M/s Pharma Logistics (Panchkula), Panchkula V. CIT, Panchkula

ITA 545/CHANDI/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68569 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 06-11-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 14-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: OM DUTT SHARMA
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI T.R.SOOD ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.545/CHD/2013 ASSESSMENT YEAR : 2008-09 M/S PHARMA LOGISTICS VS THE COMMIS SIONER OF INCOME TAX, (PANCHKULA), PANCHKULA. # 324, INDUSTRIAL AREA, PHASE II, PANCHKULA. PAN : AAJFP-1308F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI OM DUTT SHARMA RESPONDENT BY : SHRI MANJIT SINGH DATE OF HEARING : 06.11.2013 DATE OF PRONOUNCEMENT : 22.11.2013 O R D E R PER SUSHMA CHOWLA, JM THE APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX, DATED 20.03.2013 RELATI NG TO ASSESSMENT YEARS 2008-09 AGAINST THE ORDER PASSED U NDER SECTION 263 OF THE INCOME-TAX ACT, 1961 ( 'THE ACT' FOR SHO RT). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APPEAL : 1. THE LD. CIT(APPEALS) IS NOT JUSTIFIED IN INVOKI NG THE PROVISION OF SECTION 263 OF THE INCOME TAX ACT AND THEREBY SETTING ASIDE THE ASSESSMENT MADE BY THE ASSESSING OFFICER. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAD FURNISHED RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 10,1 7,330/- ON 05.09.2008 WHICH IN-TURN WAS PROCESSED UNDER SECTIO N 143(1) OF THE 2 ACT. THEREAFTER, THE ASSESSMENT IN THE CASE WAS CO MPLETED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 27.09.20 10 ON TOTAL INCOME OF RS. 11,66,432/-. THE ASSESSEE WAS A PART NERSHIP FIRM AND WAS WORKING AS C & F AGENT OF M/S GLENMARK PHARMACE UTICALS LTD. AND HAD RECEIVED COMMISSION FOR THE SERVICES PROVID ED BY IT. 4. THE COMMISSIONER OF INCOME TAX WAS OF THE VIEW T HAT THE ORDER PASSED BY THE ASSESSING OFFICER WAS BOTH ERRO NEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE ON THE FOLL OWING GROUNDS : (I) AS PER DETAILS OF TDS FILED BY THE ASSESSEE IN THE RETURN OF INCOME, IT RECEIVED COMMISSION OF RS. 43,12,507 FRO M M/S GLENMARK PHARMACEUTICALS LTD. HOWEVER, EVEN THOUGH THE TDS C ERTIFICATES DISCLOSE PAYMENT OF RS. 43,12,507, THE SUM OF RS. 37,02,366 HAS ONLY BEEN CREDITED TO THE PROFIT AND LOSS ACCOUNT. THUS, DIFFERENCE OF RS . 6,10,141 HAS NOT BEEN BROUGHT TO TAX. (II) DURING THE YEAR UNDER CONSIDERATION, THE ASSES SEE HAS RECEIVED RS. 37,02,366 ON ACCOUNT OF COMMISSION AND RS. 3,17,787 BY WAY OF RE-IMBURSEMENT OF EXPENSES. AS PER THE REPLY FURNISHED BY THE ASSE SSEE, THE NET PROFIT RATE FOR THE YEAR UNDER CONSIDERATION IS 27.1% AS COMPARED TO 11 .1% DECLARED IN THE PRECEDING YEAR. THE ASSESSING OFFICER HAS NOT CHECK ED THE REASON FOR THIS WIDE VARIATION. (III) THE ASSESSEE IS ACTING AS C&F AGENT OF M/S GL ENMARK PHARMACEUTICALS LTD. THE COPY OF AGREEMENT ENTERED INTO WITH THIS PHARMA CEUTICAL COMPANY HAS NOT BEEN OBTAINED NOR ANY ENQUIRY WAS MADE FROM THIS CO MPANY ABOUT THE ACTIVITIES UNDERTAKEN BY THE ASSESSEE, COMMISSION PAID/PAYABLE TO THE ASSESSEE FOR THE WORK DONE DURING THE YEAR AND THE DETAILS OF RE-IMBURSEM ENT OBTAINED. THUS, THE INCOME DISCLOSED BY THE ASSESSEE HAS BEEN ACCEPTED WITHOUT ANY SCRUTINY. 5. SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE AND EXPLANATION OF THE ASSESSEE HAS BEEN SUMMARIZED UNDER PARA 2 AT PAGES 2 TO 4 OF THE ORDER PASSED UNDER SECTION 263 OF THE ACT. THE COMMISSIONER OF INCOME TAX WAS OF THE VIEW THAT BECAUSE OF THE INCO NSISTENCY IN THE REPLIES GIVEN BY THE ASSESSEE AND DOCUMENTS FILED I N RESPECT OF REIMBURSEMENT OF EXPENSES, THE COMMISSIONER OF INCO ME TAX HELD 3 THAT THE ASSESSEE HAD NOT FOLLOWED PROPER SYSTEM OF ACCOUNTING WITH RESPECT TO THE VARIOUS RECEIPTS/REIMBURSEMENT RECEI VED FROM M/S GLENMARK PHARMACEUTICALS LTD. WHICH IN-TURN HAD RES ORTED IN UNDER STATEMENT OF INCOME. THE COMMISSIONER OF INCOME TA X ALSO NOTED THAT THE ASSESSING OFFICER HAD FAILED TO LOOK INTO THE DETAILS OF RECEIPTS VIS--VIS THE AGREEMENT WITH M/S GLENMARK PHARMACEUTICALS LTD. COPY OF THE SAID AGREEMENT WAS NOT FILED BY T HE ASSESSEE. THE FAILURE TO MAKE THE ENQUIRIES BY THE ASSESSING OFFI CER, AS PER THE COMMISSIONER OF INCOME TAX, MADE THE ORDER ERRONEOU S AND BECAUSE OF THE LEAKAGE OF REVENUE, THE ORDER WAS HELD TO BE PREJUDICIAL TO THE INTERESTS OF REVENUE. CONSEQUENTLY, THE COMMISSION ER OF INCOME TAX, IN EXERCISE OF THE POWERS UNDER SECTION 263 OF THE ACT, SET ASIDE THE ASSESSMENT TO BE MADE AFRESH AFTER PROPER VERIF ICATION OF THE DETAILS OF RECEIPTS FROM THE ASSESSEE AS WELL AS M/ S GLENMARK PHARMACEUTICALS LTD. 6. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT THE ISSUES RAISED BY THE COMMISSIONER OF INCOME TAX VIDE THE SHOW CAU SE NOTICE HAD BEEN CONSIDERED BY THE ASSESSING OFFICER WHILE COMP LETING THE ASSESSMENT AND THERE WAS NO MERIT IN THE ALLEGATION OF THE COMMISSIONER OF INCOME TAX. IN RESPECT OF THE FIRS T ISSUE, IT WAS POINTED OUT BY THE LD. AR FOR THE ASSESSEE THAT THE DIFFERENCE IN RECEIPTS AS PER THE PROFIT & LOSS ACCOUNT AND THE T DS CERTIFICATE WERE RE-CONCILIABLE. FIRST OF ALL, THE DIFFERENCE OF RS. 3,17,787/- REFERRED BY THE COMMISSIONER OF INCOME TAX WAS HELD CREDITED TO THE PROFIT & LOSS ACCOUNT IN ADDITION TO THE COMMISSION RECEIPTS SHOWN BY THE ASSESSEE. IN RESPECT OF THE OTHER TWO AMOUNT S, IT WAS POINTED OUT BY THE LD. AR FOR THE ASSESSEE THAT SUM OF RS. 158,893/- WAS THE REIMBURSEMENT RECEIVABLE RELATING TO THE FINANCIAL YEAR 2006-07 AND 4 THE SAME WAS SHOWN UNDER RECEIVABLES IN THE BALANCE SHEET FILED FOR ASSESSMENT YEAR 2007-08 PLACED AT PAGES 88 AND 90 O F THE PAPER BOOK. THE THIRD ITEM OF THE REIMBURSEMENT OF EXPEN SES TOTALED TO RS. 130,575/- RELATING TO THE YEAR UNDER APPEAL, DETAIL S OF WHICH WERE FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSME NT PROCEEDINGS AND OUR ATTENTION WAS DRAWN TO THE QUERY RAISED BY THE ASSESSING OFFICER AS PER ORDER-SHEET, DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THIS REGARD, COPY OF WHICH IS PLACED AT PAGES 1 TO 3 OF THE SECOND PAPER BOOK. 7. THE SECOND OBJECTION OF THE COMMISSIONER OF INCO ME TAX WAS THE INCREASE IN NET PROFIT RATE FROM 11.01% TO 27% WHICH AS PER THE LD. AR FOR THE ASSESSEE COULD NOT BE HELD TO BE PRE JUDICIAL TO THE INTEREST OF REVENUE. 