AAREY DRUGS AND PHARMACEUTICALS LTD, MUMBAI V. ACIT CEN CIR 13, MUMBAI

ITA 6815/MUM/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8993 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 08-06-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 10-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Keywords: Bogus purchase; Depreciation; Corroborative evidences
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI G.S. PANNU , ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY , JUDICIAL MEMBER ITA N O. 6815 / MUM/2014 ( ASSESSMENT YEAR : 2011 1 2 ) M/S. AAREY DRUGS & PHARMACEUTICALS LTD. 107. SAHAKAR BHAVAN 340/48, NARSI NATHA STREET MUMBAI 400009 PAN AAACA5253A . APPELLANT V/S ACIT, CENTRAL CIRCLE 13 AAYAKAR BHAVAR, M.K. ROAD MUMBAI 400020 . RESPONDENT APPELLANT BY : NONE RESPONDENT BY : S HRI RAJESH KUMAR YADAV DATE OF HEARING 12 . 10 .201 7 DATE OF ORDER 03.11.2017 O R D E R PER SAKTIJIT DEY, J.M. THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 08.08.2014 OF LEARNED CIT(A) 37 , MUMBAI FOR A.Y. 2011 12. 2 . WHEN THE APPEAL WAS CALLED FOR HEARING NO ONE APPEARED ON BEHALF OF THE ASSESSEE. EVEN , THE ASSESSEE HAS NOT FILED ANY APPLICATION SEEKING ADJOURNMENT OF THE APPEAL. AS SEEN FROM RECORD , 2 M/S. AAREY DRUGS & PHARMACEUTICALS LTD. ON EARLIER OCCASION, I.E. 08.06.2017 WHEN THE APPEAL WAS PREVIOUSLY POSTED FOR HEARING , NO ONE APPE ARED ON BEHALF OF THE ASSESSEE. HENCE , THE APPEAL WAS ADJOURNED TO THIS DATE AND NOTICE FOR HEARING WAS SENT PER RPAD TO THE ASSESSEE. AS COULD BE SEEN FROM THE POSTAL ACKNOWLEDGEMENT KEPT ON RECORD , THE NOTICE OF HEARING WAS SERVED ON THE ASSESSEE SUFFICI ENTLY AHEAD OF THE DATE FIXED FOR HEARING OF THE APPEAL. IN SPITE OF THAT THE ASSESSEE HAS FAILED TO APPEAR TO REPRESENT HIS CASE. IN THESE CIRCUMSTANCES , WE HAVE NO OTHER ALTERNATIVE BUT TO PROCEED WITH THE HEARING OF APPEAL EX PARTE QUA THE ASSESSEE AFTE R HEARING LEARNED DEPARTMENTAL REPRESENTATIVE AND ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 3 . ASSESSEE HAS RAISED THREE EFFECTIVE GROUNDS. GROUND NO. 1 IS AGAINST DISALLOWANCE OF DEPRECIATION OF ` 9,13,781/ ON PLANT AND MACHINERY. 4 . TH E BRIEF FACTS ARE, THE ASSESSEE IS A COMPANY ENGAGED IN MANUFACTURING AND TRADING OF CHEMICAL PRODUCTS, SOLVENTS, DRUGS, INTERMEDIATES, ETC. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ASSESSEE FILED ITS RETURN OF INCOME ON 29.09.2011 DECLARING TOTAL INCOME OF ` 40,92,565/ . SUBSEQUENTLY , IN THE COURSE OF A SURVEY UNDER SECTION 133A CONDUCTED ON THE ASSESSEE ON 18.01.2013 IT WAS FOUND THAT PURCHASES CLAIMED TO HAVE BEEN MADE BY THE ASSESSEE FROM A NUMBER OF PARTIES ARE BOGUS. ON THE BASIS OF INFORMATION FOUND 3 M/S. AAREY DRUGS & PHARMACEUTICALS LTD. DURING THE SURVEY , THE ASSESSING OFFICER CONCLUDED THAT PURCHASES