ACIT, Central Circle-4, Hyderabad V. M/s.Hetero Drugs Pvt.Ltd, Hyderabad

ITA 794/HYD/2012

• Counselvise Citation: 79422514 RSA 2012
• Duration Of Justice: 2 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 22-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: S RAMA RAO
• Keywords: Bogus purchase; Business income; Depreciation; Income from undisclosed sources; Search and seizure; Additional evidence; Revised return; Capital expenditure
• Section: 80HHC; 80IB

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA. NO. A.Y. APPELLANT RESPONDENT 733/HYD/2012 2001-02 M/S. HETERO DRUGS LIMITED, HYDERABAD - 18. THE DCIT, CENTRAL CIRCLE-4, HYDERABAD. 734/HYD/2012 2002-03 735/HYD/2012 2003-04 736/HYD/2012 2004-05 737/HYD/2012 2005-06 738/HYD/2012 2006-07 ITA. NO. A.Y. APPELLANT RESPONDENT 790/HYD/2012 2003-04 THE ACIT, CENTRAL CIRCLE-4, HYDERABAD. M/S. HETERO DRUGS LIMITED, HYDERABAD 18. 791/HYD/2012 2004-05 792/HYD/2012 2005-06 793/HYD/2012 2006-07 794/HYD/2012 2007-08 C.O.NO. ARISING OUT OF ITA.NO. A.Y. CROSS OBJECTOR RESPONDENT 106/HYD/12 790/HYD/2012 2003 - 04 M/S. HETERO DRUGS LIMITED, HYDERABAD- 18. THE DCIT CENTRAL CIRCLE-4 HYDERABAD. 107/HYD/12 791/HYD/2012 2004-05 108/HYD/12 792/HYD/2012 2005-06 109/HYD/12 793/HYD/2012 2006-07 2 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. FOR ASSESSEE : MR. S. RAMA RAO FOR REVENUE : MR. P. SOMASEKHAR REDDY DATE OF HEARING : 07.08.2014 DATE OF PRONOUNCEMENT : 15.10.2014 ORDER PER BENCH: APPEALS ARE FILED BY ASSESSEE AGAINST THE ORD ERS OF THE CIT(A)-VII, HYDERABAD DATED 17.2.2012 FOR THE A SSESSMENT YEARS 2001-2002 TO 2006-07. REVENUE HAS ALSO FILED APPEALS AGAINST THE VERY SAME ORDER OF THE CIT(A) FOR THE A .YS 2003-04 TO 2007-08 AGAINST WHICH THE ASSESSEE TOO FILED CROSS OBJECTIONS. SINCE, COMMON ISSUES ARE INVOLVED IN ALL THESE APPE ALS, THEY ARE CLUBBED AND HEARD TOGETHER AND ARE BEING DISPOSED O F BY THIS CONSOLIDATED ORDER. 2. WE HAVE HEARD LD COUNSEL FOR ASSESSEE AND LD. CIT DR. BRIEFLY STATED, ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF BULK DRUGS AND FORMULATIONS AND OP ERATING ITS MANUFACTURING ACTIVITIES THROUGH ITS MANUFACTURING UNITS, LOCATED AT BONTHAPALLY, IDA JEEDIMETLA, APIIC, BALANAGAR, Q UTBULLAHPUR AT HYDERABAD, CIE GANDHINAGAR, VISAKHAPATNAM ETC. W ITH ITS CORPORATE OFFICE LOCATED AT 8-3-166/7/1, ERRAGADDA, HYDERABAD. THE SEARCH & SEIZURE PROCEEDINGS HAVE TAKEN PLACE ON THE GROUP, CONSISTING OF THE FOLLOWING GROUP CONCERNS, ON 10.11.2006; 3 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. (I) HETERO DRUGS LIMITED. (II) HETERO LABS LIMITED. (III) SYMED LABS LIMITED. (IV) CIREX PHARMACEUTICALS PVT LTD. THE HETERO GROUP OF CONCERNS AS REFERRED ABOVE, ARE INTO THE BUSINESS OF MANUFACTURING AND SALE OF BULK DRUGS AN D PHARMACEUTICAL FORMULATIONS. CONSEQUENT TO THE NOTI CES ISSUED ASSESSEE FILED REVISED RETURNS ADMITTING ADDITIONAL INCOMES. AO COMPLETED ASSESSMENTS ESTIMATING BOGUS PURCHASES AN D MAKING OTHER ADDITIONS. DEDUCTIONS U/S 80HHC AND 80IB WERE RECOMPUTED. MANY OF THE ISSUES ON DEDUCTIONS AROSE IN ASSESSMENTS COMPLETED EARLIER U/S 143(3). LD CIT(A) GAVE PARTIAL RELIEF. THEREFORE ASSESSEE AND REVENUE ARE IN APPEA L. IN ALL THE ASSESSEES APPEALS THE MAJOR GROUNDS ARE WITH REFER ENCE TO NON- ALLOWANCE OF 80IB DEDUCTION ON OTHER INCOMES EARN ED BY ASSESSEE. THE OTHER CONTENTION GENERALLY IN ALL THE YEARS IS THAT A.O. HAS EXCLUDED THE 80IB DEDUCTION WHILE CALCULAT ING THE DEDUCTION UNDER SECTION 80HHC. THERE ARE OTHER GROU NDS WHICH ARE DEALT WITH SEPARATELY. ISSUE NO.1 : ALLOWANCE OF DEDUCTION UNDER SECTIO N 80IB ON OTHER INCOMES. 3. ASSESSEE HAS EARNED INCOMES, SHOWN IN THE P & L ACCOUNT AS THE OTHER INCOME, WHICH WERE EXCLUDED BY THE A.O. FROM THE COMPUTATION OF 80IB. MANY OF THE ISSUES WE RE CONTESTED IN THE ORIGINAL ASSESSMENT AND IN THE CONSEQUENTIAL PROCEEDINGS AFTER SEARCH AND SEIZURE OPERATIONS, MOST OF THE IS SUES WERE REPEATED BY A.O. AS WAS DONE IN THE ORIGINAL ASSESS MENT. SINCE MANY OF THE ISSUES ARE CRYSTALLIZED BY THE ORDERS O F LD. 4 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. CIT(A)/ITAT, LD. CIT(A) FOLLOWING THE SAME HAS NOT ALLOWED THE DEDUCTIONS. FOR THE RECORD, THE INCOMES EARNED IN V ARIOUS ASSESSMENT YEARS SHOWN AS OTHER INCOME ARE AS UND ER : OTHER INCOME A.Y. 2001-02 RS. A.Y. 2002-03 RS. A.Y. 2003-04 RS. A.Y. 2004- 05 RS. A.Y. 2005- 06 RS. DUTY DRAWBACK 2,37,403 2,15,582 HIGH SEA SALES INCOME 3,40,006 4,98,000 22,96,738 IMPORT ENTITLEMENT 7,62,085 TECHNICAL KNOW-HOW 27,83,988 1,81,648 INTEREST 17,93,725 21,39,451 RENT 2,40,000 2,40,000 INTEREST ON ELECTRICITY DEPOSIT 9,831 19,662 DEPB UNUTILIZED 8,54,573 40,17,704 SALE OF R & D MATERIAL / SAMPLE SALES A.Y. 03-04 11,80,054 8,19,421 TOTAL RS. 59,17,207 53,09,308 78,93,863 12,14,479 19,92,357 5 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. 3.1. DUTY DRAW BACK : THESE INCOMES ARE EARNED BY ASSESSEE IN A.YS. 2001-02 TO 2002-03. IT WAS ASSESS EES CONTENTION THAT IT REPRESENTS REFUND OF EXCISE DUTY AND WHEN I T IS PAID ON GOODS, THE MAIN INGREDIENTS OF COST OF PRODUCTION A ND IN THE PROCESS REDUCED THE COST OF PRODUCTION. THEREFORE, THE SAME IS TO BE CONSIDERED AS INCOME FROM THE BUSINESS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB. AS CAN BE SEEN FROM THE ORDER O F LD. CIT(A), THIS ISSUE WAS ALREADY HELD AGAINST THE ASSESSEE FO LLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ST ERLING FOODS LTD., VS. CIT REPORTED IN 237 ITR 579 AND M/S. PAND IAN CHEMICALS LTD. VS. CIT REPORTED IN 262 ITR 278 WHEREIN IT WAS HELD THAT ONLY INCOMES HAVING DIRECT NEXUS WITH ELIGIBLE BUSINESS CAN BE CONSIDERED AS INCOME DERIVED FROM SUCH UNDERTAKING. SINCE, THIS ISSUE WAS ALREADY HELD AGAINST ASSESSEE IN THE EARL IER ROUND AND NOW THAT THE HONBLE SUPREME COURT IN THE CASE OF L IBERTY INDIA VS. CIT 317 ITR 218 UPHELD THE SAME STATING THAT DE PB/DUTY DRAWBACK ARE INCENTIVES WHICH FLOW FROM THE SCHEMES FRAMED BY CENTRAL GOVERNMENT AND ARE NOT PROFITS DERIVED FROM ELIGIBLE BUSINESS UNDER SECTION 80IB, THE ORDER OF LD. CIT(A ) ON THIS ISSUE IS TO BE UPHELD. 3.1.1. NOT ONLY THAT, THE INCOMES FROM IMPORT ENTITLEMENTS , TECHNICAL KNOWHOW, HIGH SEAS SALES INCOME AND INTER EST AMOUNTS WERE ALSO ACCORDINGLY DECIDED IN EARLIER ROUND OF A PPEALS . WITH REFERENCE TO ISSUE OF HOLDING THE PROFITS ON HIGH S EA SALES AND PROFIT FROM SAMPLES CANNOT BE CONSIDERED AS ELI GIBLE FOR DEDUCTION UNDER SECTION 80IB AND 80HHC, THE COORDINATE BENCH IN THE CASE OF HETERO DRUGS LTD., IN 6 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. ITA.NO.1004/HYD/2006 (MA.NO.36/HYD/2013) HAS HELD I N PARAS 17 AND 18 AS UNDER : 17. THE NEXT GROUND BY THE ASSESSEE IS REGARDING INCLUSION OF HIGH SEAS SALES AND SALES OF SAMPLES F OR THE PURPOSE OF DEDUCTION UNDER SECTION 80LA AND 80HHC. SALE OF SAMPLES REPRESENT THE AMOUNTS REALIZED FROM SALE OF SAMPLE PRODUCTS SENT VARIOUS CUSTOMERS FOR APPROVAL. THE RECEIPT OF CONSIDERATI ON FOR SAMPLES HAVE BEEN ACCOUNTED AS OTHER INCOME. AS THE SALES SAMPLES ARE DIRECTLY CONNECTED WITH THE MANUFACTURING ACTIVITY OF THE ASSESSEE WE HOLD THAT THE ASSESSEE IS ENTITLED TO RELIEF UNDER SECTION 80 1B AS WELL AS 80HHC IN RESPECT OF SAMPLE SALES AMOUNTING TO RS.8,19,421/- 18. AS REGARDS HIGH SEAS SALES, THE ASSESSEE IMPORTED RAW MATERIALS FOR THEIR MANUFACTURE. FOR VARIOUS REASONS, IF THEY FIND THAT PORTION OF SUCH RAW MATERIALS WILL NOT BE REQUIRED FOR MANUFACTURE THE MATERIAL IS SOLD AT HIGH SEAS AT THE SAME PRICE AT WHICH IT WAS PURCHASED. IN ORDER TO RECOVER SOME OF THE EXPENDITURE THAT WAS INCURRED ON IMPORTS, THE ASSESSEE RECEIVED COMMISSION FROM THE PURCHASER OF THE RAW MATERIALS, SOLD ON HIGH SEAS BASIS. THESE EXPENDITURES HAVE BEEN CHARGED TO PROFIT AND LOSS ACCOUNT. SALES OF RAW MATERIALS ON HIGH SEAS DO NOT REPRESENT PROFIT FROM THE MANUFACTURING ACTIVITIES OF THE ASSESSEE BUT ONLY TRADING ACTIVITY. THE INCOME FROM HIGH SEAS SALES CANNOT BE INCLUDED AS BUSINESS PROFIT DERIVED FROM THE UNDERTAKING FOR THE PURPOSE OF COMPUTING RELIEF UNDER SECTION 801B. HOWEVER THE EXPENDITURE INCURRED IN EARNING THIS INCOME SHOULD ALSO BE EXCLUDED WHILE COMPUTING RELIEF U/S 801B. FURTHER, EVEN THOUGH THE COMMISSION RECEIVED ON ACCOUNT OF HIGH SEA SALES IS BUSINESS INCOME, THE SAME IS ALSO NOT ENTITLED TO RELIEF UNDER SECTION 80HHC IT IS A RECEIPT OF THE NATURE REFERRED TO IN EXPLANATION (BAA) TO SEC 80HHC. BUT AS HELD BY THE SUPREME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES LIMITED REPORTED IN 343 ITR 89, ONLY THE N ET 7 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. AMOUNT OF INCOME IN RESPECT OF RECEIPTS MENTIONED I N EXPLANATION (BAA) HAS TO BE EXCLUDED. ACCORDINGLY, WHILE COMPUTING RELIEF UNDER SECTION 80HHC, 90% OF THE NET INCOME FROM HIGH SEA SALES OF RS.22,96,738/ - AS REDUCED BY CORRESPONDING EXPENDITURE INCURRED FO R EARNING THIS INCOME SHALL BE EXCLUDED FORM THE BUSINESS PROFIT. THE ASSESSEE SHALL PROVIDE NECESSA RY PARTICULARS REGARDING EXPENDITURE INCURRED FOR EARN ING THIS INCOME. THUS IN SO FAR AS HIGH SEAS SALES IS CONCERNED THE NET INCOME SHALL BE EXCLUDED FOR THE PURPOSE OF COMPUTING THE DEDUCTION U/S. 80LB AND 90% OF THE NET INCOME SHALL BE EXCLUDED FROM BUSINESS PROFITS WHILE COMPUTING DEDUCTION U/S. 80HHC. THIS FORUM CANNOT RE-ADJUDICATE THE ISSUES ALREADY DECIDED. THEREFORE, A.O. IS DIRECTED TO FOLLOW THE DIRECTION S OF ITAT ON THE INCOMES ACCORDINGLY. 