CLESTRA LIFE SCIENCES P.LTD, MUMBAI V. ACIT CEN CIR 40, MUMBAI

ITA 7491/MUM/2014

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 9877 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2004-2005
• Appeal Filed On: 16-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Keywords: Bogus purchase; Unexplained cash credit; Reason to believe
• Section: 153A; 147; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH MUMB AI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH JUDICIAL MEMBER ITA NO. 7491/MUM/2014 (ASSESSMENT YEAR 2004-05 ) M/S CLESTRA LIFE SCIENCES PVT. LTD. (FORMERLY KNOWN AS BRAHMA DRUGS PVT. LTD.) A WING, 604, DELPHI ORCHID AVENUE, HIRANANDANI BUSINESS PARK, POWAI, MUMBAI-400076. PAN: AAACB5795L VS. DCIT CENTRAL CIRCLE- 40, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. APPELLANT RESPONDE NT APPELLANT BY : SHRI JITENDRA B. SANGHVI WITH SHRI AMIT P. KHATIWALA (AR) RESPONDENT BY : SHRI LOVE KUMAR (DR) DATE OF HEARING : 17.09.2018 DATE OF PRONOUNCEMEN T : 26.09.2018 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY ASSESSEE UNDER SECTION 253 OF INCOME -TAX ACT IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-38, MUMBAI DATED 27 .08.2014 FOR ASSESSMENT YEAR 2004-05. THE ASSESSEE HAS RAISED TH E FOLLOWING GROUNDS OF APPEAL: 1. (A) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) - 38, MUMBAI [CIT(A)] ERRED IN UPHOLDING THE REOPENING OF THE AS SESSMENT U/S.147 AND THEREBY HOLDING THAT THE ORDER U/S.143(3) R.W.S.147 PASSED BY THE ASSESSING OFFICER IS VALID. YOUR APPELLANT SUBMITS THAT UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE THE CIT(A) OUGHT TO HAVE HELD THAT REOPENING OF THE ASSESSMENT IS BAD-IN-LAW, ILLEGAL AND THE ORDER U/S .143(3) R. W.S.14 7 OUGHT TO BE QUASHED. (B) THE LEARNED CIT(A) ERRED IN HOLDING THAT THE AS SESSING OFFICER HAD SUFFICIENT GROUND TO FORM AN OPINION THAT THERE WAS A REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT AND THEREBY UPHOLDING THE VALIDITY OF REOPENING THE ASSESSMENT U/S.147 OF THE ACT. ITA NO. 7491 MUM 2014-M/S CLESTRA LIFE SCIENCES PVT . LTD. 2 YOUR APPELLANT SUBMITS THAT UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE THE ORDER U/S.143(3) R.W.S.147 IS VOID, ILLEGAL, BAD-IN-LAW AND THE SAME OUGHT TO BE CANCELLED AS THE FACTS RELEVAN T FOR ASSESSMENT WERE FULLY & TRULY DISCLOSED IN THE ASSESSMENT PROCEEDINGS U/S .143(3). 2. (A) THE LEARNED CIT(A) ERRED IN CONFIRMING THE A CTION OF THE ASSESSING OFFICER MAKING ADDITION OF RS.28,77,784 TO THE TOTA L INCOME OF THE APPELLANT ON ACCOUNT OF SALES MADE BY THE APPELLANT TO M/S. G ENOM BIOTECH PVT. LTD. BEING TREATED AS BOGUS SALES BY THE ASSESSING OFFIC ER. YOUR APPELLANT SUBMITS THAT UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE THE LEARNED CIT(A) OUGHT TO HAVE D ELETED THE ADDITION OF RS.28,77,784 BY ACCEPTING THE SALES AS GENUINE. (B) THE LEARNED CIT(A) ERRED