FRANCO INDIAN PHARMACEUTICAL PRIVATE LIMITED , MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE - 6(2), MUMBAI

MA 422/MUM/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 5444 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 1 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 17-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 15-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JANARDHANAN
• Assessee Lawyers: REEPAL TRASHAWALA
• Keywords: Bogus purchase; Capital asset; Gift; Depreciation
• Section: 133A; 133(6)

Judgement Text

1 MAS 422, 423 & 424/MUM/2018 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G, MUMBAI BEFORE SHRI MAHAVIR SINGH(JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) M.A. NO.422/MUM/2018 (ARISING OUT OF I.T.A NO.2173/MUM/2016 (ASSESSMENT YEAR: 2010-11) & M.A. NO.423/MUM/2018 (ARISING OUT OF I.T.A NO.226/MUM/2016 (ASSESSMENT YEAR: 2011-12) & M.A. NO.424/MUM/2018 (ARISING OUT OF I.T.A NO.4225/MUM/2017 (ASSESSMENT YEAR: 2012-13) FRANCO INDIAN PHARMACEUTICAL PVT. LTD, NO. 20, DR.E. MOSES ROAD WORLI, MUMBAI 400 011 PAN : AAACF1794M VS DY.C IT, CIR.6(2), MUMBAI /CENT.CIR.13, MUMBAI / CENT.CIR.2(3), MUMBAI APPLICANT RESPONDENT APPLICANT BY REEPAL TRASHAWALA RESPONDENT BY SHRI V. JANARDHANAN DATE OF HEARING 27-07-2018 DATE OF PRONOUNCEMENT 17-10-2018 O R D E R PER MAHAVIR SINGH, JM : THESE THREE MISCELLANEOUS APPLICATIONS FILED BY T HE ASSESSEE ARE DIRECTED AGAINST COMMON ORDER PASSED BY THE ITAT, M UMBAI BENCH G IN ITA NOS.2173/MUM/2016, 226/MUM/2016 & 4225/MUM/2 017 FOR ASSESSMENT YEARS 2010-11, 2011-12 AND 2012-13 VIDE CONSOLIDATED 2 MAS 422, 423 & 424/MUM/2018 ORDER DATED 08-06-2018. THE ASSESSEE HAS FILED THE SE MISCELLANEOUS APPLICATIONS BY STATING THAT CERTAIN MISTAKES CREPT IN THE ORDER PASSED BY ITAT WHICH NEEDS TO BE RECTIFIED U/S 254(2) OF THE INCOME-TAX ACT, 1961. 2. THE ASSESSEE HAS NARRATED THE MISTAKES IN ITS MI SCELLANEOUS APPLICATION DATED 15-06-2018. THE CONTENTS OF THE MISCELLANEOUS APPLICATIONS ARE EXTRACTED BELOW:- 1. THE ABOVE-MENTIONED APPEAL WAS DISPOSED OF BY BENCH 'G' OF THE INCOME- TAX APPELLATE TRIBUNAL COMPRISING OF HON'BLE SHRI M AHAVIR SINGH, JM AND HON'BLE SHRI G. MANJUNATHA, AM, BY THEIR CONSOLIDATED ORDER DATED 08.06.2018. 2. THE APPLICANT SUBMITS THAT THERE ARE CERT AIN MISTAKES APPARENT FROM THE RECORD IN THE ORDER PASSED DATED 08.06.2018. THE SAME ARE AS UNDER- I) IN PARA 6, PAGE 11 OF THE ITAT ORDER, IT IS OBSERVED THAT - '..... THE LEARNED COUNSEL FOR THE ASSESSEE ALSO FILED COMPLETE STOCK REGISTER AND STATED THA! THE AO HAS NOT DOUBTED THE SALES EXECUTED BY THE ASSESSEE ON ACCOUNT OF PURCHASE DISCLOSE FROM HAWALA PARTIES...... ' THERE IS AN ERROR IN THE ABOVE OBSERVATION BECAUSE THE PURCHASES MADE OF RS.4,59,25,643/- IN AY 2010-11; RS.6,96,36,974/- IN AY 2011-12 & RS.2,64,43,393/- IN AY 2012-13 RELATES TO PURCHASES