MEDICO REMEDIES P.LTD, MUMBAI V. DCIT 8(2), MUMBAI

ITA 7400/MUM/2014

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1465 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 11-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M K SINGH LD
• Assessee Lawyers: SANJAY R PARIKHLD
• Keywords: Unexplained cash credit; Bogus Share capital; Principle of natural justice; Accommodation entries; Reassessment proceedings; Borrowed satisfaction
• Section: 143(1); 147; 68; 148; 132

Judgement Text

1 ITA NO. 7400/MUM/2014 MEDICO REMEDIES PVT. LTD. IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , $ , ' BEFORE HONBLE SHRI PAWAN SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO. 7400/MUM/2014 ( / ASSESSMENT YEAR: 2010-11) MEDICO REMEDIES PVT. LTD. 50, JUHU SUPREME SHOPPING CENTRE GULMOHAR CROSS ROAD NO. 9 JUHU, MUMBAI-400 049. / VS. DCIT - 8(2) AAYKAR BHAVAN M.K. ROAD MUMBAI-400 020. ./ ./PAN/GIR NO. AABCM-8349-L ( /APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : SHRI SANJAY R. PARIKH- LD. AR REVENUE BY : SHRI M.K. SINGH- LD.DR !' / DATE OF HEARING 21/02/2019 !' / DATE OF PRONOUNCEMENT 19/03/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2010-11 CONTEST THE ORDER OF THE LD. COMMISSIONER OF INCOME -TAX (APPEALS)-17 [CIT(A)], MUMBAI, APPEAL NO. CIT(A)-17/12/13-14 DAT ED 27/10/2014 ON FOLLOWING GROUNDS OF APPEAL: - AGGRIEVED BY THE ORDER OF THE LEARNED DCIT (THE LEA RNED A.O.) AS CONFIRMED BY THE COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)], YOUR APPELLANT PREFERS AN 2 ITA NO. 7400/MUM/2014 MEDICO REMEDIES PVT. LTD. APPEAL AGAINST THE SAME ON FOLLOWING GROUNDS, WHICH IT IS PRAYED MAY BE CONSIDERED WITHOUT PREJUDICE TO ONE ANOTHER: (1) LEARNED CIT (A) ERRED IN CONFIRMING THAT REOP ENING OF THE ASSESSMENT U/S 147 OF I.T.ACT, 1961 BY THE AO IS VALID. (2) LEARNED CIT(A) ERRED IN CONFIRMING ADDITIONS OF RS.20,00,000/- MADE BY THE AO IN REASSESSMENT OF THE APPELLANT U/S143(3) READ WITH SECTION 147 OF THE I.T.ACT, 1961. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. DE PUTY COMMISSIONER OF INCOME TAX-8(2), MUMBAI [AO] U/S 14 3(3) READ WITH SECTION 147 ON 22/03/2013 WHEREIN THE INCOME OF THE ASSESSE E WAS DETERMINED AT RS.53.07 LACS AFTER SOLE ADDITION OF BOGUS SHARE APPLICATION MONEY OF RS.20 LACS AS AGAINST RETURNED INCOME OF RS.33. 07 LACS FILED BY THE ASSESSEE ON 21/08/2010 WHICH WAS PROCESSED U/S 143(1). THE ASSESSEE BEING RESIDENT CORPORATE ENTITY WAS STATED TO BE ENGAGED IN THE BUSINESS OF PHARMACEUTICAL AND DRUG MANUFACTURING. THE ADDITION OF RS.20 LACS MADE BY LD. AO U/S 68 IS THE SOLE SUBJECT MATTER OF PRESENT APPEAL BEFORE US. 2.1 THE REASSESSMENT PROCEEDINGS GOT TRIGGERED PURS UANT TO SEARCH & SEIZURE ACTION U/S 132 ON 25/11/2009 IN THE CASE OF M/S MAHASAGAR SECURITIES PRIVATE LIMITED BELONGING TO SHRI MUKESH CHOKSI GROUP WHEREIN IT TRANSPIRED THAT THE ASSESSEE OBTAINED AC COMMODATION ENTRIES IN THE SHAPE OF SHARE APPLICATION MONEY AGGREGATING TO RS. 20 LACS I.E. RS.10 LACS EACH FROM M/S BUNIYAD CHEMICALS LTD. & M/S TALENT INFOWAYS LTD. DURING IMPUGNED AY WHICH ESCAPED ASSESSMENT. ACCORD INGLY, NOTICE U/S 148 DATED 02/03/2012 WAS ISSUED TO THE ASSESSEE . 