MEDICO REMEDIES P.LTD,MUMBAI vs. DCIT 8(2), MUMBAI

20. Lacs i.e. Rs.10 Lacs each from M/s Buniyad Chemicals Ltd. & M/s Talent Infoways Ltd. during impugned AY which escaped assessment. Accordingly, notice u/s 148 dated 02/03/2012 was issued to the assessee. 2.2 The assessee vide reply dated 14/03/2012 requested for copy of reasons recorded for reopening of the assessment and stated that it had already filed return of income on or before due date and there was nothing further to declare. The assessee was asked to file the return u/s 148 and Medico Remedies Pvt. Ltd. also provided with copy of reasons recorded for reopening of the assessment vide letter dated 02/07/2012. At the same time, the assessee was also requested to furnish the details of Share Application money and demonstrate genuineness and creditworthiness of the transactions with bank statements. No response could be received from the assessee until its letter dated 15/03/2013 wherein the assessee submitted that the original return filed earlier should be treated as return u/s 148. Accordingly, notice u/s 143(2) was issued to the assessee on 20/03/2013 for compliance. 2.3 The search proceedings revealed that Shri Mukesh Choksi had floated more than 36 companies and no genuine business was being carried on by any of these entities including aforesaid two entities and they all were engaged in issuing bogus bills as well as Share Application Money in return for cash. The statement of Shri Mukesh Choksi as recorded during search proceedings was also perused, wherein it transpired that the two companies existed on paper only and their business was to provide accommodation entries to other concerns / companies seeking it. Further, these companies were getting certain commission in respect of bogus entries provided to the other concerns. It was further stated by Shri Mukesh Choksi that the companies seeking accommodation entries used to deposit cash in these companies and later on cheques were issued in favor of the respective companies. 2.4 Although the assessee defended the transactions by submitting that the transactions were through banking channels and in support, submitted confirmation from these two parties, however, not convinced, Ld. AO opined that the assessee failed to substantiate source, genuineness and Medico Remedies Pvt. Ltd. creditworthiness of the stated transactions. Accordingly, the same was treated as unaccounted money of the assessee and added to the income as unexplained cash credit u/s 68.

The Ld. Authorized Representative for Assessee [AR], Shri Sanjay Parikh, at the outset, submitted that the additions have been made merely on the basis of third-party statements which have not been confronted to the assessee and no opportunity to cross-examine the concerned persons have been provided by Ld. AO which was in violation of principle of natural justice and therefore, the additions could not be sustained in terms of judgment of Hon’ble Apex Court rendered in M/s Andaman Timber Industries [Civil Appeal No. 4228 of 2006 dated 02/09/2015] & various other judgments as placed on record. The reassessment proceedings have been contested by submitting that the same has been triggered by Ld. AO on borrowed satisfaction. On merits, our attention has been drawn Medico Remedies Pvt. Ltd. to the documents placed in the paper-book to submit that the primary ingredients of Section 68 have been satisfied by the assessee. Per Contra, Ld. Departmental representative [DR], submitted that the assessee has received bogus share application money from the tainted parties which justifies the impugned additions. 5.1 We have carefully considered the rival submissions and perused relevant material on record including reasons recorded by Ld. AO to reopen the assessment. So far as the validity of reassessment proceedings is concerned, we find that the original return was processed u/s 143(1) and there was no occasion for Ld. AO to examine the impugned transactions therein. Subsequently, some tangible material in the shape of information from investigation wing of the department came into the possession of Ld. AO. After perusal of the said information, it was found that numerous entities floated by Shri Mukesh Choksi & group were engaged in providing bogus entries of varied nature. It was noted that the assessee obtained accommodation entries in the form of Share Application Money aggregating to Rs.20 Lacs from two concerns and therefore, there was an escapement of income. Applying the provisions of Explanation 2(b) to Section 147, the case was reopened by issuance of notice u/s 148 dated 02/03/2012. 5.2 After careful perusal of the above, we find that Ld. AO, after considering the new information & with due application of mind, came to a conclusion that there was escapement of certain income in the hands of the assessee and it was not a case of mere borrowed satisfaction. The reassessment proceedings have been initiated in terms of Explanation 2(b) to Section 147. At this stage, in our opinion, nothing more was Medico Remedies Pvt. Ltd. required to trigger the reassessment proceedings since the material received by Ld. AO in the shape of information, prima-facie, indicated possible escapement of income in the hands of the assessee. Therefore, we decline to concur with Ld. AR’s submissions in this regard.

The Ld. AR has also contended that the opportunity of cross- examination was not provided to the assessee and adverse material was never confronted to the assessee. However, a perusal of the assessment order reveal that the assessee failed to respond to reassessment proceedings which got triggered on 02/03/2012, until 12/03/2013 i.e. towards fag end of time limit for completion of assessment, wherein the assessee, for the first time vide letter dated 15/03/2013, submitted that the original return filed be treated as a return in response to notice u/s 148. This was only after multiple notices issued by Ld. AO from time to time requesting assessee to furnish the requisite details. Further, the material on record reveal that the assessee has requested for such examination vide its letter dated 06/05/2014 i.e. much after the completion of the assessment and therefore, no cognizance of the same could be taken by Ld. AO at that time. Another important point to be noted is that Ld. CIT(A), at para 1.3.12, has made certain observation about cross-examination of Shri Mukesh Choksi on 11/03/2013, which prima-facie, do not seem to be factually correct. Nevertheless, the overall conduct of the assessee do not inspire us to accept these contentions, at this stage.

Proceeding further, so far as the merits of the case are concerned, the Ld. AR has submitted that the assessee has demonstrated the fulfilment of primary ingredients of Section 68 and therefore the additions were not justified. Keeping in view the fact that the assessment was Medico Remedies Pvt. Ltd. completed on 22/03/2013 whereas the first submissions were made by the assessee only on 15/03/2013 which suggest that the assessment was completed in a very short time, we deem it fit to restore the matter, on merits, back to the file of Ld. AO for re-appreciation of the evidences being filed by the assessee in support of the transactions. The assessee, in turn, is directed to substantiate his stand in this regard failing which Ld. AO shall be at liberty to adjudicate the same on the basis of material on record.

In nutshell, ground no.1 stands dismissed whereas ground No. 2 stands allowed for statistical purposes.

The appeal stands partly allowed for statistical purposes in terms of our above order. Order pronounced in the open court on 19th March, 2019.