THE DCIT-1(1), Indore V. M/S. ZEST PHARMA, Indore

ITA 606/IND/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5591 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 18-10-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 05-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MOHD JAVED
• Keywords: Unexplained cash credit; Rejection of books of accounts
• Section: 40A(3); 133(6); 68

Judgement Text

ITA NO. 606/IND/2015 M/S ZEST PHARMA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .., ..!', #$ # !% BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER I.T.A. NO.606/IND/2015 ASSESSMENT YEAR: 2011-12 DCIT 1(1) INDORE :: APPELLANT VS M/S ZEST PHARMA INDORE ./ PAN: AAAFZ 0735D :: RESPONDENT REVENUE BY SHRI SUMIT NEMA ASSESSEE BY SHRI MOHD. JAVED ! ' #$ DATE OF HEARING 18.10.2016 %&'( #$ DATE OF PRONOUNCEMENT 28.11.2016 * O R D E R PER SHRI D.T. GARASIA, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CIT(A)-I, INDORE, DATED 7.4.201 5. ITA NO. 606/IND/2015 M/S ZEST PHARMA 2 2. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE HAS FILED THE RETURN OF INCOME ON 15.9.2011. THE ASSESS EE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PHARMACEUTICALS. THE ASSESSEE HAS CLAIMED RS.121772616/- AS SUNDRY CREDITORS AND CREDITOR OF UNSECURED LOAN. OUT OF 87, 50 SUNDRY CREDITORS AND CREDITORS OF UNSECURED LOAN WERE RECEIVED WHILE 37 N O REPLY. THE ASSESSING OFFICER HAS ALSO VERIFIED FROM THE BANK OF BARODA, IDBI AND STATE BANK OF INDIA AND AFTER VERIFICATION AND DETAILED INQUIRY THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE COULD NOT ESTABLISH THAT THE AMOUNT WAS DUE, THEREFORE, HE MADE THE ADDITION OF RS.7964643/- U/S 68 OF THE ACT. 3. THE MATTER WAS CARRIED IN APPEAL AND THE LEARNED CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER :- ITA NO. 606/IND/2015 M/S ZEST PHARMA 3 7. GROUND NOS. 2 TO 7 OF APPEAL ARE AGAINST ADDITIO N U/S 68 OF THE INCOME TAX ACT TO THE TUNE OF RS. 79,64,743/- ON ACCOUNT OF UNEXPLAINED PURCHASES MAD E FROM SOME PARTIES. A.O. NOTICED THAT SUNDRY CREDITO RS INCREASED FROM RS. 10,32,40,075/- TO RS.12,17,72,63 6/- AND FROM SUCH SUNDRY CREDITORS, APPELLANT HAS SHOWN UNSECURED LOANS AND DEPOSITS. A.O. MADE A VERY DETAILED ANALYSIS OF PURCHASES AND CAME TO FOLLOWIN G CONCLUSION REGARDING PURCHASES :- (I) PARTIES TO WHOM PAYMENTS WERE ACTUALLY MADE AS PER BANK ACCOUNT WERE DIFFERENT FROM NAMES SHOWN IN FORGED BANK ACCOUNT = RS.18,65,559/- AND RS. 14,19,956/-. (II) PARTIES WHERE MODE OF PAYMENT WERE NOT CHEQUES BUT IN REALITY IT WAS CASH/RTGS/CASH-CHEQUE OF RS.13,88,551/-. ITA NO. 606/IND/2015 M/S ZEST PHARMA 4 (III) WHERE AMOUNT OF CREDIT BALANCE AS SHOWN IN LE DGER ACCOUNT OF SUCH PARTIES WAS DIFFERENT FROM BALANCE IN ACCOUNTS CALLED FROM SUCH PARTIES U/S 133(6) OF THE INCOME TAX ACT RS. 23,71,380/-. (IV) UNEXPLAINED CREDIT BALANCE IN NAME OF SOME PARTIES, ALTHOUGH SUCH PARTIES HAVE SHOWN NIL BALAN CE OR NO TRANSACTIONS WITH APPELLANT = RS.4,24,442/-. (V) ADDITION MADE BY A.O. FOR WRONG OR FORGED CONFIRMATION FILED BY APPELLANT WITH REGARD TO CRED IT BALANCE SHOWN IN CASE OF ENVEE DRUGS P. LTD. GUJARA T OF RS.4,94,855/-. IN THIS MANNER A.O. MADE A TOTAL ADDITION OF RS.79,64,743/- ON ACCOUNT OF VARIOUS DISCREPANCIES NOTICED IN PRUCHASES, AS DISCUSSED