2.2 THE ASSESSEE VIDE REPLY DATED 14/03/2012 REQUES TED FOR COPY OF REASONS RECORDED FOR REOPENING OF THE ASSESSMENT AN D STATED THAT IT HAD ALREADY FILED RETURN OF INCOME ON OR BEFORE DUE DAT E AND THERE WAS NOTHING FURTHER TO DECLARE. THE ASSESSEE WAS ASKED TO FILE THE RETURN U/S 148 AND 3 ITA NO. 7400/MUM/2014 MEDICO REMEDIES PVT. LTD. ALSO PROVIDED WITH COPY OF REASONS RECORDED FOR REO PENING OF THE ASSESSMENT VIDE LETTER DATED 02/07/2012. AT THE SAM E TIME, THE ASSESSEE WAS ALSO REQUESTED TO FURNISH THE DETAILS OF SHARE APPLICATION MONEY AND DEMONSTRATE GENUINENESS AND CREDITWORTHINESS OF THE TRANSACTIONS WITH BANK STATEMENTS. NO RESPONSE COULD BE RECEIVED FROM THE ASSESSEE UNTIL ITS LETTER DATED 15/03/2013 WHEREIN THE ASSESSEE SU BMITTED THAT THE ORIGINAL RETURN FILED EARLIER SHOULD BE TREATED AS RETURN U/S 148. ACCORDINGLY, NOTICE U/S 143(2) WAS ISSUED TO THE AS SESSEE ON 20/03/2013 FOR COMPLIANCE. 2.3 THE SEARCH PROCEEDINGS REVEALED THAT SHRI MUKESH CHOKSI HAD FLOATED MORE THAN 36 COMPANIES AND NO GENUINE BUSIN ESS WAS BEING CARRIED ON BY ANY OF THESE ENTITIES INCLUDING AFORE SAID TWO ENTITIES AND THEY ALL WERE ENGAGED IN ISSUING BOGUS BILLS AS WELL AS SHARE APPLICATION MONEY IN RETURN FOR CASH. THE STATEMENT OF S HRI MUKESH CHOKSI AS RECORDED DURING SEARCH PROCEEDINGS WAS ALSO PERUSED , WHEREIN IT TRANSPIRED THAT THE TWO COMPANIES EXISTED ON PAPER ONLY AND THEIR BUSINESS WAS TO PROVIDE ACCOMMODATION ENTRIES TO OT HER CONCERNS / COMPANIES SEEKING IT. FURTHER, THESE COMPANIES WERE GETTING CERTAIN COMMISSION IN RESPECT OF BOGUS ENTRIES PROVIDED TO THE OTHER CONCERNS. IT WAS FURTHER STATED BY SHRI MUKESH CHOKSI THAT THE COMPANIES SEEKING ACCOMMODATION ENTRIES USED TO DEPOSIT CASH IN THESE COMPANIES AND LATER ON CHEQUES WERE ISSUED IN FAVOR OF THE RESPECTIVE C OMPANIES. 2.4 ALTHOUGH THE ASSESSEE DEFENDED THE TRANSACTIONS BY SUBMITTING THAT THE TRANSACTIONS WERE THROUGH BANKING CHANNELS AND IN SUPPORT, SUBMITTED CONFIRMATION FROM THESE TWO PARTIES, HOWEVER, NOT C ONVINCED, LD. AO OPINED THAT THE ASSESSEE FAILED TO SUBSTANTIATE SOU RCE, GENUINENESS AND 4 ITA NO. 7400/MUM/2014 MEDICO REMEDIES PVT. LTD. CREDITWORTHINESS OF THE STATED TRANSACTIONS. ACCOR DINGLY, THE SAME WAS TREATED AS UNACCOUNTED MONEY OF THE ASSESSEE AND AD DED TO THE INCOME AS UNEXPLAINED CASH CREDIT U/S 68. 