MADE BY THE ASSESSEE FROM CERTAIN PARTIES IN DIFFERENT ASSESSMENT YEARS WERE NOT GENUINE. ACCORDINGLY , HE WORKED OUT THE ADDITION TO BE MADE ON PEAK BASIS ON ACCOUNT OF BOGUS PURCHASES IN DIFFERENT ASSESSMEN T YEARS AGGREGATING TO ` 8,27,72,620/ . SINCE , THE TOTAL ADDITION TO BE MADE ON PEAK BASIS WAS APPORTIONED TO THE ASSESSMENT YEARS 2007 08 AND 2008 09 , N O FURTHER ADDITION ON ACCOUNT OF BOG U S PURCHASE WAS MADE IN THE IMPUGNED ASSESSMENT YEAR. HOWEVER, THE A SSESSING OFFICER FOUND THAT DEPRECIATION CLAIMED BY THE ASSESSEE ON ADDITIONS MADE TO FIXED ASSETS DURING THE YEAR INCLUDES ADDITION TO PLANT AND MACHINERY WHICH FORMS PART OF BOGUS PURCHASES MADE BY THE ASSESSEE. HE THEREFORE CALLED UPON THE ASSESSEE TO F URNISH THE BILLS AND VOUCHERS FOR THE ADDITIONS MADE TO THE PLANT AND MACHINERY. AS OBSERVED BY THE ASSESSING OFFICER , THE ASSESSEE DID NOT FURNISH THE REQUIRED EVIDENCES ON THE PLEA THAT THEY HAVE BEEN SUBMITTED TO THE DDI. SINCE , THE ADDITION MADE TO PLA NT AND MACHINERY DURING THE YEAR WERE FOUND TO BE BOGUS , THE ASSESSING OFFICER DISALLOWED DEPRECIATION CLAIMED OF ` 9,13,781/ . ASSESSEE CHALLENGED HE DISALLOWA NCE BEFORE THE COMMISSIONER (A PPEALS ). SINCE , BEFORE THE COMMISSIONER (A PPEALS ) THE ASSESSEE NEIT HER APPEARED NOR PRODUCED ANY EVIDENCE TO PROVE THE GENUINENESS OF THE ADDITION S MADE TO PLANT AND MACHINERY 4 M/S. AAREY DRUGS & PHARMACEUTICALS LTD. AND DEPRECIATION CLAIMED ON SUCH ASSETS , HE CONFIRMED THE DISALLOWANCE. 5 . WE HAVE H EARD LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE MATERIALS ON RECORD. AS COULD BE SEEN FROM THE CONCURRENT FINDINGS OF THE DEPARTMENT AUTHORITIES , THE REASON FOR DISALLOWANCE OF ASSESSEES CLAIM OF DEPRECIATION WAS DUE TO THE FACT , ASSESSEE WAS UNABLE TO ESTABLISH WITH PROPER EVIDENCE THE ADDITION MADE TO PLANT AND MACHINERY ON WHICH DEPRECIATION WAS CLAIMED. IN FACT , BEFORE THE COMMISSIONER (A PPEALS ) THE ASSESSEE NEITHER APPEARED NOR PRODUCED ANY EVIDENCE TO PROVE IT S CLAIM. THE P OSITION REMAINS UNCHANGED BEFORE US AS WELL. THEREFORE , SINCE , THE ASSESSEE HAS BEEN UNABLE TO ESTABLISH THE GENUINENESS OF ITS CLAIM OF DEPRECIATION ON ADDITION MADE TO PLANT AND MACHINERY WITH PROPER DOCUMENTARY EVIDENCE , WE UPHOLD THE ORDER OF THE COMMI SSIONER (A PPEALS ) ON THIS ISSUE. 6 . IN GROUND NO. 2 ASSESSEE HAS CHALLENGED DISALLOWANCE OF ` 5,500/ ON ACCOUNT OF DONATION PAID. 7 . DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICING THAT ASSESSEE HAS DEBITED AN AMOUNT OF ` 5,500/ ON ACCOUNT OF D ONATION CALLED UPON THE ASSESSEE TO FURNISH EVIDENCE IN SUPPORT OF SUCH CLAIM. SINCE , THE ASSESSEE WAS UNABLE TO FURNISH ANY EVIDENCE , 5 M/S. AAREY DRUGS & PHARMACEUTICALS LTD. THE ASSESSING OFFICER DISALLOW ED ASSESSEES CLAIM. LEARNED COMMISSIONER (A PPEALS ) ALSO SUSTAINED THE DISALLOWANCE FOR THE VERY SAME REASON. 