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Income Tax Appellate Tribunal, BENCH, NAGPUR
Before: SHRI RAVISH SOOD & SHRI JAMLAPPA D BATTULL
आदेश/ ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee is directed against the order passed by the Pr. Commissioner of Income Tax (Central), Nagpur (for short ‘Pr. CIT’) passed u/s. 263 of the Income- tax Act, 1961 (for short ‘the Act’), dated 27.03.2018, which in turn arises from the order passed by the A.O under Sec. 143(3) r.w.s 153A of the Act dated 31.03.2016 for assessment year 2011-12. Before us the assessee has assailed the impugned order on the following grounds of appeal:
“1. That the notice and the order of the learned Pr. Commissioner of Income Tax (Central), Nagpur passed u/s.263 is bad in law and wrong on facts. On the facts and circumstances of the case, the assessment order passed by the AO u/s. 143(3) r.w.s. 153A was neither erroneous nor prejudicial to the interest of the revenue and the notice u/s.263 and the proceedings, thereafter, are illegal and liable to be quashed. 2. That the learned Pr. CIT erred in law and on facts in directing the AO to make an addition of Rs.22,49,062/- on account of additional depreciation on fixed assets holding that the party from whom the said asset was purchased is not genuine. On the facts and
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circumstances of the case, the Pr. CIT erred in disregarding all the documentary evidences and explanations furnished in support of genuineness of party and purchase of asset. 3. That the learned Pr. CIT erred in law and on facts in holding that the AO did not verify during the assessment proceedings the purchases made by the assessee and more specifically the purchases from M/s. Anjaneya Life Care Ltd. ( Now known as Dr. Datson Labs Ltd. On the facts and circumstances of the case, the assessee has not made any purchase from the above said party and hence, the action of the learned Pr. CIT is highly unjustified. 4. That for any other ground with kind permission of your honour at the time of hearing of appeal.”
Succinctly stated, the assessee company which is engaged in the business of manufacturing of pharmaceuticals items had filed its return of income for the assessment year 2011-12 on 29.09.2011, declaring an income of Rs.9,89,28,680/-. The return of income filed by the assesee was processed as such u/s.143(1) of the Act.
Search and seizure operations were conducted at the office/factory premises of the assesee company as well as at the residential premises of the directors on 27.08.2013. Assessment was, thereafter, framed by the Assessing Officer vide his order passed under Sec. 143(3) r.w.s 153A of the Act, dated 31.03.2016 determining the income of the assessee company at Rs.11,19,27,637/-.
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After culmination of the assessment proceedings the Pr. CIT called for the assessment records of the assessee. On a perusal of the assessment records, it was observed by the Pr. CIT that the Assessing Officer had failed to disallow the assessee’s claim of additional depreciation u/s. 32(1)(iia) of Rs.22,49,062/- on the machinery whose purchase in itself was held by him as non-genuine/bogus. Also, it was noticed by the Pr. CIT that despite the fact that the assessee had indulged in procuring accommodation bills qua purchase of plant & machinery, the Assessing Officer had failed to verify the purchases of raw materials and other goods. Backed by his aforesaid observations, the Pr. CIT called upon the assessee to explain as to why the order passed by the Assessing Officer under Sec. 143(3) r.w.s 153A, dated 31.03.2016 may not be revised by him u/s. 263 of the Act. In reply, it was submitted by the assessee that as the purchases of machinery in question was genuine, therefore, no disallowance of depreciation including additional depreciation claimed u/s. 32(1)(iia) of the Act was called for in its hands. As regards the observations of the Pr. CIT that the assessee had indulged in bogus transactions with M/s. Anjaneya
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Life Care Ltd. (now known as Dr. Datson Labs Ltd.), it was claimed by the assessee that it had not carried out any transactions with the aforementioned party.
