA, CHARTER ED ACCOUNTANT, WHO REPRESENTED THE ASSESSEE BEFORE THE AO. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING, MARKETING AND TRADING OF PHARMACEUTI CAL PRODUCTS. IT HAS FILED ITS RETURN OF INCOME ON 19.9.2011 DECL ARING TOTAL INCOME AT RS.3,23,33,453/-. THIS RETURN WAS REVISE D ON 26.9.2012 AND INCOME WAS REVISED TO RS.2,77,45,974/ -. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMEN T AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED AND SERV ED ON 3.8.2012. INCUMBENT IN THE CHAIR OF THE AO HAS CHA NGED, THEREFORE, A FRESH NOTICE UNDER SECTION 143(2) WAS ISSUED ON 12.8.2013. ON SCRUTINY OF THE ACCOUNTS, IT REVEALE D TO THE AO THAT THE ASSESSEE HAS CLAIMED SALES PROMOTION EXPENSES T O THE TUNE OF RS.4.19 CRORES. VIDE ORDER SHEET DATED 5.2.2014 TH E LD.AO DIRECTED THE ASSESSEE TO SUBMIT DETAILS OF ALL THES E EXPENDITURES ALONG WITH DOCUMENTARY EVIDENCE. ACCORDING TO THE ASSESSEE IT HAS SUBMITTED DETAILS AND AFTER PERUSAL OF THE DETA ILS, THE LD.AO FOUND THAT A SUM OF RS..1,25,04,573/- REPRESENTING THE EXPENDITURE INCURRED TOWARDS GIFTS ARTICLES ALLEGED LY GIVEN TO CHEMISTS, STOCKISTS AND RETAILERS REQUIRED FURTHER PROBE. THE AO DIRECTED THE ASSESSEE VIDE ORDER SHEET DATED 26.2.2 014 TO SUBMIT NAMES, ADDRESSES AND DETAILS OF GIFT ITEMS GIVEN TO SUCH CHEMISTS, STOCKISTS AND RETAILERS. ACCORDING TO THE ASSESSEE IT HAS SUBMITTED DETAILS AND COPY OF VARIOUS SCHEMES UNDER WHICH SUC H GIFTS WERE ITA NO.3453/AHD/2015 3 GIVEN. THE LD.AO WAS NOT SATISFIED WITH THE EXPLAN ATION OF THE ASSESSEE, HE THEREFORE, CONFRONTED THE ASSESSEE VID E SHOW CAUSE NOTICE DATED 13.3.2014 AS TO WHY THIS EXPENDITURE B E NOT DISALLOWED TO THE ASSESSEE. THE LD.AO ALSO RELIED UPON THE GUIDELINES ISSUED BY MEDICAL COUNCIL OF INDIA, JUDG MENT OF HIMACHAL PRADESH HIGH COURT. IN HIS OPINION, THE A SSESSEE FAILED TO DEMONSTRATE BUSINESS EXIGENCY FOR GIVING SUCH GI FTS. HE DISALLOWED THE CLAIM OF THE ASSESSEE AND MADE ADDIT ION OF RS.1,25,04,572/-. APPEAL TO THE CIT(A) DID NOT BRI NG ANY RELIEF TO THE ASSESSEE. 5. IT EMERGES OUT FROM THE RECORD THAT THE LD.CIT(A ) HAS LISTED THE APPEAL ON FIVE TO SIX OCCASIONS. THE DATES WER E DULY INTIMATED THROUGH SHOW CAUSE NOTICE, BUT EVERY TIME ASSESSEE SOUGHT ADJOURNMENT. ON THE LAST OCCASION, NEITHER ANYBODY WAS APPEARED NOR ANY ADJOURNMENT APPLICATION FILED. AC CORDINGLY, THE LD.CIT(A) DECIDED THE APPEAL EX PARTE . THE LD.CIT(A) HAD CONCURRED WITH THE AO AND CONFIRMED THE DISALLOWANC E. BEFORE THE LD.CIT(A) IT WAS SUBMITTED THAT DOMESTIC TURNOV ER OF THE COMPANY INCREASED FROM 1.74 CRORES IN F.Y.2009-10 T O RS.152 CRORES IN F.Y.2010-11. IN OTHER WORDS, THERE IS AN INCREASE OF 42% IN THE TURNOVER DUE TO EFFORTS BY THE MANAGEMEN T AND INCREASED SALE ACHIEVED BY THE CHEMISTS AND RETAILE RS. THESE ARTICLES WERE GIVEN UNDER THE SALE PROMOTION SCHEME S. THE AO DID NOT PROVIDE PROPER OPPORTUNITY FOR SUBMITTING D ETAILS, OTHERWISE, THE ASSESSEE HAS COMPLETE DETAILS I.E. L IST OF ALL THE STOCKISTS, RETAILERS AND CHEMISTS. THE LD.AO HAS A PPLIED GUIDELINES ISSUED BY THE MEDICAL COUNCIL OF INDIA WHICH IS MEA NT FOR DOCTORS. THE ASSESSEE HAS NOT GIVEN GIFTS TO DOCTORS. RATHE R, THESE WERE GIVEN