M/s. Regenerative Medical Services Pvt. Ltd. v. ITO 8(3)-1, Mumbai
[Citation -2016-LL-1019-179]

Citation 2016-LL-1019-179
Appellant Name M/s. Regenerative Medical Services Pvt. Ltd.
Respondent Name ITO 8(3)-1, Mumbai
Court ITAT-Mumbai
Relevant Act Income-tax
Date of Order 19/10/2016
Assessment Year 2005-06
Judgment View Judgment
Keyword Tags reassessment proceedings • commission payment • reassessment order • reason to believe • fresh assessment
Bot Summary: The assessee, during the course of reassessment proceedings, raised objection about the illegality of the Reasons, but the AO without disposing of the objections of the assessee framed the reassessment order. Per contra, Ld. DR submitted that copy of statement of Mr. Vimal Todi dated 23.03.2007 has been provided to the assessee. The Reasons were stated to have been provided by AO by reproducing its extract in the letter dated 05.12.2008 issued by the AO, but verbatim certified copy of the Reasons recorded has not been provided by the AO to the assessee. Under these circumstances, neither the assessee made proper objections before the AO nor the AO disposed whatever objections were filed by the assessee, in accordance with law and facts. The Assessee shall raise objections in writing before the AO, if so desired. The AO shall provide to the assessee entire adverse material to be used against assessee by the AO. The assessee shall submit requisite details and documentary evidences as may be required by the AO time to time as per law and shall extend full cooperation to the AO. The assessee shall be free to raise all legal and factual issues before the AO with regard to jurisdictional aspect of reopening as well as merits of the proposed additions/disallowances. The AO shall give adequate opportunity of hearing to the assessee before framing fresh assessment order.


IN INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D , MUMBAI Before Shri Sanjay Garg, Judicial Member, and Shri Ashwani Taneja, Accountant Member ITA NO.6319/Mum/2012 Assessment Year: 2005-06 & ITA NO.4345/Mum/2013 Assessment Year: 2005-06 M/s. Regenerative Medical ITO 8(3)-1 Services Pvt. Ltd., /Vs. Mumbai- 2, ABC ACME Plaza, 2nd Floor, Hemukalani Road No.4, Kandivali West, Mumbai-400067 (Appellant) (Revenue) P.A. No. AADCS4917N ITA NO.6318/Mum/2012 Assessment Year: 2005-06 & ITA NO.4344/Mum/2013 Assessment Year: 2005-06 M/s. Satyan Pharmaceuticals P. ITO 8(3)-1 Ltd., /Vs. Mumbai- 2, ABC ACME Plaza, 2nd Floor, Hemukalani Road No.4, Kandivali West, Mumbai-400067 (Appellant) (Revenue) P.A. No. AAGCS9818R 2 Satyam Medical S. P. Ltd. Appellant by Shri Paresh Vakharia (AR) Revenue by Shri B.S. Bist (Sr. DR) Date of Hearing : 19/10/2016 Date of Order: 19/10/2016 ORDER Per Bench: These appeals involve common issues, therefore these were heard together and being disposed by this common order. 2. During course of hearing, arguments were made by Shri Paresh Vakharia, Authorised Representative (AR) on behalf of Assessee and by Shri B.S. Bist, Departmental Representative (Sr. DR) on behalf of Revenue. We shall first take up appeal in case of Regenerative Medical Services Pvt. Ltd. in ITA No.6319/Mum/2012: 3. This appeal has been filed by assessee against order of Ld. CIT(A) dated 18.07.2012 passed against assessment order u/s 147 r.w.s. 143(3) of Act, dated 24.12.2008 for A.Y. 2005-06 on following grounds: 1.The learned CIT(A) erred in confirming addition of aggregate commission payment of Rs.12,00,000 mad e to M/ s. Mo ir S te e ls L td. in c ourse and f or purposes of business of your Appellant. 1 . 1 T h e l e r n e d C IT ( ) f i l e d t o p p r e c i t e th at disallo wance of commission was unsustainable merely on basis of statement of Mr. Vimal Todi (Director of M/s. Moira S teels Ltd.) in course of survey of that company, ignoring contradictory statement given by accountant of company Mr. Sandeep Jain, who on record 3 Satyam Medical S. P. Ltd. has been stated to be more conversant with day to day business affairs. 