ACIT 24(1), MUMBAI v. T M THAKORE PHARMACEUTICALS, MUMBAI

ITA 3863/MUM/2011 | 2008-2009
Pronouncement Date: 30-03-2012 | Result: Allowed

Appeal Details

RSA Number 386319914 RSA 2011
Assessee PAN AAAFT0662R
Bench Mumbai
Appeal Number ITA 3863/MUM/2011
Duration Of Justice 10 month(s) 19 day(s)
Appellant ACIT 24(1), MUMBAI
Respondent T M THAKORE PHARMACEUTICALS, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2012
Appeal Filed By Department
Order Result Allowed
Bench Allotted E
Tribunal Order Date 30-03-2012
Assessment Year 2008-2009
Appeal Filed On 11-05-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI BEFORE SHIRI P.M. JAGTAP ACCOUTANT MEMBER AND SHRI AMIT SHUKLA JUDICIAL MEMBER ITA NO. : 3863/MUM/2011 ASSESSMENT YEAR : 2008-09 A.C.I.T. 24(1) MUMBAI VS. M/S. T M THAKORE PHARMACEUTICAL LABORATORIES 15-A PREMSONS INDL. ESTATE CAVES RD. JOGESHWARI (E) MUMBAI-400 060 PAN NO: AAAFT 0662 R (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PAVAN VED RESPONDENT BY : SHRI RAJESH B. GUPTA DATE OF HEARING : 12.03.2012 DATE OF PRON OUNCEMENT : 30 .03.2012 ORDER PER AMIT SHUKLA (J.M.) : THE PRESENT APPEAL HAS BEEN FILED BY THE DEPARTMEN T AGAINST ORDER DATED 09.03.2011 PASSED BY THE LEARNED CIT(APPEALS) -34 MUMBAI FOR THE QUANTUM OF ASSESSMENT FOR THE ASSESSMENT YEAR 2008- 09 ON THE FOLLOWING GROUNDS OF APPEALS :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF `. 3 65 09 643/- MADE BY THE AO U/S.41(1) AS CESSATION OF LIABILITY BY IGNORING THE FACT OF THE CASE THAT THE ASSESSEE HAD FAILED TO DISCHARGE HIS PRIMARY ONUS OF PROVING THE EXISTENCE AND GENUINENESS OF CREDITORS. ITA NO : 3863/MUM/2011 M/S. T M THAKORE PHARMACEUTICALS LABORATORIES 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AN DIN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE DISAL LOWANCE OF `. 82 39 109/- ON ACCOUNT OF COMMISSION PAID TO M/S. E MERALD ALCHYMICUS PVT. LTD. BY IGNORING THE FACT THAT MERE LY DEDUCTING OF TDS AND SERVICE TAX DOES NOT PROVE THAT THE SERV ICES ARE ACTUALLY RENDERED. 3. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFI CER BE RESTORED. 2. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN TH E BUSINESS OF PHARMACEUTICALS DRUGS AND TABLETS. IN THE COURSE O F SCRUTINY PROCEEDINGS THE ASSESSING OFFICER TOOK NOTE OF THE FACT THAT IN THE BALANCE SHEET THE LIABILITY UNDER THE HEAD SUNDRY CREDITO RS WAS SHOWN AT A HUGE AMOUNT OF `. 7.12 CRORES ON A TURNOVER OF `. 10 CRORES AND BESIDES THIS THERE WAS AN EXPENSES OF BROKERAGE AND COMMIS SION OF `. 