DCIT 2(3)(2), MUMBAI V. SRS PHARMACEUTICALS P LTD, MUMBAI

ITA 825/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7727 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 06-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Keywords: Bogus purchase

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -EBENCH MUMBAI , , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMARJIT SINGH,JUDICIAL MEMBER ./I.T.A./825/MUM/2015, / ASSESSMENT YEAR: 2009-10 ./I.T.A./7728/MUM/2014, / ASSESSMENT YEAR: 2010-11 ./I.T.A./826/MUM/2015, / ASSESSMENT YEAR: 2011-12 DY.CIT-2(3)(2) ROOM NO.556, 5TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020 VS. M/S. SRS PHARMACEUTICALS PVT.LTD. 601-605, 6TH FLOOR, MARATHON MAX BUILDING NO.2,LBS MARG, MULUND GOREGAON LINK ROAD, MULUND (W),MUMBAI-400080 PAN:AAFCS 4633 P ( /APPELLANT ) ( / RESPONDENT) / REVENUE BY: SHRI A.K. NAYAK- DR /ASSESSEE BY: SHRI RAHUL HAKANI / DATE OF HEARING: 22.03.2017 / DATE OF PRONOUNCEMENT:29.03.2017 PER RAJENDRA, AM - CHALLENGING THE ORDERS,DATED 7/10/2014 AND 16/9/201 4,OF THE CIT (A)-6,MUMBAI, THE ASSESSING OFFICER(AO)HAS FILED THE APPEALS FOR THE ABOVE-MENTIONED AY.S. AS THE ISSUES INVOLVED IN ALL THE APPEALS ARE IDENTICAL,SO,WE ARE DISPOSING THEM THE SAME BY A SINGLE COMMON ORDER.ASSESSEE-COMPANY IS ENGAGED IN THE BUS INESS OF SUPPLY OF AVANT GRADE PHARMACEUTICALS.THE DETAILS OF DATES OF FILING OF R ETURNS, RETURNED INCOMES,DATES OF ASSESSMENT ETC. CAN BE SUMMARISED AS UNDER: AY ROI FILED ON RETURNED INCOME ASSESSMENT DATE ASS ESSED INCOME 2009-10 26/09/2009 RS.4.11 CRORES 27/03/2014 RS.5.1 8 CRORES 2010-11 26/09/2010 RS.6.04 CRORES 23/03/2013 RS.7.6 3 CRORES 2011-12 26/09/2011 RS.6.55 CRORES 27/03/2014 RS.8.0 0 CRORES ITA/825/MUM/2015-AY.2009-10.BRIEF FACTS: 2. EFFECTIVE GROUND OF APPEAL IS ABOUT DELETING THE DI SALLOWANCE UNDER THE HEAD BOGUS PURCHASES,AMOUNTING TO RS. 1.07 CRORES.INITIALLY,TH E RETURN WAS PROCESSED U/S.143 (1) OF THE ACT.SUBSEQUENTLY,THE AO RECEIVED INFORMATION FROM T HE INVESTIGATION WING THAT THE ASSESSEE HAD OBTAINED BOGUS BILLS FROM HAWALA DEALERS/BUILDE RS WITHOUT ACTUAL PURCHASE OF GOODS. HE ISSUED A NOTICE U/S.148 OF THE ACT FOR REOPENING TH E ASSESSMENT. THE REASONS RECORDED BY HIM WERE SUPPLIED TO THE ASSESSEE,AGAINST WHICH IT RAIS ED OBJECTIONS AS WELL AS CHALLENGED THE LEGALITY OF REOPENING.THE AO VIDE HIS ORDER,DATED 1 /10/2013,DISPOSED OFF THE OBJECTIONS. THEREAFTER,THE AO TOOK UP THE REASSESSMENT PROCEEDI NGS AND REQUIRED THE ASSESSEE TO FURNISH DETAILS AND EVIDENCE TO ESTABLISH THE GENUINENESS O F THE PURCHASES AMOUNTING RS.1,07, 77, 617/-. AFTER CONSIDERING THE SUBMISSIONS OF THE ASS ESSEE, THE AO HELD THAT THE ALLEGED 825-26/M/15(09-10&11-12);7728/M/14(10-11) M/S.SRS PHARMACEUTICALS PVT.LTD. 2 PURCHASES WERE NOT GENUINE AND ACCORDINGLY ASSESSED THE INCOME OF THE ASSESSEE UNDER THE NORMAL PROVISIONS AND THE MAT PROVISIONS, AS INDICA TED IN THE EARLIER PARAGRAPH. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA) AND MADE ELABORATE SUBMIS SIONS ABOUT VALIDITY OF REOPENING PROCEEDINGS AND MERITS OF THE CASE.AFTER CONSIDERIN G THE ASSESSMENT ORDER AND THE EXPLANATION OF THE ASSESSEE,HE UPHELD THE REOPENING . WITH REGARD TO ADDITION ON ACCOUNT OF BOGUS PURCHASES,HE HELD THAT THE ASSESSEE WAS 100% EXPORT ORIENTED PHARMACEUTICAL COMPANY,THAT IT EXPORTED ALL THE PRODUCTS MANUFACTU RED BY IT AND WAS NOT INVOLVED IN LOCAL SALES,THAT THE ASSESSEE DID NOT HAVE ITS OWN FACTOR Y FOR MANUFACTURING UNITS,THAT THE ENTIRE PRODUCTION WAS OUTSOURCED TO VARIOUS COMPANIES SITU ATED ALL OVER INDIA, THAT IT ENTERED INTO SEPARATE AGREEMENTS WITH THIRD PARTIES FOR THE MANU FACTURE OF PHARMACEUTICAL PRODUCTS, THAT THE FORMULATIONS AND SPECIFICATIONS WERE PROVIDED B Y THE ASSESSEE, THAT THE MANUFACTURER AFFIXES THE TRADEMARK OF THE ASSESSEE ON THE ARTICL ES PRODUCED, THAT THE NO MATERIAL AND PACKING MATERIAL FOR THE PRODUCTION WAS ORDERED BY THE ASSESSEE, THAT SAME WAS DIRECTLY DELIVERED TO THE CONCERNED PARTIES,THAT THE SUPPLIE RS OF THE RAW MATERIAL, UPON DELIVERY OF RAW MATERIAL,WOULD ISSUE INVOICES AND LORRIES RECEIPTS/ TRANSPORT COPIES, THAT THE MANUFACTURERS ON RECEIPT OF MATERIAL FROM SUPPLIERS WOULD ISSUE GOOD S RECEIVED NOTE(GRN),THAT AFTER THE PRODUCTION WAS COMPLETE THE MANUFACTURER WOULD GENE RATE BATCH MANUFACTURE RECORD (BMR), THAT BMR WOULD CONTAIN DETAILS OF RAW MATERI AL AND PACKING MATERIAL UTILISING THE PRODUCTION OF THE FINISHED GOODS, THAT ALL THE PROD UCTS MANUFACTURED WERE APPROVED BY THE FDA,THAT DURING THE YEAR UNDER CONSIDERATION THE AS SESSEE HAD PURCHASED GOODS WORTH RS. 19.67 CRORES,THAT OUT OF THE TOTAL PURCHASE-ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT-THE AO HAD MADE DISALLOWANCE ABOUT T HREE PARTIES WHO HAD SUPPLIED GOODS TO THE ASSESSEE,THAT IT HAD FILED DETAILS OF COPIES OF PURCHASE BILLS,LEDGER ACCOUNTS LORRIES RECEIPTS/TRANSPORTATION BILLS,BANK STATEMENTS, CONF IRMATION FROM THE VENDORS,GRN, DETAILS OF PURCHASE FROM THE ALLEGED SUPPLIERS ALONG WITH THE INVOICE AND TRANSPORT COPIES,COPIES OF BMR.S,DURING THE ASSESSMENT PROCEEDINGS,THAT THE AO REJECTED THE CLAIM MADE BY THE ASSESSEE WITH REGARD TO PURCHASES MADE FROM 3 PARTI ES,THAT THE QUANTITATIVE TALLY PRODUCED BY THE ASSESSEE CONTAINED PURCHASE ORDER ISSUED BY THE ASSESSEE AS WELL AS THE INVOICES OF THE SUPPLIER,THAT IT WAS ALSO MAINTAINING STOCK REGISTE R THAT WAS REFLECTED IN THE TAX AUDIT REPORT, THAT THE AO HAD NOT DOUBTED THE THIRD-PARTY EVIDENC ES NAMELY THE DAILY WHICH ALLOWANCE, GRN,BRM AND DELIVERY CHANNELS ISSUED BY THE TRANSPO RTERS,THAT HE HAD NOT FOUND ANY FAULT WITH THE QUANTITATIVE DETAIL SUPPLIED BY THE ASSESS EE,THAT THE CONSUMPTION OF RAW MATERIAL 825-26/M/15(09-10&11-12);7728/M/14(10-11) M/S.SRS PHARMACEUTICALS PVT.LTD. 3 PURCHASED BY THE ASSESSEE STOOD PROVED,THAT THE PAY MENTS WERE MADE THROUGH BANKING CHANNELS,THAT THE INVOICES SUPPLIED BY THE SUPPLIER CONTAINED VAT TIN AND CST TIN,THAT THE ASSESSEE HAD PAID VAT TO THE SUPPLIERS,THAT HE HAD FILED THE CONFIRMATION FROM THE VENDORS,THAT THE AO HAD NOT MADE ANY ATTEMPT TO FIN D OUT THE DETAILS OF SUPPLIERS ON THE BASIS OF PAN NUMBERS, THAT THE