3.2. AS FAR AS ASSESSEES ALTERNATE CONTENTION THAT ONLY NET INCOME CAN BE CONSIDERED AND NOT THE GROSS INCOME, EVEN THOUGH THERE IS LEGAL PRINCIPLES INVOLVED IN IT, WHICH WER E UPHELD BY HONBLE APEX COURT IN THE CASE OF ACG ASSOCIATED CA PSULES P. LTD., VS. CIT 343 ITR 89 GIVEN IN THE CONTEXT OF 80 HHC, THE SAME PRINCIPLES CANNOT BE DIRECTED TO BE APPLIED HERE AS THESE ISSUES WERE ALREADY DECIDED IN THE EARLIER APPEALS . AS WE FIND FROM SOME OF THE ORDERS PLACED ON RECORD BY ASSESSEE THE ISSUE OF EXCLUDING GROSS INTEREST AND OTHER INCOME FROM T HE PROFITS OF BUSINESS FOR THE PURPOSE OF COMPUTATION AND DEDUCTION UNDER SECTION 80HHC WERE DECIDED BY THE COORDINATE BENCH OF THE TRIBUNAL IN ITA.NO.74,75 AN D 76/HYD/2007 FOR ASSESSMENT YEARS 2002-03 TO 2004-05 IN THE CASE OF M/S. HETERO LABS LTD., WHEREIN THE ITAT VIDE 8 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. PARA 14 OF ITS ORDER HAS DECIDED THE ISSUE AS UNDER : 14. WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE APEX COURT IN THE C ASE OF ACG ASSOCIATED CAPSULES P. LTD. VS. CIT (2012-TIOL-13-S C-IT-LB) WHEREIN THE APEX COURT HAS HELD THAT NETTING OF INC OME FROM EXPENDITURE IS ALLOWED UNDER EXPLANATION (BAA) TO 8 0HCC I.E., ONLY 90% OF THE NET INCOME FROM OF THE NATURE MENTI ONED IN CLAUSE (1) OF EXPLANATION BAA TO 80HHC WHICH IS ACT UALLY INCLUDED IN THE PROFITS OF THE ASSESSEE IS TO BE DE DUCTED FROM THE PROFITS OF THE ASSESSEE FOR DETERMINING PROFIT S OF THE BUSINESS. WE THEREFORE SET ASIDE THE ISSUE TO THE FILE OF ASSESSING OFFICER TO RE-COMPUTE THE RELIEF U/S.80HH C FOLLOWING THE RATIO OF THE APEX COURT DECISION . THEREFORE, A.O. IS DIRECTED TO FOLLOW THE ORDERS OF THE APPELLATE AUTHORITIES ON THE ISSUE. IN CASE NO SUCH INSTRUCTI ONS/DIRECTIONS WERE GIVEN IN ANY YEAR, AO IS DIRECTED TO FOLLOW TH E PRINCIPLE AND EXCLUDE ONLY NET INCOME, SUBJECT TO ASSESSEE FURNIS HING SUCH EXPENDITURE DETAILS, WHILE COMPUTING THE DEDUCTIONS . 4. IN A.Y. 2002-03 IN ADDITION TO DUTY DRAWBACK, H IGH SEA SALES, TECHNICAL KNOWHOW AND INTEREST INCOMES A S IN EARLIER YEAR, THERE WAS RENT TO AN EXTENT OF RS.2,40,000 AN D DEPB UNUTILIZED TO AN EXTENT OF RS.8,54,573 UNDER THE HE AD OTHER INCOME. HEREIN ALSO THESE ISSUES WERE ALREADY DECI DED IN EARLIER APPEALS AND PARTICULARLY, AS SEEN FROM THE ORDER OF LD. CIT(A), ITAT HAS DECIDED MANY OF THE ISSUES AGAINST ASSESSEE FOL LOWING THE SPECIAL BENCH ORDERS THEN EXISTING. THEREFORE, LD. CIT(A), DID NOT ENTERTAIN FRESH CONTENTIONS. SINCE, THESE ISSUES WE RE ALREADY DECIDED IN THE ORIGINAL ASSESSMENTS, A.O. IS DIRECT ED TO FOLLOW THE SAME. THEREFORE, GROUND RAISED IN A.Y. 2002-03 IS A CCORDINGLY DISMISSED. 9 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. 5. IN A.Y. 2003-04, OTHER INCOMES CONSIST OF RENT, HIGH SEA SALES, DEPB UNUTILIZED. SINCE, THESE ISSUES WER E COMING IN ORIGINAL ROUND OF APPEALS, THERE IS NO NEED TO ADJU DICATE IT AFRESH. A.O. IS DIRECTED TO FOLLOW THE DIRECTIONS AVAILABLE ON THESE. 5.1. THE OTHER ISSUE COMING IN A.Y. 2003-04 IS WIT H REFERENCE TO SALE OF R & D MATERIAL TO AN EXTENT OF RS.8,19,421. HOWEVER, AS SEEN FROM THE ORDERS, THIS ISSUE WAS AL READY DECIDED IN THE ORIGINAL ASSESSMENTS AND THEREFORE, THIS FOR UM CANNOT RE- ADJUDICATE THE ISSUE. A.O. IS DIRECTED TO FOLLOW TH E DIRECTIONS ALREADY ISSUED ON THIS INCOME IN EARLIER ROUND OF A PPEALS. WITH THIS, GROUNDS RAISED IN A.Y. 2003-04 ON THE ISSUE A RE TREATED AS DISMISSED. 6. IN A.YS. 2004-05, 2005-06, THERE ARE TWO COMPON ENTS OF OTHER INCOME. ONE IS INTEREST ON ELECTRICITY DEP OSIT WHICH WAS CLAIMED AS INCOME ELIGIBLE FOR DEDUCTION UNDER SECT ION 80IB. AS SEEN FROM THE ORDERS, THIS ISSUE IS ALSO HELD AGAIN ST ASSESSEE. NOW THAT THE HONBLE SUPREME COURT IN THE CASE OF LIBER TY INDIA (SUPRA) HELD AGAINST THE ASSESSEE AND THERE IS NO NEED TO D IFFER FROM THE FINDINGS OF THE AUTHORITIES. ANOTHER IS THE PROPORT IONATE INCOME DECLARED PERTAINING TO GANDHINAGAR UNIT OUT OF OTHE R INCOMES SHOULD BE CONSIDERED FOR DEDUCTION UNDER SECTION 80 IB ON PRO-RATA BASIS. SINCE, OTHER INCOMES WERE ALREADY CONSIDERED AND NOT ALLOWED DEDUCTION UNDER SECTION 80IB IN EARLIER ROU ND, WE ARE OF THE OPINION THAT PRORATA INCOMES ON THE GANDHINAGAR UNIT ALSO CANNOT BE CONSIDERED AS INCOME ELIGIBLE FOR THE UNI T. THEREFORE, WE UPHOLD THE ORDERS OF LD. CIT(A) ON THIS ISSUE. INCA SE, THERE ARE NO ORDERS ON ANY ISSUE IN ANY OF THE YEARS, AO IS DIRE CTED TO FOLLOW THE 10 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. SAME DIRECTION/ PRINCIPLES DECIDED IN ANY OF THE YE ARS ON SAME NATURE OF INCOME IN DECIDING THE ISSUE. WITH THESE DIRECTIONS, WE PARTLY ALLOW THE FOLLOWING GROUNDS INCLUDING THE AL TERNATE GROUND RAISED ON THIS ISSUE IN THE FOLLOWING APPEALS. IN ITA.NO.733 & 734/HYD/2012 GROUNDS NO. 2 TO 7. IN ITA.NO.735 & 736/HYD/2012 GROUNDS NO. 2 TO 6. AN D ITA.NO.737/HYD/2012, GROUNDS NO.2 TO 5. ISSUE NO. 2 : ALLOWING DEDUCTION UNDER SECTION 80HH C AFTER REDUCING DEDUCTION UNDER SECTION 80IB. 7. THIS ISSUE WAS RAISED IN ALL THE ASSESSMENT YEARS UNDER CONSIDERATION EXCEPT IN AY 06-07. WITH RESPE CT TO THIS GROUND, WHILE COMPUTING THE RELIEF U/S 80HHC, THE A SSESSING OFFICER HAD REDUCED FROM THE PROFITS AND GAINS OF T HE BUSINESS, THE DEDUCTION COMPUTED U/S 80IB. IN ASSESSEE'S OWN CASE IN ITA NO 74 TO 76/HYD/2007 DATED 30.3.2012 FOR THE AY 2002-03 T O 2004-05, THE CLAIM OF ASSESSEE WAS ALLOWED FOLLOWING THE DEC ISION OF THE BOMBAY HIGH COURT IN THE CASE OF ASSOCIATED CAPSULE S P LTD V DCIT (332 ITR 42) WHEREIN IT HAS BEEN HELD THAT THE TRIBUNAL WAS NOT RIGHT IN HOLDING THAT SECTION 80-IA(9) OF THE A CT, MANDATES THAT THE AMOUNT OF PROFITS ALLOWED AS DEDUCTION UNDER SE CTION 80-IA(1) OF THE ACT HAVE TO BE REDUCED FROM THE PROFITS OF T HE BUSINESS OF THE UNDERTAKING WHILE COMPUTING DEDUCTION UNDER ANY OTHER PROVISIONS UNDER HEADING C IN CHAPTER VI-A OF THE A CT'. T HE COORDINATE BENCH IN ITA.NO.74 TO 76/HYD/2007 IN THE CASE OF HETERO LABS LTD., (SUPRA) HAS DECIDED THE I SSUE VIDE PARAS 17 AND 18 AS UNDER : 11 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. 17. WE FIND THAT THIS ISSUE IS COVERED BY THE DEC ISION OF ASSOCIATED CAPSULES P LTD. VS. DCIT (332 ITR 42 (BO M. HC), WHEREIN IT HAS BEEN HELD : THE TRIBUNAL WAS NOT RIGHT IN HOLDING THAT SECTION 80IA(9) OF THE ACT, MANDATES THAT THE AMOUNT OF PROFITS ALLOWE D AS DEDUCTION U/S 80IA(1) OF THE ACT HAVE TO BE REDUCED FROM THE PROFITS OF THE BUSINESS OF THE UNDERTAKING WHILE CO MPUTING DEDUCTION UNDER ANY OTHER PROVISIONS UNDER HEADING C IN CHAPTER VI-A OF THE ACT. 18. RESPECTFULLY FOLLOWING THE DECISION OF THE MUM BAI HIGH COURT WE HOLD THAT WHILE COMPUTING THE RELIEF U/S. 80HHC THE DEDUCTION ALLOWABLE U/S.80IB NEED NOT BE DEDUCTED F ROM BUSINESS PROFITS. 7.1 SINCE, THIS ISSUE IS ALREADY DECIDED IN FA VOUR OF ASSESSEE, WE DO NOT HAVE TO ADJUDICATE IT AFRESH. A .O. IS DIRECTED TO FOLLOW INSTRUCTIONS ON THIS IN ALL THE YEARS CONCER NED. ACCORDINGLY THE FOLLOWING GROUNDS ARE ALLOWED FOR STATISTICAL P URPOSES. ITA.NO. 733/HYD/2012 GROUND NO 8, ITA.NO. 734/HYD/2012 GROUND NO 9, ITA.NO 735/HYD/2012 GROUND NO 7, ITA.NO. 736/HYD/2012 GROUND NO 7, ITA.NO. 737/HYD/2012 GROUND NO 6. ISSUE NO. 3 : DEDUCTION UNDER SECTION 80IB FROM THE GANDHINAGAR UNIT. 8. THIS ISSUE ARISE IN ITA.NO.733/HYD/2012 AS GROU ND NO.9, IN ITA.NO.734/HYD/2012 AS GROUND NO.8, IN 12 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. ITA.NO.735/HYD/2012 AS GROUND NO.10 AND IN ITA NO. 736/HYD/2012 AS GROUND NO 8. 8.1. IT WAS THE CONTENTION OF ASSESSEE THAT ASSESS EE HAD A UNITS AT GANDHINAGAR ON WHICH ASSESSEE HAS EARNED P ROFIT AND CLAIMED DEDUCTION UNDER SECTION 80IB. WITHOUT ANY D ISCUSSION, A.O. EXCLUDED THIS AMOUNT WHILE COMPUTING DEDUCTION UNDER SECTION 80IB AND WHEN THE GROUND WAS RAISED SPECIFI CALLY BEFORE THE LD. CIT(A), HE DID NOT ADJUDICATE. IT WAS THE S UBMISSION THAT THE MATTER CAN BE REFERRED TO THE A.O. TO EXAMINE A ND ALLOW AS THERE WAS NO DISCUSSION WHILE DISALLOWING THE AMOUN T. 8.2. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE A RE OF THE OPINION THAT THIS ISSUE HAS TO BE EXAMINED BY THE A .O. AFRESH. AS SEEN FROM THE ORDER OF THE A.O. HE DID MENTION THAT ASSESSEE IS HAVING A UNIT IN GANDHINAGAR BUT IT WAS THE CONTENT ION THAT WHILE CONSIDERING DEDUCTION UNDER SECTION 80IB INCOME FRO M THIS UNIT WAS NOT CONSIDERED. IN THE ORDER ALSO THERE IS ONLY DISCUSSION ABOUT REDUCING THE INCOME BROUGHT TO TAX AS OTHER S OURCES WHEREAS, IN THE COMPUTATION, THERE WAS REDUCTION OF 80IB DISALLOWANCE WITH REFERENCE TO GANDHINAGAR UNIT. WH Y THE AMOUNT IS REDUCED, WHAT IT PERTAINS TO, HAS NOT BEEN DISCU SSED IN THE ORDER AT ALL. THEREFORE, WE ARE OF THE OPINION THAT THIS ISSUE IS TO BE EXAMINED BY A.O. AFRESH AND CONSIDER ALLOWING THE D EDUCTION AFTER GIVING DUE OPPORTUNITY TO ASSESSEE, SUBJECT TO VERI FICATION OF ELIGIBILITY AND AMOUNT OF INCOME TO BE CONSIDERED F OR DEDUCTION. IN CASE, THIS ISSUE WAS ALREADY DECIDED IN EARLIER ORD ERS OF ITAT, THEN A.O. IS SPECIFICALLY DIRECTED TO FOLLOW THE INSTRUC TIONS ALREADY 13 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. ISSUED. WITH THESE DIRECTIONS, GROUNDS ARE RESTORE D TO THE FILE OF A.O. FOR FRESH ADJUDICATION. ISSUE NO. 4 : INCOME FROM SPENT SOLVENTS 9. THIS ISSUE PERTAINS TO INCOME FROM SPENT SOLVEN TS. THIS ISSUE ARISE IN A.YS. 2002-03 TO 2006-07. THE ASSESSING OFFICER MADE AN ADDITION AS MENTIONED HEREUNDER UND ER THE HEAD 'SUPPRESSION OF INCOME ARISING OUT OF SPEN T SOLVENTS/BULK DRUGS: A.Y. AMOUNT ADDED IN RS. 2002-03 17,48,971 2003-04 72,49,744 2004-05 1,72,49,936 2005-06 3,76,99,926 2006-07 4,20,428 IT WAS MADE UNDER THE HEAD 'SUPPRESSION OF INCOME ARISING OUT OF SPENT SOLVENT/BULK DRUGS'. ACCORDING