1.01 CRORES DEBITED TO THE PROFIT AND LOSS ACCOUNT. THIS PRIMA FACIE ACCORDING TO HIM WAS EXCESSIVE. ACCORDINGLY HE ISSUED NOTICE U/S.142(1 ) CALLING FOR DETAILS OF SUNDRY CREDITORS COMMISSION AND BROKERAGE EXPEN SES AND VARIOUS OTHER EXPENSES. THE CONTENTS OF THE SHOW CAUSE NOT ICE HAVE BEEN REPRODUCED IN PARA 3.2 OF THE ASSESSMENT ORDER. FR OM THE PERUSAL OF THE ASSESSMENT ORDER IT IS EVIDENT THAT WITH REGARD TO THE DETAILS OF SUNDRY CREDITORS AND JUSTIFICATION FOR PAYMENT OF COMMISSI ON DESPITE REPEATED OPPORTUNITIES THE ASSESSEE DID NOT FURNISHED ANY D ETAILS OR THE BOOKS OF ACCOUNTS. THE ASSESSEE ON VARIOUS OCCASIONS WAS RE QUIRED BY THE ASSESSING OFFICER TO FURNISH THE BOOKS OF ACCOUNTS LEDGER ACCOUNT FOR THE LAST THREE YEARS GIVING DETAILS OF BALANCES OF CRED ITORS SALES COMMISSION VIS A VIS SALES AFFECTED NAME AND ADDRESSES OF THE PARTIES. HOWEVER THE SAME WERE NOT FURNISHED. FINDING TO THIS EFFECT HAV E BEEN GIVEN IN THE ASSESSMENT ORDER FROM IN PARA 3.5 TO PARA 4.3. HAV ING LEFT WITH NO ALTERNATIVE THE ASSESSING OFFICER ADDED THE AMOUNT OF `. 3 65 09 585/- SHOWN UNDER THE HEAD LIABILITY (SUNDRY CREDITORS) U /S.41(1). AS REGARDS ITA NO : 3863/MUM/2011 M/S. T M THAKORE PHARMACEUTICALS LABORATORIES 3 THE BROKERAGE PAID TO M/S. EMERALD ALCHYMICUS PVT. LTD NOTICE U/S.133(6) REMAINED UNCOMPLIED WITH AND BESIDES N O COPY OF ACCOUNT OR CONFIRMATION WAS FILED. ACCORDINGLY HE ADDED THE SUM OF `. 83 89 109/- ALSO ON THE GROUND THAT THE ONUS OF PROOF COULD NOT BE DISCHARGED BY THE ASSESSEE. 3. IN THE FIRST APPEAL THE ASSESSEE FILED A DETAIL ED PAPER BOOK GIVING THE DETAILS OF SUNDRY CREDITORS AND IN SUPPORT BIL LS ALONG WITH THE DELIVERY CHALLAN FOR SUBSEQUENT SALE LEDGER ACCOUNT WERE FI LED. REGARDING PAYMENT OF BROKERAGE AND COMMISSION CONFIRMATION A LONG WITH THE DEBIT NOTE AND SALE INVOICE OF THE BROKER M/S. EMERALD A LCHYMICUS PVT. LTD WAS ALSO FILED. RELYING ON THESE DETAILS THE CIT( APPEALS) DELETED THE ADDITIONS AFTER OBSERVING AND HOLDING AS UNDER :- 2.3 I HAVE GONE THROUGH THE CONTENTS OF THE IMPUG NED ASSESSMENT ORDER AS WELL AS ARGUMENTS & SUBMISSIONS OF THE LD. COUNSEL OF THE APPELLANT ALONG WITH THE MATERIA L AVAILABLE ON RECORD. I FIND THAT THERE IS NO DISPUTE THAT THE TURNOVER OF THE FIRM IS `. 10 08 70 381/- AND GROSS PROFIT IS DISCLOSED @ 31.11%. THERE IS NO FURTHER DISPUTE THAT THE FOLLOW ING CREDITORS OUTSTANDING TO THE TUNE OF `. 3 65 09 643/- ARE THE PURCHASE/TRADE CREDITORS AND NO FRESH PURCHASES ARE MADE FROM THESE PARTIES DURING THE YEAR AND AS SUCH NO P AYMENTS ARE MADE IN THE INSTANT YEAR TO THESE PARTIES: S. NO. NAME OF CREDITORS AMOUNT 1 M/S. PHARMA SALES AGENCIES `. 28 20 033/- 2 M/S. CHEM PHARM CORPORATION `. 