OF GIFT ITEMS, ETC. WHICH ARE DISTRIBUTED TO DEALERS ETC. THUS, THERE IS NO S ALE OF SUCH GOODS AND ARE NOT INCLUDED IN STOCK REGISTER - AS OBSERVED IN THE ITAT ORDER. THESE ARE VITAL FACTS OF THE PRESENT CASE AND THEREFORE THE OBSERVATION MADE IN ITAT ORDER REQUIRES MODIFICATION/RECTIFICATION. II) IN PARA 8, PAGE 15 OF THE ITAT ORDER, IT IS OBS ERVED THAT - '....... WE HAVE NOTICED FROM THE ASSESSMENT ORDER AND (HE ORDER OF CIT(A) THAT THE SALES ARE NOT AT ALL DOUBTED. ONLY PURCHASES ARE NOT GENUINE HUT IN REGARD TO THESE PURCHASES THE ASSESSEE HAS MADE PAYMENT BY ACCOUNT PAYEE CHEQ UE AND ALSO INCLUDED THE GOODS IN THE STOCK REGISTER. ........ ONCE, THE SALES ARE NO! DOUBLE IT IS PRESUMED THAT.,.,....' . AS STATED IN PARA (I) ABOVE, THE GOODS PURCHASED RE LATE TO GIFT ITEMS, ETC., ARE NOT SOLD BUT DISTRIBUTED TO DEALERS, ETC. ALSO, THE GOODS DO NOT FORM PART OF STOCK REGISTER. THESE ARE VITAL FACTS OF THE PRESENT CASE AND THEREFORE THE OBSERVATION MADE IN ITAT ORDER REQUIR ES MODIFICATION/ RECTIFICATION. III) IN GROUND NO.4 OF AY 2010-11, THE APPLICANT HAS CONTES TED THE ISSUE OF PURCHASE OF CAPITAL ASSETS OF RS. 1,97,14,945/- [OT HER THAN RS,4,59,25,643/-] FROM 3 MAS 422, 423 & 424/MUM/2018 SUSPICIOUS PARTIES. THIS GROUND WAS ARGUED BUT HAS REMAINED TO BE ADJUDICATED IN THE ITAT ORDER. THESE PURCHASES ARE OTHER THAN THOSE OF GIFT ITEMS, ETC. AND DO NOT FORM PART OF DISALLOWANCE OF 30% AND HENCE, REQUIRE TO BE SEP ARATELY ADJUDICATED. IN THIS REGARD, THE AR HAS RELIED UPON THE DECISION OF MUMBAI ITAT IN THE CASE OF NEW CONSOLIDATED CONSTRUCTION CO. LTD. V. D Y. CIT, ITA NO.3410/MUM/20L5, AY 2010-11, BENCH T, ORDER DATED 15.12.2017, IN PARA 10, PAGE 8 OF THE ORDER. THIS REQUIRES RECTIFICATIO N. IV) IN PARA 3, PAGE 5 OF ITAT ORDER, IT IS OBSERVED THA T - 'IN THE MEANTIME, A SURVEY UNDER SECTION ]33A OF THE ACT WAS CONDUCTED BY THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT ON ASSESSEE'S PREMISES ON 15.01.2013 AND ASSESSEE VOLUNTARILY ADMITTED BOGUS PURCHASES/ RECEIVING HAW ALA BILL WITHOUT RECEIVING IN GOODS.' THE APPLICANT SUBMITS THAT THERE IS AN ERROR HERE. IN THE STATEMENT OF THE DIRECTOR, MR.NOEL AMMANA RECORDED U/S.133A OF THE I NCOME-TAX ACT ON 15.01.2013, THERE IS NO VOLUNTARY ADMISSION OF BOGUS PURCHASES/ RECEIVING HAWALA BILLS WITHOUT RECEIVING GOODS. THE ANSWER TO Q.55 IN THE STATEMENT RECORDED IS REPRODUCED AS UNDER [RELEVANT PAGE 123-124 OF PAPER BOOK]- 'ANS SIR AS YOU ARE A\VARE THAT CONSIDERING THE N ATURE OF BUSINESS WE HAVE TO DISTRIBUTE A LOT OF SALES PROMOTIONAL MATER IAL TO PROMOTE OUR SALES AND ACCORDINGLY THE MATERIAL HAVE BEEN PURCHASED AN D * USED IN OUR MARKETING. HOWEVER SINCE I MAY NOT BE A BLE TO FULLY JUSTIFY THE PURCHASES TO YOUR UTMOST SATISFACTION, I AM WILLING TO OFFER THE UNVERIFIABLE PURCHASES TO THE EXTENT OF RS. 16, 30,73,214 FOR TAXATION IN THE RELEVANT YEAR....... ' THE ABOVE OFFER WAS THEREAFTER CONTESTED ON MERITS IN THE COURSE OF ASSESSMENT PROCEEDINGS AND ALSO DURING CIT(A) APPELLATE PROCEE DINGS. HOWEVER, THE ITAT ORDER DOCS NOT CONTAIN THIS FACTUAL ASPECT OF THE MATTER. HENCE, THERE IS ERROR AND REQUIRES MODIFICATION/RECTIFICATION. V) IN FIRST PARA, PAGE 2 OF ITAT ORDER, IT I S MENTIONED THAT 'THESE THREE APPEALS BY THE ASSESSEE ARE ARISING OUT OF THE ORDERS OF COMMI SSIONER OF INCOME TAX (APPEALS)- 44, COMMISSIONER OF INCOME TAX (A)~48 MUMBAI ..... ' THE APPLICANT SUBMITS THAT THE THREE APPEALS ARE AR ISING OUT OF THE ORDERS OF-CIT (A) - 12 FOR AY 2010-11, CIT (A) - 48 FOR AY 2011-1 2 & CIT (A) - 52 FOR AY 2012-13. HENCE, THIS IS FACTUAL ERROR AND REQUIRES MODIFICATION / RECTIFICATION. VI) ON THE FIRST PAGE OF ITAT ORDER, THE RESP ONDENTS FOR EACH OF THE THREE ASSTT. YEARS ARE REQUIRED TO BE MENTIONED AS UNDER IN PLAC E OF 'THE DY.COMMISSIONER OF INCOME-TAX, CIRCLE-6(2)' MENTIONED AS COMMON FOR AL L THREE ASSTT. YEARS. A.Y.2010-11 : DY.CIT CIRCLE-6(2), AAYKAR BHAVAN, M.K.ROAD, MUMBAI-400 020. .Y.2011-12 : ACIT, CENTRAL CIRCLE-13, PRATISHTHA BHAVAN, M.K.ROAD, 4 MAS 422, 423 & 424/MUM/2018 MUMBAI-400 020. 'A.Y.2012-13 : DY.CIT, CENTRAL CIRCLE-2(3 ), PRATISHTHA BHAVAN, M.K.ROAD, MUMBAI-400 020. 3. THE APPLICANT THUS SUBMITS THAT THERE ARE MISTAKES APPARENT FROM RECORD IN THE ORDER OF THE TRIBUNAL (AS STATED ABOVE) AND THE SAME MAY BE RECTIFIED / MODIFIED. 4. THE APPLICANT THEREFORE PRAYS THAT THE HO N'BLE TRIBUNAL MAY BE PLEASED TO: A) RECTIFY THE MISTAKES APPARENT FROM RECORD IN THE ORDER DATED 08.06.2018 AND GRANT THE RELIEF PRAYED FOR IN THE AFORESAID MISCEL LANEOUS APPLICATION; B) ANY OTHER RELIEF WHICH THE HON'BLE BENCH DEEMS FIT. 3. THE ASSESSEE, VIDE ITS GROUNDS NO.5 & 6 OF MISCE LLANEOUS APPLICATIONS TAKEN A PLEA THAT THERE IS ERROR IN CA USE TITLE AS PER WHICH, THE RESPONDENT HAS BEEN TAKEN FOR ALL THREE YEARS A S THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 6(2), WHEREAS FO R DIFFERENT ASSESSMENT YEARS, THE ORDER HAS BEEN PASSED BY THRE E DIFFERENT ASSESSING OFFICERS, THEREFORE, THE SAME MAY BE INCO RPORATED. 4. HAVING CONSIDERED THE ARGUMENTS, WE FIND THAT TH ERE IS AN ERROR IN MENTIONING RESPONDENTS NAME IN THE CAUSE TITLE WHI CH REQUIRES RECTIFICATION. ACCORDINGLY, THE CAUSE TITLE HAS BE EN MODIFIED WITH THE RESPECTIVE ASSESSING OFFICER FOR EACH ASSESSMENT YE AR, AS UNDER:- I.T.A NO.2173/MUM/2016 (ASSESSMENT YEAR: 2010-11) FRANCO INDIAN PHARMACEUTICAL P LTD, 20, DR.E. MOSES ROAD WORLI, MUMBAI 400 011 PAN : AAACF1794M VS DY.C IT, CIR.6(2), MUMBAI APPELLANT RESPONDENT 5 MAS 422, 423 & 424/MUM/2018 I.T.A NO.226/MUM/2016 (ASSESSMENT YEAR: 2011-12) FRANCO INDIAN PHARMACEUTICAL P LTD, 20, DR.E. MOSES ROAD WORLI, MUMBAI 400 011 PAN : AAACF1794M VS DY.C IT, CENT. CIR.