ACIT, Ghaziabad V. M/s. Omega Laboratories, Ghaziabad

ITSSA 56/DEL/2009

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 1890 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 9 month(s) 25 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 16-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 24-02-2016
• Assessment Year: misc
• Appeal Filed On: 22-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VINOD KUMAR BINJAL
• Keywords: Unexplained expenditure; Income from undisclosed sources; Search and seizure; Retrospective amendment; Corroborative evidences
• Section: 40A(3)

Judgement Text

1 ITA NO.56/DEL/2009 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SMT SUCHITRA KAMBLE , JUDICIAL MEMBER I.T(S S).A .NO.-56/DEL/2009 (ASSESSMENT YEA R-1997-98 TO 1996-97) ACIT CIRCLE-1, CGO COMPLEX-1 GHAZIABAD (APPELLANT) VS OMEGA LABORATORIES E-13/1, KAVI NAGAR INDL. AREA GHAZIABAD (RESPONDENT) APPELLANT BY SH. SANDEEP JAIN, CIT (DR) RESPONDENT BY SH. VINOD KUMAR BINJAL, CA ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER DATED 18/5/2009 PASSED BY CIT (A)-GHAZIABAD. 2. THE GROUNDS OF APPEAL ARE AS FOLLOWS:- 1. THAT THE LD. CIT(A) HAS WRONGLY DELETED THE DIS ALLOWANCE OF DEDUCTION U/S 80IA OF THE I.T. ACT, 1961 OF RS.6,35 ,08,746/- WITHOUT APPRECIATING THE MATERIAL FACTS AVAILABLE O N RECORD. DATE OF HEARING 24.02.2016 DATE OF PRONOUNCEMENT 16.05.2016 2 ITA NO.56/DEL/2009 2. THAT THE LD. CIT(A) HAS WRONGLY DELETED DISALLOW ANCE MADE BY THE A.O U/S 40A(3) OF THE I.T. ACT, 1961 OF RS.1,70 ,62,649/- WITHOUT APPRECIATING THE MATERIAL FACTS AVAILABLE O N RECORD. 3. THAT THE LD. CIT(A) HAS WRONGLY DELETE THE ADDIT ION MADE ON ACCOUNT OF INCOME EARNED FROM JOB WORK OF RS.48,22, 658/- WITHOUT APPRECIATING THE MATERIAL FACTS AVAILABLE O N RECORD. 4. HENCE, ORDER OF THE LD. CIT(A) MAY BE SET-ASIDE AND THE ORDER OF THE A.O BE RESTORED. 3. THE ASSESSEE COMPANY IS A MANUFACTURER OF GENERI C & SPECIFIC MEDICINES HAVING ONE FACTORY AT GHAZIABAD AND ONE A T DADRA THAT WAS SET UP IN 1994. A SEARCH AND SEIZURE OPERATION WAS CARRIED OUT ON 19/12/2997. THE VARIOUS PREMISES OF THE ASSESSE E LOCATED IN DELHI, GHAZIABAD, DADRA AND NAGARHAVELI WERE COVERE D BY THIS SEARCH OPERTAION. VARIOUS DOCUMENTS AND BOOKS OF A CCOUNTS WERE SEIZED. THE A.O GAVE A FINDING THAT THE ASSESSEE HA D INDULGED IN LARGE SCALE PRODUCTION OUTSIDE THE BOOKS OF ACCOUNT S AND HAS BEEN CONSISTENTLY ADOPTING THE DUBIOUS METHOD OF DUPLICA TE BILLING. ON THE BASIS OF MATERIAL FOUND AT THE TIME OF SEARCH A ND THE STATEMENT OF VARIOUS PERSONS RECORDED FOLLOWING ADDITIONS WER E MADE BY THE A.O VIDE ORDER DATED 31/1/2000. 1) PROFIT ON THE SALES NOT RECORDED IN THE BOOKS OF A/C. RS. 7,74,89,956/- 2) CAPITAL EMPLOYED FOR PRODUCTION OUTSIDE BOOKS OF RS.3,60,15,661/- ACCOUNT FOR THE PURPOSE OF UNRECORDED SALES. 3) DISALLOWANCE U/S 40A (3) OF I.T. ACT, 1961. RS. 1,70,62,649/- 4) INCOME EARNED ON ACCOUNT OF JOB WORK RS. 48,22,658/- 3 ITA NO.56/DEL/2009 5) INVESTMENT MADE IN THE CONSTRUCTION OF THE FAC TORY PREMISES AT DADRA AND GHAZIABAD. RS . 