Observing, that the Assessing Officer while framing assessment had after taking cognizance of the fact that the assessee had not made any genuine purchases of air handling system from M/s. Real Traders, had though for the said reason disallowed its claim for depreciation on the same of Rs.16,86,796/-, but had failed to disallow its claim of additional depreciation of Rs. 22,49,062/-, the Pr. CIT was of the view that the same had thus rendered his order as erroneous in so far it was prejudicial to the interest of the revenue within the meaning of Sec. 263 of the Act. Also, it was observed by the Pr. CIT that during the course of search and seizure proceedings conducted on the assessee’s group company certain documents relating to purchases made from M/s. Anjaneya Life Care Ltd.(supra) were found. It was further observed by the Pr. CIT that Shri Kannan Viswanathan, Managing Director of M/s. Anjaneya Life Care Ltd. (supra) in his statement recorded u/s. 131 of the Act, had stated that his company
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had not supplied materials to the aforementioned group company of the assesee and had admitted of having indulged in providing accommodation entries of purchase/sales to various beneficiaries. It was noticed by the Pr. CIT that Shri Kannan Viswanathan (supra) had admitted that the aforementioned group company of the assessee had booked bogus purchases and not made any genuine purchases from his company, viz. M/s. Anjaneya Life Care Ltd. It was observed by the Pr. CIT that though the purchases claimed by the group company of the assessee from M/s. Anjaneya Life Care Ltd.(supra) were found to be bogus, however, the Assessing Officer had failed to verify the genuineness and veracity of the purchases made by the assessee from the said company during the year under consideration. Backed by his aforesaid observation, the Pr. CIT was of the view that the failure on the part of the Assessing Officer to verify the purchases including those made from M/s. Anjaneya Life Care Ltd. (supra) had rendered the order passed by him u/s. 143(3) r.w.s 153A, dated 31.03.2016 as erroneous in so far it was prejudicial to the interest of the revenue u/s. 263 of the Act. Accordingly, the Pr. CIT vide his order passed u/s.263
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of the Act, dated 27.03.2018 set-aside the assessment order with a direction to the Assessing Officer to de-novo examine the aforementioned issues in question.
The assessee being aggrieved with the order passed by the Pr. CIT under Sec. 263 of the Act, dated 27.03.2018 has carried the matter in appeal before us.
We have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions. In so far the observation of the Pr. CIT that the failure on the part of Assessing Officer to disallow the assessee’s claim for additional depreciation u/s. 32(1)(iia) of the Act qua the air handling system that was stated to have been purchased from M/s. Real Traders, a bogus concern, despite the fact that he had disallowed its claim for depreciation in respect of the aforesaid machinery, had thus rendered the order passed by him under Sec. 143(3) r.w.s 153A, dated
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31.03.2016 as erroneous in so far it was prejudicial to the interest of the revenue within the meaning of section 263 of the Act is concerned, the same in our considered view carries substantial force. Admittedly, it is a matter of fact borne from record that the Assessing Officer while framing the assessment u/s.143(3) r.w.s 153A, dated 31.03.2016 had disallowed the assessee’s claim for depreciation on air handling system that was stated by the assessee to have been purchased from M/s. Real Traders. On a perusal of the assessment order, we are unable to comprehend that now when the Assessing Officer had concluded that the assessee had merely procured accommodation bills from M/s. Real Traders and not carried out any genuine purchases from the said party, and therein disallowed its claim for depreciation, then, on what basis he had allowed its claim for additional depreciation qua the said machinery, i.e., air handling unit. Although, it is the claim of the Ld. AR before us that the CIT(Appeals) while disposing off the quantum appeal of the assessee against the order passed by the Assessing Officer u/s.143(3) r.w.s. 153A, dated 31.03.2016, had vide his order dated 27.03.2018 concluded that the assessee had made genuine
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purchases from M/s. Real Traders, Mumbai, but the said contention, in our considered view would have no bearing for adjudicating the sustainability of the order passed by the Pr. CIT under Sec. 263 of the Act as has been assailed before us. Be that as it may, we are of the considered view that now when the Assessing Officer holding the purchases claimed by the assessee from M/s. Real Traders, Mumbai as bogus had disallowed its claim for depreciation, then, there was no justification on his part to have allowed its claim for additional depreciation on the same. We, thus, in terms of our aforesaid observations finding no infirmity in the view taken by the Pr. CIT, who had rightly observed that the failure on the part of the Assessing Officer to disallow the assessee’s claim of additional depreciation u/s. 32(1)(iia) of the Act had rendered the order passed by him u/s. 143(3) r.w.s 153A, dated 31.03.2016 as erroneous in so far it was prejudicial to the interest of the revenue u/s. 263 of the Act, thus, to the said extent uphold his order. Thus, the Ground of appeal No.2 raised by the assessee is dismissed in terms of our aforesaid observations.
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We shall now advert to the claim of the assessee that the Pr. CIT had erred in law and on the facts of the case, in concluding, that the failure on the part of the Assessing Officer to have carried out necessary verifications qua the purchases made by the assessee from M/s. Anjaneya Life Care Ltd. (now known as Dr. Datson Labs Ltd.) had rendered his order as erroneous in so far it was prejudicial to the interest of the revenue u/s. 263 of the Act.
