Income Tax Appellate Tribunal - Mumbai
Universal Medicare P.Ltd ( Successor To ... vs Department Of Income Tax on 26 February, 2014
अिधकरण मुंबई Ûयायपीठ 'एफ' मुंबई ।
आयकर अपीलीय अिधकरण,
IN THE INCOME TAX APPELLATE TRIBUNAL " F" BENCH, MUMBAI
सव[ौी डȣ. मुमोहन, उपाÚय¢ एवं , नरे Ûि कुमार ǒबãलैáया, लेखा सदःय के सम¢
BEFORE SHRI D.MANMOHAN, VP AND SHRI N.K. BILLAIYA, AM
आयकर अपील सं./I.T.A. Nos.5259 & 5260/Mum2011
िनधा[रण वष[ / Assessment Years :2003-04 & 2004-05
(िनधा[
The ACIT, बनाम M/s. Universal Medicare Pvt. Ltd.,
बनाम/
Central Circle-20, (Successor to Banner Pharmacaps
Vs.
Aayakar Bhavan, India Pvt. Ltd,)
Mumbai-400020 Capsulation Premises, 1 s t Floor,
Sion Trombay Road, Deonar,
Mumbai-400 088
ःथायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AAACU 0717B
(अपीलाथȸ /Appellant) .. (ू×यथȸ / Respondent)
अपीलाथȸ ओर से/ Appellant by: Shri R.K. Sahu
ू×यथȸ कȧ ओर से/Respondent by: Shri D.V. Lakhani
सुनवाई कȧ तारȣख / Date of Hearing :26.02.2014
घोषणा कȧ तारȣख /Date of Pronouncement :28.02.2014
आदे श / O R D E R
PER N.K. BILLAIYA, AM:
These two appeals by the Revenue are preferred against two separate orders of the Ld. CIT(A)-21, Mumbai pertaining to A.Yrs. 2003- 04 and 2004-05. As common issue is involved in both these appeals, they were heard together and disposed of by this common order for the sake of convenience and brevity.
2 M/s. Universal Medicare Pvt. Ltd.
2. In both these years, the only grievance of the Revenue relates to the deletion of the penalty levied u/s. 271(1)(c) of the Act , though quantum of penalty defer.
ITA No. 5260/Mum/2011 - A.Y 2003-043. The assessment in this case was completed u/s. 143(3) r.w. Section 142(2A) of the Act vide order dt. 29.11.2006. The assessment was completed after making following disallowances:
1. Purchases of aw material Rs. 33,40,362 treated non-genuine
2. Sundry Creditors Rs.1,84,54,124
3. Purchases of packing Rs. 25,62,992 material treated as non-
genuine
4. Research & Development Rs. 27,30,000 Expenses
5. Addition u/s. 28(iv) of the Rs. 43,97,601 I.T. Act, 1961
6. Disallowance of Rs. 5,47,813 Depreciation
7. Foreign Travelling Rs. 3,96,284 expenses
8. Various non-genuine Rs. 14,04,711 expenses
9. Stock written off Rs. 3,16,483 Rs.3,41,50,370 Total Income Rs. 6,20,60,411 3 M/s. Universal Medicare Pvt. Ltd.
3. The assessee got part relief from the Ld. CIT(A) and the final position stood as under:
DETAILS OF DISALLWOANCES U/S 271 (1)(C) Disallowance Head 143(3) r.w.s. Relief Disallowance 142(2A) Allowed by accepted by Dated CIT(A) us.
29.09.2006 Order Dtd.
3/6/2008 Purchase of Raw Material - Non 3,340,362 2,161,544 1,178,818 Genuine Purchase of Packing Material - 2,562,992 2,486,124 76,868 Non genuine Sundry Creditors 18,454,124 17,198,230 1,255,894 Various Non-Genuine Expenses 1,404,711 763,247 641,464 Foreign Travelling Expenditure 396,284 217,923 178,361 Disallowance of depreciation on 547,813 - 547,813 Fixed Assets 26,706,286 22,827,068 38,79,218 Thus the final disallowances stood at Rs. 38,79,218/-. The penalty has been levied on these disallowances.