8 . WE HAVE HEARD LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE MATERIAL ON RECORD. IT IS EVIDENT FROM FACTS ON RECORD , THOUGH , ASSESSEE HAS CLAIMED DEDUCTION OF ` 5,500/ ON ACCOUNT OF DONATION PAID , HOWEVER, AT NO STAGE OF THE PROCEED INGS THE ASSESSEE HAS FURNISHED ANY SUPPORTING EVIDENCE IN RESPECT OF THE DEDUCTION CLAIMED. THAT BEING THE CASE THE DISALLOWANCE MADE DESERVES TO BE UPHELD. GROUND RAISED IS DISMISSED. 9 . IN GROUND NO. 3 ASSESSEE HAS CHALLENGED DISALLOWANCE OF ` 8,00,000/ UN DER SECTION 40A(2)(B) ON ACCOUNT OF PAYMENT OF PERQUISITES TO THE DIRECTOR. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICING THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF AN AMOUNTING OF ` 8,05,870/ ON ACCOUNT OF PERQUISITES PAID TO THE DIREC TOR CALLED UPON THE ASSESSEE TO JUSTIFY ITS CLAIM. THOUGH , THE ASSESSEE SUBMITTED HIS REPLY JUSTIFYING THE PAYMENT MADE , HOWEVER, THE ASSESSING OFFICER FOUND THE CLAIM UNACCEPTABLE AS IN HIS OPINION , SUCH PAYMENT MADE TO THE DIRECTOR WAS UNREASONABLE CONSI DERING THE FACT THAT REMUNERATION PAID TO DIRECTORS FOR SERVICES RENDERED HAS ALREADY BEEN DEBITED UNDER THE HEAD ADMINISTRATIVE EXPENSES. HE ALSO NOTED THAT THERE WAS NO PROVISION REGARDING PERQUISITE TO DIRECTOR 6 M/S. AAREY DRUGS & PHARMACEUTICALS LTD. IN PRECEDING YEAR. ACCORDINGLY , HE DISALLOWED ASSESSEES CLAIM AND ADDED BACK AN AMOUNT OF ` 8,00,000/ TO THE INCOME OF THE ASSESSEE. THOUGH , THE ASSESSEE CHALLE NGED THE ADDITION BEFORE THE COMMISSIONER (A PPEALS), H E ALSO CONFIRMED THE DISALLOWANCE BY AGREEING TO THE REASONING OF THE AS SESSING OFFICER. 10 . WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED MATERIAL ON RECORD. AS COULD BE SEEN , IN SPITE OF A SPECIFIC QUERY RAISED BY THE ASSESSING OFFICER TO JUSTIFY THE REASONABLENESS OF PAYMENT MADE TO THE DIRECTOR TOWARDS PER QUISITES , THE ASSESSEE HAS FAILED TO OFFER PROPER EXPLANATION WITH SUPPORTING EVIDENCE. NEITHER BEFORE THE CIT(A) NOR BEFORE US THE ASSESSEE HAS APPEARED AND PRODUCED ANY EVIDENCE TO PROVE THE REASONABLENESS OF SUCH PAYMENT MADE TO DIRECTOR. FURTHER , THE F INDING OF THE ASSESSING OFFICER THAT NO SUCH PAYMENT WAS MADE TO DIRECTORS IN THE PRECEDING ASSESSMENT YEARS REMAINS UNCONTROVERTED. IN VIEW OF THE AFORESAID FACTS , WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDERS OF THE DEPARTMENT AUTHORITIES ON THI S ISSUE. THE GROUND RAISED IS DISMISSED. 11 . IN THE RESULT, ASSESSEES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 03.11.2017 SD/ - G.S. PANNU ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 03.11.2017 7 M/S. AAREY DRUGS & PHARMACEUTICALS LTD. COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER N. PANICKER SR. PRIVATE SECRETARY (DY./ASSTT. REGISTRAR) ITAT, MUMBAI