SYNBIOTICS LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) These petitions arise in common background and involve the same assessee. We may notice the facts from Special Civil Application No.5813/2004.

(2.) The petitioner is a limited company registered under the Companies Act and is engaged in the business of manufacturing and marketing of bulk drugs, formulations etc. For the assessment year 19931994, the petitioner filed the return of income on 29.12.1993 declaring a total loss of Rs.1.29 crores (rounded off). The Assessing Officer confirmed the assessment under section 143(3) of the Income Tax Act ("the Act" for short) on 29.3.1995 and assessed loss at Rs.22 lacs (rounded off). The assessee filed appeal against such order. CIT(Appeals) by an order dated 24.3.1999 assessed the loss at Rs.1.26 crores and thereby substantially allowing the appeal of the assessee. While these assessment proceedings thus achieved finality, the department in Dec. 1999 carried out search operations on one F.H. Rizvi of Mumbai. During search operations, the Revenue collected documents and statements suggesting that said F.H. Rizvi was engaged in bogus sales billing activities. He had admitted to have given sale bills without actual sales for a commission of 1% to 2%. The assessee is also one of the major purchasers of raw materials from F.H. Rizvi. The Assessing Officer therefore, issued a notice of reopening of the assessment on 29.11.2000. In such reasons, he had recorded at considerable length the materials at the command of the department to prima facie suggest that the purchases made by the assessee from F.H. Rizvi were bogus. During the assessment, pursuant to such notice, the Assessing Officer confronted the assessee with various purchases made from F.H. Rizvi and also fluctuations in Gross Profit ratio of the company from year to year. Despite opposition from the assessee, the Assessing Officer held that the entire purchases were bogus and that such expenditure should therefore, be disallowed. The Assessing Officer therefore, added back a sum of Rs.62.75 lacs (rounded off) on account of bogus purchases by the assessee from F.H. Rizvi. In the order of assessment dated 26.3.2002 that the Assessing Officer passed under section 147 read with section 143(3) of the Act, he brought down the loss to Rs.63.38 lacs (rounded off) by adding back the amount of Rs.62.75 lacs towards bogus purchases. The Commissioner desired to take such order of assessment in revision, for which purpose, he issued the impugned notice dated 22.1.2004. In the notice itself, he had recorded his reasons for revising the order, relevant portion of which reads as under :

(3.) Pursuant to such notice, the Commissioner passed order dated 1.3.2004 in which he directed the Assessing Officer to investigate the angle of increase in Gross Profit ratio.