8. THE THIRD OBJECTION OF THE COMMISSIONER OF INCOM E TAX WAS IN RESPECT OF THE COPY OF AGREEMENT NOT BEING FILED BY THE ASSESSEE. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT THERE WAS NO MERIT IN THE SAID STAND OF THE COMMISSIONER OF INCOME TAX AS THE SAID AGREEMENT WAS DULY REQUISITIONED BY THE ASSESSING OFFICER AS PER THE QUERY RAISED AS PER ORDER-SHEET PLACED AT PAGE 3 OF PAPER BOOK NO. 2 AND COPY OF THE SAME IS DULY AVAILABLE ON RECORD. 9. THE LD. DR FOR THE REVENUE PLACED RELIANCE ON TH E ORDER OF THE COMMISSIONER OF INCOME TAX. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RELAT ION TO THE EXERCISE OF POWERS UNDER SECTION 263 OF THE ACT. THE COMMIS SIONER OF INCOME TAX IS EMPOWERED TO EXERCISE THE SAID POWERS WHERE THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND AL SO PREJUDICIAL TO 5 THE INTEREST OF REVENUE. BOTH THE CONDITIONS I.E. THE ORDER OF THE ASSESSING OFFICER BEING ERRONEOUS AND BEING PREJUDI CIAL TO THE INTEREST OF REVENUE ARE TO BE SATISFIED SIMULTANEOU SLY. 11. IN THE FACTS OF THE PRESENT CASE, THE ORIGINAL ASSESSMENT IN THE CASE WAS COMPLETED UNDER SECTION 143(3) OF THE ACT. THE ASSESSEE FIRM WAS C & F AGENT OF /S M/S GLENMARK PHARMACEUTI CALS LTD. AND HAD DECLARED INCOME FROM COMMISSION FROM THE SAID C ONCERN. THE PERUSAL OF THE PROFIT & LOSS ACCOUNT PLACED AT PAGE 77 OF THE PAPER BOOK REFLECTS THAT IN ADDITION TO THE COMMISSION RE CEIPTS OF RS. 37,05,252/- THE ASSESSEE HAD REFLECTED REIMBURSEMEN T OF INVESTMENT AT RS. 317,787/- IN THE PROFIT & LOSS ACCOUNT. THE NEXT ITEM OF INVESTMENT RELATING TO FINANCIAL YEAR 2006-07 WHICH HAS DULY BEEN SHOWN AS RECEIVABLE IN THE BALANCE SHEET FOR THE YE AR ENDING 31.3.2007 IS PLACED AT PAGES 88-89 OF THE PAPER BOO K. 12. THE THIRD ITEM OF REIMBURSEMENT OF EXPENSES TOT ALED TO RS. 130,575/- RELATED TO THE FINANCIAL YEAR 2007-08 FOR WHICH THE ASSESSING OFFICER HAD REQUISITIONED THE ASSESSEE TO FURNISH THE DETAILS AS PER QUERY RAISED AS PER ORDER-SHEET. CO PY OF WHICH IS PLACED IN THE PAPER BOOK NO. II AT PAGES 1 TO 3. T HE DETAILS OF THE SAID EXPENDITURE WAS CONSIDERED BY THE ASSESSING OF FICER AND THEREAFTER THE ASSESSMENT IN THE CASE WAS COMPLETED ACCEPTING THE RECEIPTS SHOWN BY THE ASSESSEE. 13. THE COMMISSIONER OF INCOME TAX IN VIEW OF THE T DS CERTIFICATES FILED ALONGWITH THE RETURN OF INCOME W HICH REFLECTED COMMISSION OF RS. 43,12,507/- AS AGAINST COMMISSION OF RS. 37,02,366/- DECLARED IN THE PROFIT & LOSS ACCOUNT W AS OF THE VIEW THAT PART OF THE COMMISSION INCOME HAS NOT BEEN BRO UGHT TO TAX, HAD 6 ISSUED THE SHOW CAUSE NOTICE HOLDING THE ASSESSMENT FRAMED IN THE CASE TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERES T OF REVENUE. WE FIND NO MERIT IN THE STAND OF THE COMMISSIONER OF I NCOME TAX IN THIS REGARD, FIRSTLY BECAUSE OF THE FACT THAT THE ISSUE HAS BEEN DELIBERATED UPON BY THE ASSESSING OFFICER AND QUERIES HAVE BEEN RAISED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHICH HAS BEE N CONSIDERED BEFORE COMPLETING ASSESSMENT AND HENCE, THE ORDER C ANNOT, IN SUCH CIRCUMSTANCES, BE HELD TO BE ERRONEOUS. SECONDLY, THE ASSESSEE HAD, DURING THE ASSESSMENT PROCEEDINGS AND EVEN BEFORE U S HAD FILED COMPLETE EXPLANATION IN RESPECT OF THE ALLEGED DIFF ERENCE IN THE COMMISSION RECEIPTS WHICH PARTLY HAVE BEEN DECLARED IN THE PROFIT & LOSS ACCOUNT AND PARTLY RELATE TO THE EARLIER YEAR, WHICH HAD BEEN DECLARED IN THE PRECEDING YEAR AND PARTLY RELATE TO THE YEAR WHICH ARE IN CONNECTION WITH REIMBURSEMENT OF EXPENSES INCURR ED BY THE ASSESSEE ON ITS PRINCIPAL AND NOT BOOKED AS AN EXPE NDITURE BY THE ASSESSEE. HENCE, THERE IS NO MERIT IN THE ORDER OF REVISION UNDER SECTION 263 OF THE ACT PASSED BY THE COMMISSIONER O F INCOME TAX IN THIS REGARD. 14. THE SECOND ISSUE RAISED BY THE COMMISSIONER OF INCOME TAX WAS THAT THE ASSESSING OFFICER HAD FAILED TO RECONC ILE THE INCOME EARNED BY THE ASSESSEE AS NO COPY OF THE AGREEMENT WITH THE COMPANY HAD BEEN LOOKED INTO. WE FIND THAT THE ASSESSING O FFICER HAD RAISED A QUERY OF FURNISHING THE AGREEMENT WITH M/S GLENMA RK PHARMACEUTICALS LTD. VIDE ORDER SHEET ENTRY DATED 0 5.08.2010 COPY OF WHICH IS PLACED IN PAPER BOOK NO. II AT PAGES 1 TO 3 OF THE PAPER BOOK. THE ASSESSEE HAD FURNISHED THE SAID AGREEMEN T DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND COPY OF WHICH IS PLACED AT PAGES 22 TO 47 OF THE PAPER BOOK. IN VIEW OF THE ABOVESAID FACTS AND 7 CIRCUMSTANCES, WE FIND NO MERIT IN THE EXERCISE OF POWER UNDER SECTION 263 OF THE ACT BY THE COMMISSIONER OF INCOM E TAX IN THE PRESENT CASE. 15. THE THIRD OBJECTION RAISED BY THE COMMISSIONER OF INCOME TAX WAS IN RESPECT OF THE HIGHER NP RATE SHOWN BY THE A SSESSEE WHICH IN NO MANNER CAN BE HELD TO BE PREJUDICIAL TO THE INTE REST OF REVENUE WHERE HIGHER INCOME HAS BEEN DECLARED BY THE ASSESS EE. THE TWIN CONDITIONS PROVIDED UNDER SECTION 263 OF THE ACT BE ING NOT SATISFIED, WE FIND NO MERIT IN THE ORDER PASSED UNDER SECTION 263 OF THE ACT BY THE COMMISSIONER OF INCOME TAX. 16. IN THE TOTALITY OF THE ABOVESAID FACTS AND CIRC UMSTANCES, WE SET ASIDE THE ORDER PASSED UNDER SECTION 263 OF THE ACT AND ALSO CANCEL THE DIRECTIONS ISSUED BY THE COMMISSIONER OF INCOME TAX IN MAKING THE ASSESSMENT AFRESH AFTER PROPER VERIFICATION OF THE DETAILS OF RECEIPTS. THE GROUNDS OF APPEAL RAISED BY THE ASSE SSEE ARE THUS, ALLOWED. 17. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND NOVEMBER,2013. SD/- SD/- ( T.R.SOOD) (SUSHMA C HOWLA) ACCOUNTANT MEMBER JUDICIA L MEMBER DATED: 22 ND NOVEMBER,2013 POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR ITAT,CHD.