87 85 630/- 3 M/S. AERORNA DRUG SALES CORPORATION `. 79 38 953/- 4 M/S. MANORAMA AGENCIES `. 38 86 316/- 5 M/S. PHARMALINK DISTRIBUTORS `. 130 98 643/- 2.4 THE ASSESSING OFFICER HAS MADE IMPUGNED ADDITI ON OF `. 3 65 09 643/- FOR THE ABOVE CREDITORS SIMPLY BECAUS E THE DETAILS OF THESE PARTIES SUCH AS ADDRESSES OF THESE PARTIES &PAN ETC. COULD NOT BE FURNISHED BY THE APPELLANT D URING THE COURSE OF ASSESSMENT PROCEEDINGS. I FIND THAT SINCE THESE CREDITORS DO NOT PERTAIN FOR THE CURRENT CREDITS N O ADDITION ITA NO : 3863/MUM/2011 M/S. T M THAKORE PHARMACEUTICALS LABORATORIES 4 COULD HAVE BEEN MADE U/S 68 OF THE IT. ACT. HOWEVER THE ASSESSING OFFICER MADE THE IMPUGNED ADDITION U/S 41 (1) OF THE I.T. ACT 1961 WHICH IS TOTALLY UNJUSTIFIED IN THE FACTS & CIRCUMSTANCES OF THE INSTANT CASE. CESSATION OF LIA BILITY IS NOT AN UNILATERAL ACT. THERE IS NO ADVERSE MATERIAL AVA ILABLE ON RECORD TO SUGGEST THAT ANY OF THE CREDITORS HAS DEN OUNCED HIS RIGHT TO RECEIVE THE IMPUGNED AMOUNT DUE FROM THE A PPELLANT. NEITHER THE APPELLANT HAS WRITTEN BACK THESE AMOUNT S IN THE P & L ACCOUNT TREATING IT THE LIABILITY NOT PAYABLE A NY MORE. IN THE CASE OF CIT V. T.V.S.SUNDERAM IYENGAR 222 ITR 344 (SC) THE TRADE LIABILITIES WERE WRITTEN BACK BY THE AS SESSEE IN THE P & L ACCOUNT AND THAT IS HOW THE HONBLE SUPRE ME COURT HELD THE SAME TO BE TAXABLE WHEREAS IN THE INSTANT CASE NO SUCH ACTION HAS BEEN TAKEN BY THE APPELLANT. RATHER THE PART PAYMENTS ARE MADE BY APPELLANT IN SUBSEQUENT YEARS. THUS BY NO STRETCH OF IMAGINATION THE IMPUGNED LIABILIT IES CAN BE TREATED TO HAVE BEEN CEASED WITHIN THE MEANING OF S EC.41(1) OF THE I.T. ACT. HENCE I FIND FORCE IN THE ARGUMENTS & SUBMISSIONS OF THE LD. COUNSEL THAT NO ADDITION COULD HAVE BEEN MADE U/S 41(1) OF THE L.T. ACT 1961 IN THE CASE OF THE APPEL LANT. ACCORDINGLY THE SAME DELETED IN THE FACTS & CIRCUM STANCES OF THE INSTANT CASE. 3.3 I HAVE GONE THROUGH THE CONTENTS OF THE IMPUGN ED ASSESSMENT ORDER AS WELL AS ARGUMENTS & SUBMISSIONS OF THE LD. COUNSEL OF THE APPELLANT ALONG WITH THE MATERIA L AVAILABLE ON RECORD. I FIND FORCE IN THE ARGUMENTS & SUBMISSI ONS OF THE LD. COUNSEL AS FAR AS THE DISALLOWANCE OF `. 82 39 109/- IS CONCERNED. SINCE THE APPELLANT HAD DEDUCTED TAX AT SOURCE ON THE SAID COMMISSION PAID TO M/S. EMERALD ALCHAYMICU S PVT. LTD. THE ASSESSING OFFICER COULD HAVE VERIFIED FRO M THE CONCERNED ASSESSING OFFICER AS TO WHETHER THE SAID PARTY HAS DISCLOSED THE AMOUNT OF `. 82 39 109/- AS THEIR INCOME AND GOT CREDIT OF THE IMPUGNED TDS OR NOT. IF NOT THIS THE N ATLEAST THE ASSESSING OFFICER COULD HAVE INTIMATED THE CONCERNE D ASSESSING OFFICER ABOUT THIS COMMISSION TO BE TAKEN CARE OF IN THE HANDS OF M/S. EMERALD ALCHAYMICUS PVT. LTD. IN CASE HE HAD SERIOUS DOUBTS ABOUT IT. NEVERTHELESS THIS AMOU NT CANNOT BE SAID TO HAVE NOT BEEN INCURRED WHOLLY & EXCLUSIV ELY FOR THE BUSINESS PURPOSES DURING THE YEAR IN VIEW OF THE FA CTS & CIRCUMSTANCES AVAILABLE ON RECORD. HENCE I DO NOT F IND ANY JUSTIFICATION IN MAKING THE ADDITION TO THE TUNE OF `. 82 39 109/- BY WAY DISALLOWING THE AMOUNT PAID TO M/S. EMERALD ITA NO : 3863/MUM/2011 M/S. T M THAKORE PHARMACEUTICALS LABORATORIES 5 ALCHAYMICUS PVT. LTD. ON WHICH TDS ALONG WITH SERVI CE TAX IS MADE AND PAID TO THE RESPECTIVE DEPARTMENTS. ACCORD INGLY THE SAME DELETED IN VIEW OF THE FACTS & CIRCUMSTANCES O F THE INSTANT CASE. 4. THE LEARNED SR. DR VEHEMENTLY ARGUED THAT THE CI T(APPEALS) HAS ERRED IN NOT GIVING ANY OPPORTUNITY TO THE ASSESSIN G OFFICER DESPITE THE FACT THAT HE HAD GIVEN REPEATED OPPORTUNITIES TO TH E ASSESSEE IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. ALL THE DETA ILS AS HAVE BEEN FILED IN THE PAPER BOOK WERE GIVEN ONLY BEFORE THE CIT(AP PEALS). ON THE ISSUE OF THE BROKERAGE HE SUBMITTED THAT NO PROOF OF WOR K DONE WAS GIVEN AND SIMPLY BECAUSE TDS HAS BEEN DEDUCTED ON THE PAYMENT IT CANNOT BE HELD TO BE GENUINE. HE THUS CONTENTED THAT THE ENTIRE F INDING OF THE CIT(APPEALS) CANNOT BE UPHELD IN VIEW OF THE FACT T HAT DOCUMENTS FURNISHED HAVE NOT BEEN EXAMINED PROPERLY EITHER B Y THE ASSESSING OFFICER OR BY THE CIT(APPEALS) HIMSELF. 5. ON THE CONTRARY THE LEARNED AR ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE COPIES OF LEDGER ACCOUNTS BILLS AND SALES INVOICE WITH REGARD TO THE SUNDRY CREDITORS WERE PRODUCED BEFORE THE CIT(APPEALS) AND HE ALSO TOOK US TO THE VARIOUS DOCUMENTS FURNISHED IN THE PAPER BOOK. RELYING ON THESE DOCUMENTS HE STRONGLY CONTENTED T HAT SECTION 41(1) CANNOT BE APPLIED AS THE LIABILITIES DID NOT CEASED TO EXIST. AS REGARDS TO THE COMMISSION PAID HE SUBMITTED THAT THE ASSESSEE GOT THE CONTRACT ONLY BECAUSE OF THE BROKER WHO HAS PROCURED THE WOR K AND HAS RENDERED SERVICES. HE HEAVILY RELIED UPON THE COPY OF DEBIT NOTE AND THE SALE INVOICE ALONG WITH THE CONFIRMATION OF M/S. EMERAL D ALCHYMICUS PVT. LTD. 6. WE HAVE CAREFULLY HEARD THE CONTENTIONS OF THE R IVAL PARTIES AND ALSO GONE THROUGH THE ORDERS OF THE ASSESSING OFFICER AS WELL AS CIT(APPEALS). FROM THE CERTIFICATE GIVEN IN THE PAPER BOOK IT IS SEEN THAT ALL THE DOCUMENTS WERE FURNISHED ONLY BEFORE THE CIT(APPEAL S). DESPITE REPEATED ITA NO : 3863/MUM/2011 M/S. T M THAKORE PHARMACEUTICALS