4. During the course of the penalty proceedings, the assessee claimed that it has proved its bonafide for claiming deductions, the department has not pointed out that facts were hidden and the assessee has discharged its onus of not furnishing inaccurate particulars. The contentions of the assessee were rejected by the AO who was of the firm belief that assessee's books of accounts were subjected to special audits and additions were made on special auditor's report and the assessee 4 M/s. Universal Medicare Pvt. Ltd.
could not substantiate its claim by proper evidences and documents. In the opinion of the AO, had the return not come under scrutiny, these facts would never been revealed. Drawing support from the decision of the Hon'ble Supreme Court in the case of Union of India Vs Dharmendra Textile Processors and Ors 306 ITR 277 the AO went on to levy penalty being 100% of tax sought to be evaded at Rs. 14,25,593/-.
5. The assessee carried the matter before the Ld. CIT(A) and reiterated what has been submitted during the assessment proceedings. It was claimed that during the assessment proceedings itself one of the Directors informed the Revenue that one Mr. S.G. Teredesai, Vice President (Finance) had committed certain serious irregularities. It was also brought to the notice of the Ld. CIT(A) that the matter was reported to the Police Department and also to Economic Office Wing. The Economic Office Wing filed petition to Session Court, for taking Criminal action against Shri S.G. Teredesai. The alleged fraud was being thoroughly investigated by the Special person appointed by the company for identification and quantification of defalcation. Because of the fraud committed by the Vice President, the assessee could not substantiate its claim with respect to some expenses even during the course of the special audit conducted u/s. 142(2A) of the Act. The assessee could not bring any material evidences in support of its claim of expenditure. The reasons for non production were explained to the Special auditor also. After considering the facts and the submissions and the surrounding circumstances, the Ld. CIT(A) observed that though certain bills/vouchers could not be produced before the Special Auditors but the assessee did produce them before the AO but the AO did not admit such bills/vouchers on the ground that the same were not produced before the Special Auditors. The Ld. CIT(A) was of the firm belief that there is no 5 M/s. Universal Medicare Pvt. Ltd.
bar in the Act that if an evidence has not been produced before special auditor, the assessee will be debarred from producing the same before the AO during the assessment proceedings. The Ld. CIT(A) further observed that on the directions of his processor in quantum proceedings, the AO did verify the bills and vouchers submitted by the assessee and on that very basis the Ld. CIT(A) gave part relief from the disallowances made by the AO.
5.1. The Ld. CIT(A) was convinced that the assessee was making efforts in collecting the evidences and was successful in its efforts though finally it could not locate some of the bills/vouchers. The Ld. CIT(A) also observed that the total defalcation in the group companies was at Rs. 19.04 crores and the same has been accepted in the case of group companies in A.Y. 2006-07 and subsequent assessment years. In the case of M/s. Universal Medicare Ltd. for A.Y. 2006-07 out of the total loss of Rs. 19.04 crores claim of loss at Rs. 14.04 crores has been allowed and since the assets of Shri S.G. Teredesai attached by police to the extent of Rs. 5 crores , the loss was not allowed since it could be recouped from the assets attached. The Ld. CIT(A) further observed that Shri S.G. Teredesai was in service of the assessee till 2006 whereas the return for the impugned assessment year was filed on 27.11.2003. According to the Ld. CIT(A) till the date of filing of return along with Tax Audit Report, vouchers/bills were in existence because the same have been verified by the Tax auditor. Therefore, the claim of expenses made in the return was correctly made under a bonafide belief. The defalcation had taken place between 2001-02 and 2006-07 and the assessee came to know about the said defalcation when Shri S.G. Teredesai was on leave in the month of June, 2005. Drawing support from the decision of the Hon'ble Supreme Court in the case of CIT Vs Reliance Petro Products Pvt. Ltd. 322 ITR 6 M/s. Universal Medicare Pvt. Ltd.