(13), MUMBAI APPELLANT RESPONDENT I.T.A NO.4225 /MUM/2017 (ASSESSMENT YEAR: 2012-13) FRANCO INDIAN PHARMACEUTICAL P LTD, 20, DR.E. MOSES ROAD WORLI, MUMBAI 400 011 PAN : AAACF1794M VS DY.C IT, CENT.CIR.2(3), MUMBAI APPELLANT RESPONDENT 5. IN SO FAR AS FIRST PARA ON PAGE 2, THE ASSESSEE STATED THAT THE APPEALS FOR AYS 2010-11 TO AY 2012-13 HAVE BEEN DIS POSED OF BY DIFFERENT CIT(A). HOWEVER, THE ITAT HAS STATED THA T THESE THREE APPEALS FILED BY THE ASSESSEE ARE ARISING OUT OF THE ORDERS OF CIT(A)-44 AND CIT(A)-48, MUMBAI, WHICH IS FACTUAL ERROR REQUIRES MODIFICATION. 6. HAVING CONSIDERED THE ARGUMENTS OF THE LD.COUNSE L, WE FIND THAT THERE IS A FACTUAL ERROR IN RECORDING THE FACTS IN RESPECT OF THE COMMISSIONERS OF APPEALS, WHO HAD DISPOSED OF THE A PPEALS AND ACCORDINGLY, THE SAME HAS BEEN MODIFIED AS UNDER:- 1. THESE THREE APPEALS BY THE ASSESSEE ARE ARISIN G OUT OF THE ORDERS OF COMMISSIONER OF INCOME-TAX (APPEALS)-44, MUMBAI IN APPEAL NO.CIT(A)-12-IT-204/DCIT 6(3)(1)/2015-16, CI T(A)-48, MUMBAI, NO.CIT(A)-48- IT.594/ACCC-13/2014-15 AND CI T(A)- 6 MAS 422, 423 & 424/MUM/2018 52/IT/DC-CC-2(3)/300/2016-17 DATED 28.01.2016, 20.1 1.2015, 08.03.2017. 7. THE LD.AR REFERRING TO MISCELLANEOUS APPLICATION , SUBMITTED THAT IN PARA 6, PAGE 11 OF THE ITAT ORDER IT WAS OBSERVED T HAT THE LD.COUNSEL FOR THE ASSESSEE HAS FILED COMPLETE STOCK REGISTER AND STATED THAT THE AO HAS NOT DOUBTED THE SALES EXECUTED BY THE ASSESSEE ON ACCOUNT OF PURCHASES DISCLOSED FROM HAWALA PARTIES. BUT, WHIL E NARRATING FACTS OF THE CASE, THE ITAT HAS IGNORED THE ARGUMENTS MADE B Y THE LD.COUNSEL THAT THE ASSESSEE IS INVOLVED IN THE BUSINESS OF MA NUFACTURING PHARMACEUTICAL PRODUCTS. IN THE PROCESS, IT HAS PU RCHASED GIFT ITEMS, ETC. WHICH ARE DISTRIBUTED TO DEALERS DIRECTLY FROM ITS GODOWN AT BHIWANDI, MUMBAI WHERE MORE THAN 90% OF THE SALES P ROMOTIONAL ITEMS ARE PURCHASED AND DELIVERED. THESE SALES PROMOTION AL ITEMS ARE DISTRIBUTED TO ITS DISTRIBUTORS / MEDICAL REPRESENT ATIVES / PSOS THROUGH THE C & F AGENTS ACROSS THE COUNTRY. THEREFORE, TH E QUESTION OF TAKING SUCH PURCHASE INTO STOCK REGISTERS AND SALE OF SUCH GOODS DOES NOT ARISE. THESE ARE FACTUAL ERRORS THEREFORE, THE OBS ERVATIONS MADE IN ORDER DATED 08-06-2018 REQUIRES MODIFICATIONS / REC TIFICATION. THE LD.AR FURTHER SUBMITTED THAT THE ITAT FURTHER OBSERVED AT PARA 8 ON PAGE 15 THAT WE ARE NOTICED FROM THE ASSESSMENT ORDER AND T HE ORDER OF CIT(A) THAT THE SALES ARE NOT AT ALL DOUBTED, ONLY PURCHAS ES ARE NON-GENUINE, 7 MAS 422, 423 & 424/MUM/2018 BUT IN REGARD TO THESE PURCHASES, THE ASSESSEE HAS MADE PAYMENT BY ACCOUNT PAYEE CHEQUE AND ALSO INCLUDED THE GOODS IN THE STOCK REGISTER. ONCE THE SALES ARE NOT DOUBTED, IT IS PRESUMED THAT THE ASSESSEE MIGHT HAVE MADE PURCHASES FROM GREY MARKET AND OBTAINED B OGUS BILLS TO SAVE VAT AND PURCHASES FROM GREY MARKET ARE MADE AT A LOWER RATE. THE OBSERVATIONS MADE BY THE ITAT ARE FACTUALLY INC ORRECT AS THE ASSESSEE