DCIT 2(3)(2), MUMBAI vs. SRS PHARMACEUTICALS P LTD, MUMBAI

order s,dated 7/10/2014 and 16/9/2014,of the CIT (A)-6,Mumbai, the Assessing Officer(AO)has filed the appeals for the above-mentioned AY.s. As the issues involved in all the appeals are identical,so,we are disposing them the same by a single common order.Assessee-company is engaged in the business of supply of avant grade pharmaceuticals.The details of dates of filing of returns, returned incomes,dates of assessment etc. can be summarised as under: AY ROI filed on Returned income Assessment Date Assessed income 2009-10 26/09/2009 Rs.4.11 crores 27/03/2014 Rs.5.18 crores 2010-11 26/09/2010 Rs.6.04 crores 23/03/2013 Rs.7.63 crores 2011-12 26/09/2011 Rs.6.55 crores 27/03/2014 Rs.8.00 crores ITA/825/Mum/2015-AY.2009-10.Brief facts: 2.Effective ground of appeal is about deleting the disallowance under the head bogus purchases,amounting to Rs. 1.07 crores.Initially,the return was processed u/s.143 (1) of the Act.Subsequently,the AO received information from the Investigation Wing that the assessee had obtained bogus bills from hawala dealers/builders without actual purchase of goods. He issued a notice u/s.148 of the Act for reopening the assessment. The reasons recorded by him were supplied to the assessee,against which it raised objections as well as challenged the legality of reopening.The AO vide his order,dated 1/10/2013,disposed off the objections. Thereafter,the AO took up the reassessment proceedings and required the assessee to furnish details and evidence to establish the genuineness of the purchases amounting Rs.1,07, 77, 617/-. After considering the submissions of the assessee, the AO held that the alleged 825-26/M/15(09-10&11-12);7728/M/14(10-11) M/s.SRS Pharmaceuticals Pvt.Ltd.

purchases were not genuine and accordingly assessed the income of the assessee under the normal provisions and the MAT provisions, as indicated in the earlier paragraph. 3.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA) and made elaborate submissions about validity of reopening proceedings and merits of the case.After considering the assessment order and the explanation of the assessee,he upheld the reopening. With regard to addition on account of bogus purchases,he held that the assessee was 100% export oriented pharmaceutical company,that it exported all the products manufactured by it and was not involved in local sales,that the assessee did not have its own factory for Manufacturing units,that the entire production was outsourced to various companies situated all over India, that it entered into separate agreements with third parties for the Manufacture of pharmaceutical products, that the formulations and specifications were provided by the assessee, that the manufacturer affixes the trademark of the assessee on the articles produced, that the no material and packing material for the production was ordered by the assessee, that same was directly delivered to the concerned parties,that the suppliers of the raw material, upon delivery of raw material,would issue invoices and lorries receipts/transport copies, that the manufacturers on receipt of material from suppliers would issue Goods Received Note(GRN),that after the production was complete the Manufacturer would generate Batch Manufacture Record (BMR), that BMR would contain details of raw material and packing material utilising the production of the finished goods, that all the products manufactured were approved by the FDA,that during the year under consideration the assessee had purchased goods worth Rs. 19.67 crores,that out of the total purchase-on the basis of information received from the sales tax Department-the AO had made disallowance about three parties who had supplied goods to the assessee,that it had filed details of copies of purchase bills,Ledger accounts lorries receipts/transportation bills,bank statements, confirmation from the vendors,GRN, details of purchase from the alleged suppliers along with the invoice and transport copies,copies of BMR.s,during the assessment proceedings,that the AO rejected the claim made by the assessee with regard to purchases made from 3 parties,that the quantitative tally produced by the assessee contained purchase order issued by the assessee as well as the invoices of the supplier,that it was also maintaining stock register that was reflected in the tax audit report, that the AO had not doubted the third-party evidences namely the daily which allowance, GRN,BRM and delivery channels issued by the transporters,that he had not found any fault with the quantitative detail supplied by the assessee,that the consumption of raw material 825-26/M/15(09-10&11-12);7728/M/14(10-11) M/s.SRS Pharmaceuticals Pvt.Ltd. purchased by the assessee stood proved,that the payments were made through banking channels,that the invoices supplied by the supplier contained VAT TIN and CST TIN,that the assessee had paid VAT to the suppliers,that he had filed the confirmation from the vendors,that the AO had not made any attempt to find out the details of suppliers on the basis of PAN numbers, that the alleged bogus purchases constituted only 5.48% of the total purchases,that the AO had not doubted the sales, that manufactured goods were dispatched directly by the Manufacturer,that there was no reason to come to the conclusion that purchases had not been actually made,that the alleged bogus purchases disallowed by the AO could not be disallowed u/s.37 merely because the suppliers had not been produced before the AO.He referred to the cases of Nikunj Eximp Enterprises Private Limited. (Income Tax Appeal Number 5604 of 2010, dated 17/12/2012)Babulal C. Borana(282 ITR 251) and Rajeev Kalathil of the Tribunal. Finally, he deleted the disallowance made by the AO. 4.During the course of hearing before us, the Departmental Representative (DR) relied upon the order of the AO. The Authorised Representative (AR) supported the order of the FAA. 5.We have heard the rival submissions and perused the material before us. We find that assessee is a hundred percent export oriented unit, that it was purchasing goods from various parties and was getting the goods manufactured from manufacturers,that it had made the payments through banking channels,that the manufacturers were supplying the goods with the details of raw material consumed and the batch number,that the AO had not doubted the BMR, GRN, delivery challans,issued by the transporters with regard to supply of goods/supply of raw material,that the AO had not pointed out any defect in the quantitative tally maintained by the assessee,that he had not made any enquiry with the suppliers, that payment of VAT by the assessee was also ignored by him, that except relying upon the information supplied by the sales tax Department/investigation wing of the income tax Department the AO has not brought on record any evidence to prove that the purchases made by the assessee were not genuine.The FAA, after considering the relevant material and referring to the case laws,had given a categorical finding of fact that purchases made by the assessee could not be doubted.In our opinion, his order does not suffer from any legal or factual infirmity.So,confirming the same, we decide the effective ground of appeal against the AO. ITA.s/7728/Mum/2014 & 826/Mum/2015, AY.s 2010-11 and 2011-12: The facts of the case for both the years are identical, except for the amount of disallowance made under the head bogus purchases. The AO had made disallowance of Rs. 1.57 crores and 3