CLESTRA LIFE SCIENCES P.LTD,MUMBAI vs. ACIT CEN CIR 40, MUMBAI

PER PAWAN SINGH, JUDICIAL MEMBER;

1. (a) The learned Commissioner of Income Tax (Appeals) - 38, Mumbai [CIT(A)] erred in upholding the reopening of the assessment u/s.147 and thereby holding that the order u/s.143(3) r.w.s.147 passed by the Assessing Officer is valid. Your appellant submits that under the facts and in the circumstances of the appellant's case the CIT(A) ought to have held that reopening of the assessment is bad-in-law, illegal and the order u/s.143(3) r. w.s.14 7 ought to be quashed. (b) The learned CIT(A) erred in holding that the Assessing Officer had sufficient ground to form an opinion that there was a reason to believe that income had escaped assessment and thereby upholding the validity of reopening the assessment u/s.147 of the Act.

Mum 2014-M/s Clestra Life Sciences Pvt. Ltd.

Your appellant submits that under the facts and in the circumstances of the appellant's case the order u/s.143(3) r.w.s.147 is void, illegal, bad-in-law and the same ought to be cancelled as the facts relevant for assessment were fully & truly disclosed in the assessment proceedings u/s.143(3). 2. (a) The learned CIT(A) erred in confirming the action of the Assessing Officer making addition of Rs.28,77,784 to the total income of the appellant on account of sales made by the appellant to M/s. Genom Biotech Pvt. Ltd. being treated as bogus sales by the Assessing Officer. Your appellant submits that under the facts and in the circumstances of the appellant's case the learned CIT(A) ought to have deleted the addition of Rs.28,77,784 by accepting the sales as genuine. (b) The learned CIT(A) erred in concluding that the credit of Rs.28,77,784 in the books of the appellant being so-called bogus sales ought to be treated as unexplained cash credit u/s.68 of the Income Tax Act as the appellant's claim of sales being genuine is rejected and thereby the addition of Rs.28,77,784 ought to be confirmed. Your appellant submits that under the facts and in the circumstances of the appellant's case the provisions of section 68 are not applicable and sum credited to the books of account ought to have accepted as proceeds of sale made to M/s. Genom Biotech Pvt. Ltd.

The ld. AR of the assessee further submits that on the grounds of appeal filed by M/s Genom Biotech Pvt. Ltd. related to disallowance of purchase for the same Assessment Year held that addition has been made on the basis of report furnished by Special Auditor. The Special Auditor has expressed in opinion about the inadequacy of the evidence and deleted the addition relating to the said purchases. The ld. AR of the assessee further Mum 2014-M/s Clestra Life Sciences Pvt. Ltd. submits that the essential ingredients for making the addition under section 68 is lacking. On the other hand, the ld. DR for the Revenue relied upon the order of ld. CIT(A).

5. We have considered the rival submission of the parties and have gone through the orders of authorities below. The Assessing Officer made the addition on his observation that the assessee has not filed any documentary evidence viz. delivery challan, Lorry receipt and treated the transaction with sister concern/related parties as bogus sale. The ld. CIT(A) substituted the addition and treated the same under section 68 of the Act. The ld. CIT(A) while substituting the addition concluded that in the books of assessee a sum of Rs. 28,77,784/- is credited at sales made to M/s Genom Biotech Pvt. Ltd. and the sum credited was not considered as genuine sale to M/s Genom Biotech Pvt. Ltd., the only recourse left for Assessing Officer was to treat the credit of Rs. 28,77,784/- as cash credit under section 68 of the Act being unexplained credit. We have noted that the addition in the hand of M/s Genom Biotech Pvt. Ltd. is deleted by Co- ordinate Bench holding that assessment for Assessment Years 2003-04 to 2006-07 were under the category of unabated assessment (completed assessment) and the addition can be made in those year on the basis of incriminating material found during the course of search. The additions were made on (M/s Genom Biotech Pvt. Ltd.) the basis of report of Special Auditor. The report of Special Auditor was not based on any incriminating ITA No. 7491 Mum 2014-M/s Clestra Life Sciences Pvt. Ltd. material found during the search; therefore, the additions were deleted being beyond the scope of provision of section 153A of the Act.

6. We have noted that the ld. CIT(A) substituted the addition of bogus sale to addition under section 68 of the Act. In our view, no addition under section 68 is warranted on the facts of the present case. The present case relates to the sale of goods to sister concern/group concern, wherein identity of purchaser is not disputed. Moreover, this is not a case of unexplained cash credit in the books of assessee nor the fact remains unexplained by the assessee. The assessee claimed sale of Rs. 28,77,784/- to its sister concern, which cannot be by any stretch of imagination can be treated as cash credit at the hand of assessee. In our view, the ld. CIT(A) misconceived by substituting the addition of alleged bogus sale to addition under section 68 of the Act. Hence, the Ground no.2 of appeal raised by assessee is allowed.

Order pronounced in the open court on 26/09/2018.