HAS ALREADY STATED IN EARLIER PARA 2 THAT IT IS INVOLVED IN MANUFACTURING OF 56 DIFFERENT MEDICAL / PHARMACEUTI CAL PRODUCTS AND SUCH GOODS HAVE BEEN SOLD THROUGHOUT THE COUNTRY TH ROUGH DISTRIBUTORS AND THE ITEMS PURCHASED FROM THE PARTIES HAVE BEEN DISTRIBUTED THROUGH C&F AGENTS AND HENCE, THE QUESTION OF TAKING THOSE GOODS INTO STOCK REGISTER AND SELLING THOSE ITEMS SUBSEQUENTLY DOES NOT RISE. THE LD.AR FURTHER SUBMITTED THAT IN PARA 3 ON PAGE 5 OF ITAT ORDER, IT IS OBSERVED THAT IN THE MEANTIME, A SURVEY U/S 133A OF THE ACT WAS CONDUCTED BY THE INVESTIGATION WING OF INCOME-TAX DEPARTMENT AT ASS ESSEES BUSINESS PREMISES ON 15-01-2013 AND ASSESSEE VOLUNTARILY ADM ITTED BOGUS PURCHASES / OBTAINING BILLS WITHOUT RECEIVING GOODS . THE FACT REMAINS THAT IN SURVEY PROCEEDINGS U/S 133A, THE DIRECTOR M R. NOEL AMMANA, WHILE ANSWERING QUESTION NO.55 STATED THAT THE COM PANY HAS PURCHASED SALES PROMOTION ITEMS TO DISTRIBUTE THROU GH ITS C&F AGENTS TO PROMOTE SALES AND ACCORDINGLY THE MATERIAL PURCHASE D ARE USED IN OUR 8 MAS 422, 423 & 424/MUM/2018 MARKETING. HOWEVER, SINCE I MAY NOT BE ABLE TO FUL LY JUSTIFY THE PURCHASES, TO YOUR UTMOST SATISFACTION, I AM WILLIN G TO OFFER THE UNVERIFIABLE PURCHASES FOR TAXATION. NOWHERE THE DIRECTOR STATED THAT THEY HAVE OBTAINED BOGUS PURCHASE BILLS AND VOLUNTA RILY OFFER BOGUS PURCHASES FOR TAXATION. THE ITATS ORDER DOES NOT CONTAIN THIS FACTUAL ASPECT OF THE MATTER AND HENCE, NEEDS MODIFICATION / RECTIFICATION. 8. THE LD.DR, ON THE OTHER HAND, SUBMITTED THAT THE ITAT HAS CONSIDERED ALL ARGUMENTS OF BOTH THE SIDES WHILE DE CIDING THE ISSUE. THEREFORE, THERE IS NO MERIT IN THE CONTENTS OF MIS CELLANEOUS APPLICATIONS FILED BY THE ASSESSEE AND HENCE, MISCELLANEOUS APPL ICATIONS FILED BY THE ASSESSE MAY BE REJECTED. 9. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDER PASSED BY THE ITA T ON 08-06-2018. THE ASSESSEE HAS NARRATED THE MISTAKES APPARENT IN THE ORDER DATED 08- 06-2018 INSOFAR AS FACTUAL ASPECTS OF THE MATTER, B UT NEVER DISPUTED THE FINAL CONCLUSION ARRIVED AT BY THE ITAT IN DIRECTIN G THE AO TO ESTIMATE 30% NET PROFIT ON ALLEGED BOGUS PURCHASES. WE FIND THAT WHILE NARRATING THE FACTS, THE ITAT HAS STATED THAT THE ASSESSEE HA S PURCHASED GOODS FROM GREY MARKET AND TO COVER UP SUCH PURCHASES, OB TAINED BOGUS PURCHASE BILLS FROM HAWALA OPERATORS. WE FURTHER N OTICE THAT THE ITAT FURTHER STATED THAT THE ASSESSEE HAS FURNISHED COMP LETE DETAILS OF STOCK 9 MAS 422, 423 & 424/MUM/2018 REGISTERS AND ALSO THE AO AND THE LD.CIT(A) NEVER D ISPUTED SALES DECLARED BY THE ASSESSEE. THE PAYMENTS HAVE BEEN M ADE BY ACCOUNT PAYEE CHEQUES FOR ALLEGED BOGUS PURCHASES. ONCE TH E SALES ARE NOT DOUBTED, THEN GENERAL PRESUMPTION IS THAT ASSESSEE MIGHT HAVE PURCHASED GOODS FROM MARKET AND OBTAINED PURCHASE B ILLS FROM ENTRY PROVIDERS TO SAVE VAT COMPONENT AND REDUCE SOME AMO UNT IS PRICES. ON