158, the Ld. CIT(A) was of the firm belief that merely because the assessee had claimed the expenditure which claim was not accepted or was not acceptable to the Revenue that by itself would not attract the penalty u/s. 271(1)(c) of the Act. The Ld. CIT(A) further noticed that in the case of assessee's group company M/s. Universal Medicare in A.Y. 2003-04 and 2004-05 on similar set of facts the Ld. CIT(A) has cancelled the penalty levied by the AO u/s. 271(1)(c) of the Act. After considering the entire factual matrix, the Ld. CIT(A) deleted the penalty levied.
6. Aggrieved by this, Revenue is before us. The Ld. Departmental Representative strongly relied upon the assessment order and the order of the levy of penalty u/s. 271(1)(c) of the Act.
7. Per contra, the Ld. Counsel for the assessee reiterated what has been submitted before the lower authorities.
8. We have carefully perused the orders of the lower authorities. We have also perused the assessment order wherein the roots for the levy of penalty lie. It is an undisputed fact that a fraud/defalcation has been committed by one of the employees of the assessee which came to the notice of the assessee in 2005. It is also an undisputed fact that the return of income alongwith Tax audit report were filed much earlier to the date of detection of defalcation. It is also not in dispute that the returns of income were accompanied by Tax Audit Report and no adverse finding relating to the claim of expenditure were given by Tax Audit Report. It is only in the course of Special Audit conducted u/s. 142(2A) of the Act. The assessee could not produce bills and vouchers because the same has been destroyed by the employee of the assessee. These facts clearly 7 M/s. Universal Medicare Pvt. Ltd.
show that the claim of expenditure was bonafide at the time of filing of the return of income. Merely because of subsequent events, the assessee could not produce bills/vouchers to substantiate its claim of expenditure cannot ipso facto lead to the conclusion that the assessee has filed inaccurate particulars. There is a distinction between "wrong claim" and "false claim". Considering the entire factual matrix, it cannot be said that assessee had made false claim. The Ld. CIT(A) has discussed the fact of the case as they were during the course of the assessment proceedings, Special Audit proceedings and in quantum appeal proceedings. Orders of the Tribunal in the case of group companies have been placed before us bearing ITA Nos. 5258 and 5257/M/2011 in the case of Geltec Pvt. Ltd. , ITA No. 6078/M/2010 in the case of Universal Medicare Pvt. Ltd. wherein the Tribunal have deleted the penalty levied u/s. 271(1)(c) of the Act on similar facts and circumstances. As no distinguishing fact has been brought before us, respectfully following the decision of the Tribunal in group cases and also after considering the entire factual matrix in the light of the decision of the Hon'ble Supreme Court in the case of Reliance Petro Products (supra), we have no hesitation in confirming the orders of the Ld. CIT(A). Appeals filed by the Revenue are accordingly dismissed.
9. Before closing, the Revenue has relied upon the decision of the Hon'ble Delhi High Court in the case of Zoom Communication Pvt. Ltde. 327 ITR 510. The facts are clearly distinguishable and are more supported by the decision of the Hon'ble Supreme Court in the case of Reliance Petro Products.
8 M/s. Universal Medicare Pvt. Ltd.
10. In the result, both the appeals filed by the Revenue are dismissed.
Order pronounced in the open court on 28/02/2014 .
आदे श कȧ धोषणा खुले Ûयायालय मɅ Ǒदनांकः 28.2.2014 को कȧ गई ।
Sd/- Sd/-
(D.MANMOHAN ) (N.K. BILLAIYA)
उपाÚय¢/ Vice President लेखा सदःय / ACCOUNTANT MEMBER
मुंबई Mumbai; Ǒदनांक Dated 28.2.2014
व.िन.स./ RJ , Sr. PS
आदे श कȧ ूितिलǒप अमेǒषत/Copy
षत of the Order forwarded to :
1. अपीलाथȸ / The Appellant
2. ू×यथȸ / The Respondent.
3. आयकर आयुƠ(अपील) / The CIT(A)-
4. आयकर आयुƠ / CIT
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai
6. गाड[ फाईल / Guard file.
आदे शानुसार/ ार BY ORDER, स×याǒपत ूित //True Copy// उप/सहायक उप सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अिधकरण मुंबई / ITAT, Mumbai