1.2 learned CIT(A) failed to appreciate that statement made under section 133 in course of survey proceedings does not have evidence value in law and hence it could not have been sole basis of conf irming disallowance of commission. 1.3 learned CIT(A) failed to appreciate that commission payment was necessary expenditu re of business of your appellan t as per tr ade practices, amounts were reasonable and paid to unrelated person such that disallowance was unsustainable. 1.4 Without prejudice, learned CIT(A) f ailed to appreciate that in absence of reason to believe that income has escaped assessment pursuant to section 147 of Income Tax Act, reassessment proceedings were invalid and hence additions made were unsustainable. 1 . 5 W i th o u t p r e ju d ic e , th e le ar n e d C IT ( ) f ail e d to ap p r e c i te th at y o u r Appellant case was picked up for reassessment arbitrarily ignoring principles of equality in as much as several other parties who made commission payments to M/s. Moira Steels Ltd. were not subjected to reassessment. 2. Without prejudice, your appellant submits alternative ground of appeal as follows: learned CIT(A) failed to appreciate that even if it is assumed that M/s. Moira Steels Ltd. were not beneficiary of commission payment, nevertheless, in absence of any evidence that expenditure was reversed by compensatory p ay me n t in f av o r of y o u r p p e l l t n d in ab s e n c e of y e v id e n c e th t expenditure has not been incurred, commission payment was allowable as expenditure incurred in favor of undisclosed recipient pursuant to trade practice. 4. In this case, brief background is that case was reopened after recording Reasons on basis of statement recorded during survey u/s 133A of Shri Vimal 4 Satyam Medical S. P. Ltd. Todi, Director of M/s. Moira Steels Ltd., wherein he allegedly stated that no services were rendered by him and thus commission paid by assessee company to said company was bogus. In reassessment order passed by AO, impugned commission of Rs. 12 lacs was disallowed, and this disallowance was confirmed by Ld. CIT(A) in first appeal. 4.1. During course of hearing before us, Ld. Counsel vehemently submitted that in this case assessment order is bad in law in as much as it has been passed by AO without assuming jurisdiction as per law and in violation of principles of natural justice. It was submitted that statement of Mr. Vimal Todi dated 20th February 2007, has never been provided by assessee despite specific request of assessee. Further, AO did not provide certified copy to Reasons nor invited objection of assessee. assessee, during course of reassessment proceedings, raised objection about illegality of Reasons, but AO without disposing of objections of assessee framed reassessment order. 4.2. Per contra, Ld. DR submitted that copy of statement of Mr. Vimal Todi dated 23.03.2007 has been provided to assessee. It was further submitted no proper objection has been raised by assessee during course of assessment proceedings. 4.3. We have gone through orders passed by lower authorities as well as submissions made by both sides before us. It is noted from perusal of assessment order 5 Satyam Medical S. P. Ltd. that Reasons recorded by AO have been reproduced therein. Though, Reasons were stated to have been provided by AO by reproducing its extract in letter dated 05.12.2008 issued by AO, but verbatim certified copy of Reasons recorded has not been provided by AO to assessee. It is further noted that statement of Mr. Vimal Todi dated 20th February, 2007, which has been mentioned in Reasons recorded has not been provided to assessee. Though, one statement of Mr. Vimal Todi dated 1st March, 2007 had been provided, but that seems to be different one. It is further noted from perusal of order of Ld. CIT(A) that there was reference to statement dated 20th February, 2007, but that was stated to have been given by one Shri Sandeep Jain and not by Shri Vimal Todi. Thus, there seems to be some confusion in this regard. Under