APPRAISAL OF THE ORDER PASSED BY THE LOWER AUTHORIT IES, IT IS VERY CLEAR THAT THE ASSESSEE HAS STATED BEFORE THE LOWER AUTHORITIE S THAT IT HAS PURCHASED SALES PROMOTIONAL ITEMS INCLUDING GIFT AR TICLES FOR DISTRIBUTION TO ITS CUSTOMERS THROUGH THE C&F AGENTS AND SUCH GO ODS HAVE BEEN DISTRIBUTED FROM ITS OWN GODOWN AT BHIWANDI, MUMBAI . THE LOWER AUTHORITIES HAVE NEVER DISPUTED THESE FACTS, BUT TH EY WENT ON TO MAKE ADDITION ONLY ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATION WING WHICH IS BASED ON INFORMATION RECEIVED FROM SALES-T AX DEPARTMENT ON SUSPICIOUS / HAWALA DEALERS. FURTHER, THE AO ALSO RELIED UPON THE SURVEY STATEMENT RECORDED DURING THE COURSE OF SURVEY U/S 133A, WHERE THE DIRECTOR OF THE COMPANY HAS ADMITTED ADDITIONAL INC OME ON ACCOUNT OF UNVERIFIABLE PURCHASES. NOWHERE THE DIRECTOR STATE D THAT THE COMPANY HAS OBTAINED BOGUS PURCHASE BILLS TO COVER UP PURCH ASES MADE FROM GREY MARKET. ON THE OTHER HAND, THE ASSESSEE HAS F ILED COMPLETE DETAILS BEFORE THE LOWER AUTHORITIES TO PROVE THAT THE ITEM S PURCHASED FROM THOSE 10 MAS 422, 423 & 424/MUM/2018 DEALERS ARE SALES PROMOTIONAL ITEMS WHICH ARE PURCH ASED AND DISTRIBUTED FROM ITS GODOWN. SINCE, THERE IS FACTUAL ERROR IN THE FINDINGS RECORDED BY THE ITAT IN RESPECT OF BASIC FACTS OF THE MATTER, W E FIND THAT THERE IS MERIT IN THE MISCELLANEOUS APPLICATIONS FILED BY THE ASSE SSEE SEEKING MODIFICATION / RECTIFICATION OF FACTS NARRATED IN T HE ORDER OF ITAT IN PARA 6 ON PAGE 11 AND IN PARA 8 ON PAGE 15 OF THE ORDER AN D ACCORDINGLY WE MODIFY THE FINDINGS GIVEN ON PARA 8 ON PAGES 15 & 1 6 OF ORDER DATED 08- 06-2018. PARA 8 OF THE ORDER DATED 08-06-2018 WILL NOW READ AS MENTIONED BELOW:- 8. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUF ACTURING AND MARKETING BULK DRUGS AND FORMULATIONS SINCE 194 7. DURING THE IMPUGNED ASSESSMENTS THE ASSESSEE WAS MANUFACTU RING ABOUT 56 DIFFERENT MEDICAL / PHARMACEUTICAL PRODUCT S. THE ASSESSEE HAS SOLD ITS PRODUCTS THROUGH ABOUT 1800 D ISTRIBUTORS SPREAD ALL OVER THE COUNTRY. THE ASSESSEE ALSO EMP LOYED 1400 MEDICAL REPRESENTATIVES AND PROFESSIONAL SALES OFFI CERS ALONGWITH 28 C&F AGENTS TO MANAGE SALES. THE SALES PROMOTIONAL ITEMS PURCHASED BY THE ASSESSEE FROM AL LEGED HAWALA DEALERS ARE DISTRIBUTED FROM ITS OWN GODOWN AT BHIWANDI, MUMBAI WHERE FROM ABOUT 90% OF THE PROMOT IONAL ITEMS ARE PURCHASED, ARE DELIVERED. THE SAID SALES PROMOTIONAL 11 MAS 422, 423 & 424/MUM/2018 ITEMS INCLUDING BOOKLETS CONTAINING PRODUCT DETAILS , ETC., ARE DISTRIBUTED THROUGH THE C&F AGENTS ACROSS THE COUNT RY. THE ASSESSEE IS PURCHASING THESE SALES PROMOTIONAL ITEM S REGULARLY SINCE FROM BEGINNING. THE DEPARTMENT NEVER DISPUTE D THE SALES PROMOTIONAL EXPENSES CLAIMED BY THE ASSESSEE FOR TH E EARLIER YEARS. DURING THE YEAR UNDER CONSIDERATION, ONLY O N THE BASIS OF INFORMATION RECEIVED FROM DGIT(INV) WHICH IS SUPPOR TED BY THE FINDINGS OF SALES-TAX DEPARTMENT, THE AO HAS DISPUT ED THE SALES PROMOTION EXPENSES IGNORING ALL EVIDENCES FILED BY THE ASSESSEE INCLUDING COMPLETE DETAILS OF PURCHASES AN D DISTRIBUTION OF SUCH SALES PROMOTIONAL ITEMS. IT I S NOT THE CASE OF THE DEPARTMENT THAT PAYMENT MADE FOR THESE PURCHASE S CAME BACK TO THE ASSESSEE FROM THE SUPPLIERS WITHDRAWING EQUAL CASH FROM THEIR BANK ACCOUNTS AGAINST PAYMENT RECEIVED F ROM THE ASSESSEE. THE ASSESSEE HAS ALSO NOT TAKEN ANY CRED IT FOR THE SALES-TAX PAID BY IT ON THE SAID PURCHASES. AS SUC H, THE SALES- TAX DEPARTMENT IS ALSO NOT PUT TO ANY LOSS DUE TO N ON PAYMENT, IF ANY OF SALES-TAX COLLECTED BY THOSE SUPPLIERS FR OM THE ASSESSEE ON THE ABOVE PURCHASES. THE SO-CALLED DEC LARATIONS MADE BY THE SUPPLIERS BEFORE THE SALES-TAX AUTHORIT IES HEAVILY RELIED UPON BY THE AO WERE NOT PROVIDED TO THE ASSE SSEE. NO 12 MAS 422, 423 & 424/MUM/2018 ENQUIRIES WERE MADE BY THE AO FROM THE SUPPLIERS EI THER U/S 133(6) OR OTHERWISE TO ESTABLISH THE FACT THAT THE PURCHASES WERE IN THE NATURE OF ACCOMMODATION BILLS. MERELY BECAUSE THE ASSESSEE HAS VOLUNTARILY OFFERED THE SAID PURCHASES TO TAX DOES NOT ABSOLVE THE AO FROM HIS RESPONSIBILITY OF PROVI NG THAT THE PURCHASES WERE IN FACT TAXED PARTICULARLY WHEN THE DISCLOSURE WAS IMPLIEDLY RETRACTED BY CONTESTING THE ADDITION DURING ASSESSMENT AND APPELLATE PROCEEDINGS. THE AO HAS N OT BROUGHT OUT ANY EVIDENCE ON RECORD BY CONCLUSIVELY PROVING THAT THE PURCHASES WERE NOT GENUINE AND MERELY RELIED UP ON THE SALES-TAX DEPARTMENTS LIST COUPLED WITH ASSESSES OWN ADMISSION ON THE SAID PURCHASES DURING SURVEY ACTIO N U/S 133A, TO MAKE THE ADDITION. FURTHER, UNDER SIMILAR FACTS AND CIRCUMSTANCES, THE CO-ORDINATE BENCH OF ITAT, KOLKA TA BENCH IN ASSESSEES SISTER CONCERN CASE IN DCIT VS LABORATOR IES GRIFFON PVT LTD, VIDE ITS ORDER DATED 11-04-2018 FOR AY 201 1-12 HAS RESTRICTED THE DISALLOWANCE @30% OF THE ALLEGED BOG US PURCHASES. THEREFORE, CONSIDERING THE FACTS AND CI RCUMSTANCES OF THIS CASE AND ALSO BY FOLLOWING THE DECISION OF CO-ORDINATE BENCH IN ASSESSEES SISTER CONCERNS CASE, WE DIREC T THE AO TO RESTRICT ADDITION @30% OF ALLEGED BOGUS PURCHASES. 13 MAS 422, 423 & 424/MUM/2018 10. THE ASSESSEE HAS TAKEN ONE MORE GROUND IN MISCE LLANEOUS APPLICATION FOR ALL ASSESSMENT YEARS IN RESPECT OF ADDITION MADE TOWARDS CAPITAL GOODS FROM THE ALLEGED SUSPICIOUS DEALERS. THOUGH, THE ASSESSEE HAS TAKEN A SPECIFIC GROUND CHALLENGING AD DITION MADE BY THE AO TOWARDS CAPITAL GOODS, THE ITAT HAS FAILED TO GI VE ANY FINDINGS ON THE ISSUE, THEREFORE, THERE IS A FACTUAL ERROR WHICH RE QUIRES RECTIFICATION / MODIFICATION. IN THIS REGARD, THE ASSESSEE HAS REL IED UPON THE DECISION OF ITAT, MUMBAI BENCH IN THE CASE OF NEW CONSOLIDATED CONSTRUCTION CO. LTD VS DCIT IN ITA NO.3410/MUM/2015 ORDER DATED 15- 12-2017 WHERE THE ITAT, UNDER SIMILAR CIRCUMSTANCES, DIRECTED THE AO TO ESTIMATE 12.5% PROFIT ON ALLEGED BOGUS PURCHASES OF CAPITAL GOODS AND BALANCE SHALL BE TAKEN TO CAPITAL ACCOUNT AND ACCORDINGLY D EPRECIATION SHALL BE ALLOWED ON THE ASSETS AT THE PRESCRIBED RATES. 11. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATE RIAL ON RECORD, WE FIND THAT ALTHOUGH THE ASSESSEE HAS TAKEN A SPECIFI C GROUND ON THE ISSUES OF ADDITION TOWARDS CAPITAL GOODS VIDE GROUN D NO.4, THE ITAT HAS INADVERTENTLY OMITTED TO GIVE ITS FINDINGS. THEREFO RE, WE ARE OF THE CONSIDERED VIEW THAT THERE IS ERROR IN SO FAR AS NO N CONSIDERATION OF GROUND NO. 4 AND ACCORDINGLY, WE DECIDE THE ISSUE A S UNDER. 14 MAS 422, 423 & 424/MUM/2018 12. WE HAVE HEARD BOTH THE SIDES AND CONSIDERED MAT ERIALS ON RECORD. WE FIND THAT THE ITAT, MUMBAI BENCH IN THE CASE OF NEW CONSOLIDATED CONSTRUCTION CO LTD VS DCIT (SUPRA) HAS CONSIDERED SIMILAR ISSUE AND HELD THAT FINDINGS GIVEN IN RESPECT OF PURCHASES OF RAW MATERIALS SHALL APPLY TO PURCHASES OF CAPITAL GOODS IN CASE OF ALLE GED BOGUS PURCHASES AND ACCORDINGLY DIRECT THE AO TO ESTIMATE 12.5% PRO FIT ON ALLEGED BOGUS PURCHASES OF CAPITAL GOODS AND BALANCE AMOUNT SHALL BE TREATED AS CAPITAL ASSET AND DEPRECIATION SHALL BE ALLOWED AT THE PRESCRIBED RATES. FACTS OF THE PRESENT CASE ARE IDENTICAL TO THE FACT S WHICH HAVE BEEN ALREADY CONSIDERED BY THE ITAT IN THE CASE OF NEW C ONSOLIDATED CONSTRUCTION CO LTD, EXCEPT TO THE EXTENT OF RATE O F NET PROFIT. IN THE PRESENT CASE WE HAVE DIRECTED THE AO TO ESTIMATE NE T PROFIT OF 30% ON ALLEGED BOGUS PURCHASES. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THIS CASE AND CONSISTENT WITH THE VIEW TAKEN BY THE CO- ORDINATE BENCH, WE DIRECT THE AO TO ESTIMATE 30% PR OFIT ON ALLEGED BOGUS PURCHASE OF CAPITAL GOODS AND THE BALANCE AMO UNT SHALL BE TREATED AS PURCHASE OF CAPITAL ASSETS AND ACCORDING LY, DEPRECIATION SHALL BE ALLOWED AT THE PRESCRIBED RATES ON CAPITALIZED P ORTION. 13. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E FOR AYS 2010-11 TO 2012-13 ARE PARTLY ALLOWED. 15 MAS 422, 423 & 424/MUM/2018 14. IN THE RESULT, MISCELLANEOUS APPLICATIONS FILED BY THE ASSESSEE FOR ALL THE THREE ASSESSMENT YEARS ARE ALLOWED IN TERMS OF OUR DISCUSSION HEREINABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH OCTOBER, 2018. SD/- SD/- (G. MANJUNATHA) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DT : 17 TH OCTOBER, 2018 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER SR.PS, ITAT, MUMBAI 16 MAS 422, 423 & 424/MUM/2018 DATE INITIAL 1. DRAFT DICTATED ON 12-10 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 15-10 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 5. APPROVED DRAFT COMES TO THE SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 7. FILE SENT TO THE BENCH CLERK 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. 11. DRAFT DICTATION SHEETS ARE ATTACHED SR.PS