Before us, it is the claim of the Ld. AR that the assessee company had not made any purchases from M/s. Anjaneya Life Care Ltd. (supra). It is the claim of the Ld. AR that the Pr. CIT had proceeded with on the basis of incorrect and misconceived facts and, had wrongly observed that there was failure on the part of the Assessing Officer to verify purchases including those made by the assessee from M/s. Anjaneya Life Care Ltd. (supra). On being confronted with the aforesaid claim of the Ld. AR that the assessee company had not made any purchases from M/s. Anjaneya Life Care Ltd.(supra), the Ld. Departmental Representative (for short ‘DR’) could not rebut the same. On the contrary, it was claimed by the Ld. AR that
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the Assessing Officer while framing the assessment had duly verified the purchases made by the assessee during the year under consideration, and not being satisfied with the genuineness of the purchases of Rs. 9,50,092/- which the assessee had claimed to have made from a concern, viz. M/s. Trishna Impex disallowed the same. Backed by the aforesaid facts, it was claimed by the Ld. AR that as the Pr. CIT had proceeded with on absolutely incorrect facts, i.e., the assessee company had during the year carried out purchases from M/s. Anjaneya Life Care Ltd. (supra), therefore, the order passed by him u/s. 263 of the Act to the said extent could not be sustained and was liable to be vacated.
We have heard the Ld. Authorized Representatives of both the parties on the aforesaid issue in hand and find substantial force in the claim of the Ld. AR. Admittedly, it is an uncontroverted fact borne from record that the assessee’s group company had during the year claimed to have made purchases from M/s. Anjaneya Life Care Ltd. (supra), an accommodation entry provider, which was disallowed by the AO while framing the assessment u/s. 143(3) r.w.s. 153A, dated 31.03.2016 in
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the case of the said group concern. Although, it is observed by the Pr. CIT that as per information received by him the assesee company had also made purchases from M/s. Anjaneya Life Care Ltd. (supra), but the said fact had been controverted by the assessee. It is the claim of the assessee that it had not carried out any purchases during the year under consideration from M/s. Anjaneya Life Care Ltd. (supra). On being confronted with the aforesaid claim of the assessee, we find that neither the Ld. DR had placed on record any material to rebut the same, nor any material is available on record to prove otherwise. Backed by the fact that the assessee company during the year under consideration had not made any purchases from M/s. Anjaneya Life Care Ltd. (supra), we are of the considered view that there was no justification on the part of the Pr. CIT to have held the order passed by the Assessing Officer u/s. 143(3) r.w.s. 153A, dated 31.03.2016 as erroneous in so far it was prejudicial to the interest of the revenue, for the reason that he had failed to verify the purchase transactions of the assessee including those made from M/s. Anjaneya Life Care Ltd. (supra). On the contrary, we find that the Assessing Officer while
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framing the assessment, on not being satisfied with the genuineness of the purchase of raw materials amounting to Rs. 9,50,092/- that was claimed by the assessee to have been made from one concern, viz. M/s. Trishna Impex, had disallowed the same and treating it as bogus purchase made an addition in the hands of the assessee company. In the backdrop of our aforesaid deliberations, we are of the considered view that as the Pr. CIT had wrongly held the order passed by the Assessing Officer u/s. 143(3) r.w.s 153A, dated 31.03.2016 as erroneous in so far it was prejudicial to the interest of the revenue within the meaning of Sec. 263 of the Act, for the reason that the Assessing Officer had failed to carry out necessary verification of the purchase transactions of the assessee including those with M/s. Anjaneya Life Care Ltd. (supra), therefore, to the said extent we set- side his order and restore the order passed by the Assessing Officer u/s. 143(3) r.w.s. 153A, dated 31.03.2016.
We, thus, in terms of our aforesaid deliberations partly set-aside the order passed by the Pr. CIT u/s. 263 of the Act, dated 27.03.2018,
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and to the said extent restore the order passed by the Assessing Officer u/s. 143(3) r.w.s. 153A, dated 31.03.2016.
In the result, appeal of the assessee is partly allowed in terms of our aforesaid observations.
Order pronounced in open Court on 09th day of May, 2022. Sd/- Sd/- JAMLAPPA D. BATTULL RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायपुर/ RAIPUR ; �दनांक / Dated : 09th May, 2022 SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The Pr. CIT (Central), Nagpur �वभागीय ��त�न�ध,आयकर अपील�य अ�धकरण, 4. नागपुर/ DR, ITAT, Nagpur. गाड� फ़ाइल / Guard File. 5. आदेशानुसार / BY ORDER, // True Copy // �नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, रायपुर / ITAT, Raipur.
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Date 1 Draft dictated on 20.04.2022 Sr.PS/PS 2 Draft placed before author 22.04.2022 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved AM/JM by second Member 5 Approved draft comes to Sr.PS/PS the Sr. PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order