TO THE ASSESSING OFFICER, BEFORE THE CENTRAL EXCISE SETTLE MENT COMMISSION, THE ASSESSEE ADMITTED AN UNACCOUNTED FO R TURNOVER OF RS.6,43,69,005 FOR ALL THE YEARS TOGETH ER. THE ASSESSING OFFICER IS OF THE VIEW THAT SUCH AN AMOUN T WOULD REPRESENT THE INCOME OF THE ASSESSEE HEREIN A ND ACCORDINGLY ADDED AS SUPPRESSION OF INCOME FROM SAL E OF SPENT SOLVENTS. IN THIS REGARD, THE ASSESSEE SUBMIT TED A DETAILED NOTE BEFORE THE ASSESSING OFFICER WHICH IS EXTRACTED BY THE ASSESSING OFFICER AT PAGES 37 TO 4 0. IT 14 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. WAS SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE EXCISE DUTY WAS PAID FOR THREE REASONS - (A) THE CLEARANCE OF SPENT SOLVENTS WITHOUT PAYMENT OF DUTY; (B) UNDERVALUATION OF THE SALE PRICE OF SPENT SOLVENTS AND (C) PAYMENT OF DUTY AND THE CLEARANCE OF BULK DRUGS. WITH REGARD TO THE ADDITION MADE ON ACCOUNT OF SPENT SOL VENTS, THE ASSESSEE ACCEPTED THE ADDITION AND ADMITTED THE SAME IN THE RETURN OF INCOME FILED TO THE EXTENT OF THE AMOUNT ARRIVED AT WITH REFERENCE TO THE QUANTUM OF CLEARAN CE OF SPENT SOLVENTS WITHOUT PAYMENT OF DUTY. ASSESSEE SUBMITTED THAT THE SPENT SOLVENTS ARE WASTE MATERIA L ARISING DURING THE PROCESS OF PRODUCTION WHICH CANN OT BE RE-USED BY THE COMPANY. THEY ARE HIGHLY INFLAMMABLE IN CHARACTER AND CANNOT BE STORED IN THE OPEN YARDS. T HEY HAVE TO BE STORED ONLY IN THE UNDERGROUND TANKS AND SUCH A STORAGE FACILITY FOR THE SPENT SOLVENTS IS NOT VI ABLE ECONOMICALLY AND, THEREFORE, THE ASSESSEE DID NOT M AINTAIN SUCH STORAGE FACILITY SO AS TO STORE THE SPENT SOLV ENTS FOR LONG. THE SPENT SOLVENTS ARE GENERATED CONTINUOUSLY BY THE BULK DRUG INDUSTRY AND TO PREVENT ANY PROBLEM FOR S TORAGE OF THE SAME, THE ASSESSEE SELLS SUCH ITEMS AT THROW AWAY PRICES TO THE AVAILABLE PURCHASERS. THE CENTRAL EXC ISE AUTHORITIES FOUND (A) THAT THERE IS DIFFERENCE IN T HE RATE AT WHICH SUCH SOLVENTS WERE SOLD AND (B) THAT THE ENTI RE QUANTUM OF SOLVENTS WAS NOT RECORDED IN THE BOOKS A S SALE OF SOLVENTS. THE SAID AUTHORITIES ARRIVED AT THE DI FFERENCE IN THE SALE PRICE ON AN ESTIMATE BASIS. THE ASSESSEE A GREED BEFORE THE CENTRAL EXCISE SETTLEMENT COMMISSION ONL Y TO 15 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. AVOID ANY LITIGATION WITH THE DEPARTMENT. TO THE EX TENT OF THE AMOUNT ARRIVED AT WITH REFERENCE TO THE SPENT S OLVENTS SOLD WITHOUT PAYMENT OF EXCISE DUTY IS CONCERNED, T HE SAME IS ADMITTED IN THE RETURN OF INCOME. THE ASSES SEE, HOWEVER, DID NOT ACCEPT THAT THERE IS ANY DIFFERENC E IN THE SALE PRICE FIXED, AS THERE IS NO EVIDENCE THAT THE SPENT SOLVENTS WERE SOLD AT A PARTICULAR PRICE AS AGAINST THE RECORDED PRICE AND AS THE DIFFERENCE WAS ARRIVED AT ONLY ON AN ESTIMATE. THE THIRD ADDITION PROPOSED BY THE CENTRAL EXCISE AUTHORITIES IS ON ACCOUNT OF REMOVAL OF BULK DRUGS FROM THE PLACE OF MANUFACTURE WITHOUT RECORDING THE SAME IN THE REGISTERS. THE CONTENTION OF THE ASSESSEE BE FORE THE EXCISE AUTHORITIES WAS THAT THE BULK DRUGS WERE TRA NSFERRED FOR TESTING FROM ONE UNIT TO THE OTHER OR FROM THE PRODUCTION UNIT TO THE OFFICE. IF SUCH FINISHED PRO DUCT WAS CLEARED WITHOUT PAYMENT OF THE EXCISE DUTY, IT MAY BE RELEVANT FOR THE EXCISE AUTHORITIES AND NOT FOR THE INCOME- TAX DEPARTMENT. IT IS FURTHER SUBMITTED THAT THE D ETAILS OF THE MOVEMENT OF THE GOODS FROM ONE UNIT TO ANOTHER HAVE BEEN PROVIDED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER. IN THE CIRCUMSTANCES, THE ASSESSEE SUBMITTED THAT N O INCOME ACCRUED TO THE ASSESSEE HEREIN FROM THE SAID TRANSACTIONS. THE ASSESSING OFFICER, HOWEVER, MENTI ONED THAT THE CONTENTIONS OF THE ASSESSEE ARE NOT ACCEPT ED SINCE THE CENTRAL EXCISE DEPARTMENT DECIDED THAT DUTY IS PAYABLE IN RESPECT OF THE AMOUNT OF RS.L,72,49,936. THE ASSESSING OFFICER, HOWEVER IN HIS ORDER ADDED THE E NTIRE AMOUNT TOWARDS SPENT SOLVENTS. THE ASSESSEE SUBMITT ED 16 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. BEFORE LD. CIT(A) THAT : A) THE ASSESSING OFFICER IS NOT CORRECT IN MENTIONING THAT THE AMOUNT OF SPENT SOLVENTS AGGREGATED TO RS. 72,49,744 WHEREAS THE AMOUNT OF SPENT SOLVENT IS ON LY RS.2,29,975 WHICH WAS ALREADY OFFERED BY THE ASSESS EE. B) IN SO FAR AS THE DIFFERENCE ON ACCOUNT OF QUANTITY OF SPENT SOLVENTS IS CONCERNED, IT IS ONLY A PRESUMPTI ON THAT THE ASSESSEE DERIVED SOME INCOME FROM THE SALE OF SUCH SPENT SOLVENTS. THERE IS NO POSITIVE EVIDENCE TO SHOW THAT SUCH ITEMS HAVE BEEN SOLD AND THE SALE CONSIDERATION WAS REALIZED. C) WITH REGARD TO THE RATE DIFFERENCE BETWEEN THE SALE PRICE OF THE SPENT SOLVENTS, THERE IS NO EVIDENCE TO SHOW THAT THE ASSESSEE HEREIN SOLD AT A HIGHER PRICE THAN REC ORDED IN THE BOOKS OF ACCOUNT AND THE ADDITION IS ARRIVED AT ONLY ON AN ESTIMATE BASIS. D) IN SO FAR AS THE CENTRAL EXCISE AUTHORITIES ARE CONCERNED, THEY ARE ONLY CONCERNED WITH THE DUTY PAYABLE ON THE MOVEMENT OF GOODS WITH REFERENCE TO THEIR VALUE. HOWEVER, IN SO FAR AS THE INCOME-TAX I S CONCERNED, THERE SHOULD BE EVIDENCE THAT THE ASSESS EE HEREIN HAS ACTUALLY SOLD SUCH GOODS. THERE IS NO SU CH EVIDENCE DURING THE COURSE OF SEARCH EITHER BY THE CENTRAL EXCISE AUTHORITIES OR BY THE INCOME-TAX AUTHORITIES AND, THEREFORE, THE ASSESSING OFFICER I S NOT JUSTIFIED IN MAKING ANY ADDITION. E) WITHOUT PREJUDICE TO THE ABOVE CONTENTION, THE ASSE SSEE SUBMITTED THAT IF THE AUTHORITIES ARE OF THE VIEW T HAT THERE IS ANY TURNOVER NOT RECORDED IN THE BOOKS OF ACCOUNT (WHICH IS NOT BORN OUT OF SEIZED MATERIAL), THE ASSESSING OFFICER OUGHT TO HAVE ADOPTED ONLY THE NE T INCOME FROM OUT OF SUCH TURNOVER. 17 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. THE ASSESSEE RELIED ON THE FOLLOWING DECISIONS: A) THE DECISION OF THE HIGH COURT OF MADHYA PRADESH IN THE CASE OF CIT VS BALCHAND AJIT KUMAR REPORTED IN 263 ITR 610. B) THE DECISION OF THE HON'BLE ITAT, HYDERABAD IN THE CASE OF SHRI RAMJI MISHRA VS ACIT IN ITA NO.148/HYD/2002 . C) THE DECISION OF THE HON'BLE ITAT, HYDERABAD IN THE CASE OF HOTEL GANESH BHAVAN, TIRUPATI VS ITO, WARD-2, TIRUPATI IN ITA NO.756/HYD/2000. D) THE DECISION OF THE HON'BLE ITAT, HYDERABAD IN THE CASE R.S.SILKS, TIRUPATI IN ITA NO.86 TO 88/HYD/ 1995 10. THE LD. CIT(A) AFTER CONSIDERING THE DETAILED SUBMISSIONS OF THE ASSESSEE HOWEVER, DID NOT AGREE AND DISMISSED THE CONTENTIONS BY STATING AS UNDER : 5.4. THE FINDINGS/OBSERVATIONS OF THE A.O. AND THE WRITTEN SUBMISSIONS OF THE APPELLANT WITH REFERENCE TO THE SPECIAL NOTE ON SPENT SOLVENTS AND THE FINDIN GS OF CENTRAL EXCISE SETTLEMENT COMMISSION ARE PERUSED. A S COULD BE SEEN FROM THE CHART INDICATED ABOVE, THE A MOUNT OF RS.6,43,69,005 FOR THE ASSESSMENT YEARS 2002-03 TO 2006-07 REPRESENT THE AMOUNT OF THE TURNOVERS, UNDE R THREE SUB-HEADS AS UNDERVALUATION OF SPENT SOLVENT S, CLEARING OF SPENT SOLVENTS WITHOUT PAYMENT OF DUTY AND CLEARING OF BULK DRUGS WITHOUT PAYMENT OF DUTY, A S ARRIVED BY THE CENTRAL EXCISE DEPARTMENT, ON WHICH THE DUTY WAS NOT PAID BY THE APPELLANT ORIGINALLY BUT F ILED APPLICATION BEFORE THE CENTRAL EXCISE SETTLEMENT COMMISSION WHILE ADMITTING THE SAME AS VALUE OF THE GOODS MOVED WITHOUT PAYMENT OF DUTY AND PAID DUTY SUBSEQUENTLY ON SUCH AMOUNTS. AGAINST THE SAID QUANTIFICATION, THE APPELLANT SHOWN TO HAVE DECLARE D AN ADDITIONAL INCOME OF RS.1,40,78,316 FOR A.YS. 2002- 03 TO 2005-06 WHILE FURNISHING THE INCOME TAX RETURNS. FO R THE YEAR UNDER REFERENCE, SUCH FIGURES ARE INDICATED AT 18 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. RS.17,48,971 AGAINST WHICH THE APPELLANT ADMITTED RS.14,55,275 AS ADDITIONAL INCOME, PRECISELY REPRESENTING THE FIGURES RELATED TO CLEARING OF SPE NT SOLVENTS WITHOUT PAYING DUTY. HOWEVER, THE ASSESSIN G OFFICER HAS MADE THE ADDITION OF ENTIRE AMOUNT WITH OUT GIVING CREDIT TO THE AMOUNT OF RS.14,55,275 DECLARE D BY THE APPELLANT. 5.5. AS COULD BE SEEN FROM THE SUBMISSIONS OF THE APPELLANT, THERE IS NO DISPUTE, AS FAR AS THE INCOM E RELATABLE TO THE SPENT SOLVENTS CLEARED WITHOUT PA YMENT OF DUTY, IS CONCERNED, SINCE THE AMOUNTS RELATED T O THE ITEM/ISSUE (RS.14,55,275) HAS BEEN ADMITTED BY THE APPELLANT. THE CONTENTION IS ONLY REGARDING THE INC OME RELATABLE TO THE UNDERVALUATION OF THE SPENT SOLVE NTS AND THE INCOME RELATABLE TO CLEARANCE OF BULK DRUG S WITHOUT PAYMENT OF DUTY. REGARDING THE UNDERVALUAT ION OF SPENT SOLVENTS, THE APPELLANTS CONTENTION WAS T HAT THERE IS NO EVIDENCE TO SHOW THAT THE APPELLANT HAS SOLD THE SPENT SOLVENTS WITH HIGHER PRICE THAN RECORDED IN THE BOOKS OF ACCOUNTS AND THE ADDITION IS ARRIVED ON ES TIMATE BASIS. WHILE ELABORATING ON THE ISSUE, THE APPELLAN T SUBMITTED THAT THE SPENT SOLVENTS ARE WASTE MATERIA LS ARISEN DURING THE PRODUCTION WHICH CANNOT BE REUSED AND CANNOT BE STORED IN OPEN YARDS AS THEY ARE HIGH LY INFLAMMABLE. KEEPING THE SHORTAGE OF STORAGE AND TH E PROBLEMS ASSOCIATED WITH SPENT SOLVENTS GENERATED CONTINUOUSLY BY THE BULK DRUG INDUSTRY, IN MIND, TH E SAME WERE SOLD AT THROUGH AWAY PRICES TO THE AVAILA BLE PURCHASERS, AS AGAINST WHICH, THE CENTRAL EXCISE AUTHORITIES OBSERVED AND FOUND THAT (A) THERE IS DIFFERENCE IN RATE AT WHICH SOLVENTS ARE SOLD (B) E NTIRE QUANTUM OF SOLVENTS NOT RECORDED IN BOOKS AS SALE. NOTWITHSTANDING THE OBSERVATIONS AND COMMENTS MADE BY THE CENTRAL EXCISE AUTHORITIES, THE APPELLANT AG REED BEFORE THE CENTRAL EXCISE SETTLEMENT COMMISSION ONL Y TO AVOID THE LITIGATION WITH THE DEPARTMENT, AS PER TH E SUBMISSION MADE BY THE APPELLANT. THOUGH THERE IS S OME MERIT IN THE SUBMISSIONS OF THE APPELLANT, IT IS NO T ESTABLISHED WITH THE EVIDENCE AND THE QUANTITY DETA ILS OF THE SPENT SOLVENTS, TO SHOW THAT SPENT SOLVENTS WER E SOLD AT LOWER RATES THAN THE RATES DETERMINED BY THE CEN TRAL 19 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. EXCISE DEPARTMENT. IT IS ALSO A FACT THAT THE APPEL LANT HAS ADMITTED THE QUANTIFIED AMOUNTS OF RS.2,93,696 BEFO RE THE CENTRAL EXCISE SETTLEMENT COMMISSION AND PAID T HE DUTY ON THE PRODUCTS UNDER REFERENCE. FURTHER, THE INFORMATION FOUND BY ONE GOVERNMENT ORGANISATION WH ICH IS NOT DISPUTED BY THE APPELLANT CANNOT BE BRUSHED ASIDE THAT TOO WITHOUT THE VALID REASONS GIVEN BY THE APP ELLANT. UNDER THE CIRCUMSTANCES, THE ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF THE UNDERVALUATION OF THE SPENT SOLVENTS TO THE EXTENT OF RS.2,93,696 ST ANDS CONFIRMED. 