TO THESE STOCKISTS, CHEMISTS, RETAILERS ETC. THE LD.COUNSEL FOR ITA NO.3453/AHD/2015 4 THE ASSESSEE PRAYED THAT EVIDENCES COMPILED IN 108 PAGES AND PLACED IN THE PAPER BOOK BE TAKEN ON RECORD AND THE ISSUE BE REMITTED TO THE FILE OF THE AO FOR RE-ADJUDICATION. THE LD.DR CONTENDED THAT THE AO HAS GIVEN SUFFICIENT TIME TO THE ASSESSEE FOR SUBMITTING THESE DETAILS, BUT IT FAILED TO SUBM IT THESE DETAILS, AND THEREFORE, THE AO HAS RIGHTLY DISALLOWED THE CL AIM OF THE ASSESSEE. HE ALSO POINTED OUT THAT NO-ONE HAS PROH IBITED THE ASSESSEE TO SUBMIT DETAILS ALONG WITH APPEAL BEFORE THE LD.CIT(A), BUT THE ASSESSEE HAS TAKEN ALMOST SEVEN ADJOURNMENT S IN SIX MONTHS PERIOD. IT DID NOT PRODUCE ANYTHING, THERE FORE, IT IS NOT ENTITLED FOR PRODUCING THESE DOCUMENTS ON RECORD. 6. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD CAREFULLY. WE FIND THAT FIRST DATE ON W HICH THE AO HAS CALLED FOR DETAILS WITH REGARD TO THESE ITEMS OF EX PENDITURE IS RS.5.2.2014. THE ASSESSEE HAS SUBMITTED DETAILS. THE AO WAS SATISFIED TO SOME EXTENT. BECAUSE, HE WAS INVESTIGA TING THE DETAILS OF SALES PROMOTION EXPENSES TO THE EXTENT O F RS.4.19 CRORES. OUT OF THAT, HE DOUBTED RS.1.25 CRORES. T HEREAFTER, THE LD.AO CALLED FOR DETAILS VIDE ORDER SHEET DATED 26. 2.2014. THE ASSESSEE HAS GIVEN DETAILS AND ULTIMATELY A SHOW CA USE NOTICE INVITING EXPLANATION OF THE ASSESSEE, AS TO WHY THI S EXPENDITURE SHOULD NOT BE DISALLOWED WAS ISSUED ON 13.3.2014. T HE LD.AO HAS PASSED THE ASSESSMENT ORDER ON 28.3.2014. IT SUGGE STS THAT TIME GAP OF 15 DAYS WAS GIVEN TO THE ASSESSEE FOR SUBMIT TING DETAILS. THESE GIFTS WERE GIVEN THROUGHOUT INDIA. IT IS QUI TE IMPOSSIBLE TO COLLECT DETAILS IN SUCH A SHORT SPAN OF TIME. THIS AO DID NOT GRANT PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE. HE ISSUED A SHOW CAUSE NOTICE UNDER SECTION 143(2) OF THE ACT ON 3.8 .2012, BUT THEREAFTER ASSESSMENT PROCEEDINGS REMAINED DORMANT. THESE ITA NO.3453/AHD/2015 5 WERE REVIVED VIDE ORDER SHEET ENTRY DATED 5.2.2014. THE AO HAD ISSUED QUESTIONNAIRES UNDER SECTION 142(2) ON 10.1. 2013, 28.5.2013 AND 12.8.2013. BUT IT APPEARS THAT THERE WAS NO SYSTEMATIC HEARING TAKEN PLACE. WE HAVE GONE THROU GH THE DETAILS SOUGHT TO BE PRODUCED BY WAY OF ADDITIONAL EVIDENCES. WE FEEL THAT FOR A JUST DECISION ON THIS DISPUTE, THEY ARE ESSENTIAL DOCUMENTS. THEREFORE, WE TAKE THEM ON RECORD. 7. BEFORE CONSIDERING THESE DETAILS ON MERIT, AN OPP ORTUNITY IS TO BE GIVEN TO THE AO FOR EXAMINATION OF DOCUMENTS AS WELL AS ADDUCING ANY OTHER EVIDENCE IN REBUTTAL. CONSIDERI NG THESE PROCEDURAL ASPECTS, WE DEEM IT APPROPRIATE TO SET A SIDE THIS ISSUE TO THE FILE OF THE AO FOR RE-ADJUDICATION. THE ASS ESSEE WILL BE AT LIBERTY TO SUBMIT ANY OTHER EVIDENCE IN SUPPORT OF ITS CLAIM BEFORE THE LD.AO. THE LD.AO SHALL DECIDE THE ISSUE AFRESH AFTER PROVIDING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. OBSERVATION MADE BY US WILL NOT IMPAIR OR INJURE T HE CASE OF THE AO, AND WILL NOT CAUSE ANY PREJUDICE TO THE DEFENSE/EXPLANATION OF THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON 12 TH SEPTEMBER, 2017. SD/- SD/- (N.K. BILLAIYA) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 12/09/2017