ABOVE. HOWEVER, A.O. ADDED ENTIRE OF SUCH AMOUNT WITHOUT FINDING AN Y DEFECT IN STOCK REGISTER AND EXCISE REGISTER WHICH IS MAINTAINED BY APPELLANT AS PER STATUTORY REQUIREMEN T OF ITA NO. 606/IND/2015 M/S ZEST PHARMA 5 EXCISE DEPARTMENT. THEREFORE, ALTHOUGH SUCH PURCHAS ES WERE DOUBTFUL AND THEY CONSTITUTE VALID GROUND FOR REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) OF THE IN COME TAX ACT BUT ADDITION OF ENTIRE PURCHASE ITSELF IN H ANDS OF APPELLANT, WITHOUT FINDING ANY FAULT IN STOCK REGIS TER OR MANUFACTURING PROCESS OR INWARD/OUTWARD REGISTER, I S NOT JUSTIFIED, AS HELD IN CASE OF MS. SIMIT P. SHET H (GUJ) 356 ITR 451 WHERE IT WAS HELD THAT PURCHASES WERE MADE FROM PARTIES OTHER THAN THOSE MENTIONED IN BOO KS OF ACCOUNTS ONLY PROFIT ELEMENT EMBEDED IN SUCH PURCHASES COULD BE ADDED. SIMILAR FINDING WAS ARRIV ED IN CASE OF BHOLANATH POLY FAB(P) LTD. (2013) 355 IT R 290 (GUJARAT). RESPECTFULLY FOLLOWING AFORESAID DECISIO N A HIGHER GP RATE OF 25% IS APPLIED ON SUCH BOGUS/DOUB TFUL PURCHASES, INSTEAD OF 20.03% SHOWN BY APPELLANT. 7.1 BUT BEFORE APPLICATION OF GP RATE SUCH PURCHASE S ARE REMOVED FROM SUCH AMOUNT OF DOUBTFUL PURCHASES OF ITA NO. 606/IND/2015 M/S ZEST PHARMA 6 RS.79,64,743/- WHICH WERE MADE IN CASH, AS ENTIRE AMOUNT OF SUCH PURCHASE HAS TO BE ADDED IN HANDS OF APPELLANT U/S 40A(3) OF THE INCOME TAX ACT. SUCH CA SH PURCHASES IS IDENTIFIED FROM FOLLOWING PARTIES :- SR.NO. PARTY NAME PURCHASE AMOUNTS (IN RS.) 1. M/S K. SEVANTILAL & CO. CASH RS.6,00,000 2 M/S PALAM PHARMA CASH RS.5,02,961 3 M/S KORES (INDIA)LTD. RS.4,69,584/- CASH- CHEQUE 4 M/S CRYSTAL CHEMICALS RS.5,17,124 CASH-CHEQUE 5 M/S ENVEE DRUG P. LTD. CASH RS.4,94,855 TOTAL RS.25,84,524 HENCE WHILE PURCHASES OF RS.25,84,524/- ARE ADDED U/S 40A(3) OF THE INCOME TAX ACT, BEING CASH PURCHA SES, ON BALANCE OF SUCH PURCHASES OF RS.53,80,218/- (RS.79,64,743 RS.25,84,524) A GP ADDITION OF RS.2,67,396/- IS MADE AT THE RATEOF 4.97% (25% - 20.03%). AS A RESULT OUT OF ADDITION OF RS.79,64,74 3/- ITA NO. 606/IND/2015 M/S ZEST PHARMA 7 MADE BY A.O., ADDITION OF RS.28,51,920/- (RS.25,84, 524 + RS. 2,67,396/-) IS HEREBY CONFIRMED AND APPELLANT GETS A RELIEF OF RS.51,12,822/-. AS A RESULT, GROUNDS N O. 2 TO 7 OF APPEAL ARE PARTLY ALLOWED. 4. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE LEARNED CIT(A) HAS APPLIED THE GP RATE ON ALL TH E PURCHASES WHILE IDENTIFIED PURCHASES WERE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THEREFORE, THE LEARNED CIT(A) HAS RELIED UPON THE JUDGMENT OF THE HON'BLE GUJARAT HI GH COURT IN THE CASE OF MS. SIMIT P. SHETH (GUJ) 356 IT R 451 WHERE IT WAS HELD THAT PURCHASES WERE MADE FROM PARTIES OTHER THAN THOSE MENTIONED IN BOOKS OF ACCOUNTS ONLY PROFIT ELEMENT EMBEDED IN SUCH PURCHASES COULD BE AD DED . THEREFORE, WE ARE OF THE VIEW THAT THE ISSUE IN CONT ROVERSY IS COVERED BY THE ABOVE JUDGMENT OF THE HON'BLE GUJAR AT ITA NO. 606/IND/2015 M/S ZEST PHARMA 8 HIGH COURT AND THE LEARNED CIT(A) WAS RIGHT IN HIS APPROACH. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. THE ORDER HAS BEEN PRONOUNCED IN OPEN COURT ON 28 NOVEMBER, 2016. SD SD ( ..!') (..) #$ (O.P.MEENA) (D.T.GARASIA) ACCOUNTANT MEMBER J UDICIAL MEMBER )'* / DATED : 28 NOVEMBER, 2016. DN/ ITA NO. 606/IND/2015 M/S ZEST PHARMA 9