5.6. ACCORDINGLY, THE ADDITIONS MADE BY THE ASSESSING OFFICER UNDER THE HEAD INCOME FROM THE SUPPRESSED TURNOVERS OF SPENT SOLVENTS TO THE TUNE OF RS.17,48,971 REPRESENTING THE UNDERVALUATION OF THE SPENT SOLVENTS IS CONFIRMED WITH A FURTHER DIRECTIO N TO THE ASSESSING OFFICER TO GIVE CREDIT FOR RS.14,55,275 T HE AMOUNT OFFERED BY THE APPELLANT IN FILING THE RETUR N OF INCOME REPRESENTING THE INCOME RELATED TO CLEARANC E OF SPENT SOLVENTS FOR THE YEAR UNDER REFERENCE. THERE FORE, THIS GROUND OF APPEAL IS TREATED AS PARTLY ALLOWED. 11. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE DO NOT SEE ANY REASON TO DIFFER FROM THE FINDINGS OF T HE LD. CIT(A). IT IS A FACT THAT ASSESSEE HAS ADMITTED THE AMOUNT BEFORE THE CENTRAL EXCISE COMMISSION. WHATEVER MAY BE THE REASONS FOR ADMISSION BEFORE THE AUTHORITY THE FACT IS THAT THESE AMOUNTS WERE QUANTIFIED BY ANOTHER AUTHO RITY AND TO THAT EXTENT, THERE IS NO DISPUTE. CONSEQUENT LY, WE SEE NO REASON TO DIFFER FROM THE ORDERS OF THE AUTH ORITIES SINCE WE ARE NOT CONVINCED WITH THE REASONS STATED BEFORE US BY ASSESSEE THAT ONLY PROFIT SHOULD BE BROUGHT T O TAX AND NOT THE ENTIRE AMOUNTS ADMITTED BEFORE THE CENT RAL EXCISE AUTHORITIES. WE ARE NOT CONVINCED WITH THE S AME ASSESSEES ADMISSION ITSELF IS BEST FORM OF EVIDENC E AND 20 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. THAT TOO BEFORE ANOTHER AUTHORITY OF GOVERNMENT OF INDIA. IN VIEW OF THIS, ORDERS OF LD. CIT(A) ON THIS ISSUE ARE UPHELD. GROUNDS RAISED BY ASSESSEE IN ITA.NO.734/HYD/2012 AS GROUND NO.10, IN ITA.NO.735/HYD/2012 AS GROUND N O.8 & 9, IN ITA.NO.736/HYD/2012 AS GROUND NO.10 AND 11 AND IN I TA NO. 737/HYD/2012 AS GROUND NO 7 & 8 AND IN ITA NO. 738/ HYD/2012 AS GROUND NO 2 ARE ACCORDINGLY DISMISSED. ISSUE NO. 5 : NEW DRUG LICENSE FEE AS CAPITAL EXPENDITURE 12. THIS ISSUE HAS BEEN RAISED IN ITA.NO.735/HYD/2012 AS GROUND NO.11 AND IN ITA.NO.736/HYD/2012 AS GROUND NO.9. 12.1 BRIEFLY STATED, WITHOUT DISCUSSION IN THE ASSESSMENT ORDER, A.O. MADE THE DISALLOWANCE OF NEW DRUG LICENSE FEE OF RS. 22 LAKHS FOR ASSESSMENT YEAR 200 3-04 (ITA.NO.735/HYD/2012). ON OBJECTIONS FROM ASSESSEE, LD. CIT(A) ANALYSED THE ISSUE AND HELD THAT PRESUMABLY, A.O. DISALLOWED THIS AMOUNT AS CAPITAL EXPENDITURE AND A LLOWED DEPRECIATION THEREON. HOWEVER, HE ALSO GAVE A FINDI NG THAT IN ASSESSEES OWN CASE THIS ISSUE WAS ALREADY DECID ED BY LD. CIT(A) EARLIER AND SUCH EXPENDITURE CANNOT BE A LLOWED EITHER UNDER SECTION 35AB OR UNDER SECTION 37. 12.2. EVEN THOUGH ASSESSEE HAS RE-AGITATED THE ISS UE IN THE PRESENT APPEAL, WE FIND THAT THIS ISSUE WAS DECIDED AGAINST ASSESSEE FOR A.Y. 2003-04 IN 21 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. ITA.NO.1004/HYD/2006 VIDE ORDER DATED 16.04.2012 WHEREIN VIDE PARA-7 OF THE ORDER IT WAS HELD AS UND ER : 7. WE HAVE HEARD THE PARTIES, PERUSED THE RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. IT IS OBSERVED THAT IT IS NOT A MERE LICENSE TO USE AN Y KNOWHOW BUT A LICENSE TO MANUFACTURE AND IS OF ENDURING NATURE. SECTION 32(1)(II) PROVIDES FOR GRA NTING DEPRECIATION IN RESPECT OF LICENSES ACQUIRED. THE A .O. FOUND THAT FOR THE EARLIER YEAR I.E., A.Y. 2002-03 THE ASSESSEE CLAIMED EXPENDITURE ON ACQUIRING LICENSES AS EXPENDITURE TOWARDS R&D. SINCE THE FACTS ABOUT R&D WERE NOT AVAILABLE, THE ISSUE WAS SET ASIDE. HOWEVE R, THERE IS NO SUCH CLAIM FOR DEDUCTION AS R&D EXPENDI TURE. IN THE GROUND OF APPEAL, THE ASSESSEE HAD CLAIMED DEDUCTION U/S.35AB. SECTION 35AB IS NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION AND THE SAME IS APPLIC ABLE TO ACQUISITION OF KNOWHOW AND NOT MERE OF GRANT OF LICENSE TO MANUFACTURE. THEREFORE, WE HOLD THAT PAY MENT MADE TO ACQUIRE PERMISSION FROM GOVERNMENT TO MANUFACTURE A NEW DRUG FOR A PERIOD OF TIME IS CAPI TAL IN NATURE. WE, THEREFORE, CONFIRM THE ORDER OF CIT(A) AND DISMISS THE ASSESSEES GROUND OF APPEAL ON THIS ISS UE. 12.3 SINCE THE ISSUE WAS ALREADY CRYSTALLIZED I N THE EARLIER ROUND OF ASSESSMENT ORDERS, MAY BE THAT IS THE REASON WHY THE A.O. DID NOT DISCUSS ANYTHING WHILE COMPUTING IN THE RE-ASSESSMENT PROCEEDINGS. SINCE T HE ISSUE WAS ALREADY DECIDED AGAINST ASSESSEE, THERE I S NO NEED TO RECONSIDER THE ISSUE IN THE PRESENT PROCEED INGS. ACCORDINGLY, GROUNDS NO. 11 AND 9 IN ITA.NO.735 & 736/HYD/2012 RESPECTIVELY RAISED ON THIS ISSUE ARE REJECTED. 22 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. ADDITIONAL GROUND : 13. IN THE COURSE OF APPEAL PROCEEDINGS, ASSESSEE HAS RAISED ADDITIONAL GROUND IN ITA.NO. 735, 736, 737/HYD/2012. ASSESSEE HAS DECLARED ADDITIONAL INCO MES CONSEQUENT TO SEARCHES AND A.O. AND LD. CIT(A) TREA TED THE ADDITIONAL INCOMES AS INCOME FROM OTHER SOURCE S CONSEQUENTLY, DEDUCTION UNDER SECTION 80HHC AND 80I B ARE NOT ALLOWED. ASSESSEE HAS RAISED ADDITIONAL GRO UNDS AND SUBMITTED DETAILED NOTE AS UNDER : THE ASSESSEE HUMBLY SUBMITS THAT THE ADDITIONAL AMOUNTS OFFERED BY THE ASSESSEE HEREIN AND ADDED BY THE ASSESSING OFFICER FORMS PART OF THE INCOME FROM BUSINESS AND NOT INCOME FROM OTHER SOURCES. THE ASSESSEE SUBMITS THAT THE ADDITIONAL INCOME WAS ACCEPTED BY THE CMD DURING THE COURSE OF SEARCH AND SEIZURE OPERATIONS. THE STATEMENT IS AT PAGE NOS. 1 1 TO 13 OF THE PAPER BOOK WHICH CLEARLY INDICATES THAT ADDITIONAL INCOME FORMS PART OF THE INCOME FROM BUSINESS AND NOT INCOME FROM OTHER SOURCES. FURTHER , EVEN THE ASSESSING OFFICER WORKED OUT THE DISALLOWA NCE FROM THE PURCHASES AND, THEREFORE, ARMS PART OF BUSINESS INCOME. THE CMD ALSO OFFERED THE ADDITIONA L INCOME ON THE GROUND THAT THERE MAY BE SOME EXCESSI VE CLAIM OF PURCHASES. THEREFORE, THE ADDITION REPRESE NTS INCOME FROM BUSINESS. THE SAID AMOUNT CANNOT BE ASSESSED SEPARATELY AS INCOME FROM OTHER SOURCES BU T IS TO BE INCLUDED 3S FORMING PART OF THE BUSINESS INCOME OF THE ASSESSEE HEREIN. THE ASSESSEE SUBMITS THAT ONCE THE ADDITIONAL INCOME FORMS PART OF THE BUSINESS INCOME, THE SAID AMOUNT IS ALLOWABLE FOR DEDUCTION U/ S 80HHC AND 80LB OF THE I.T. ACT. IN THIS REGARD, THE ASSESSEE SUBMITS THAT FOR THE PURPOSE OF 80HHC, THE PROFITS OF THE BUSINESS IS DE FINED BY SEC.80HHC EXPLANATION (BAA). ACCORDING TO THE SA ID 23 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. DEFINITION, THE PROFITS OF THE BUSINESS MEANS THE P ROFITS OF THE BUSINESS AS COMPUTED UNDER THE SAID HEAD. TH E WORD 'COMPUTED' WOULD INDICATE THAT THE AMOUNT ARRI VED AT AFTER MAKING ADDITIONS. THEREFORE, THE ASSESSING OFFICER AND THE CIT (A) ARE NOT JUSTIFIED IN EXCLUD ING THE SAID SUM FOR THE PURPOSE OF WORKING 80HHC. IN SO FAR AS 80I B IS CONCERNED, THE DEDUCTION IS TO BE ALLOWED FROM THE GROSS TOTAL INCOME AND IT IS TO BE COMPUTED WITH REFERENCE TO THE PROFITS AND GAINS DERIVED FROM THE U NDERTAKING, THE PROFITS AND GAINS WOULD INDICATE THE AMOUNT COMPUTED UNDER THE HEAD BUSINESS. FURTHER, THE PROVISIONS OF SEC.80IB DEFINES THE WORD TOTAL I NCOME TO INCLUDE ALL THE INCOMES ASSESSABLE AFTER CONSIDERIN G ALL THE PROVISIONS OF THE ACT BEFORE ALLOWING DEDUCTION UND ER CHAPTER VIA. THEREFORE, THE A.O. AND THE LD. CIT(A) ARE NOT JUSTIFIED IN REDUCING SUCH ADDITIONS FOR THE PURPOS E OF WORKING 80IB OF THE ACT. THE ASSESSEE PRAYS THE HONBLE TRIBUNAL TO HOLD THAT THE ADDITIONAL INCOME REPRESENTS THE INCOME FR OM BUSINESS AND IS ENTITLED FOR DEDUCTION U/S.80HHC AN D 80IB OF THE ACT. 14. AFTER CONSIDERING RIVAL CONTENTIONS, WE NOTICE THAT THE LD. CIT(A) DELETED THE ADDITIONS MADE AS BOGUS PURCHASES SEPARATELY MADE BY A.O. WHILE DIRECTING T HE A.O. TO ACCEPT THE INCOMES OFFERED BY ASSESSEE AS OTHER INCOME OF ASSESSEE. IT WAS THE CONTENTION THAT THIS INCOME AL SO SHOULD BE TREATED AS BUSINESS INCOME AND DEDUCTIONS UNDER SECTION 80HHC AND 80IB ARE TO BE ALLOWED ON THIS. THIS CONT ENTIONS WERE NOT RAISED EITHER BEFORE THE A.O. OR BEFORE LD . CIT(A) AND RAISED FOR THE FIRST TIME AS ADDITIONAL GROUND BEFORE US. IN VIEW OF THIS, WHILE ADMITTING LEGAL GROUND THE I SSUE IS RESTORED TO THE FILE OF A.O. TO EXAMINE WHETHER THE INCOMES CAN BE CONSIDERED AS INCOME OF THE BUSINESS ELIGIBL E FOR 24 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. DEDUCTION OF ELIGIBLE UNITS/ UNDERTAKING UNDER SECT ION 80HHC OR 80IB AS THE CASE MAY BE, SUBJECT TO SATISF YING THE CONDITIONS THEREIN. THEREFORE, THE ISSUE PERTAINING TO COMPUTATION OF INCOME ALONG WITH ELIGIBILITY IS RES TORED TO THE FILE OF A.O. FOR FRESH CONSIDERATION AS PER FACTS A ND LAW. NEEDLESS TO SAY THAT ASSESSEE SHOULD BE GIVEN DUE OPPORTUNITY OF HEARING. WITH THIS THE ADDITIONAL GR OUNDS RAISED IN ITA.NO. 735, 736, 737/HYD/2012 ARE ALLOWED FOR STATISTICAL PURPOSES. ITA.NO.790 TO 794/HYD/2012 : 15. THESE 5 APPEALS ARE BY REVENUE FOR ASSESSMENT YEARS 2003-04 TO 2007-08. REVENUE HAS RAISED COMMON GROUNDS AS UNDER : 2. THE LD. CIT(A) OUGHT TO HAVE UPHELD THE TOTAL DISALLOWANCE MADE ON FICTITIOUS/BOGUS PURCHASES CLAIM OF ASSESSEE, AS THE SAME IS LOGICALLY AND ARITHMETICALLY ESTIMATED IN ASSESSMENT ORDER AS PER IN PRINCIPLE CONFESSION OF ASSESSEE TO HAVE MADE UNVERIFIABLE PURCHASES FROM THE SAID PARTIES OF MUMBAI FOR HIS CONCERNS. 