LABORATORIES 6 NOTICES AND OPPORTUNITIES GIVEN BY THE ASSESSING OF FICER THE ASSESSEE HAS FAILED TO PRODUCE THE RELEVANT DOCUMENTS AND EVIDEN CES IN SUPPORT OF ITS CASE AND EVEN FAILED TO RESPOND TO THE SHOW CAUSE N OTICE GIVEN BY THE ASSESSING OFFICER. NO PRIMA FACIE REASON HAS BEEN GIVEN AS TO WHY THESE DOCUMENTS WHICH HAVE A VERY VITAL BEARING ON THE IS SUES INVOLVED WERE NOT FILED BEFORE THE ASSESSING OFFICER. EVEN THE C IT(APPEALS) HAS NOT CONFRONTED THESE DOCUMENT TO THE ASSESSING OFFICER. THOUGH FROM A PERUSAL OF THE FINDING GIVEN BY THE CIT(APPEALS) IT APPEARS PRIMA FACIE THAT THE PROVISIONS OF SECTION 41(1) WILL NOT BE APPLICA BLE. HOWEVER THE ONUS LIES UPON THE ASSESSEE TO SHOW THAT THE SUNDRY CRED ITORS ARE COMING FROM THE EARLIER YEARS AND THE LIABILITY HAS NOT CEASED TO EXIST AND ARE ACTUALLY GENUINE LIABILITIES. EVEN FOR THE PAYMENT OF BROKE RAGE AND COMMISSION IT IS NOT CLEAR UNDER WHAT AGREEMENT THE COMMISSION WA S PAID TO THE BROKER AND WHAT WAS THE PERCENTAGE OF COMMISSION VIS A VIS SALES AFFECTED. DEDUCTING OF TDS SHOWS THAT THE PAYMENT HAS BEEN MA DE TO THE SAID PARTY AND THE GENUINENESS OF THE PAYMENT CANNOT BE DOUBTED BUT AT THE SAME TIME THE ONUS IS ON THE ASSESSEE TO DEMONSTR ATE THAT THE PAYMENT WAS FOR BUSINESS PURPOSES AND WAS IN LIEU OF SERVIC ES RENDERED OR WORK PERFORMED BY THE BROKERS IN OBTAINING THE CONTRACT WORK AND SALES AFFECTED THEREON. IN THIS CASE NO SUCH DOCUMENTS WERE FURNISHED BEFORE THE ASSESSING OFFICER WHO COULD HAVE MADE PROPER EN QUIRY FROM THE SAID PARTY SPECIFICALLY WHEN NOTICE U/S.133(6) REMAINED UNSERVED. 6.1 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES T HE ENTIRE MATTER NEEDS TO BE RESTORED BACK TO THE FILE OF THE ASSESS ING OFFICER WHO WILL DECIDE THE ISSUES AFRESH AFTER EXAMINING ALL THE DO CUMENTS THAT WERE FURNISHED BEFORE THE CIT(APPEALS) AND VERIFY THE CL AIM AND THE CONTENTIONS OF THE APPELLANT. HE MAY ALSO CARRY OU T NECESSARY ENQUIRY AS MAY BE DEEMED FIT. NEEDLESS TO SAY THAT THE ASSESS ING OFFICER WILL PROVIDE ITA NO : 3863/MUM/2011 M/S. T M THAKORE PHARMACEUTICALS LABORATORIES 7 PROPER AND SUFFICIENT OPPORTUNITY TO THE ASSESSEE W HILE DECIDING THE ISSUES WHICH ARE SUBJECT MATTER OF APPEAL BEFORE U S. 7. IN THE RESULT THE APPEAL FILED BY THE DEPARTMEN T IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 30 TH DAY OF MARCH 2012. SD/- SD/- ( P. M. JAGTAP ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DT: 30.03.2012 COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T. 4. CIT (A) 5. THE DR E - BENCH ITAT MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI ROSHANI