IN CONCLUDING THAT THE CREDIT OF RS.28,77,784 IN THE BOOKS OF THE APPELLANT BEING SO-CALLED BOGUS SA LES OUGHT TO BE TREATED AS UNEXPLAINED CASH CREDIT U/S.68 OF THE INCOME TAX AC T AS THE APPELLANT'S CLAIM OF SALES BEING GENUINE IS REJECTED AND THEREBY THE ADDITION OF RS.28,77,784 OUGHT TO BE CONFIRMED. YOUR APPELLANT SUBMITS THAT UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE THE PROVISIONS OF SECTION 68 ARE N OT APPLICABLE AND SUM CREDITED TO THE BOOKS OF ACCOUNT OUGHT TO HAVE ACCE PTED AS PROCEEDS OF SALE MADE TO M/S. GENOM BIOTECH PVT. LTD. 2. AT THE OUTSET OF HEARING, THE LD. AUTHORIZED REPRES ENTATIVE (AR) OF THE ASSESSEE SUBMITS THAT HE IS NOT PRESSING THE GROUND NO. 1(A) & (B), WHICH RELATES TO RE-OPENING UNDER SECTION 147 OF THE ACT. CONSIDERING THE SUBMISSION OF LD.AR OF THE ASSESSEE, GROUND NO. 1(A ) & (B) OF THE APPEAL IS DISMISSED AS NOT PRESSED. 3. BRIEF FACTS RELATED TO GROUND NO.2 ARE THAT ASSESSE E-COMPANY IS ENGAGED IN THE BUSINESS OF EXPORT TRADING & MANUFACTURING IN P HARMACEUTICAL PRODUCTS. DURING THE RE-ASSESSMENT PROCEEDING INITI ATED AFTER SERVICE OF NOTICE UNDER SECTION 148 DATED 31.03.2011 MADE ADDI TION OF RS. 28,77,784/- ON ACCOUNT OF BOGUS SALES TO ITS SISTER CONCERN M/S GENOM BIOTECH PVT. LTD. ITA NO. 7491 MUM 2014-M/S CLESTRA LIFE SCIENCES PVT . LTD. 3 HOLDING THAT THE ASSESSEE HAS NOT FILED ANY DOCUMEN TARY EVIDENCE SUCH AS DELIVERY CHALLAN, LORRY RECEIPT ETC. ON APPEAL BEFO RE THE LD. CIT(A), THE ADDITION ON ACCOUNT OF BOGUS SALE WAS TREATED AS CA SH CREDIT UNDER SECTION 68. THE LD. CIT(A) WHILE CONVERTING THE ADDITION FR OM BOGUS SALES TO CASH CREDIT UNDER SECTION 68 HELD THAT THE AMOUNT OF RS. 28,77,784/- WAS TREATED AS BOGUS PURCHASE IN THE HAND OF M/S GENOM BIOTECH PVT. LTD. AND THAT ADDITION WAS CONFIRMED IN THE CASE OF M/S GENOM BIO TECH PVT. LTD., THEREFORE, THE ASSESSING OFFICER OUGHT TO HAVE ADDE D THE AMOUNT UNDER SECTION 68. HENCE, FURTHER AGGRIEVED BY THE ORDER O F LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 4. WE HAVE HEARD THE LD. AR OF THE ASSESSEE AND LD. DR FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. A R OF THE ASSESSEE SUBMITS THAT LD. CIT(A) SUBSTITUTED THE ALLEGED BOG US SALE INTO CASH CREDIT UNDER SECTION 68. SECTION 68 IS NOT APPLICABLE BECA USE EVERYTHING IS A CREDIT ENTRY ON THE BASIS OF SALE TO SISTER CONCERN. THE L D. AR OF THE ASSESSEE FURTHER SUBMITS THAT NO MONEY WAS RECEIVED BY ASSES SEE DURING THIS YEAR. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT ON THE GROUNDS OF APPEAL FILED BY M/S GENOM BIOTECH PVT. LTD. RELATED TO DIS ALLOWANCE OF PURCHASE FOR THE SAME ASSESSMENT YEAR HELD THAT ADDITION HAS BEEN MADE ON THE BASIS OF REPORT FURNISHED BY SPECIAL AUDITOR. THE S PECIAL AUDITOR HAS EXPRESSED IN OPINION ABOUT THE INADEQUACY OF THE EV IDENCE AND DELETED THE ADDITION RELATING TO THE SAID PURCHASES. THE LD. AR OF THE ASSESSEE FURTHER ITA NO. 7491 MUM 2014-M/S CLESTRA LIFE SCIENCES PVT . LTD. 4 SUBMITS THAT THE ESSENTIAL INGREDIENTS FOR MAKING T HE ADDITION UNDER SECTION 68 IS LACKING. ON THE OTHER HAND, THE LD. DR FOR TH E REVENUE RELIED UPON THE ORDER OF LD. CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESS ING OFFICER MADE THE ADDITION ON HIS OBSERVATION THAT THE ASSESSEE HAS N OT FILED ANY DOCUMENTARY EVIDENCE VIZ. DELIVERY CHALLAN, LORRY RECEIPT AND T REATED THE TRANSACTION WITH SISTER CONCERN/RELATED PARTIES AS BOGUS SALE. THE LD. CIT(A) SUBSTITUTED THE ADDITION AND TREATED THE SAME UNDER SECTION 68 OF THE ACT. THE LD. CIT(A) WHILE SUBSTITUTING THE ADDITION CONCLUDED TH AT IN THE BOOKS OF ASSESSEE A SUM OF RS. 28,77,784/- IS CREDITED AT SA LES MADE TO M/S GENOM BIOTECH PVT. LTD. AND THE SUM CREDITED WAS NOT CONS IDERED AS GENUINE SALE TO M/S GENOM BIOTECH PVT. LTD., THE ONLY RECOURSE L EFT FOR ASSESSING OFFICER WAS TO TREAT THE CREDIT OF RS. 28,77,784/- AS CASH CREDIT UNDER SECTION 68 OF THE ACT BEING UNEXPLAINED CREDIT. WE HAVE NOTED THAT THE ADDITION IN THE HAND OF M/S GENOM BIOTECH PVT. LTD. IS DELETED BY CO- ORDINATE BENCH HOLDING THAT ASSESSMENT FOR ASSESSME NT YEARS 2003-04 TO 2006-07 WERE UNDER THE CATEGORY OF UNABATED ASSESSM ENT (COMPLETED ASSESSMENT) AND THE ADDITION CAN BE MADE IN THOSE Y EAR ON THE BASIS OF INCRIMINATING MATERIAL FOUND DURING THE COURSE OF S EARCH. THE ADDITIONS WERE MADE ON (M/S GENOM BIOTECH PVT. LTD.) THE BASI S OF REPORT OF SPECIAL AUDITOR. THE REPORT OF SPECIAL AUDITOR WAS NOT BASE D ON ANY INCRIMINATING ITA NO. 7491 MUM 2014-M/S CLESTRA LIFE SCIENCES PVT . LTD. 5 MATERIAL FOUND DURING THE SEARCH; THEREFORE, THE AD DITIONS WERE DELETED BEING BEYOND THE SCOPE OF PROVISION OF SECTION 153A OF THE ACT. 6. WE HAVE NOTED THAT THE LD. CIT(A) SUBSTITUTED THE A DDITION OF BOGUS SALE TO ADDITION UNDER SECTION 68 OF THE ACT. IN OUR VIEW, NO ADDITION UNDER SECTION 68 IS WARRANTED ON THE FACTS OF THE PRESENT CASE. T HE PRESENT CASE RELATES TO THE SALE OF GOODS TO SISTER CONCERN/GROUP CONCERN, WHEREIN IDENTITY OF PURCHASER IS NOT DISPUTED. MOREOVER, THIS IS NOT A CASE OF UNEXPLAINED CASH CREDIT IN THE BOOKS OF ASSESSEE NOR THE FACT REMAIN S UNEXPLAINED BY THE ASSESSEE. THE ASSESSEE CLAIMED SALE OF RS. 28,77,78 4/- TO ITS SISTER CONCERN, WHICH CANNOT BE BY ANY STRETCH OF IMAGINATION CAN B E TREATED AS CASH CREDIT AT THE HAND OF ASSESSEE. IN OUR VIEW, THE LD. CIT(A ) MISCONCEIVED BY SUBSTITUTING THE ADDITION OF ALLEGED BOGUS SALE TO ADDITION UNDER SECTION 68 OF THE ACT. HENCE, THE GROUND NO.2 OF APPEAL RAISED BY ASSESSEE IS ALLOWED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26/09/2018. SD/- SD/- G.S. PANNU PAWAN SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 26.09.2018 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR C BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI