SATYAN PHARMACEUTICALS P.LTD, MUMBAI v. ITO 8(3)(1), MUMBAI

ITA 6318/MUM/2012 | 2005-2006
Pronouncement Date: 19-10-2016

Appeal Details

RSA Number 631819914 RSA 2012
Assessee PAN AADCS4917N
Bench Mumbai
Appeal Number ITA 6318/MUM/2012
Duration Of Justice 4 year(s) 4 day(s)
Appellant SATYAN PHARMACEUTICALS P.LTD, MUMBAI
Respondent ITO 8(3)(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 19-10-2016
Appeal Filed By Assessee
Bench Allotted D
Tribunal Order Date 19-10-2016
Date Of Final Hearing 23-02-2015
Next Hearing Date 23-02-2015
Assessment Year 2005-2006
Appeal Filed On 15-10-2012
Judgment Text
D IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D MUMBAI BEFORE SHRI SANJAY GARG JUDICIAL MEMBER AND SHRI ASHWANI TANEJA ACCOUNTANT MEMBER ITA NO.6319/MUM/2012 ASSESSMENT YEAR: 2005-06 & ITA NO.4345/MUM/2013 ASSESSMENT YEAR: 2005-06 M/S. REGENERATIVE MEDICAL SERVICES PVT. LTD. 2 ABC ACME PLAZA 2 ND FLOOR HEMUKALANI ROAD NO.4 KANDIVALI WEST MUMBAI-400067 / VS. ITO 8(3) - 1 MUMBAI- ( APPELLANT ) ( REVENUE ) P.A. NO . AADCS4917N ITA NO.6318/MUM/2012 ASSESSMENT YEAR: 2005-06 & ITA NO.4344/MUM/2013 ASSESSMENT YEAR: 2005-06 M/S. SATYAN PHARMACEUTICALS P. LTD. 2 ABC ACME PLAZA 2 ND FLOOR HEMUKALANI ROAD NO.4 KANDIVALI WEST MUMBAI-400067 / VS. ITO 8(3) - 1 MUMBAI- (APPELLANT ) (REVENUE) P.A. NO . AAGCS9818R SATYAM MEDICAL S. P. LTD. 2 APPELLANT BY SHRI PARESH VAKHARIA (AR) REVENUE BY SHRI B.S. BIST ( SR. DR) ! ' # $% / DATE OF HEARING : 19/10/2016 # $% / DATE OF ORDER: 19/10/2016 / O R D E R PER BENCH: THESE APPEALS INVOLVE COMMON ISSUES THEREFORE THES E WERE HEARD TOGETHER AND BEING DISPOSED BY THIS COMM ON ORDER. 2. DURING THE COURSE OF HEARING ARGUMENTS WERE MADE B Y SHRI PARESH VAKHARIA AUTHORISED REPRESENTATIVE (AR ) ON BEHALF OF THE ASSESSEE AND BY SHRI B.S. BIST DEPAR TMENTAL REPRESENTATIVE (SR. DR) ON BEHALF OF THE REVENUE. WE SHALL FIRST TAKE UP APPEAL IN THE CASE OF REGENE RATIVE MEDICAL SERVICES PVT. LTD. IN ITA NO.6319/MUM/2012: 3. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) DATED 18.07.2012 PASSED AGAINST THE A SSESSMENT ORDER U/S 147 R.W.S. 143(3) OF THE ACT DATED 24.12 .2008 FOR A.Y. 2005-06 ON FOLLOWING GROUNDS: 1.THE LEARNED CIT(A) ERRED IN CONFIRMING ADDITION OF AGGREGATE COMMISSION PAYMENT OF RS.12 00 000 MADE TO M/S. MOIRA STEELS LTD. IN THE COURSE AND FOR THE PURPOSES OF BUSINESS OF YOUR APPELLANT. 1.1 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE DISALLOWANCE OF COMMISSION WAS UNSUSTAINABLE MERELY ON THE BASIS OF STATEMENT OF MR. VIMAL TODI (DIRECTOR OF M/S. MOIRA STEELS LTD.) IN THE COURSE OF SURVEY OF THAT COMPANY IGNORING THE CONTRADICTORY STATEMENT GIVEN BY THE ACCOUNTANT OF THE COMPANY MR. SANDEEP JAIN WHO ON RECORD SATYAM MEDICAL S. P. LTD. 3 HAS BEEN STATED TO BE MORE CONVERSANT WITH DAY TO DAY BUSINESS AFFAIRS. 1.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT STATEMENT MADE UNDER SECTION 133 IN THE COURSE OF SURVEY PROCEEDINGS DOES NOT HAVE EVIDENCE VALUE IN LAW AND HENCE IT COULD NOT HAVE BEEN THE SOLE BASIS OF CONFIRMING DISALLOWANCE OF THE COMMISSION. 1.3 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT TH E COMMISSION PAYMENT WAS A NECESSARY EXPENDITURE OF THE BUSINESS OF YOUR APPELLANT AS PER THE TRADE PRACTICES THE AMOUNTS WERE REASONABLE AND PAID TO UNRELATED PERSON SUCH THAT DISALLOWANCE WAS UNSUSTAINABLE. 1.4 WITHOUT PREJUDICE THE LEARNED CIT(A) FAILED TO APPRECIATE THAT IN THE ABSENCE OF REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT PURSUANT TO SECTION 147 OF THE INCOME TAX ACT THE REASSESSMENT PROCEEDINGS WERE INVALID AND HENCE THE ADDITIONS MA DE WERE UNSUSTAINABLE. 1.5 WITHOUT PREJUDICE THE LEARNED CIT(A) FAILED TO APPRECIATE THAT YOUR APPELLANT CASE WAS PICKED UP FOR REASSESSMENT ARBITRARILY IGNORING THE PRINCI PLES OF EQUALITY IN AS MUCH AS SEVERAL OTHER PARTIES WHO MADE COMMISSION PAYMENTS TO M/S. MOIRA STEELS LTD. WERE NOT SUBJECTED TO THE REASSESSMENT. 2. WITHOUT PREJUDICE YOUR APPELLANT SUBMITS ALTERN ATIVE GROUND OF APPEAL AS FOLLOWS: THE LEARNED CIT(A) FAILED TO APPRECIATE THAT EVEN I F IT IS ASSUMED THAT M/S. MOIRA STEELS LTD. WERE NOT THE BENEFICIARY OF THE COMMISSION PAYMENT NEVERTHELESS IN THE ABSENCE OF ANY EVIDENCE THAT THE EXPENDITURE WAS REVERSED BY COMPENSATORY PAYMENT IN FAVOR OF YOUR APPELLANT AND IN ABSENCE OF ANY EVIDENCE THAT EXPENDITURE HAS NOT BEEN INCURRED THE COMMISSION PAYMENT WAS ALLOWABLE AS EXPENDITURE INCURRED IN FAVOR OF UNDISCLOSED RECIPIENT PURSUANT TO TRADE PRACTICE. 4. IN THIS CASE THE BRIEF BACKGROUND IS THAT THE CASE WAS REOPENED AFTER RECORDING THE REASONS ON THE BASIS O F STATEMENT RECORDED DURING THE SURVEY U/S 133A OF SH RI VIMAL SATYAM MEDICAL S. P. LTD. 4 TODI DIRECTOR OF M/S. MOIRA STEELS LTD. WHEREIN H E ALLEGEDLY STATED THAT NO SERVICES WERE RENDERED BY HIM AND TH US COMMISSION PAID BY THE ASSESSEE COMPANY TO THE SAID COMPANY WAS BOGUS. IN THE REASSESSMENT ORDER PASSED BY THE AO IMPUGNED COMMISSION OF RS. 12 LACS WAS DISALLOW ED AND THIS DISALLOWANCE WAS CONFIRMED BY LD. CIT(A) IN TH E FIRST APPEAL. 4.1. DURING THE COURSE OF HEARING BEFORE US LD. COUNSE L VEHEMENTLY SUBMITTED THAT IN THIS CASE THE ASSESSME NT ORDER IS BAD IN LAW IN AS MUCH AS IT HAS BEEN PASSED BY T HE AO WITHOUT ASSUMING JURISDICTION AS PER LAW AND IN VIO LATION OF PRINCIPLES OF NATURAL JUSTICE. IT WAS SUBMITTED THA T STATEMENT OF MR. VIMAL TODI DATED 20 TH FEBRUARY 2007 HAS NEVER BEEN PROVIDED BY THE ASSESSEE DESPITE SPECIFIC REQUEST O F THE ASSESSEE. FURTHER THE AO DID NOT PROVIDE CERTIFIED COPY TO THE REASONS NOR INVITED OBJECTION OF THE ASSESSEE. THE ASSESSEE DURING THE COURSE OF REASSESSMENT PROCEEDINGS RAIS ED OBJECTION ABOUT THE ILLEGALITY OF THE REASONS BUT THE AO WITHOUT DISPOSING OF THE OBJECTIONS OF THE ASSESSEE FRAMED THE REASSESSMENT ORDER. 