VIPRA DRUGS P.LTD, MUMBAI V. ITO WD 8(3)(4), MUMBAI

ITA 3602/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3777 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: F
• Assessment Year: 2007-2008
• Appeal Filed On: 08-05-2013
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN
• Keywords: Rejection of books of accounts; Accommodation entries; Tax effect
• Section: 144

Judgement Text

, , F , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI , , , BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.3602/MUM/2013 ASSESSMENT YEAR: 2007-08 & ITA NO.614/MUM/2013 ASSESSMENT YEAR: 2009-10 VIPRA DRUGS P. LTD. 4101, OBEROI GARDAN ESTATE, SAKIVIHAR R.D. CHANDIALI ANDHERI(E) MUMBAI-400072 / VS. ITO WD 8(3)(4) AAYAKAR BHAVAN, MUMBAI ( APPELLANT ) (RESPONDENT ) P.A. NO. AACCV1960B APPELLANT BY SHRI VIMAL PUNMIYA ( D R) REVENUE BY SHRI ASGHAR ZAIN (DR) / DATE OF HEARING: 25/07/2016 / DATE OF ORDER: 11/08/2016 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THESE APPEALS HAVE BEEN FILED BY THE SAME ASSESSEE AGAINST DIFFERENT ORDERS OF LD. CIT(A). VIPRA DURGS PVT. LTD. 2 FIRST WE SHALL TAKE UP FOR A.Y. 2007-08 IN ITA NO.3602/MUM/2013 THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST ORDER OF LD. COMMISSIONER OF INCOME TAX(APPEALS) DATED 25 .02.2013 PASSED AGAINST THE PENALTY ORDER OF THE AO U/S 271( 1)(C) DATED 28.03.2012 FOR A.Y. 2007-08 ON THE FOLLOWING GROUND S: 1.LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERR ED IN CONFIRMING PENALTY LEVIED U/S 271(1)(C) OF THE ACT BY LEARNED ASSESSING OFFICER ON THE PLEA THAT THE APPE LLANT HAS FURNISHED INACCURATE PARTICULARS OF INCOME AND ALSO ALLEGED THAT APPELLANT HAS FAILED TO OFFER ANY EXPL ANATION. APPELLANT SUBMITS THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE SAI D PENALTY LEVIED U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 IS BAD IN LAW AND DESERVES TO BE DELETED. 2. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y SHRI VIMAL PUNMIYA, AUTHORISED REPRESENTATIVES (AR) ON BEHALF OF THE ASSESSEE AND BY SHRI ASGHAR ZAIN, DEP ARTMENTAL REPRESENTATIVE (DR) ON BEHALF OF THE REVENUE. 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE Y EAR UNDER CONSIDERATION ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING OF DRUGS AND PHARMACEUTICALS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO REJECTED THE BOOKS O F ACCOUNTS U/S 144(3) AND PASSED EX PARTE ORDER U/S 1 44 ON THE GROUND OF NOT BEING ABLE TO VERIFY THE TRANSACTIONS . ACCORDINGLY, THE AO HELD THAT ASSESSEE WAS IN THE B USINESS OF ACCOMMODATION ENTRIES AND INCOME WAS QUANTIFIED @ 2 % OF THE PURCHASES. 