20,63,107/- 6) UNEXPLAINED EXPENDITURE ON ACCOUNT OF COMMISSION PAID. RS. 28,39, 523/- 7) EXEMPTION U/S 80IA RS. 6,35,08,746/ 4. ON APPEAL, THE CIT (A) ALLOWED THE FOLLOWING R ELIEFS TO THE ASSESSEE:- 1) PROFIT ON THE SALES NOT RECORDED IN THE BOOKS OF A/C. RS. 7,52,28,233/- 2) CAPITAL EMPLOYED FOR PRODUCTION OUTSIDE BOOKS OF RS.3,60,15,661/- ACCOUNT FOR THE PURPOSE OF UNRECORDED SA LES. 3) DISALLOWANCE U/S 40A (3) OF I.T. ACT, 1961. RS. 1,31,56,743/- 4) INCOME EARNED ON ACCOUNT OF JOB WORK RS. 48,22,658/- 5) INVESTMENT MADE IN THE CONSTRUCTION OF THE FACTORY PREMISES AT DADRA AND GHAZIABAD. RS. 20,63,107/- 6) UNEXPLAINED EXPENDITURE ON ACCOUNT OF COMMISSION PAID. RS. 28,3 9,523/- 7) EXEMPTION U/S 80IA RS. 6,35,08,746/- 5. AGAINST THE ORDER OF THE CIT(A), BOTH THE ASSESS EE AS WELL AS THE DEPARTMENT PREFERRED APPEALS BEFORE THE ITAT WH EREIN VIDE ORDERS DATED 23/3/2007 PASSED IN ITA NO. 71/DEL/200 1 AND 145/DEL/2001 THE ITAT HAD ALLOWED THE FOLLOWING REL IEFS: 1) PROFIT ON THE SALES NOT RECORDED IN THE BOOKS OF A/C. RS. 7,74,89,956/- 4 ITA NO.56/DEL/2009 2) CAPITAL EMPLOYED FOR PRODUCTION OUTSIDE BOOKS OF RS.3,60,15,661/- ACCOUNT FOR THE PURPOSE OF UNRECORDED SALES. 3) DISALLOWANCE U/S 40A (3) OF I.T. ACT, 1961. SET-ASIDE 4) INCOME EARNED ON ACCOUNT OF JOB WORK SET-ASIDE 5) INVESTMENT MADE IN THE CONSTRUCTION OF THE FACTORY PREMISES AT DADRA AND GHAZIABAD. RS . 20,63,107/- 6). UNEXPLAINED EXPENDITURE ON ACCOUNT OF COMMISSION PAID. RS. 28,39,523/ - 7). EXEMPTION U/S 80IA SET ASIDE 6. AGAINST THE RELIEF ALLOWED BY THE ITAT MENTIONED AT POINT NO. 1, 2, 5 AND 6, THE DEPARTMENT FILED AN APPEAL U/S 2 60A BEFORE THE HONBLE HIGH COURT, ALLAHABAD ON 17/9/2007 WHICH IS PENDING FOR DECISION. 7. THE ISSUES COVERED UNDER POINT NO. 3, 4 AND 7 AB OVE HAVE BEEN SET-ASIDE BY THE ITAT TO THE FILE OF THE ASSES SING OFFICER. ACCORDINGLY, NOTICE U/S 143(2) AND NOTICE U/S 142(1 ) ALONG WITH QUESTIONNAIRE DATED 12/12/2008 WERE ISSUED TO THE A SSESSEE BY THE ASSESSING OFFICER. AS REGARDS DISALLOWANCE U/S 40A (3), THE ASSESSEE WAS REQUIRED TO FURNISH THE DETAILS OF SUCH PAYMENT S MADE TO EMPLOYEES ALONG WITH SUPPORTING EVIDENCE. THE ASSE SSEE WAS ALSO REQUIRED TO JUSTIFY ITS CLAIM U/S 80IA OF RS.6,35,0 8,746/- IN VIEW OF THE DIRECTIONS OF THE ITAT. THE ASSESSEE WAS ALSO REQUIRED TO EXPLAIN, THAT SINCE THE INCOME FROM JOB WORK OF RS. 48, 22,658/- WAS NOT DISCLOSED IN DADRA UNIT AND AS THE SAME WAS TAX ED BY THE A.O 5 ITA NO.56/DEL/2009 AS INCOME FROM UNDISCLOSED SOURCES, AS TO WHY DEDUC TION U/S 80IA ON SUCH INCOME SHOULD NOT BE DENIED. 8. THE ASSESSEE FILED HIS SUBMISSIONS BEFORE THE AS SESSING OFFICER. THE ASSESSING OFFICER RECORDED THE FINDING THAT THE ASSESSEE HAS FAILED TO ESTABLISH THAT THE JOB WORK WAS DONE AT DADRA UNIT TO CLAIM DEDUCTION U/S. 80IA. THUS ASSESSING OFFICER D ISALLOWED THE SAME. THE ASSESSEE FILED APPEAL BEFORE THE CIT (A). THE CIT (A) WHILE RECORDING THE FINDING HELD THAT NO EVIDENCE H AS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER TO SHOW THAT THE JOB WORK CHARGES ARE NOT ELIGIBLE FOR DEDUCTION U/S. 80IA OF THE ACT. IT WAS AN ADMITTED FACT THAT THE JOB WORK CHARGES WERE NOT DI SCLOSED BY THE ASSESSEE IN ITS REGULAR RETURNS OF INCOME AND THERE FORE THE ADDITION OF THE SAID AMOUNT HAS BEEN CONFIRMED BY THE ITAT. THE ASSESSING OFFICER DISALLOWED THE SAID AMOUNT BY MERELY REITER ATING THE FINDINGS OF THE ORIGINAL ASSESSMENT ORDER WHICH HAS ALREADY BEEN CONSIDERED BY THE ITAT. HOWEVER, NO EVIDENCE HAS B EEN BROUGHT ON RECORD BY THE ASSESSING OFFICER TO SHOW