4.2. PER CONTRA LD. DR SUBMITTED THAT COPY OF STATEMEN T OF MR. VIMAL TODI DATED 23.03.2007 HAS BEEN PROVIDED T O THE ASSESSEE. IT WAS FURTHER SUBMITTED NO PROPER OBJECT ION HAS BEEN RAISED BY THE ASSESSEE DURING THE COURSE OF AS SESSMENT PROCEEDINGS. 4.3. WE HAVE GONE THROUGH THE ORDERS PASSED BY THE LOWE R AUTHORITIES AS WELL AS SUBMISSIONS MADE BY BOTH THE SIDES BEFORE US. IT IS NOTED FROM THE PERUSAL OF THE ASSE SSMENT ORDER SATYAM MEDICAL S. P. LTD. 5 THAT REASONS RECORDED BY THE AO HAVE BEEN REPRODUCE D THEREIN. THOUGH THE REASONS WERE STATED TO HAVE BE EN PROVIDED BY AO BY REPRODUCING ITS EXTRACT IN THE LE TTER DATED 05.12.2008 ISSUED BY THE AO BUT VERBATIM CERTIFIED COPY OF THE REASONS RECORDED HAS NOT BEEN PROVIDED BY THE A O TO THE ASSESSEE. IT IS FURTHER NOTED THAT STATEMENT OF MR. VIMAL TODI DATED 20 TH FEBRUARY 2007 WHICH HAS BEEN MENTIONED IN THE REASONS RECORDED HAS NOT BEEN PROVIDED TO THE ASSES SEE. THOUGH ONE STATEMENT OF MR. VIMAL TODI DATED 1 ST MARCH 2007 HAD BEEN PROVIDED BUT THAT SEEMS TO BE DIFFER ENT ONE. IT IS FURTHER NOTED FROM THE PERUSAL OF THE ORDER OF L D. CIT(A) THAT THERE WAS A REFERENCE TO THE STATEMENT DATED 20 TH FEBRUARY 2007 BUT THAT WAS STATED TO HAVE BEEN GIVEN BY ONE SHRI SANDEEP JAIN AND NOT BY SHRI VIMAL TODI. THUS THER E SEEMS TO BE SOME CONFUSION IN THIS REGARD. UNDER THESE CIRCUMSTANCES NEITHER THE ASSESSEE MADE PROPER OBJ ECTIONS BEFORE THE AO NOR THE AO DISPOSED WHATEVER OBJECTIO NS WERE FILED BY THE ASSESSEE IN ACCORDANCE WITH LAW AND F ACTS. THUS TAKING INTO ACCOUNT TOTALITY OF FACTS AND CIRCUMSTA NCES OF THE CASE WE FIND IT APPROPRIATE IN THE INTEREST OF JUS TICE THAT THIS MATTER SHOULD BE SENT BACK TO THE FILE OF THE AO AL ONG WITH ALL THE GROUNDS RAISED BY THE ASSESSEE BEFORE US. THE A O SHALL PROVIDE CERTIFIED COPY OF THE REASONS AND ALSO COPY OF THE STATEMENT WHICH HAS BEEN RELIED UPON BY THE AO IN T HE REASONS RECORDED I.E. STATEMENT OF SHRI VIMAL TODI DATED 20 TH FEBRUARY 2007. THE ASSESSEE SHALL RAISE OBJECTIONS IN WRITING BEFORE THE AO IF SO DESIRED. THE AO SHALL DISPOSE OF THE OBJECTION IN ACCORDANCE WITH LAW AND SHALL FOLLOW T HE SATYAM MEDICAL S. P. LTD. 6 PROCEDURE AS PER MANDATE GIVEN BY THE HONBLE SUPRE ME COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD (2003) 259 ITR 19. THE AO SHALL PROVIDE TO THE ASSE SSEE ENTIRE ADVERSE MATERIAL TO BE USED AGAINST ASSESSEE BY THE AO. THE ASSESSEE SHALL SUBMIT REQUISITE DETAILS AND DOCUMEN TARY EVIDENCES AS MAY BE REQUIRED BY THE AO TIME TO TIME AS PER LAW AND SHALL EXTEND FULL COOPERATION TO THE AO. TH E ASSESSEE SHALL BE FREE TO RAISE ALL LEGAL AND FACTUAL ISSUES BEFORE THE AO WITH REGARD TO JURISDICTIONAL ASPECT OF REOPENING A S WELL AS MERITS OF THE PROPOSED ADDITIONS/DISALLOWANCES. THE AO SHALL GIVE ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSE E BEFORE FRAMING FRESH ASSESSMENT ORDER. THUS WITH THESE DI RECTIONS ALL THE GROUNDS RAISED BY THE ASSESSEE ARE SENT BAC K TO THE FILE OF THE AO. 5. AS A RESULT THIS APPEAL MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. WE SHALL NOW TAKE UP APPEAL IN THE CASE OF REGENERA TIVE MEDICAL SERVICES PVT. LTD. IN ITA NO.4345/MUM/2013: THIS APPEAL HAS BEEN FILED AGAINST THE ORDER OF LD. CIT(A) DATED 22.03.2013 PASSED AGAINST THE PENALTY ORDER O F THE AO U/S 271(1)(C) DATED 20.12.2012 FOR A.Y. 2005-06. 6. IT IS NOTED BY US THAT QUANTUM ORDER OF THE AO HA S BEEN SET ASIDE BY WAY OF OUR ORDER IN ITA NO.6319/MUM/20 12 THEREFORE THE PENALTY ORDER DOES NOT SURVIVE ANY M ORE AS ON DATE. UNDER THESE CIRCUMSTANCES PENALTY ORDER IS S ET ASIDE. THE AO SHALL BE FREE TO INITIATE PENALTY PROCEEDING S AFRESH IF REQUIRED AS PER LAW. SATYAM MEDICAL S. P. LTD. 7 NOW WE SHALL TAKE APPEAL IN THE CASE OF M/S. SATYA N PHARMACEUTICALS PVT. LTD. IN ITA NO.6318/MUM/2012: THIS APPEAL HAS BEEN FILED AGAINST THE ORDER OF LD. CIT(A) DATED 18.07.2012 PASSED AGAINST ASSESSMENT ORDER U/ S 147 R.W.S. 143(3) OF THE ACT DATED 24.12.2008 FOR A.Y. 2005-06. 7. IT IS NOTED THAT GROUND RAISED AND ISSUE INVOLVED IN THIS APPEAL ARE IDENTICAL TO THE APPEAL IN THE CASE OF M /S. REGENERATIVE MEDICAL SERVICES P. LTD. IN ITA NO.6319/MUM/2012. BOTH THE PARTIES AGREED THAT THE FACTS INVOLVED IN THIS APPEAL ARE IDENTICAL TO AFORESAID APPEAL THEREFORE THIS APPEAL ALONG WITH ALL THE GROUNDS A RE SENT BACK TO THE FILE OF THE AO WITH ALL THE DIRECTIONS AS CO NTAINED IN THE AFORESAID APPEAL. THE AO IS DIRECTED TO FOLLOW OUR ORDER AS GIVEN IN ITA NO.6319/MUM/2012. 8. AS A RESULT THIS APPEAL MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. NOW WE SHALL TAKE APPEALS IN THE CASE OF M/S. SATY AN PHARMACEUTICALS PVT. LTD. IN ITA NO.4344/MUM/2013. THIS APPEAL HAS BEEN FILED AGAINST THE ORDER OF LD. CIT(A) DATED 22.03.2013 AGAINST THE PENALTY ORDER OF THE A O U/S 271(1)(C) DATED 20.12.2012. 9. SINCE QUANTUM APPEAL HAS ALREADY BEEN SENT BACK TO THE AO THEREFORE PENALTY ORDER DOES NOT SURVIVE ANY M ORE AS ON DATE. THEREFORE PENALTY ORDER IS SET ASIDE. THE AO SHALL BE FREE TO INITIATE THE PENALTY PROCEEDINGS AFRESH IF AND AS & WHEN REQUIRED AS PER LAW. SATYAM MEDICAL S. P. LTD. 8 10. AS A RESULT THESE APPEALS MAY BE TREATED AS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE CONCL USION OF HEARING. SD/- (SANJAY GARG ) SD/- (ASHWANI TANEJA) ! / JUDICIAL MEMBER ' ! / ACCOUNTANT MEMBER ! ' MUMBAI; ' DATED :19/10/2016 CTX? P.S/. .. #$%&'(')% / COPY OF THE ORDER FORWARDED TO : 1. ) *+ / THE APPELLANT 2. -*+ / THE RESPONDENT. 3. .$ . ! / ( ) ) / THE CIT MUMBAI. 4. .$ . ! / / CIT(A)- MUMBAI 5. 23 45 .$ )% 45$6 ! ' / DR ITAT MUMBAI 6. 7 8 ' / GUARD FILE. / BY ORDER - 2) //TRUE COPY// / (DY./ASSTT. REGISTRAR) ! ' / ITAT MUMBAI