ALLEGED BOGUS PURCHASES CO NSTITUTED ONLY 5.48% OF THE TOTAL PURCHASES,THAT THE AO HAD NOT DOUBTED THE SALES, TH AT MANUFACTURED GOODS WERE DISPATCHED DIRECTLY BY THE MANUFACTURER,THAT THERE WAS NO REAS ON TO COME TO THE CONCLUSION THAT PURCHASES HAD NOT BEEN ACTUALLY MADE,THAT THE ALLEG ED BOGUS PURCHASES DISALLOWED BY THE AO COULD NOT BE DISALLOWED U/S.37 MERELY BECAUSE THE S UPPLIERS HAD NOT BEEN PRODUCED BEFORE THE AO.HE REFERRED TO THE CASES OF NIKUNJ EXIMP ENTERPR ISES PRIVATE LIMITED. (INCOME TAX APPEAL NUMBER 5604 OF 2010, DATED 17/12/2012)BABULA L C. BORANA(282 ITR 251) AND RAJEEV KALATHIL OF THE TRIBUNAL. FINALLY, HE DELETE D THE DISALLOWANCE MADE BY THE AO. 4. DURING THE COURSE OF HEARING BEFORE US, THE DEPARTM ENTAL REPRESENTATIVE (DR) RELIED UPON THE ORDER OF THE AO. THE AUTHORISED REPRESENTATIVE (AR) SUPPORTED THE ORDER OF THE FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT ASSESSEE IS A HUNDRED PERCENT EXPORT ORIENTED UNIT, THAT IT WAS PURCHASING GOODS FROM VARIOUS PARTIES AND WAS GETTING THE GOODS MANUFACTURED FROM MANUFACTURERS,THAT IT HAD MADE THE PAYMENTS THROUGH BANKING CHANNELS,THAT THE MANUFACT URERS WERE SUPPLYING THE GOODS WITH THE DETAILS OF RAW MATERIAL CONSUMED AND THE BATCH NUMB ER,THAT THE AO HAD NOT DOUBTED THE BMR, GRN, DELIVERY CHALLANS,ISSUED BY THE TRANSPORT ERS WITH REGARD TO SUPPLY OF GOODS/SUPPLY OF RAW MATERIAL,THAT THE AO HAD NOT PO INTED OUT ANY DEFECT IN THE QUANTITATIVE TALLY MAINTAINED BY THE ASSESSEE,THAT HE HAD NOT MA DE ANY ENQUIRY WITH THE SUPPLIERS, THAT PAYMENT OF VAT BY THE ASSESSEE WAS ALSO IGNORED BY HIM, THAT EXCEPT RELYING UPON THE INFORMATION SUPPLIED BY THE SALES TAX DEPARTMENT/IN VESTIGATION WING OF THE INCOME TAX DEPARTMENT THE AO HAS NOT BROUGHT ON RECORD ANY EVI DENCE TO PROVE THAT THE PURCHASES MADE BY THE ASSESSEE WERE NOT GENUINE.THE FAA, AFTER CON SIDERING THE RELEVANT MATERIAL AND REFERRING TO THE CASE LAWS,HAD GIVEN A CATEGORICAL FINDING OF FACT THAT PURCHASES MADE BY THE ASSESSEE COULD NOT BE DOUBTED.IN OUR OPINION, HIS O RDER DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY.SO,CONFIRMING THE SAME, WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. ITA.S/7728/MUM/2014 & 826/MUM/2015, AY.S 2010-11 AN D 2011-12: THE FACTS OF THE CASE FOR BOTH THE YEARS ARE IDENTI CAL, EXCEPT FOR THE AMOUNT OF DISALLOWANCE MADE UNDER THE HEAD BOGUS PURCHASES. THE AO HAD MAD E DISALLOWANCE OF RS. 1.57 CRORES AND 825-26/M/15(09-10&11-12);7728/M/14(10-11) M/S.SRS PHARMACEUTICALS PVT.LTD. 4 RS. 1.45 CRORES FOR THE AY.2010-11 AND THE NEXT AY. RESPECTIVELY, FOLLOWING OUR ORDER FOR THE AY. 2009-10,WE UPHOLD THE ORDER OF THE FAA AND DECIDE THE EFFECTIVE GROUNDS OF APPEAL AGAINST THE AO FOR BOTH THE AY.S. AS A RESULT APPEALS FILED BY THE AO FOR ALL THE THR EE AY.S STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH MARCH , 2017. 29 , 2017 SD/- SD/- ( / AMARJIT SINGH ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 29.03.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR E BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.