DCIT, Ludhiana V. Sh. Davinder Kumar Bhasin, Ludhiana

ITA 12/CHANDI/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95589 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-10-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 02-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY SHRMA
• Assessee Lawyers: ASHWANI KUMAR; ADITYA KUMAR
• Keywords: Transfer pricing; International transaction; Rule of consistency; Additional evidence; Wholly owned subsidiary; Corroborative evidences; Assessment record

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS.ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO. 12/CHD/2014 ASSESSMENT YEAR: 2006-07 THE DCIT, VS SHRI DAVINDER KUMAR BHASIN, CENTRAL CIRCLE 1, PROP. M/S MUNISH INTERNATIONAL LUDHIANA. C-128, FOCAL POINT, LUDHIANA. PAN: ABAPB9076A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AJAY SHRMA RESPONDENT BY : S/SHRI ADITYA KUMAR & ASHWANI KUMAR DATE OF HEARING : 01.10.2015 DATE OF PRONOUNCEMENT : 15.10.2015 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF LD. CIT(APPEALS)-I LUDHIANA DATED 29.10.2013 FOR ASSESSMENT YEAR 2006-07 ON THE FOLLOWING GROUNDS : 1(I) THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 1,75,69,711/- ON ACCOUNT OF TRA NSFER PRICING IN RELATION TO THE ARMS' LENGTH PRICE OF THE INTERNATI ONAL TRANSACTION. 1(II) THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACTS THAT THE ASSESSEE FAILED TO PRODUCE THE DESIRED DATA FOR JUSTIFYING THE USE OF CUP METHOD. THE TPO THEN ACCEPTED THE TNMM METHOD AND THE OPERATING PROFIT MARGIN WAS TAK EN AS THE PROFIT LEVEL INDICATOR. 2 1(III) THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACTS THAT THE DIFFERENCE IN PRODU CT RANGE DOES NOT MAKE IT A NON-COMPARABLE AS THE TNMM METHOD IS ONLY VULNERABLE TO FUNCTIONAL DIFFERENCES AND NOT TO THE PRODUCT DIFFE RENCES. SIMILARLY, THE COMPARABLE HAVING 52% EXPORT INCOME AND THE ASSESSE E HAVING 100% EXPORT INCOME WILL NOT MAKE A DIFFERENCE AS THE MAJ ORITY OF INCOME OF COMPARABLE (MORE THAN 50%) IS ALSO FROM EXPORTS. 2(I) THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 7,50,000/- ON ACCOUNT OF TREATING A GRICULTURAL INCOME AS 'INCOME FROM OTHER SOURCES'. 2(II) THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACTS THAT IN THE GIRDAWARI FURNIS HED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THERE IS NO MENTION OF 'POPULAR TREES', RATHER ONLY 'BAGH' IS MENTIONED IN THE GIRDAWARI. 3. THAT THE LD. C1T(A) HAS ERRED IN LAW AND ON FACTS IN ADMITTING THE ADDITIONAL EVIDENCE AT APPELLATE STAGE . 2. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF AUTHORITIES BELOW AND CONSIDERED MATERIAL AVAILABLE ON RECORD. 3. ON GROUND NO. 1 OF THE DEPARTMENTAL APPEAL, REVENUE CHALLENGED DELETION OF ADDITION OF RS.1.75 CR ON ACCOUNT OF TRANSFER PRICING IN RELATION TO ARMS LE NGTH PRICE OF THE INTERNATIONAL TRANSACTION AND ON GROUN D NO. 3, CHALLENGED THE ADMISSION OF THE ADDITIONAL EVIDE NCES AT APPELLATE STAGE ON THE SAME ISSUE. 