Itta/742/2014 Of M/S Natco Pharma Limited v. Assistant Commissioner Of Income Tax

FOR THE STATE OF TELANGANA AND THE STATE OF ANDHRA PRADESH PRESENT THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR DATED:29.1.2015 Between: I.T.T.A. NO.742 OF 2014 M/s.Natco Pharma Limited“Natco House”, Road No.2,Banjara Hills,Hyderabad … Appellant And Assistant Commissioner of Income TaxCentral Circle-1, Hyderabad … Respondent THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A. NO.742 OF 2014 JUDGMENT:(per the Hon’ble Sri Justice Sanjay Kumar) This appeal by the assessee against the order dt.28.8.2009 passed by the IncomeTax Appellate Tribunal, Hyderabad Bench-A, Hyderabad, in relation to the blockperiod 1.4.1988 to 6.5.1998, seeks to raise the following suggested questions of law. 1. “On the facts and in the circumstances of the case, when all the purchasesand sales were recorded in regular books of accounts and payments arerouted through bank account, and there is no finding by any of theauthorities that the appellant had conducted any purchases and salesoutside the books, whether the Income Tax Appellate Tribunal is correct inlaw in holding that the same could be considered in an assessment madeu/s.158-BC of the Income Tax Act?.and sales were recorded in regular books of accounts and payments arerouted through bank account, and there is no finding by any of theauthorities that the appellant had conducted any purchases and salesoutside the books, whether the Income Tax Appellate Tribunal is correct inlaw in holding that the same could be considered in an assessment madeu/s.158-BC of the Income Tax Act?. 2. On the facts and in the circumstances of the case, when all the purchasesand sales were recorded in regular books of accounts and payments arerouted through bank account, and there is no finding by any of theauthorities that the appellant had conducted any purchases and salesoutside the books, whether the Income Tax Appellate Tribunal is correct inlaw in holding the difference in purchases and sales resulted whichactually resulted in loss to be considered as undisclosed income of theappellant?and sales were recorded in regular books of accounts and payments arerouted through bank account, and there is no finding by any of theauthorities that the appellant had conducted any purchases and salesoutside the books, whether the Income Tax Appellate Tribunal is correct inlaw in holding the difference in purchases and sales resulted whichactually resulted in loss to be considered as undisclosed income of theappellant? 3. Whether the Income Tax Appellate Tribunal is correct in law in not consideringthe stock (Vinyl Sulphone) Rs.93,77,290/- as being part of closing stock,in spite of the fact that the appellant had proved the availability of the saidstock beyond doubt?the stock (Vinyl Sulphone) Rs.93,77,290/- as being part of closing stock,in spite of the fact that the appellant had proved the availability of the saidstock beyond doubt? 4. Whether the Income Tax Appellate Tribunal is correct in law in holding that thepayment of Rs.15 lacs made towards alleged bogus purchase and salesis not allowable as expenditure in view of Explanation to Section 37(1) ofthe Income Tax Act, 1961 though there is no such infraction of law and theexpenditure is for business purpose?payment of Rs.15 lacs made towards alleged bogus purchase and salesis not allowable as expenditure in view of Explanation to Section 37(1) ofthe Income Tax Act, 1961 though there is no such infraction of law and theexpenditure is for business purpose? 4. Whether the Income Tax Appellate Tribunal is correct in law in holding that thepayment of Rs.15 lacs made towards alleged bogus purchase and salesis not allowable as expenditure in view of Explanation to Section 37(1) ofthe Income Tax Act, 1961 though there is no such infraction of law and theexpenditure is for business purpose?payment of Rs.15 lacs made towards alleged bogus purchase and salesis not allowable as expenditure in view of Explanation to Section 37(1) ofthe Income Tax Act, 1961 though there is no such infraction of law and theexpenditure is for business purpose? 5. Whether, on the facts and in the circumstances of the case, the order ofIncome Tax Appellate Tribunal is correct in law in holding that thedisclosure of the appellant under the provisions of Section 132(4) of theIncome Tax Act, 1961 could not have been retracted in spite of positiveevidence to prove that the disclosure was made on mistaken impression,and only because it was retracted very late from the date of thedisclosure?”Income Tax Appellate Tribunal is correct in law in holding that thedisclosure of the appellant under the provisions of Section 132(4) of theIncome Tax Act, 1961 could not have been retracted in spite of positiveevidence to prove that the disclosure was made on mistaken impression,and only because it was retracted very late from the date of thedisclosure?” Sri K. Vasanth Kumar, learned counsel appearing for the appellant-assessee,would however submit that only the first suggested question of law is being pressedand that he does not want to press the remaining questions. It is his contention that the assessment for the block period ought to havebeen limited only to the material found during the search operations and the issue ofbogus purchases and sales could not have been subjected to such block periodassessment saddling the assessee with a higher rate of tax. We find from the order passed by the learned Tribunal that during the courseof search and seizure operations carried out on 6.5.1998, various incriminatingdocuments were seized which related to bogus purchases and sales. There is nodispute as to the factum of these documents being found during the search operations. There is also no dispute that the learned counsel appearing for theassessee admitted that the subject transactions were in fact bogus purchases andsales and sought to justify them, as is evident from reading paragraph 6 of theTribunal’s order. Once the incriminating material based on which the transactionswere categorized as bogus were relatable to the search and seizure operations, theassessee cannot contend that the provisions of Section 158-BC of the Income TaxAct, 1961 would have no application to the assessment in relation to the aforesaidbogus transactions. We therefore find no irregularity in the order passed by theTribunal as regards this aspect. No substantial question of law arises for consideration in this appeal and thesame is accordingly dismissed. There will be no order as to costs. K.J. SENGUPTA, CJ ________________________ SANJAY KUMAR, J 29.1.2015 bnr _______________________