3. THE LD. CIT(A) OUGHT NOT HAVE GIVEN CREDENCE TO THE SEARCH SUBSEQUENT STATEMENT OF ASSESSEE AND RELATED PERSONS AS IT IS AN AFTERTHOUGHT TO NEGATE THE FACT OF ASSESSEES UNVERIFIABLE PURCHASES CLAIM THAT TOO WITHOUT ANY VERIFIABLE PROOFS/JUSTIFICATIO N FOR THE CONTRADICTION OF SEARCH DAY CONFESSION. 4. THE LD. CIT(A) ERRED IN HOLDING THAT PROFITS EMBEDDED IN THE TURNOVERS FROM THE EXCISE RECORDS MAY BE CHARGED TO TAX AND NOT THE ENTIRE UNACCOUNTED TURNOVER ASSOCIATED WITH CLEARANCE OF 25 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. BULK DRUGS WITHOUT PAYMENT OF DUTY. 5. THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ADDITION MADE WITH REGARD TO CLEARANCE OF BULK DRUGS WITHOUT PAYMENT OF DUTY WHEN NO EVIDENCE REGARDING UNACCOUNTED PURCHASE OF BULK DRUGS WAS FURNISHED. 16. GROUNDS NO. 4 AND 5 ARE PERTAINING TO THE ADDITION ON ACCOUNT OF SPENT SOLVENTS AND CLEARANCE OF BULK DRUGS WITHOUT PAYMENT OF DUTY. THESE ISSUES AR E ALREADY CONSIDERED IN ASSESSEES APPEALS AS ISSUE N O.4 VIDE PARAS NO. 10 TO 12 HEREINABOVE. CONSEQUENT TO THE DECISION TAKEN THEREIN, AS WE HAVE ALREADY UPHELD T HE ORDERS OF LD. CIT(A) ON THE CONTENTION OF ASSESSEE, WE DO NOT SEE ANY MERIT IN REVENUE APPEALS ON THE SAME GROUNDS. ACCORDINGLY GROUNDS NO. 4 AND 5 ARE REJECT ED. 17. COMING TO GROUNDS NO. 2 AND 3 IN ALL THE YEARS THE FACTS ARE AS UNDER : 17.1 BRIEFLY STATED, HETERO GROUP OF CONCERNS ARE INTO THE BUSINESS OF MANUFACTURING AND SALE OF BULK DRUGS AN D PHARMACEUTICAL FORMULATIONS. AS FAR AS PROCUREMENT OF RAW MATERIALS ARE CONCERNED, A CENTRALIZED MECHANISM WA S SHOWN TO HAVE BEEN ADOPTED BY THE GROUP CONCERNS, WITH THE P ROCUREMENT OF RAW MATERIALS MADE FROM VARIOUS SOURCES INCLUDING T HE GROUP OF CONCERNS LOCATED AT MUMBAI. THE MAIN RAW MATERIALS THAT WERE SHOWN TO HAVE PURCHASED FROM THE BOMBAY BASED FIRMS ARE (A) METHANOL (B) CAUSTIC SODA FLAKES (C) TOLUENE (D) ET HYL ACETATE (E) ACETIC ACID (F) M.BUTANOL (G) CYELO HEXANONE ETC. T HE DETAILS OF THE 26 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. TOTAL PURCHASES AND THE PURCHASES FROM THE BOMBAY B ASED CONCERNS ARE INDICATED AS UNDER, TO GAUGE THE VOLUM ES OF THE BUSINESSES ACHIEVED BY THE GROUP COMPANIES FOR VARI OUS ASSESSMENT YEARS RELATED TO THE SEARCH PROCEEDINGS. PURCHASES FROM MUMBAI CONCERNS BY HETERO GROUP A.Y. TOTAL PURCHASES BY HETERO GROUP OF COMPANIES SHREE GROUP POOJA GROUP TOTAL (3+4) 2002-03 2201650390 -- 13701566 13701566 2003-04 1896852370 31628717 52770523 84399240 2004-05 3133018520 41328562 143539030 184867592 2005-06 4093073397 62614788 124308602 186923390 2006-07 6626050454 151419013 145744355 297163368 2007-08 7995503539 26087710 2563878 28651588 TOTAL 27850987818 313078790 482627954 795706744 17.2. DURING THE COURSE OF THE SEARCH/SURVEY PROC EEDINGS CONDUCTED AT THE GROUP CONCERNS, IT WAS ALLEGED TO HAVE FOUND SOME EVIDENCE, THAT THE ASSESSEE COMPANY ALONG WITH THE OTHER GROUP CONCERNS WERE INDULGING IN INFLATION OF PURCH ASES OF THE RAW MATERIAL, SPECIALLY THROUGH TWO GROUPS OF CONCERNS VIZ. SHREE GROUP AND POOJA GROUP LOCATED AT MUMBAI. IN ARRIVIN G AT THE SAID CONCLUSION, THE ASSESSING OFFICER HAS RELIED ON THE STATEMENTS RECORDED FROM THE SENIOR EMPLOYEES OF THE GROUP CON CERNS ON THE DAY OF SEARCH, WHEREIN IT WAS STATED BY THEM THAT A PORTION OF PURCHASES OF RAW MATERIAL WERE INFLATED AND ENTRIES WERE MADE IN THE REGISTER WITHOUT RECEIVING THE MATERIAL WHILE I NDICATING THE SOURCES OF SUCH PURCHASES FROM MUMBAI. STATEMENTS W ERE ALSO RECORDED FROM THE TWO ASSOCIATED PERSONS OF THE GRO UPS MENTIONED 27 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. ABOVE LOCATED AT MUMBAI ON TWO DIFFERENT DATES, DUR ING THE COURSE OF SURVEY/SEARCH CONDUCTED IN THEIR RESPECTIVE BUSI NESS PREMISES, WHEREIN IT WAS SHOWN TO HAVE INDICATED THAT THE SAI D PARTIES WERE ISSUING CERTAIN BOGUS SALE BILLS TO THE HETERO GROU P COMPANIES. DURING THE COURSE OF SEARCH & SEIZURE PROCEEDINGS, THE CMD OF THE GROUP CONCERNS WAS EXAMINED ON OATH WHO HAVE MADE A DISCLOSURE OF ADDITIONAL INCOME OF RS.25.00 CRORES FOR THE GROUP CONCERNS, BY TAKING CERTAIN OMISSIONS COMMITTED BY THE PAID EMPLOYEES/MANAGERS OF THE COMPANIES INTO CONSIDERAT ION. THE DETAILS OF THE DISCLOSURE ARE AS UNDER : AY 03-04 AY 04-05 AY 05-06 AY 06-07 TOTAL SYMED LABS LTD., 10000000 7000000 18000000 20000000 55000000 HETERO DRUGS LTD., 5000000 13000000 21000000 80000000 119000000 HETERO LABS LTD., 5000000 10000000 21000000 40000000 76000000 TOTAL 20000000 30000000 60000000 140000000 250000000 17.3 AS COULD BE SEEN FROM THE ABOVE CHART, T HE DISCLOSURES WERE MADE IN THE NAMES OF THE THREE COMPANIES FOR A YS 2003-04 TO 2006-07 EXCLUDING THE ASSESSMENT YEAR 2007-08 AN D IN CASE OF M/S CIREX PHARMACEUTICALS PVT LTD, THE OTHER CONCER N OF THE GROUP, NO DISCLOSURES WERE MADE. 28 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. 17.4. THE ASSESSEE COMPANY M/S HETERO DRUGS LIM ITED, WAS INCORPORATED ON 6.4.1993, INVOLVED IN MANUFACTURING AND SALE OF BULK DRUGS AND PHARMACEUTICAL FORMULATIONS, WHILE P ROCURING THE RAW MATERIAL FROM VARIOUS SOURCES INCLUDING THE TWO CONCERNS VIZ. SHREE GROUP AND POOJA GROUP LOCATED AT MUMBAI, FOR LAST SEVERAL YEARS AND DETAILS OF THE TOTAL PURCHASES AND THE PU RCHASES MADE BY THE ASSESSEE FROM THE TWO GROUP CONCERNS AT MUMB AI, FROM WHOM THE ALLEGED FICTITIOUS PURCHASES WERE SHOWN TO HAVE BEEN MADE, ARE AS UNDER : HETERO DRUGS LIMITED A.Y. TOTAL PURCHASES PURCHASES FROM SHREE GROUP PURCHASES FROM POOJA GROUP 2002-03 1428631409 -- 345957 2003-04 1184879517 7392689 9841536 2004-05 1766929257 18248124 42770225 2005-06 2475193896 21854684 47248861 2006-07 3896837721 86710788 52455543 2007-08 5151264938 12066668 1292697 TOTAL 17251159128 146272953 153954819 29 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. 17.5. THE ASSESSEE COMPANY HAS FILED ITS RETURN OF INCOME ON 18.6.2007 ADMITTING THE TOTAL INCOME OF RS.8,18, 97,190 INCLUDING THE ADDITIONAL INCOME OF RS.50,00,000 DEC LARED U/S 132(4) OF THE I.T. ACT, 1961. WHILE COMPUTING THE T AXABLE INCOME AND FINALIZING THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS MADE CERTAIN ADDITIONS AND DISALLOWANCES AND THE NO TABLE AMONG THEM BEING THE ADDITION OF RS.51,84,960 TREATING A PORTION OF PURCHASES MADE FROM BOMBAY GROUP CONCERNS, AS FICTI TIOUS PURCHASES. 17.6. ASSESSING OFFICER HAS MADE ADDITIONS ON ACCOUNT OF FICTITIOUS/UNAUTHENTIC PURCHASES AND WHI LE TAXING THE SAME DECLARED INCOMES HAVE NOT BEEN CONSIDERED. LD. CIT(A) ON THE CONTENTIONS OF THE AS SESSEE ANALYSED THE ISSUE, EXAMINED THE DETAILED SUBMISSIO NS PLACED ON RECORD AND CONTENTIONS OF THE ASSESSEE AN D HELD THAT DISALLOWANCE ON ESTIMATE BASIS AND DISALLOWANC E ON PERCENTAGE BASIS CANNOT BE UPHELD. SO, WHILE CANCEL LING THE DISALLOWANCE MADE BY A.O. ON THE PURCHASES, THE DIRECTION WAS GIVEN TO TAX ADDITIONALLY DECLARED IN COME OF ASSESSEE IN RESPECTIVE ASSESSMENT YEARS. HIS DETAIL ED ORDERS IN PARA 5.12 TO 5.26 ARE AS UNDER : 5.12. THE FINDINGS/OBSERVATIONS OF THE ASSESSING OFFICER AND THE WRITTEN SUBMISSIONS OF THE APPELLAN T WITH REFERENCE TO THE NOTE GIVEN ON FICTITIOUS PURCHASES , ARE PERUSED. AS COULD BE SEEN FROM THE FACTS OF THE CASE, THE AP PELLANT COMPANY IS INTO THE BUSINESS OF MANUFACTURING AND S ALE OF BULK DRUGS AND PHARMACEUTICAL FORMULATIONS SINCE 19 96, WITH HIGH VOLUMES OF TURNOVERS, AS INDICATED IN THE FORE GOING PARAGRAPHS OF THIS ORDER. IT HAS BEEN OBSERVED THAT THE GROUP 30 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. COMPANIES WERE PROCURING THE RAW MATERIAL, THROUGH A COMMON MECHANISM AND THE CENTRALIZED PROCESS, FOR GROUP AS A WHOLE. THE APPELLANT COMPANY WAS PROCURING THE RAW MATERIA LS FROM VARIOUS SOURCES INCLUDING THE TWO GROUP OF COMPANIES/CONCERNS VIZ. SHREE GROUP AND POOJA GROUP , LOCATED AT MUMBAI, WHERE SURVEY/SEARCH PROCEEDINGS WERE CONDUCTED AT THEIR PLACES, WHEREIN IT WAS STATED BY THE REPRESENTATIVES OF THE SAID CONCERNS VIZ. MR.NISHIT J. DOSHI AND MR.RAJESH K.PUNAMIA THAT BILLS WERE ORGANIZED BY TH EM TO THE FOUR HETERO GROUP OF COMPANIES VIZ. M/S SYMED LABS LTD. M/S HETERO DRUGS LTD. M/S HETERO LABS LTD AND M/S CIREX PHARMACEUTICALS PVT LTD. DURING THE PERIOD OF FINAN CIAL YEAR 2002-03 TO 2006-07, WITHOUT SUPPLYING THE RAW MATER IAL. MEANWHILE, SEARCH & SEIZURE PROCEEDINGS HAVE TAKEN PLACE IN THE CASE OF HETERO GROUP OF COMPANIES WITH PROCEEDI NGS INITIATED ON 10.11.2006 AND CONCLUDED ON 8.1.2007, DURING WHICH STATEMENTS WERE RECORDED FROM THE SENIOR EMPL OYEES OF THE GROUP CONCERNS, A SECURITY GUARD AT FACTORY PRE MISES OF M/S HETERO LABS LTD. THE STATEMENTS OF SRI B. PARTH ASARATHY REDDY, CHAIRMAN OF THE GROUP COMPANIES, WAS ALSO RE CORDED ON 8.1.2007. IN THE INITIAL STATEMENT RECORDED FROM SRI B.RAMACHANDRA REDDY, VICE-PRESIDENT (MATERIALS), WO RKING FOR M/S HETERO LABS LTD, ON 10.11.2006, IT WAS STATED B Y HIM ON ENQUIRY THAT THERE ARE CERTAIN BILLS WHICH WERE ACC OMMODATED BY THE TWO BOMBAY BASED CONCERNS WHILE INDICATING T HE PERIOD OF SUCH SUPPLIES, THE PROCEDURE ADOPTED IN MAKINGTH E ENTRY OF SUCH PURCHASES IN THE STOCK REGISTER ETC.. SIMILARL Y, STATEMENT WAS ALSO RECORDED FROM SRI SRIHARI REDDY, MANAGER (WAREHOUSE), WORKING WITH M/S HETERO DRUGS LIMITED ON 10.11.2006, WHEREIN HE HAS INDICATED THAT THERE ARE CERTAIN BILLS WHICH