THAT THE JO B WORK CHARGES ARE NOT ELIGIBLE FOR DEDUCTION U/S 80IA. THE ASSESSEE WAS ALLOWED DEDUCTION U/S 80IA ON THE JOB WORK CHARGES IN A.Y 1997-98 IN THE REGULAR ASSESSMENT PR OCEEDINGS. IN VIEW OF THE RETROSPECTIVE AMENDMENT IN THE SECTION 158BB, UNDISCLOSED INCOME HAS TO BE COMPUTED AS PER THE PR OVISIONS OF THE ACT AND WILL THEREFORE BE ELIGIBLE FOR DEDUCTION UN DER CHAPTER VI-A IF ALL THE CONDITIONS ARE FULFILLED. SINCE THE ITAT H ELD THAT THESE JOB 6 ITA NO.56/DEL/2009 WORK CHARGES RELATE TO THE DADRA UNIT FOR WHICH UNI T DEDUCTION U/S 80IA ON JOB WORK CHARGES WAS ALLOWED FOR THE A.Y 19 97-98. 9. THE CIT(A) HELD THAT THE ASSESSING OFFICER HAS N OT BROUGHT ANY EVIDENCE ON RECORD TO DIFFERENTIATE THE JOB WORK CH ARGES OF THE BLOCK PERIOD AND OF THE REGULAR ASSESSMENT, THE SAME WOUL D BE ELIGIBLE FOR DEDUCTION IN LAW. IT IS HELD THAT THE JOB WORK CHA RGES ARE ELIGIBLE FOR DEDUCTION U/S 80IA AND THUS THE SAID SUM OF RS.48,2 2,658/- WAS ALLOWED AS A DEDUCTION FROM THE UNDISCLOSED INCOME COMPUTED U/S158BC OF THE ACT. THE CIT(A) GRANTED RELIEF OF RS.48,22,658/- TO THE ASSESSEE. 10. THE LD. AR SUBMITTED THAT THE CIT (A) HAS RIGHT LY ALLOWED THE APPEAL OF THE ASSESSEE AS THE A.O HAD MERELY DISALL OWING THE SAID AMOUNT BY REITERATING HIS FINDINGS OF THE ORIGINAL ASSESSMENT ORDER WHICH WAS ALREADY REVERSED BY THE ITAT. THUS, THE JOB WORK CHARGES ARE NOT ELIGIBLE FOR DEDUCTION U/S 80IA. 11. THE LD. DR RELIED UPON THE ASSESSING OFFICERS ORDER. 12. WE HAVE PERUSED ALL THE RECORDS AND HEARD BOTH THE PARTIES. IT IS FOUND THAT THE CIT (A) HAS RIGHTLY CONSIDERED TH E ENTIRE ISSUE. FROM THE RETROSPECTIVE AMENDMENT TO SECTION 158BB, IT CAN BE SEEN THAT UNDISCLOSED INCOME HAS TO BE COMPUTED AS PER T HE PROVISIONS OF THE ACT AND WILL THEREFORE BE ELIGIBLE FOR DEDUC TION UNDER CHAPTER VI-A IF ALL THE CONDITIONS ARE FULFILLED. SINCE TH E ITAT HAS HELD THAT THESE JOB WORK CHARGES RELATE TO THE DADRA UNIT FOR WHICH UNIT DEDUCTION U/S 80IA ON JOB WORK CHARGES HAS BEEN ALL OWED FOR THE 7 ITA NO.56/DEL/2009 A.Y 1997-98. THE CIT(A) RIGHTLY POINTED OUT THAT T HE ASSESSING OFFICER HAS NOT BROUGHT ANY EVIDENCE ON RECORD TO DIFFERENTIATE THE JOB WORK CHARGES OF THE BLOCK PERIOD AND OF THE REG ULAR ASSESSMENT. THUS, THE CIT(A) RIGHTLY HELD THAT THE JOB WORK CH ARGES WERE ELIGIBLE FOR DEDUCTION U/S 80IA AND ALLOWED RS.48,22,658/- A S A DEDUCTION FROM THE UNDISCLOSED INCOME COMPUTED U/S158BC OF TH E ACT. THE ISSUE RELATED TO SECTION 40A(3) OF THE ACT DOES NOT SURVIVE FOR THE REASON THAT SUCH DISALLOWANCE GOES TO INCREASE THE PROFITS WHICH IN TURN WOULD BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE ACT RESULTS IN NIL-ADDITION. 12. IN THE RESULT, THE APPEAL IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 16TH OF MAY, 2016. SD/- SD/- (J. SUDHAKAR REDDY) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 16/05/2016 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT R EGISTRAR 8 ITA NO.56/DEL/2009 ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 25/02/2016 PS 2. DRAFT PLACED BEFORE AUTHOR 25/02/2016 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2016 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 16.05.2016 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 16.05.2016 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.