3. AGGRIEVED THE ASSESSEE CHALLENGED THE REASSESSME NT PROCEEDINGS ON LEGAL GROUNDS AND ADDITIONS ON MERITS, HOWEVER, WITHOUT ANY SUCCESS, BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 27/10/2 014. ON LEGAL GROUNDS, THE PRIME CONTENTION OF THE ASSESSEE REVOL VED AROUND THE FACT THAT NO INDEPENDENT INQUIRIES WERE MADE BY LD. AO W HILE REOPENING THE ASSESSMENT. THE ATTENTION WAS DRAWN TO THAT FACT TH AT THE ASSESSEE, VIDE LETTER DATED 06/05/2014 REQUESTED LD. AO TO FURNISH THE COPY OF THE STATEMENT AND COMPUTER DATA FOUND DURING THE COURSE OF SEARCH & SEIZURE PROCEEDINGS WHICH WAS NEVER SUPPLIED. HOWEVER, LD. FIRST APPELLATE AUTHORITY, AFTER DUE CONSIDERATION OF FACTUAL MATRI X AS WELL AS ASSESSEES SUBMISSIONS, CONFIRMED THE STAND OF LD.AO. AGGRIEVE D THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [ AR], SHRI SANJAY PARIKH, AT THE OUTSET, SUBMITTED THAT THE ADDITIONS HAVE BE EN MADE MERELY ON THE BASIS OF THIRD-PARTY STATEMENTS WHICH HAVE N OT BEEN CONFRONTED TO THE ASSESSEE AND NO OPPORTUNITY TO CROSS-EXAMINE TH E CONCERNED PERSONS HAVE BEEN PROVIDED BY LD. AO WHICH WAS IN VIOLATION OF PRINCIPLE OF NATURAL JUSTICE AND THEREFORE, THE ADDITIONS COULD NOT BE SUSTAINED IN TERMS OF JUDGMENT OF HONBLE APEX COURT RENDERED IN M/S ANDAMAN TIMBER INDUSTRIES [CIVIL APPEAL NO. 4228 OF 2006 DATED 02/ 09/2015] & VARIOUS OTHER JUDGMENTS AS PLACED ON RECORD . THE REASSESSMENT PROCEEDINGS HAVE BEEN CONTESTED BY SUBMITTING THAT THE SAME HAS BEEN TRIGGERED BY LD. AO ON BORROWED SATISFACTION. ON MERITS, OUR ATT ENTION HAS BEEN DRAWN 5 ITA NO. 7400/MUM/2014 MEDICO REMEDIES PVT. LTD. TO THE DOCUMENTS PLACED IN THE PAPER-BOOK TO SUBMIT THAT THE PRIMARY INGREDIENTS OF SECTION 68 HAVE BEEN SATISFIED BY TH E ASSESSEE. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE [DR], SUBMITTED THA T THE ASSESSEE HAS RECEIVED BOGUS SHARE APPLICATION MONEY FROM THE TAINTED PARTIES WHICH JUSTIFIES THE IMPUGNED ADDITIONS. 5.1 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED RELEVANT MATERIAL ON RECORD INCLUDING REASONS RECOR DED BY LD. AO TO REOPEN THE ASSESSMENT. SO FAR AS THE VALIDITY OF RE ASSESSMENT PROCEEDINGS IS CONCERNED, WE FIND THAT THE ORIGINAL RETURN WAS PROCESSED U/S 143(1) AND THERE WAS NO OCCASION FOR LD. AO TO EXAMINE THE IMPUGNED TRANSACTIONS THEREIN. SUBSEQUENTLY, SOME T ANGIBLE MATERIAL IN THE SHAPE OF INFORMATION FROM INVESTIGATION WING OF THE DEPARTMENT CAME INTO THE POSSESSION OF LD. AO. AFTER PERUSAL OF THE SAID INFORMATION, IT WAS FOUND THAT NUMEROUS ENTITIES FLOATED BY SHRI MUKESH CHOKSI & GROUP WERE ENGAGED IN PROVIDING BOGUS ENTRIES OF VARIED NATURE . IT WAS NOTED THAT THE ASSESSEE OBTAINED ACCOMMODATION ENTRIES IN THE FORM OF SHARE APPLICATION MONEY AGGREGATING TO RS.20 LACS FROM TWO CONCERNS AND THEREFORE, THERE WAS AN ESCAPEMENT OF INCOME. APPLY ING THE PROVISIONS OF EXPLANATION 2(B) TO SECTION 147, THE CASE WAS REOPE NED BY ISSUANCE OF NOTICE U/S 148 DATED 02/03/2012. 5.2 AFTER CAREFUL PERUSAL OF THE ABOVE, WE FIND THA T LD. AO, AFTER CONSIDERING THE NEW INFORMATION & WITH DUE APPLICAT ION OF MIND, CAME TO A CONCLUSION THAT THERE WAS ESCAPEMENT OF CERTAIN INC OME IN THE HANDS OF THE ASSESSEE AND IT WAS NOT A CASE OF MERE BORROWED SATISFACTION. THE REASSESSMENT PROCEEDINGS HAVE BEEN INITIATED IN TER MS OF EXPLANATION 2(B) TO SECTION 147. AT THIS STAGE, IN OUR OPINION, NOTHING MORE WAS 6 ITA NO. 7400/MUM/2014 MEDICO REMEDIES PVT. LTD. REQUIRED TO TRIGGER THE REASSESSMENT PROCEEDINGS SI NCE THE MATERIAL RECEIVED BY LD. AO IN THE SHAPE OF INFORMATION, PRIMA-FACIE, INDICATED POSSIBLE ESCAPEMENT OF INCOME IN THE HANDS OF THE A SSESSEE. THEREFORE, WE DECLINE TO CONCUR WITH LD. ARS SUBMISSIONS IN T HIS REGARD. 