WERE RECEIVED WITHOUT THE MATERIAL AND WERE ENTERED INTO THE STOCK REGISTER WITHOUT VERIFYING T HE QUANTITIES OF THE RAW MATERIAL RECEIVED. IN THE PROCESS, MR. S RIHARI REDDY ALSO CONFIRMED THE CORRECTNESS OF THE STATEMENT REC ORDED FROM SRI A. SUDHAKAR, A SECURITY GUARD, POSTED AT HETERO LABS LTD, AS REGARDS TO THE PROCEDURE ADOPTED IN ENTERING THE BILLS THAT WERE NOT ACCOMPANIED BY THE MATERIAL. IT IS ALSO A FACT THAT WHILE GIVING THE STATEMENT MR. RAMACHANDRA REDDY AN D SRI SRIHARI REDDY WERE REFERRING TO NAME OF SRI K.V. BH ASKER REDDY, GENERAL MANAGER (FINANCE), STATING THAT MR. BHASKER REDDY IS THE IN-CHARGE OF THE ACCOUNTS AND AS SUCH HE IS AWARE ABOUT ALL SUCH TRANSACTIONS. HOWEVER, IT IS N OTICED THAT 31 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. NO STATEMENT FROM SRI K.V. BHASKER REDDY WAS RECORD ED DURING THE COURSE OF SEARCH & SEIZURE PROCEEDINGS E XCEPT ON 26.12.2008 JUST BEFORE CONCLUSION OF THE ASSESSMENT PROCEEDINGS AND IN THE STATEMENT RECORDED, MR. BHAS KER REDDY HAS DENIED THE INITIAL STATEMENTS GIVEN BY MR. RAMC HANDRA REDDY AS WELL AS MR. SRIHARI REDDY ON 10.11.2006. M R. RAMCHANDRA REDDY AND MR. SRIHARI REDDY HAVE DENIED THE STATEMENTS GIVEN BY THEM EARLIER AND AFFIDAVITS WER E FILED BY THE APPELLANT/DEPONENTS INDICATING THE DETAILS AND REASONS FOR DENIALS OF THEIR STATEMENT DT.10.11.2006. SIMILARLY , MR. A. SUDHAKAR ALSO FILED AFFIDAVIT DENYING THE STATEMENT GIVEN BY HIM ON 10.11.2006. 5.13 AS COULD BE SEEN FROM THE INFORMATION BROUGH T ON THE RECORD, THE APPELLANT GROUP MADE PURCHASES OF R AW MATERIAL FROM SHREE GROUP, AND POOJA GROUP, DURING THE AY 2002-03 TO AY 2007-08 AND SUCH PURCHASES ARE QUANTI FIED AT RS.31,30,78,790 AND RS.48,26,27,954, RESPECTIVELY, AS AGAINST THE TOTAL PURCHASES OF RS.2785,09,87,818, W HICH CONSTITUTE AROUND 2.85%, PURCHASES FROM THE TWO MUM BAI CONCERNS PUT TOGETHER. SIMILARLY, THE TOTAL PURCHAS ES OF THE RAW MATERIAL MADE BY M/S HLL, FROM THE SHREE GROUP AND POOJA GROUP ARE QUANTIFIED AT RS.9,97,94,004 AND RS.15,51 ,94,422 RESPECTIVELY, AS AGAINST THE TOTAL PURCHASES OF RS.795,62,21,188 BY THE APPELLANT COMPANY, FOR THE AY 2002- 03 TO AY 2007-08, WHICH CONSTITUTE AROUND 3.20% OF THE TOTAL PURCHASES. A PORTION OF SUCH PURCHASES FROM BOTH TH E GROUPS WERE TREATED AS FICTITIOUS PURCHASES BY THE ASSESSI NG OFFICER AND THE BASIS FOR SUCH TREATMENT/CONCLUSION IS THE STATEMENTS RECORDED FROM THE SENIOR EMPLOYEES/MANAGERS OF THE HETERO GROUP COMPANIES APART FROM THE STATEMENTS OF MR. RA JESH K.PUNAMIA, THE REPRESENTATIVE OF POOJA GROUP AND MR .NISHIT J. DOSHI, THE REPRESENTATIVE OF SHREE GROUP. IN QUANTI FICATION OF SUCH FICTITIOUS PURCHASES, FROM POOJA GROUP, THE AS SESSING OFFICER RELIED UPON THE STATEMENT OF MR. RAJESH K. PUNAMIA AND THE ASSESSMENT ORDER PASSED BY DCLT CC-46, MUMBAI, IN THE CASE OF TWO GROUP CONCERNS. IN THE CASE OF SHREE GR OUP, THE BASIS ADOPTED IS THE STATEMENT OF MR. NISHIT J. DOS HI APART FROM THE FEW ENQUIRIES MADE WITH REFERENCE TO THE VARIAT IONS, AS REGARD TO QUANTITY AND AMOUNTS IN THE BILLS ISSUED BY SHREE GROUP. 32 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. 5.14 COMING TO THE FACTS FOR THE YEAR UNDER REFER ENCE, THE TOTAL FICTITIOUS PURCHASES WERE QUANTIFIED AT R S.53,87,828 WHICH INCLUDE THE FICTITIOUS PURCHASES ATTRIBUTABLE TO THE PURCHASES MADE FROM SHREE GROUP AND POOJA GROUP AND THE AMOUNTS QUANTIFIED ARE RS.12,86,341 FROM POOJA GROU P AND RS.41,01,487 FROM SHREE GROUP. AS INDICATED, IN THE CASE OF SHREE GROUP, THE QUANTIFICATION OF FICTITIOUS PURCH ASES WERE BASED ON THE THEORY THAT FEW PURCHASES ARE 'DIRECT PURCHASES' WITH PURCHASES MADE FROM THE MANUFACTURERS/IMPORTER S DIRECTLY AND BALANCE ORDERED BY THE TRADERS FROM TH E IMPORTERS/MANUFACTURES WITH GOODS DELIVERED DIRECTL Y TO THE CLIENTS. IN CASE OF THE TRANSIT PURCHASES, 55% OF S UCH PURCHASES WERE TREATED AS UNVERIFIABLE BY THE ASSESSING OFFIC ER OBSERVING THAT CERTAIN BILLS WERE NOT FULLY VERIFIABLE AND IN CASE OF DIRECT PURCHASES, ENTIRE PURCHASES WERE TREATED AS FICTITI OUS, ON THE BASIS THAT THE ASSESSEE HAS NOT OBJECTED TO SUCH TR EATMENT OR COULD DISPROVE THE CONCLUSIONS DRAWN BY THE ASSESSI NG OFFICER. HOWEVER, THIS ASPECT APPEARS NOT CORRECT AS VERIFIA BLE FROM THE RECORD AND WAS DISPUTED BY THE APPELLANT SAYING THA T THEY HAVE FILED THEIR OBJECTIONS TO THE SHOW CAUSE NOTIC E WHERE SUCH TREATMENT WAS OPPOSED BUT WAS NOT TAKEN INTO CONSID ERATION BY THE ASSESSING OFFICER. IT WAS ALSO OBSERVED THAT SUCH PURCHASES WERE MADE FROM REPUTED SUPPLIERS WITH SOM E OF THEM BEING STATE GOVERNMENT UNDERTAKINGS BUT NO ENQ UIRIES WERE MADE WITH SUCH SUPPLIERS AS REGARDS TO THE GEN UINENESS OF THE SUPPLIES MADE. IN CASE OF THE QUANTIFICATION OF FICTITIOUS PURCHASES FROM POOJA GROUP, THE ASSESSING OFFICER H AS GONE BY THE STATEMENT OF MR. PUNAMIA AND THE OBSERVATIONS M ADE BY THE ASSESSING OFFICER (DCLT CC-46, MUMBAI), AS REGA RDS TO THE QUANTIFICATION/BASIS FOR ARRIVING AT THE FIGURE OF FICTITIOUS PURCHASES, WITHOUT ANY EVIDENCE, OR THE SEIZED MATE RIAL IN THIS REGARD. 5.15 IT IS PERTINENT TO MENTION HERE THAT THE APP ELLANT MADE CERTAIN DISCLOSURES OF UNACCOUNTED INCOME DURI NG THE COURSE OF THE SEARCH PROCEEDINGS AND SUCH DISCLOSUR ES WERE MADE TO COVER UP THE OMISSIONS, IF ANY, ON THE PART OF THE APPELLANT COMPANY AND GROUP CONCERNS, AS PER THE SW ORN STATEMENT RECORDED FROM DR. B. PARTHASARTHY REDDY O N 8.1.2007. THE AMOUNT OF SUCH DISCLOSURE MADE BY THE APPELLANT COMPANY FOR THE ASSESSMENT YEARS 2003-04 TO 2006- 07, WAS INDICATED AT RS.7,60,00,000 INCLUDING THE A MOUNT OF 33 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. RS. RS.50,00,000 FOR THE YEAR UNDER REFERENCE, AS A GAINST THE TOTAL ADDITION OF RS.53,87,828, MADE UNDER THE HEAD FICTITIOUS PURCHASES' BY THE ASSESSING OFFICER. 5.16. THE FINDINGS AND OBSERVATIONS OF THE ASSESS ING OFFICER AS PER THE ASSESSMENT ORDER AS WELL AS THE SUBMISSIONS OF THE APPELLANT, WITH REFERENCE TO THE ANALYSES OF THE STATEMENTS RECORDED FROM SENIOR EMPLOYEES OF GROUP COMPANIES INDICATE THAT FEW OF THEM DO ASSOCIATED WITH THE AP PELLANT COMPANY, THOUGH ALL OF THEM WORKING FOR THE GROUP C OMPANIES AND THE ASSESSING OFFICER HAS GONE BY THEIR INITIAL STATEMENTS WITHOUT ANY DISCUSSION ON THE STATEMENTS RECORDED F ROM THEM IN LATER PERIODS AND THE AFFIDAVITS FILED IN THAT C ONNECTION. IT IS ALSO A FACT THAT THE STATEMENT OF THE MAIN PERSON I N-CHARGE OF THE ACCOUNTS FOR THE GROUP CONCERNS, MR. K.V. BHASK AR REDDY, COULD BE OBTAINED ONLY AT THE FAG END OF THE ASSESS MENT PROCEEDINGS WHEREIN HE CATEGORICALLY DENIED THE EXI STENCE OF FICTITIOUS PURCHASES AND THE SUBMISSIONS MADE BY TH E SAID SENIOR EMPLOYEES, IN THEIR INITIAL STATEMENTS. AS A RGUED BY THE APPELLANT, WHICH ARE SUPPORTED BY THE ESTABLISHED J UDICIAL DECISIONS AS REFERRED IN THEIR SUBMISSIONS, THE AFF IDAVITS FILED BY THE EMPLOYEES AS WELL AS THE APPELLANT SHOULD NO T HAVE BEEN REJECTED BY THE ASSESSING OFFICER WITHOUT CONT ROVERTING THE CONTENTS OF THE AFFIDAVITS AND WITHOUT BRINGING ANY ADDITIONAL EVIDENCE ON THE RECORD. HENCE, IT CAN BE HELD THAT THE RELIANCE OF THE ASSESSING OFFICER ON THE MERE S TATEMENTS AND COMING TO THE CONCLUSION THAT CERTAIN PORTION O F PURCHASES MADE FROM SHREE GROUP AND POOJA GROUP AS FICTITIOUS , CANNOT BE SUSTAINABLE. FURTHER, NO EVIDENCE WAS SHOWN TO H AVE BEEN FOUND DURING THE COURSE OF SEARCH & SEIZURE PROCEED INGS OR BROUGHT ON RECORD TO PROVE THAT THE RECORDS MAINTAI NED BY THE APPELLANT ARE NOT RELIABLE OR VERIFIABLE. AS COULD BE SEEN FROM THE COPY OF THE STOCK REGISTER FILED DURING THE COU RSE OF APPEAL PROCEEDINGS, WHEREIN THE QUANTITATIVE DETAILS OF VA RIOUS RAW MATERIAL RECEIVED AND ISSUED UNDER VARIOUS CODES GI VEN TO THEM, ARE RECORDED IN THE COMPUTERIZED FORMAT, WHIC H APPEARS NOT EXAMINED BY THE ASSESSING OFFICER. THE DEFICIT STOCKS ON ACCOUNT OF ALLEGED FICTITIOUS/UNVERIFIABLE PURCHASE S WAS NEITHER QUANTIFIED NOR ANALYSED WITH REFERENCE TO T HE PRODUCTION AND BOOKS OF ACCOUNTS WERE NOT DISTURBED . 34 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. 5.17 REGARDING THE RELIANCE PLACED BY THE ASSESSI NG OFFICER ON THE STATEMENTS OF MR. RAJESH K. PUNAMIA OF POOJA GROUP AND MR.NISHIT J. DOSHI OF SHREE GROUP AT MUMBAI, THE BASIC FACT REMAINS THAT THE STATEMENT FROM MR. PUNA MIA WAS RECORDED ON 12.4.2006 AND MR. NISHIT DOSHI ON 2.3.2 007, BOTH WITH A GAP OF FEW MONTHS FROM THE DATE OF SEARCH, I N APPELLANT'S CASE I.E. 8.11.2006, WHICH MAY MAKE THE THINGS LOOK LITTLE INCOHERENT AS FAR AS COLLATING THE EVID ENCES ARE CONCERNED. FURTHER, AS ARGUED BY THE APPELLANT, THE STATEMENTS RECORDED FROM SUCH PERSONS WERE ON THE BACK OF THE APPELLANT AND IT APPEARS THAT THERE WAS NO OCCASION OR OPPORT UNITY PROVIDED FOR THE CROSS EXAMINATION OF THE SAID PART IES. UNDER THE CIRCUMSTANCES, IT CAN BE HELD THAT SUCH STATEME NTS ARE NOT FULLY RELIABLE FOR DRAWING CONCLUSION ON THE NATURE OT BOGUS/FICTITIOUS PURCHASES APART FROM QUANTIFYING S UCH PURCHASES FURTHER, AS PER MR. PUNAMIA, THE SALES WE RE MADE TO HETERO GROUP AND THE UNACCOUNTED INCOME ADMITTED BY HIM, WAS ON ACCOUNT OF UNAVAILABILITY OF CERTAIN TRANSPO RT RECEIPTS FOR PURCHASES FROM M/S R.R. ENTERPRISES, APART FROM MAKING THE PEACE WITH THE DEPARTMENT, WHICH CAN NOT BE THE BASIS FOR QUANTIFYING THE UNACCOUNTED INCOME IN THE CASE OF C LIENTS CONNECTED TO SUCH TRANSACTIONS, BY ANY STRETCH OF I MAGINATION. 5.18 THE OTHER INFORMATION RELIED UPON BY THE ASSESSING OFFICER WAS THE ASSESSMENT ORDERS PASSED BY THE DCIT, CC-46, MUMBAI, IN THE CASE OF POOJA PETROCHEM ICALS AND SHREE VALLABH PHARMACHEM PVT. LTD. WHEREIN THE CONC LUSIONS DRAWN BY THE ASSESSING OFFICER WERE ABRUPT AND LEAD ING IN NATURE, WITH NO RELIABLE EVIDENCE BROUGHT ON THE RE CORD TO INDICATE THAT THE FICTITIOUS SALES MADE BY POOJA GR OUP CAN BE DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR CLIENTS. TH E ASSESSING OFFICER OF POOJA GROUP CONCERNS STRAIGHT AWAY CONCL UDED THAT SUCH AMOUNTS OF SALES MADE BY POOJA GROUP REPRESENT THE UNACCOUNTED PURCHASES MADE BY HETERO GROUP AND THE AMOUNTS WERE QUANTIFIED AT RS.2.48 CRORES AS AGAINS T RS.2.59 CRORES QUANTIFIED IN THE ASSESSMENT ORDER. IN THIS CONTEXT, IT IS RELEVANT TO MENTION THAT AT EVERY STAGE THE PRESUMP TIONS AND SURMISES HAVE PLAYED A BIGGER ROLE THAN THE FACTS. 5.19. FURTHER, IN CASE OF POOJA GROUP, THE UNVERI FIABLE PURCHASES WERE QUANTIFIED AT RS.2.48 CRORES AS AGAI NST THE TOTAL PURCHASES MADE FROM THE GROUP QUANTIFIED AT R S.48.37 35 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. CRORES. WHILE QUANTIFYING THE UNVERIFIABLE SALES IN THE HANDS OF POOJA PETROCHEMICALS AND SHREE VALLABH PHARMACHEM P VT LTD. THE ASSESSING OFFICER OF THE GROUP HAS DRAWN THE GI ST OF SUCH AMOUNTS AS ATTRIBUTABLE TO AY 2003-04 TO 2006-07, A T RS.2.48 CRORES AGAINST WHICH THE ASSESSING OFFICER OF THE H ETERO GROUP HAS ADOPTED DIFFERENT SET OF FIGURES AND PARAMETERS AS INDICATED IN A CHART AT PARA 5.6 OF THIS ORDER IN D ISTRIBUTING SUCH PURCHASES AMONG THE HETERO GROUP COMPANIES, WH ICH ALSO INDICATES THE PRESUMPTIVE METHODS ADOPTED IN QUANTIFICATION OF FICTITIOUS PURCHASES. WHILE QUANT IFYING SUCH UNVERIFIABLE PURCHASES AMONG THE GROUP COMPANIES, T HE ASSESSING OFFICER HAS ADOPTED THE PRORATA BASIS AND THE BASIS ADOPTED IS QUANTUM OF PURCHASES MADE BY THE GROUP COMPANIES FROM POOJA GROUP. 5.20. ON SIMILAR LINES, THE PURCHASES MADE FROM S HREE GROUP WERE CATEGORIZED AS 'DIRECT PURCHASES' AND 'T RANSIT PURCHASES', AS INDICATED IN THE EARLIER PART OF THI S ORDER, WITH 55% OF THE 'TRANSIT PURCHASES', ARE ESTIMATED AND Q UANTIFIED AS FICTITIOUS PURCHASES, WHILE 100% OF THE 'DIRECT PUR CHASES' WERE TREATED AS FICTITIOUS. WHILE TREATING A PORTION OF 'TRANSIT PURCHASES' AS FICTITIOUS, FOR THE AY 2003-04 TO 200 6-07, THE ASSESSING OFFICER HAS OBSERVED AND CONCLUDED THAT ' ON ENQUIRY, IT REVEALS THAT ALL TRANSIT PURCHASES ARE NOT GENUINE AND THERE IS VARIATION AS REGARDS TO THE RATES AND QUANTITY TO THE EXTENT OF 50-55% OF THE BILLS' AND QUANTIFIED S UCH BILLS THROUGH A COMMON ANNEXURE MARKED AS 'ANNEXURE A' AT TACHED TO THE ASSESSMENT ORDER, WHICH CONTAIN THE DETAILS OF PURCHASES BY THE ENTIRE GROUP, FOR THE CORRESPONDIN G YEAR UNDER REFERENCE, WHICH DOES NOT INDICATE THE PURCHA SES BY THE INDIVIDUAL COMPANY/CONCERN. THE INCONSISTENCIES IN THE STANDS TAKEN BY MR. NISHIT J. DOSHI WERE NOT EXAMINED WITH REFERENCE TO THE FACTS, EXCEPT FALLING THE STATEMENT RECORDED ONCE ON 2.3.2007. IN THE COURSE OF THE STATEMENT DT.2.3.200 7 RECORDED FROM MR. NISHIT J. DOSHI, THE QUANTIFICATION OF THE PURCHASES WHICH WERE STATED TO BE BOGUS/UNVERIFIABLE WERE PUT AT RS.29.48 CRORES, AS AGAINST RS.31.30 CRORES FOR AY 2003-04 TO RS.2007-08 AND THE AMOUNTS QUANTIFIED AS FICTITIOUS PURCHASES, STOOD AT RS.24,24,37,646. AS COULD BE SE EN, DETAILS OF THE AMOUNTS BY EACH CONCERN, FOR EACH ASSESSMENT YEAR WERE NEITHER QUANTIFIED BY MR. DOSHI NOR BY THE ASS ESSING OFFICER. UNDER THE CIRCUMSTANCES, IT MAY BE DIFFICU LT TO PROVE 36 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. THAT THE APPELLANT COMPANY MADE THE SAID FICTITIOUS PURCHASES FROM PARTICULAR CONCERNS AND PARTICULAR QUANTUMS, F OR EACH OF THE ASSESSMENT YEAR. 5.21. FURTHER, THE INCONSISTENCY OR THE INCIDENCE OF ESTIMATIONS INVOLVED IN QUANTIFICATION OF THE FICTI TIOUS PURCHASES ARE ILLUSTRATED IN DISTRIBUTION OF SUCH FICTITIOUS PURCHASES AMONG THE GROUP CONCERNS WITH THEIR PERCENTAGES AS REGARDS TO THE TOTAL PURCHASES MADE FROM THE TWO GROUPS I.E. P OOJA GROUP AND SHREE GROUP. NAME OF THE CONCERN TOTAL PURCHASES FROM SHREE GROUP FICTITIOUS PURCHASES FROM SHREE GROUP & % TOTAL PURCHASES FROM POOJA GROUP FICTITIOUS PURCHASES FROM POOJA GROUP & % 1 2 3 4 5 CIREX PHARMACEUTICALS PVT. LTD., 2350161 1860304/79.15% 11820755 720273/6.09% HETERO DRUGS LTD., 146272953 120203092/82.17% 153954819 7509150/4.87% HETERO LABS LTD., 99794004 77637913/77.80% 156290013 9370444/6.00% SYMED LABS LTD., 64661942 42736292/66.09% 161657958 8717195/5.39% TOTAL 313079060 242437601/77.43% 483723545 26317062/5.44% AS COULD BE SEEN FROM THE ABOVE, THOUGH THE PURCHAS ES ARE MADE FROM THE SAME/COMMON SOURCES, THE QUANTIFI CATION OF FICTITIOUS PURCHASES WITHOUT REFERENCE TOSPECIFIC B ILL OR INFORMATION IS VARYING FROM CASE TO CASE IN THE SAM E GROUP, WHICH IS ON ACCOUNT OF THE ELEMENT OF ESTIMATION IN VOLVED IN THE PROCESS OF QUANTIFICATION. UNDER THE CIRCUMSTANCES, I AM OF THE OPINION THAT T HE STATEMENTS FROM SENIOR EMPLOYEES OF THE GROUP, WHIC H WERE 37 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. SUPPORTED BY AFFIDAVITS, THAT WERE NOT CONTROVERTED BY THE ASSESSING OFFICER AND THE STATEMENTS FROM MR. RAJES H PUNAMIA AND MR. NISHIT DOSHI, WHICH WERE NOT SUPPORTED BY T HE SEIZED MATERIAL OR FURTHER ENQUIRIES MADE IN THE REGARD, A RE NOT FULLY RELIABLE TO TREAT FEW PURCHASES AS BOGUS. THE METHOD/PROCEDURES ADOPTED IN QUANTIFICATION OF FICT ITIOUS PURCHASES IN THE CASES OF THE APPELLANT COMPANY AS WELL AS THE GROUP CONCERNS ARE NOT ON SOUND BASIS, SO AS TO BE USED FOR QUANTIFICATION OF UNACCOUNTED INCOME, IN A SEARCH R ELATED ASSESSMENTS. ACCORDINGLY, THE ADDITION OF RS.53,87, 828 ON ACCOUNT OF FICTITIOUS PURCHASES QUANTIFIED AGAINST THE PURCHASES MADE FROM POOJA GROUP (RS.12,86,341) AND SHREE GROUP (RS.41,01,487) IN THE CASE OF APPELLANT COMPA NY, FOR THE YEAR UNDER REFERENCE, IS NOT SUSTAINABLE. 5.22. AS COULD BE SEEN FROM THE ASSESSMENT ORDER , IN THIS METHOD OF QUANTIFICATION, THERE IS NO SPECIFIC INFORMATION OR BASIS AND AS SUCH IT HAS ASSUMED THE ANGLE OF ESTIM ATION. IT APPEARS THAT IN SEARCH ASSESSMENTS OF ALL THE GROUP OF CONCERNS INCLUDING THE APPELLANT'S CASE FOR THE YEA R UNDER REFERENCE, ESTIMATION HAS PLAYED VITAL ROLE IN QUAN TIFICATION OF UNACCOUNTED INCOME IN THE FORM OF 'FICTITIOUS PURCH ASES', AND NO CONCRETE EVIDENCES WERE BROUGHT ON THE RECORD. ESTI MATIONS SHOULD BE THE LAST RESORT IN ASSESSMENTS OF INCOME, MORE SO IN THE CASES OF SEARCH ASSESSMENTS, UNLESS THE ASSESSE E RUNS AWAY FROM THE RESPONSIBILITY IN CARRYING OUT THE NE EDED INVESTIGATIONS/ENQUIRIES OR FORCES THE ASSESSING OF FICER TO RESORT TO ESTIMATION. EVEN IN CASES OF INEVITABLE/ UNAVOIDABLE CIRCUMSTANCES, THE ESTIMATION SHOULD BE GUIDED BY R ELEVANT FACTS OF THE CASE AS AVAILABLE ON RECORD AND IN THI S CASE, NO SUCH INSTANCES OF FALTERING ON THE PART OF THE APPE LLANT COULD BE SEEN FROM THE ASSESSMENT PROCEEDINGS. THE FACTORS T HAT DECIDED THE ASSESSMENT OF UNACCOUNTED INCOME FROM T HE PERCEIVED FICTITIOUS PURCHASES, ARE NONE BUT THE ST ATEMENTS RECORDED FROM THESENIOR EMPLOYEES AND THE PROMOTERS OF TWO GROUPS OF SUPPLIERS AT MUMBAI, WHICH WERE NOT SUPPO RTED BY RELIABLE EVIDENCES. FURTHER, SUCH STATEMENTS WERE N OT TAKEN TO LOGICAL CONCLUSIONS, EITHER WITH THE HELP OF EVIDEN CES AS AVAILABLE WITH THE ASSESSING OFFICER OR BY CROSS EX AMINATIONS OF THE PARTIES CONCERNED. 38 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. 5.23. FURTHER, THE ARGUMENTS AND THE OBSERVATIONS, THAT GO AGAINST THE FICTITIOUS PURCHASES ON ESTIMATED BASIS , RUN AS UNDER ; (A) THE APPELLANT COMPANY IS AN ESTABLISHED MANUFAC TURER OF BULK DRUGS AND FORMULATIONS, WHEREIN THE RECORDS AR E COMPUTERIZED, STOCK REGISTERS ARE MAINTAINED AND NO VERIFICATION WHATSOEVER WAS MADE BY THE ASSESSING A UTHORITIES TO POINT OUT THE INFLATION OF THE PURCHASES AND THE RESULTANT DEFECTS IN THE ACCOUNTS ACCORDINGLY. (B) THE ACTUAL SUPPLIERS/MANUFACTURERS/IMPORTERS SU CH AS M/S GUJARAT ALKALIES & CHEMICALS ARE NOT ONLY WELL KNOW N COMPANIES BUT FEW ALSO THE GOVERNMENT UNDERTAKINGS AND THEIR ACCOUNTS WERE NOT EXAMINED TO VERIFY WHETHER THE SU PPLIES MADE BY THEM WERE GENUINE OR BOGUS. (C) THE SUPPLIES WERE SUPPORTED BY INVOICES OF SUPPLIERS/MANUFACTURER/IMPORTERS WHEREAS THE ASSESS ING OFFICER HAS RELIED UPON THE STATEMENTS RECORDED ON EXAMINATION OF THE AGENTS INVOLVED. (D) MATERIAL RECEIVED WERE ENTERED INTO THE BOOKS O F ACCOUNTS AND WERE ISSUED TO THE PRODUCTION OF DRUGS WHICH WA S NOT DISPUTED BY THE ASSESSING OFFICER ANDBOOKS OF ACCOU NTS WERE NOT DISTURBED. (E) THE AMOUNTS FOR PURCHASE OF THE MATERIAL WERE P AID BY CHEQUES AND NO EVIDENCE WHATSOEVER WAS FOUND/ UNEAR THED TO SHOW THAT THE AMOUNTS WERE RETURNED TO THE APPEL LANT DESPITE SUCH CLAIM MADE BY MR. NISHIT J. DOSHI IN H IS STATEMENT AND DURING THE COURSE OF SEARCH & SEIZURE PROCEEDINGS, NO FINDINGS WERE MADE AS REGARDS TO TH E ASSETS OR CASH RECEIVED, AS RELATABLE TO SUCH FICTITIOUS PURC HASES. (F) SRI RAJESH PUNAMIA OF POOJA GROUP HAS NEVER STA TED THAT HE HAS NOT SUPPLIED GOODS BUT HE HAS ONLY ACCEPTED CER TAIN ADDITION ON ACCOUNT OF ABSENCE OF AVAILABILITY OF T HE TRANSPORT RECEIPTS AND TO SAVE HIMSELF FROM THE LITIGATION TO THE DEPARTMENT. 39 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. (G) THE ASSESSING OFFICER OF THE POOJA GROUP HAS ME NTIONED IN ASSESSMENT ORDER THAT BOTH PURCHASES AND SALES MADE BY THE GROUP ARE REFLECTED BY THE BOOKS ON WHICH PROFIT WA S SHOWN AT 5% AND AS SUCH NO FURTHER INFERENCE CAN BE DRAWN, A ND SUCH OBSERVATION INDICATES THAT PROFIT OF 5% ON SALES WA S ACCEPTABLE, AND IN NO MANNER IT INDICATES THE SALES BY THE GROUP TO BE BOGUS. (H) THE METHODOLOGY AND QUANTUMS OF ACCOMMODATED PU RCHASE BILLS AND FICTITIOUS PURCHASES AS QUANTIFIED AND AD OPTED BY MR. NISHIT J. DOSHI FOR SHREE GROUP AND MR. RAJESH K. P UNAMIA FOR POOJA GROUP ARE AT VARIANCE, WITH THE METHODS AND F IGURES ADOPTED BY THE ASSESSING OFFICER. 5.24. IN THIS CONTEXT, IT IS PERTINENT TO MENTION THAT AN AMOUNT OF RS.25.00 CRORES WAS DISCLOSED AS UNACCOUN TED. INCOME OF THE APPELLANT GROUP CONCERNS VIZ. M/S SYM ED LABS LTD, M/S HETERO DRUGS LTD & M/S HETERO LABS LTD. FOR ASSESSMENT YEARS 2003-04 TO 2006-07, AS INDICATED A T PARA 3.2 OF THIS ORDER AND SUCH DISCLOSURES MADE BY THE APPELLANT COMPANY WAS PUT AT RS.7,60,00,000 FOR FOUR YEARS WI TH AN AMOUNT OF RS.50,00,000 DISCLOSED FOR THE YEAR UNDER REFERENCE. DISCLOSURE WAS MADE BY THE CHAIRMAN OF THE GROUP ON THE CONCLUDING DAY OF SEARCH VIDE HIS STATEMENT DT.8.1. 2007 AND THE DISCLOSURES WERE TO COVER THE OMISSIONS AND MIS TAKES COMMITTED BY THE APPELLANT GROUP COMPANIES RUN BY P AID MANAGERS. THIS ASPECT ALSO INDICATE THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE GROUP CONCERNS AS WELL AS THE APP ELLANT COMPANY ARE NOT FULLY RELIABLE, AS REGARDS TO THE P URCHASES AND OTHER AFFAIRS. IN CASE OF THE APPELLANT COMPANY M/S HDL, THE INCIDENCE OF SUPPRESSED TURNOVERS OF SPENT SOLV ENTS AND BULK DRUGS AS POINTED OUT BY THE CENTRAL EXCISE AUT HORITIES IS A FURTHER POINTING CASE WHO INDICATE THAT ALL IS NOT WELL WITH THE BOOKS OF ACCOUNTS OF THE APPELLANT. HOWEVER, THE DIFFICULTY HAS ARISEN IN ADOPTING THE METHODOLOGY FOR QUANTIFICATI ON OF THE EXTRA INCOMES EARNED BY THE GROUP CONCERNS AND THE APPELLANT. SINCE THE DEFICIENCIES AS POINTED OUT BY THE ASSESS ING OFFICER AND AS EVIDENCED THROUGH THE ACTIVITIES OF SOME OF THE SUPPLIERS, ARE SUPPORTED BY THE DECLARATIONS MADE B Y THE APPELLANT, THE QUANTIFICATIONS OF FICTITIOUS PURCHA SES WITHOUT VERIFIABLE EVIDENCE/INFORMATION, ARE HELD TO BE NOT SUSTAINABLE, AS THE SAME WOULD ALSO AMOUNT TO DUPLICATION, IN AS SESSMENT 40 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. OF THE UNACCOUNTED INCOMES. 5.25. IT MAY BE PERTINENT TO NOTE THAT THE ASSESSI NG OFFICER HAS NOT CONSIDERED THE DECLARATIONS MADE BY THE APPELLA NT WHICH WERE ALSO ADMITTED IN FILING THE RETURNS OF INCOME, THER EBY CREATING A SITUATION WHERE THE DECLARED INCOME IS MORE THAN TH E UNACCOUNTED INCOME ASSESSED ON ACCOUNT OF QUANTIFICATION OF FIC TITIOUS PURCHASES FOR CERTAIN YEARS, IN THE CASE OF THE APPELLANT AS WELL AS OTHER GROUP CONCERNS. THE SAME ARE ILLUSTRATED AS UNDER ; AY SYMED LABS LTD., HETERO LABS LTD., HETERO DRUGS LTD., TOTAL 03- 04 QUANTIFICATION DISCLOSURE QUANTIFICATION DISCLOSURE QUANTIFICATION DISCLOSURE QUANTIFICATION DISCLOSURE 12184094 10000000 5387828 5000000 5184960 5000000 22756882 20000000 04 - 05 6806310 7000000 11372601 10000000 16630477 13000000 34809388 30000000 05 - 06 11689614 18000000 13940749 21000000 14652512 21000000 40282875 60000000 06 - 07 20314454 20000000 41228091 40000000 79177624 80000000 140720169 140000000 TOTAL 50994472 55000000 71929269 76000000 115645573 119000000 238569314 250000000 5.26. AS COULD BE SEEN FROM THE ABOVE, THE DISCLOS URES WERE MADE FOR AY 2003-04 TO AY 2006-07, IN THE CASE OF THREE GROUP COMPANIES EXCLUDING M/S CIREX PHARMACEUTICALS PVT LTD. IT HAS BEEN OBSERVED THAT THE TOTAL AMOUNTS OF DISCLOSURE IS HIGHER THAN THE TOTAL AMOUNTS OF FICTITIOUS PURCHASES QUANTIFIED IN EACH OF THE I NDIVIDUAL CASE AS WELL AS THREE GROUP COMPANIES FOR ALL THE YEARS PUT TOGETHER WHERE DISCLOSURES WERE MADE. HOWEVER, IN CASE OF THE THRE E APPELLANT COMPANIES FOR ASSESSMENT YEAR 2007-08 AND IN CASE O F M/S CIREX PHARMACEUTICALS PVT LTD, NO DISCLOSURES WERE MADE B Y THE APPELLANT GROUP, WHERE QUANTIFICATIONS WERE CARRIED OUT BY TH E ASSESSING OFFICER ON THE BASIS /METHODOLOGY, AS DISCUSSED ABO VE. THE QUANTIFICATION MADE BY THE ASSESSING OFFICER AND TH E DISCLOSURES 41 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. MADE BY THE APPELLANT COMPANY HAVE CREATED AN ANOMA LY IN CERTAIN ASSESSMENT YEARS, WHEREIN THE AMOUNTS OF ADDITIONS MADE ON ACCOUNT OF FICTITIOUS PURCHASES ARE LOWER THAN THE UNACCOUNTED INCOME ADMITTED BY THE APPELLANT. AS COULD BE CONCL UDED FROM THE ABOVE FACTS AND DISCUSSIONS, BOTH QUANTIFICATIONS O F FICTITIOUS PURCHASES OF RAW MATERIALS BY THE ASSESSING OFFICER AND THE ADMITTANCE OF THE INCOME BY THE APPELLANT WERE BASE D ON ESTIMATION AND PRESUMPTION, AS SUCH ONLY ONE OF SUCH BASIS SUR VIVES. HENCE, I AM OF THE CONSIDERED OPINION THAT THE QUANTIFICATIO NS OF FICTITIOUS PURCHASES DONE ON ESTIMATION BASIS DO NOT SURVIVE. SINCE THE DECLARATIONS MADE BY THE APPELLANT ARE HIGHER THAN THE SAID AMOUNTS FOR THE RELEVANT FOUR YEARS PUT TOGETHER (A YS 2003-04 TO 2006-07).' ACCORDINGLY, THE ASSESSING OFFICER IS DI RECTED TO ACCEPT THE ADDITIONAL INCOMES ADMITTED BY THE APPELLANT IN FIL ING THE RETURNS OF INCOME FOR THE RESPECTIVE YEARS OF THE APPELLANT CO MPANY AND THE SAID INCOME MAY BE ASSESSED AS INCOME FROM OTHER SO URCES SINCE THE APPELLANT HAS NOT QUANTIFIED AND ACCEPTED IT AS INC OME FROM THE BUSINESS OF THE UNDERTAKING. HOWEVER, AS INDICATED THE QUANTIFICATION OF FICTITIOUS PURCHASES ARE VARYING FROM YEAR TO YEAR VIS-A-VIS THE UNACCOUNTED INCOME ADMITTED BY THE AP PELLANT AND FOR THE YEAR UNDER REFERENCE, THE QUANTIFICATION OF FIC TITIOUS PURCHASES IS HIGHER THAN ADMITTED INCOME. BUT, KEEPING THE OVERA LL PICTURE IN CASE OF SEARCH RELATED ASSESSMENTS (AYS 2003-04 TO 2007- 08) IN MIND, WHERE THE FICTITIOUS PURCHASES IS ONE OF THE MAJOR ISSUE, THE AMOUNTS OF FICTITIOUS PURCHASES WHICH WAS ASSESSED AS UNACC OUNTED INCOME OF THE APPELLANT ARE TO BE IGNORED AND THE INCOME A DMITTED BY THE APPELLANT IS DIRECTED TO BE ADOPTED. ACCORDINGLY, T HE QUANTIFICATION OF THE FICTITIOUS PURCHASES TO THE TUNE OF RS.53,87,82 8, WHICH WERE TREATED AS UNACCOUNTED INCOME HELD TO UNSUSTAINABLE FOR THE REASONS DISCUSSED ABOVE AND THE INCOME OF RS.50,00,000 DECL ARED BY THE APPELLANT FOR THE YEAR UNDER REFERENCE IS DIRECTED TO BE ASSESSED AS 'OTHER INCOME' OF THE APPELLANT. ACCORDINGLY, THIS GROUND OF APPEAL IS TREATED AS PARTLY ALLOWED. 17.7 AFTER CONSIDERING THE DETAILED SUBMISSIONS OF LEARNED D.R. AND LD. COUNSEL, WE DO NOT SEE ANY REA SON TO INTERFERE WITH THE ORDERS OF LD. CIT(A) AS HE HAS C ONSIDERED NOT ONLY THE FACTS BUT ALSO STATEMENTS ON THE BASIS OF WHICH A.O. MADE DISALLOWANCE. SINCE ASSESSEES DISC LOSED INCOME IS MORE THAN THE QUANTIFIED INCOME, EVEN THO UGH VARIES IN DIFFERENT YEARS, WE ARE OF THE OPINION TH AT LD. 42 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. CIT(A) HAS CORRECTLY CAME TO THE CONCLUSION THAT TH E DISCLOSED INCOMES CAN BE ASSESSED AS SUCH. ACCORDIN GLY, HIS ORDERS ARE UPHELD. REVENUE GROUNDS 2 AND 3 ON T HIS ISSUE ARE DISMISSED. 18. IN THE RESULT, ITA.NO.790, 791, 792, 793, 794/HYD/2012 OF THE REVENUE ARE DISMISSED. CROSS OBJECTIONS : 19. ASSESSEES CROSS OBJECTIONS IS ON THE DIRECTIO N OF LD. CIT(A) IN ASSESSING THE ADMITTED INCOME. IT WAS ASSESSEES CONTENTION THAT A.O. HAS NOT BROUGHT TO TAX THE ADMITTED INCOME, THEREFORE, LD. CIT(A) SHOULD HAVE CONFINED HIMSELF TO THE DELETION OF THE SO-CALLED F ICTITIOUS PURCHASES AND SHOULD NOT HAVE DIRECTED THE A.O. TO TAX THE ADMITTED INCOME. 20. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE DO NOT SEE ANY MERIT IN ASSESSEES CONTENTIONS. IT IS A FACT THAT THERE ARE BOGUS PURCHASES AND ASSESSEE CONSEQUENT T O THE SEARCH AND SEIZURE OPERATIONS AND ALSO ON ENQUIRIES FROM THE SO-CALLED FIRMS, WHO ACCOMMODATED ASSESSEE IN I TS GROUP IN PROVIDING CERTAIN BOGUS BILLS, ASSESSEE AD MITTED INCOMES. ASSESSING OFFICER HOWEVER, CHOSE NOT TO TA KE THE ADMITTED INCOME BUT WENT BY THE QUANTIFICATION OF B OGUS PURCHASES IN A DIFFERENT METHOD BUT MORE OR LESS TA LLYING WITH ASSESSEES ADMITTED INCOMES. CONSEQUENTLY, LD. CIT(A) INSTEAD OF DELETING FULL AMOUNTS, DIRECTED T HE A.O. TO 43 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. CONSIDER THE ADMITTED INCOMES AS INCOMES ON THIS CO UNT. EVEN ASSESSEE HAS ALSO RAISED ADDITIONAL GROUND FOR CONSIDERING THE ADMITTED INCOME AS PART OF BUSINESS INCOME SO AS TO CLAIM DEDUCTION UNDER SECTION 80HHC AND 80IB WHICH ISSUE HAS BEEN CONSIDERED IN ASSESSEES APPEAL AS ADDITIONAL GROUND. HAVING ADMITTED THE INCOMES, ASSESSEE CANNOT NOW CONTEND THAT THE AMOUNT SHOULD NOT BE BROUGHT TO TAX. IN VIEW OF THIS, WE SEE NO MERIT IN THE CONTENTION AND ACCORDINGLY, CROSS OBJECTIONS ARE DISMISSED. 21. IN THE RESULT, CROSS OBJECTIONS NO.106, 107, 1 08, 109/HYD/2012 OF THE ASSESSEE ARE DISMISSED. 22. TO SUM-UP, ITA. NO.733, 734, 735, 736, 737 AND 738/HYD/2012 OF THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA.NO. 790, 791, 792, 793 AND 794/HYD/20 12 OF THE REVENUE ARE DISMISSED AND CROSS OBJECTION NOS. 106, 107, 108 AND 109/HYD/2012 OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.10 .2014. SD/- SD/- (SAKTIJIT DEY) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 15 TH OCTOBER, 2014 VBP/- 44 ITA.NO.733 TO 738/HYD/2012, ITA.NO.790 TO 794/HYD/2012 & C.O.NO.106 TO 109/HYD/2012 M/S. HETERO DRUGS LTD., HYDERABAD. COPY TO 1. M/S. HETERO DRUGS LIMITED, HYDERABAD, C/O. MR. S . RAMA RAO, ADVOCATE, FLAT NO.102, SHRIYAS ELEGANCE, H.NO .3-6- 643, STREET NO.9, HIMAYATNAGAR, HYDERABAD 500 029 . 2. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL C IRCLE-4, 8 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 3. CIT(A)-VII, HYDERABAD. 4. CIT-(CENTRAL), HYDERABAD. 5. D.R. ITAT A BENCH, HYDERABAD.