3.1. BEING AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) AGAINST THE ADDITION MADE BY THE AO WHEREIN VIPRA DURGS PVT. LTD. 3 LD. CIT(A) PARTLY ACCEPTED THE ORDER OF THE AO BY U PHOLDING REJECTION OF BOOKS OF ACCOUNTS, BUT DETERMINED THE INCOME @ 1% OF PURCHASE AS AGAINST 2% ASSESSED BY THE AO. IT WAS SUBMITTED BY THE LD. COUNSEL THAT SINCE TAX EFFECT WAS LOW THEREFORE, NO APPEAL IN QUANTUM WAS PREFERRED AGAIN ST THE ORDER OF LD. CIT(A) BEFORE THE TRIBUNAL. SUBSEQUENT LY, THE AO INITIATED PENALTY PROCEEDINGS AND PASSED EX-PARTE P ENALTY ORDER U/S 271(1)(C) LEVYING THE PENALTY OF RS.3,18, 457/- ON THE AMOUNT OF ADDITION SUSTAINED BY THE LD. CIT(A). 3.2. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A) WHERE NO RELIEF WAS GIVEN AND PENALTY ORDER WAS CONFIRMED. 3.3. BEING AGGRIEVED AGAIN, THE ASSESSEE FILED APPEAL B EFORE THE TRIBUNAL. DURING THE COURSE OF HEARING IT WAS SUBMI TTED BY THE LD. COUNSEL THAT IT IS A CASE WHERE ADDITION WAS MA DE ON SURMISES AND CONJUNCTURES DESPITE THE FACT THAT COM PLETE EVIDENCES WERE BROUGHT ON RECORD. THE ADDITION WAS MADE ON ESTIMATE BASIS AND THE ESTIMATE MADE BY THE AO WAS ALSO CHANGED BY THE LD. CIT(A) AND NO ADVERSE MATERIAL A T ALL WAS FOUND BY THE AO WHICH COULD SUPPORT THE BALD ALLEGA TION MADE BY THE AO IN THE ASSESSMENT ORDER. UNDER THESE CIRCUMSTANCES, LEVY OF PENALTY WAS HIGHLY UNJUSTIFI ED. PER CONTRA, LD. DR SUPPORTED THE ORDERS OF THE LOWER AU THORITIES. 3.4. WE HAVE GONE THROUGH THE FACTS OF THIS CASE. IT IS NOTED THAT THE ASSESSEE MADE PURCHASES DURING THE YEAR FR OM FOUR SUPPLIERS; OUT OF THESE ONE OF THE SUPPLIERS NAMELY M/S. ARCH PHARMALABS LTD., FROM WHOM THE ASSESSEE HAD MADE 80 % OF ITS TOTAL PURCHASES, HAD CONFIRMED THE TRANSACTION AS HAS BEEN VIPRA DURGS PVT. LTD. 4 ACCEPTED BY THE AO ALSO. IT IS FURTHER NOTED THAT A DMITTED FACTS ARE THAT ASSESSEE PLACED ON RECORD EXHAUSTIVE EVIDE NCES FROM ALL THE FOUR SUPPLIERS IN SUPPORT OF THE PURCHASES I.E. CONFIRMATIONS, COPY OF BILLS, LEDGER ACCOUNTS, DELI VERY CHALLANS AND VAT RETURNS ETC. THE ACCOUNTS OF THE ASSESSEE A RE AUDITED AND TAX AUDIT REPORT AS WELL AS STATUTORY AUDIT REP ORT WAS SUBMITTED BEFORE THE AO. IT IS FURTHER NOTED BY US THAT EXHAUSTIVELY MAINTAINED STOCK REGISTER WAS PRODUCED BEFORE THE AO, SHOWING QUANTITATIVELY RECONCILIATION OF PU RCHASES AND SALES. ALL THE TRANSACTIONS OF PURCHASES AND SALES HAVE BEEN MADE THROUGH BANKING CHANNELS AND NO CASH WAS DEPOS ITED OR WITHDRAWN FROM THE BANK ACCOUNTS EXCEPT FOR PETTY C ASH EXPENSES. THESE EVIDENCES HAVE NOT BEEN REBUTTED BY THE AO. THE ONLY ALLEGATION MADE BY THE AO WAS THAT SUPPLIE RS WERE NOT PRODUCED AND TRANSPORT BILLS WERE NOT SUBMITTED . IT IS NOTED THAT ASSESSEE BROUGHT ON RECORD ALL THE EVIDE NCES WHICH WERE NOT CONTROVERTED BY THE AO. WITH REGARD TO TRA NSPORT EXPENSES, IT WAS SUBMITTED THESE WERE NOT INCURRED BY THE ASSESSEE, AND THEREFORE THESE WERE NOT DEBITED IN T HE PROFIT AND LOSS ACCOUNT. IT WAS FURTHER SUBMITTED THAT ASS ESSEE AS WELL AS SUPPLIERS WERE HAVING GODOWN IN THE SAME AR EA I.E. BHIWANDI AND THEREFORE, NO MAJOR TRANSPORTATION WAS INVOLVED. 3.5. WE HAVE EXAMINED THE ENTIRE FACTS AND CIRCUMSTANCE S OF THE CASE AND FIND THAT THE PENALTY ORDER IS HIGHLY UNFAIR AND UNJUSTIFIED FOR VARIOUS REASONS. FIRST OF ALL, THE ADDITION IS MADE PURELY ON ESTIMATE BASIS AND EVEN THAT ESTIMAT E ITSELF HAS BEEN CHANGED BY LD. CIT(A); THE ADDITION WAS MA DE @ 2% OF PURCHASES WHICH HAS BEEN REDUCED TO 1% BY LD. CI T(A). VIPRA DURGS PVT. LTD. 5 FURTHER, NO INCRIMINATING MATERIAL HAS BEEN BROUGHT ON RECORD BY THE AO BEFORE MAKING SERIOUS ALLEGATIONS OF ACCO MMODATION BUSINESS. FURTHER, ASSESSEE HAS SUBMITTED OVERWHELM ING EVIDENCES IN SUPPORT OF ITS CLAIM WHICH HAVE NOT BE EN NEGATED BY THE AO BEFORE REJECTING THESE EVIDENCES EX-PARTE . THE CASE OF THE ASSESSEE HAS NEITHER BEEN DISPROVED NOR PROV ED TO BE FALSE BY THE AO. UNDER THESE CIRCUMSTANCES, IT CANN OT BE SAID AT ALL THAT THERE WAS ANY TYPE OF CONCEALMENT OF IN COME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME BY T HE ASSESSEE. THEREFORE, PENALTY LEVIED BY THE AO BEING CONTRARY TO LAW AND FACTS IS DELETED. NOW, WE SHALL TAKE UP APPEAL FILED BY THE ASSESSEE IN ITA NO.614/MUM/2013 FOR A.Y. 2009-10: 4. THIS APPEAL IS FILED AGAINST THE ORDER PASSED BY T HE LD. CIT(A) DATED 12.12.2012 PASSED AGAINST ASSESSMENT O RDER OF THE AO U/S 144 DATED 23.12.2011 ON THE FOLLOWIN G GROUNDS: 1.THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE REJECTION OF BOOKS OF ACCOUN T OF THE APPELLANT WITHOUT RECORDING ANY PROCEEDING OF H AVING EXAMINED THE BOOKS OF ACCOUNT. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE INVOKING THE PROVISIONS OF S ECTION 144 OF THE INCOME TAX ACT, 1961. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFI CER IN RESPECT OF THE ESTIMATION OF COMMISSION INCOME @ 1% ON SALES AND PURCHASE TRANSACTION AT RS.41 42,000. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT APPRECIATING THE FACTS OF THE CASE AND THE HISTORY OF PROCEEDINGS OF EARLIER YEARS BEFORE ARRI VING AT THE CONCLUSION FOR THE YEAR UNDER CONSIDERATION. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, AND/OR DELETE ALL OR ANY OF THE FORGOING GROUNDS OF APPEAL . VIPRA DURGS PVT. LTD. 6 5. IN THIS CASE, THE AO HAD MADE ADDITION OF 1% ON SA LE AND PURCHASE TRANSACTIONS SEPARATELY AGGREGATING TO RS.41,42,000/-, AFTER REJECTING THE BOOKS OF ACCOUN T AND PASSING EX PARTE ASSESSMENT ORDER U/S 144. THE MAIN ALLEGATION OF THE AO WAS THAT AS PER HIS VIEW, THE BUSINESS DONE BY THE ASSESSEE WAS NOT GENUINE AND IT WAS BUS INESS OF ACCOMMODATION ENTRIES. LD. CIT(A) ENDORSED THE ORDE R OF THE AO WITHOUT ANY PROPER REASONING AND WITHOUT DISCUSS ING EVIDENCES SUBMITTED BY THE ASSESSEE. 5.1. WE HAVE GONE THROUGH THE ORDERS PASSED BY THE LOWE R AUTHORITIES AND FOUND THE SAME TO BE ILLEGAL AND CO NTRARY TO LAW AND FACTS. IT IS NOTED THAT BOOKS OF THE ASSESS EE ARE DULY AUDITED; THE SALE AND PURCHASE ARE DULY SETTLED THR OUGH PROPER BANKING CHANNELS. IT IS FURTHER NOTED BY US THAT NO NE OF THE AUTHORITIES BROUGHT ON RECORD ANY MATERIAL OR DOCUM ENTARY EVIDENCES TO REACH ON THE CONCLUSION THAT ASSESSEE WAS ENGAGED IN THE BUSINESS FOR PROVIDING ACCOMMODATION ENTRIES. NO BASIS WHATSOEVER HAS BEEN PROVIDED FOR ESTIMATIN G THE INCOME OF THE ASSESSEE THAT TOO @ 1% OF PURCHASES A ND 1% OF SALES. THE ASSESSEE HAD PRODUCED WITH RESPECT TO AL L THE PARTIES, COPY OF LEDGER ACCOUNTS, VAT RETURNS, SALE S AND PURCHASE INVOICES, RENT AGREEMENTS, REQUISITE INFOR MATION FROM INTERNET TO ESTABLISH THAT SOME OF THESE PARTIES EX ISTED ON THE NET ALSO. THE SALES TAX DEPARTMENT IN THE CASE OF A LL THESE SUPPLIERS HAD ACCEPTED THEIR SALES OF RETURNS. THE ASSESSEE SUBMITTED STOCK REGISTER SHOWING QUANTITATIVE RECON CILIATION OF PURCHASE AND SALES. COPIES OF AUDITED ACCOUNTS AND AUDIT VIPRA DURGS PVT. LTD. 7 REPORT WERE ALSO SUBMITTED. IT IS ALSO NOTED THAT T HE AO HAD ISSUED INQUIRY LETTERS TO THESE PARTIES AND MOST OF THE PARTIES RESPONDED POSITIVELY TO THE AO. NONE OF THE PARTIES DECLINED THE TRANSACTIONS OR GAVE ANY KIND OF NEGATIVE REPLY . THE ADDITION HAS BEEN MADE BY THE AO AND CONFIRMED BY L D. CIT(A) ON SURMISES, CONJECTURES AND IRRELEVANT CONS IDERATIONS AND WITHOUT CONSIDERING OR REJECTING OVERWHELMING E VIDENCES SUBMITTED BY THE ASSESSEE. WE FIND THE ADDITION TO BE WHOLLY ILLEGAL AND UNJUSTIFIED AND THEREFORE SAME IS DIREC TED TO BE DELETED. 6. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSES SEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH AUGUST, 2016. SD/- (AMIT SHUKLA ) SD/- (ASHWANI TANEJA) ! / JUDICIAL MEMBER ' ! / ACCOUNTANT MEMBER MUMBAI; # DATED : 11/08/2016 CTX? P.S/. .. #$%&'(')% / COPY OF THE ORDER FORWARDED TO : 1. % &' / THE APPELLANT 2. ()&' / THE RESPONDENT. 3. * * ( % ) / THE CIT, MUMBAI. 4. * * / CIT(A)- , MUMBAI 5. -. / (01 , * % 012 , / DR, ITAT, MUMBAI 6. / 34 5 / GUARD FILE. / BY ORDER, ) -% ( //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI