ACIT., CENT.CIR.42, MUMBAI V. PAM PHARMACEUTICALS & ALLIED MACHINERY CO.PVT.LTD., MUMBAI

ITA 5768/MUM/2011

• Counselvise Citation: 576819914 RSA 2011
• Duration Of Justice: 2 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 31-12-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 12-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A C TEJPAL
• Assessee Lawyers: JAHANGIR MISTRY
• Keywords: Bogus purchase
• Section: 143(3); 132

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE S/SHRI P.M.JAGTAP (AM) AND DR. S. T. M.PAVALAN (JM) ./I.T.A.NO.5768/MUM/2011 ( / ASSESSMENT YEAR: 2007-08) ASSTT.C OMMISSIONER OF INCOME TAX CENTRAL CIRCLE-42, ROOM NO.655, 6 TH FLOOR, AYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 / VS. PAM PHARMACEUTICALS AND ALLIED MACHINERY CO.PVT.LTD, KANDIVALI INDUSTRIAL ESTATE, KANDIVALI (W), MUMBAI. ./ ./PAN/GIR NO. : AAACP4776H ( / APPELLANT) .. ( / RESPONDENT) / APPELLANT BY : A C TEJPAL /ASSESSEE BY S/ SHRI JAHANGIR MISTRY AND MADHUR AGGARWAL # / DATE OF HEARING : 10.4.2014 # /DATE OF PRONOUNCEMENT : 9.5.2014 / O R D E R PER P.M.JAGTAP,AM: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF LD. CIT(A)-38, DATED 24.3.2011 WHEREBY HE DELETED THE ADDITION OF RS.1 5,18,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF PAINTING PURCHASED BY THE AS SESSEE TREATING THE SAME AS UNEXPLAINED/UNPROVED PURCHASES. 2. ASSESSEE IN THE PRESENT CASE IS A COMPANY ENGA GED IN THE BUSINESS OF MANUFACTURING OF CAPSULES FILLING MACHINES. IT BE LONGS TO M/S ACG ART GROUP. A SEARCH ACTION UNDER SECTION 132 OF THE INCOME T AX ACT, 1961 (THE ACT) WAS I.T.A.NO.5768/MUM/2011 2 CONDUCTED IN THE CASES BELONGING TO ACG ART GROUP WHICH INCLUDED THE CASE OF ASSESSEE. DURING THE COURSE OF SEARCH, THE FACT OF BOGUS PURCHASES OF PAINTINGS MADE BY THE ASSESSEE AND OTHER GROUP COMPANIES CAM E TO THE LIGHT. IN ITS APPRAISAL REPORT, INVESTIGATION WING DULY HIGHLIG HTED THE VARIOUS PURCHASES OF PAINTINGS MADE BY THE GROUP COMPANIES WHICH WERE FO UND TO BE BOGUS ON THE BASIS OF EXAMINATION DONE OF THE VARIOUS SUPPLIERS . ONE OF SUCH PURCHASES OF PAINTINGS WAS MADE IN THE NAME OF ASSESSEE FOR RS. 15,18,000/- AND THE CONCERNED SUPPLIER WAS M/S AKSHITLA TRADE PVT LTD. THE EXPLANATION BY THE ASSESSEE IN THIS REGARD WAS THAT THE PAYMENT AGAINS T THE SAID PURCHASES OF PAINTINGS WAS MADE BY CHEQUE WHICH INCLUDED VAT AM OUNT ALSO. THE DOCUMENTARY EVIDENCE WAS ALSO PRODUCED BY ASSESSEE TO ESTABLISH THAT THE CHEQUES SO ISSUED WERE DULY ENCASED. THIS EXPLANAT ION OF THE ASSESSEE, HOWEVER, WAS NOT ACCEPTED BY AO ON THE BASIS OF AP PRAISAL REPORT OF THE INVESTIGATION WING AND THE AMOUNT OF RS.15,18,000 /- WAS ADDED BY THE AO TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF UNPR OVED PURCHASE OF PAINTING IN THE ASSESSMENT COMPLETED U/S 143(3) R.W.SECTION153A OF THE ACT VIDE ORDER DATED 30.12.2009. 3. AGAINST THE ORDER PASSED BY THE AO U/S 143(3) R .W.S. 153A, THE APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT( A) AND AFTER CONSIDERING THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE AS WELL AS MATERIAL AVAILABLE ON RECORD, THE LD. CIT(A) DELETED THE ADDITION MADE B Y AO ON ACCOUNT OF UNPROVED PURCHASES OF PAINTING FOR THE FOLLOWING REASONS GI VEN IN PARA 4.2 OF HIS IMPUGNED ORDER WHICH READ AS UNDER : 4.2 I HAVE CAREFULLY EXAMINED THE FACTS OF THE CA SE, STAND TAKEN BY THE AO IN THE ASSESSMENT ORDER, WRITTEN SUBMISSIONS FILED AND OTHER CONTENTIONS RAISED BY I.T.A.NO.5768/MUM/2011 3 THE LD AR OF THE APPELLANT DURING THE APPEAL PROCEE DINGS. THE APPELLANT HAS SUBMITTED THAT IT IS A PHARMACEUTICAL EQUIPMENTS MA NUFACTURING COMPANY. IT APPEARS THAT THE APPELLANT COMPANY, THOUGH BELONGS TO ACG ARTS GROUP IS NOT A TRADE IN PAINTINGS. THE APPELLANT COMPANY HAS NOT DEBITED THE COST OF PURCHASE OF THE SAID PAINTING, FOR A PRICE OF RS.15,18,000/- , IN ITS PROFIT AND LOSS ACCOUNT. IT IS REITERATED THAT NO DEDUCTION FOR THE COST OF PAINTING HAS BEEN CLAIMED WHILE ARRIVING AT THE TOTAL INCOME. IT IS FURTHER SUBMI TTED THE ALL THE REQUIRED EVIDENCE SUCH AS PAYMENTS BY CHEQUE AND PAYMENT OF VAT ETC ARE ALSO SUBMITTED IN SUPPORT OF SAID PURCHASES DURING THE A SSESSMENT PROCEEDING ITSELF. ON A CAREFUL CONSIDERATION OF THE FACTS OF THE CASE IT IS CLEAR THAT THE ACTION OF THE AO IN MAKING THE ADDITION ON ACCOUNT OF ALLEGE D BOGUS PURCHASE OF THE SAID PAINTING IS UNTENABLE. EVEN ASSUMING THAT THE GENU INENESS OF THE PURCHASE OF A PAINTING WAS NOT PROVED TO THE SATISFACTION OF THE AO, GIVEN THE FACT THAT NO DEDUCTION HAS BEEN CLAIMED WHILE ARRIVING AT THE TA XABLE INCOME OF THE APPELLANT, AN ADDITION TO THE RETURNED INCOME CANN OT BE MADE . THEREFORE , THE ACTION OF THE AO IN MAKING THE ADDITION OF RS.15, 18,000/- IS FOUND TO BE UNWARRANTED AND THE SAME IS HEREBY DIRECTED TO BE D ELETED. 4. AGGRIEVED BY THE ORDER OF LD. CIT(A), THE REVENU E HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. AS NOTED BY THE LD. CIT(A) IN HIS IMPUGNED ORDER, THE ASSESSEE COMPANY DURING THE YEAR UNDER CONSIDERATION WAS NOT ENGAGED IN THE B USINESS OF TRADING IN PAINTINGS AND NO DEDUCTION WAS CLAIMED BY IT ON ACCOUNT OF EXPENS ES INCURRED ON PURCHASES OF PAINTING WHICH WAS TREATED BY AO AS UNPROVED /UNE XPLAINED. AT THE TIME OF HEARING BEFORE US, THE LD. DR HAS NOT BEEN ABLE TO CONTROV ERT OR REBUT THIS POSITION. AS RIGHTLY HELD BY LD. CIT(A), WHEN NO DEDUCTION WAS CLAIMED BY THE ASSESSEE ON ACCOUNT OF PURCHASES OF PAINTING, ADDITION COULD NOT BE MADE T O THE TOTAL INCOME OF THE ASSESSEE EVEN IF THE SAID PURCHASE OF PAINTING WAS FOUND TO BE UNPROVED /UNEXPLAINED. MOREOVER, PAYMENT AGAINST PURCHASE OF PAINTING WAS MADE BY THE ASSESSEE COMPANY BY CHEQUE AND THE SAME WAS DULY REFLECTED IN ITS BO OKS OF ACCOUNT. WE, THEREFORE, FIND OURSELVES IN AGREEMENT WITH THE LD. CIT(A) THAT THE ADDITION MADE BY THE AO ON ACCOUNT ALLEGED UNPROVED PURCHASES OF PAINTING WA S NOT SUSTAINABLE AND ACCORDINGLY UPHOLDING THE IMPUGNED ORDER OF THE LD. CIT(A) DELE TING THE SAID ADDITION, WE DISMISS THE APPEAL FILED BY THE REVENUE. I.T.A.NO.5768/MUM/2011 4 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT 9TH M AY, 2014 ( * + MAY, 2014 SD SD ( DR. S. T. M.PAVALAN) (P .M.JAGTAP) ( / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI: ON THIS 9TH DAY OF MAY, 2014 . . ./ SRL , SR. PS ! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT /APPLICANT 2. / THE RESPONDENT. 3. 0 ( ) / THE CIT(A)- 4. 0 / CIT 5. 1 3 , # 3 , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) # 3 , /ITAT, MUMBAI