6. THE LD. AR HAS ALSO CONTENDED THAT THE OPPORTUNI TY OF CROSS- EXAMINATION WAS NOT PROVIDED TO THE ASSESSEE AND AD VERSE MATERIAL WAS NEVER CONFRONTED TO THE ASSESSEE. HOWEVER, A PERUSA L OF THE ASSESSMENT ORDER REVEAL THAT THE ASSESSEE FAILED TO RESPOND TO REASSESSMENT PROCEEDINGS WHICH GOT TRIGGERED ON 02/03/2012, UNTI L 12/03/2013 I.E. TOWARDS FAG END OF TIME LIMIT FOR COMPLETION OF ASS ESSMENT, WHEREIN THE ASSESSEE, FOR THE FIRST TIME VIDE LETTER DATED 15/0 3/2013, SUBMITTED THAT THE ORIGINAL RETURN FILED BE TREATED AS A RETURN IN RES PONSE TO NOTICE U/S 148. THIS WAS ONLY AFTER MULTIPLE NOTICES ISSUED BY LD. AO FROM TIME TO TIME REQUESTING ASSESSEE TO FURNISH THE REQUISITE DETAIL S. FURTHER, THE MATERIAL ON RECORD REVEAL THAT THE ASSESSEE HAS REQUESTED FO R SUCH EXAMINATION VIDE ITS LETTER DATED 06/05/2014 I.E. MUCH AFTER TH E COMPLETION OF THE ASSESSMENT AND THEREFORE, NO COGNIZANCE OF THE SAME COULD BE TAKEN BY LD. AO AT THAT TIME. ANOTHER IMPORTANT POINT TO BE NOTED IS THAT LD. CIT(A), AT PARA 1.3.12, HAS MADE CERTAIN OBSERVATION ABOUT CROSS-EXAMINATIO N OF SHRI MUKESH CHOKSI ON 11/03/2013, WHICH PRIMA-FACIE, DO NOT SEEM TO BE FACTUALLY CORRECT. NEVERTHELESS, THE OVERALL CONDUC T OF THE ASSESSEE DO NOT INSPIRE US TO ACCEPT THESE CONTENTIONS, AT THIS STA GE. 7. PROCEEDING FURTHER, SO FAR AS THE MERITS OF THE CASE ARE CONCERNED, THE LD. AR HAS SUBMITTED THAT THE ASSESSEE HAS DEMO NSTRATED THE FULFILMENT OF PRIMARY INGREDIENTS OF SECTION 68 AND THEREFORE THE ADDITIONS WERE NOT JUSTIFIED. KEEPING IN VIEW THE FACT THAT T HE ASSESSMENT WAS 7 ITA NO. 7400/MUM/2014 MEDICO REMEDIES PVT. LTD. COMPLETED ON 22/03/2013 WHEREAS THE FIRST SUBMISSIO NS WERE MADE BY THE ASSESSEE ONLY ON 15/03/2013 WHICH SUGGEST THAT THE ASSESSMENT WAS COMPLETED IN A VERY SHORT TIME, WE DEEM IT FIT TO R ESTORE THE MATTER, ON MERITS, BACK TO THE FILE OF LD. AO FOR RE-APPRECIAT ION OF THE EVIDENCES BEING FILED BY THE ASSESSEE IN SUPPORT OF THE TRANS ACTIONS. THE ASSESSEE, IN TURN, IS DIRECTED TO SUBSTANTIATE HIS STAND IN T HIS REGARD FAILING WHICH LD. AO SHALL BE AT LIBERTY TO ADJUDICATE THE SAME ON TH E BASIS OF MATERIAL ON RECORD. 8. IN NUTSHELL, GROUND NO.1 STANDS DISMISSED WHEREA S GROUND NO. 2 STANDS ALLOWED FOR STATISTICAL PURPOSES. 9. THE APPEAL STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH MARCH, 2019. SD/- SD/- (PAWAN SINGH) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 19/03/2019 SR. PS JAISY VARGHESE %()*$%+* / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. ! , ! , / DR, ITAT, MUMBAI 6. #$% / GUARD FILE / BY ORDER, / % (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.