these circumstances, neither assessee made proper objections before AO nor AO disposed whatever objections were filed by assessee, in accordance with law and facts. Thus, taking into account totality of facts and circumstances of case, we find it appropriate in interest of justice that this matter should be sent back to file of AO along with all grounds raised by assessee before us. AO shall provide certified copy of Reasons and also copy of statement which has been relied upon by AO in Reasons recorded i.e. statement of Shri Vimal Todi dated 20th February 2007. Assessee shall raise objections in writing before AO, if so desired. AO shall dispose of objection in accordance with law and shall follow 6 Satyam Medical S. P. Ltd. procedure as per mandate given by Hon ble Supreme Court in case of GKN Driveshafts (India) Ltd (2003) 259 ITR 19. AO shall provide to assessee entire adverse material to be used against assessee by AO. assessee shall submit requisite details and documentary evidences as may be required by AO time to time as per law and shall extend full cooperation to AO. assessee shall be free to raise all legal and factual issues before AO with regard to jurisdictional aspect of reopening as well as merits of proposed additions/disallowances. AO shall give adequate opportunity of hearing to assessee before framing fresh assessment order. Thus, with these directions, all grounds raised by assessee are sent back to file of AO. 5. As result, this appeal may be treated as allowed for statistical purposes. We shall now take up appeal in case of Regenerative Medical Services Pvt. Ltd. in ITA No.4345/Mum/2013: This appeal has been filed against order of Ld. CIT(A) dated 22.03.2013 passed against penalty order of AO u/s 271(1)(c) dated 20.12.2012 for A.Y. 2005-06. 6. It is noted by us that quantum order of AO has been set aside by way of our order in ITA No.6319/Mum/2012 therefore, penalty order does not survive any more as on date. Under these circumstances, penalty order is set aside. AO shall be free to initiate penalty proceedings afresh, if required as per law. 7 Satyam Medical S. P. Ltd. Now, we shall take appeal in case of M/s. Satyan Pharmaceuticals Pvt. Ltd. in ITA No.6318/Mum/2012: This appeal has been filed against order of Ld. CIT(A) dated 18.07.2012 passed against assessment order u/s 147 r.w.s. 143(3) of Act, dated 24.12.2008 for A.Y. 2005-06. 7. It is noted that ground raised and issue involved in this appeal are identical to appeal in case of M/s. Regenerative Medical Services P. Ltd. in ITA No.6319/Mum/2012. Both parties agreed that facts involved in this appeal are identical to aforesaid appeal, therefore, this appeal along with all grounds are sent back to file of AO with all directions as contained in aforesaid appeal. AO is directed to follow our order as given in ITA No.6319/Mum/2012. 8. As result, this appeal may be treated as allowed for statistical purposes. Now, we shall take appeals in case of M/s. Satyan Pharmaceuticals Pvt. Ltd. in ITA No.4344/Mum/2013. This appeal has been filed against order of Ld. CIT(A) dated 22.03.2013 against penalty order of AO u/s 271(1)(c) dated 20.12.2012. 9. Since quantum appeal has already been sent back to AO, therefore, penalty order does not survive any more as on date. Therefore, penalty order is set aside. AO shall be free to initiate penalty proceedings afresh, if and as & when required as per law. 8 Satyam Medical S. P. Ltd. 10. As result, these appeals may be treated as partly allowed for statistical purposes. Order was pronounced in open court at conclusion of hearing. Sd/- Sd/- (Sanjay Garg ) (Ashwani Taneja) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated :19/10/2016 Copy of Order forwarded to : 1. Appellant 2. Respondent. 3. CIT, Mumbai. 4. CIT(A)- , Mumbai 5. DR, ITAT, Mumbai 6. Guard file.BY ORDER, //True Copy// (Dy./Asstt. Registrar) , ITAT, Mumbai M/s. Regenerative Medical Services Pvt. Ltd. v. ITO 8(3)-1, Mumbai
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