4. BRIEFLY THE FACTS OF THE CASE ARE THAT THIS GROU ND PERTAINS TO THE CLAIM OF THE ASSESSEE THAT ASSESSIN G OFFICER/TPO HAS ERRED IN DETERMINING ARMS LENGTH 3 ADJUSTMENT TO ASSESSEE'S INTERNATIONAL TRANSACTION LEADING TO ADDITION OF RS. 1.75 CR. THE PERUSAL OF THE ASS ESSMENT ORDER REVEALED THAT ASSESSEE IS A PROPRIETOR OF M/S MUNISH INTERNATIONAL AND HAS DURING THE YEAR UNDER CONSIDERATION, DEALT IN TRADING OF FORGING GOODS. THE ASSESSING OFFICER OBSERVED THAT ASSESSEE HAD ENTERE D INTO INTERNATIONAL TRANSACTIONS WITH ASSOCIATED ENTERPRI SES IN THE FOLLOWING MANNERS : I) FORGE LTD., U.K. RS. 20,55,18,265/- II) FORCAST WORLDWIDE P. LTD. RS. 1,12,66,165/- AUSTRALIA III) FORCAST LTD., CANADA RS. 56,16,978/- 2. THE CASE OF THE ASSESSEE WAS, THEREFORE, TRANSF ERRED TO THE JCIT-CUM-TRANSFER PRICING OFFICER, CHANDIGAR H IN VIEW OF THE PROVISIONS OF SECTION 92CA OF THE ACT. THE TRANSFER PRICING OFFICER (TPO) VIDE HIS ORDER DATED 29.10.2009 UNDER SECTION 92CA(3) OF THE ACT DETERMI NED ARMS LENGTH PRICE OF TRANSACTIONS AT RS. 23,99,71, 119/- AS AGAINST ASSESSEE'S DECLARATION OF RS. 22,24,01,4 08/-. THE TPO OBSERVED THAT M/S MUNISH INTERNATIONAL WAS EXPORTING VARIOUS FORGED PRODUCTS LIKE DOUBLE COUPL ER, SWIVELS COUPLER, PUTLOG COUPLER, JOINT PIN, FLANGES AND GATE HEADS ETC. AND FOR CREATING BETTER MARKETING, HAD OPENED WHOLLY OWNED SUBSIDIARIES IN U.K., CANADA AN D AUSTRALIA. THE FORGED ITEMS HAD BEEN EXPORTED TO I TS ASSOCIATED ENTERPRISES. DETAILS OF SHAREHOLDING OF THE ASSOCIATED ENTERPRISES ARE ENUMERATED AS UNDER : 4 ASSOCIATED ENTERPRISES HOLDING CO. %AGE OF SHARE HOLDING DEV ARJUNA ENTERPRISES PVT. LTD. 50% FORGE LIMITED UK SH. RS DALE 50% FORCAST WORLDWIDE (P) LTD. AUSTRALIA DEV ARJUNA ENTERPRISES PVT. LTD. 100% FORCAST LTD, CANADA DEV ARJUNA ENTERPRISES PVT. LTD. 100% 3. THE ASSESSEE, AS OBSERVED BY THE TPO HAS DETERMI NED ARMS LENGTH PRICE BY ADOPTING CUP METHOD (COMPARAB LE UNCONTROLLED PRICE METHOD). THE TPO OBSERVED THAT THE SAID METHOD WAS FOUND TO BE INCORRECT A THE TRANSFER PRI CING REPORT FILED BY THE ASSESSEE WAS FOUND TO BE SKETCH Y AND THE ASSESSEE HAD NOT CARRIED OUT ANY FUNCTION, ASSETS A ND RISK ANALYSIS. IT WAS BROUGHT ON RECORD BY THE TPO THAT ASSESSEE HAD FAILED TO MAKE ANY SUBMISSIONS AS TO HOW THE TRANSACTIONS OF EXPORTS TO ASSOCIATED ENTERPRISE WA S COMPARABLE WITH UNCONTROLLED TRANSACTIONS. THE TPO PROVIDED VARIOUS OPPORTUNITIES TO THE ASSESSEE AND ACCORDING TO THE ASSESSING OFFICER, THE SAME WERE N OT AVAILED BY THE ASSESSEE. THE DETAILS FURNISHED BY T HE ASSESSEE ARE ALSO HIGHLIGHTED IN WHICH THE ASSESSEE , ON THE BASIS OF ANALSIS ABOVE THREE ACCOUNTS OF THE PARTIE S SUBMITTED THAT IN CANADA AND AUSTRALIA, ASSESSEE HA S SOLD PRODUCT EXCLUSIVELY THROUGH ASSOCIATE ENTERPRISES, AS SUCH COMPARATIVE BILL IS NOT AVAILABLE FOR THE PRODUCT S OLD IN THESE TWO COMPANIES. TO JUSTIFY THE RATE CHARGED BY THE ASSESSEE, ASSESSEE IS TAKING PERCENTAGE GP MARGIN C HARGED BY MUNISH INTERNATIONAL AGAINST THE SAID PRODUCTS. COPIES OF BALANCE SHEET CLEARLY INDICATED THAT ASSESSEE HAS N OT 5 TRANSFERRED ITS PROFIT MARGIN BY CHARGING LESS RATE AS THERE IS NO PROFIT IN THESE TWO UNITS. FURTHER, IT IS WOR TH TO MENTION THAT IN THESE TWO ASSOCIATE ENTERPRISES, TH ERE IS NO MUCH SALES. REGARDING SALES EXPORTED THROUGH FORGE CO LTD., U.K., IT WAS SUBMITTED THAT TILL THE MONTH OF SEPTE MBER,2005 ASSESSEE HAS EXCLUSIVE SALE WITH THIS PARTY WITHOUT HAVING ANY OTHER BUYER IN U.K. HOWEVER, FROM SEPTEMBER, 20 05, ASSESSEE HAS SOLD SOME PRODUCT TO OTHER BUYERS. THE COMPARATIVE RATE CHART OF THE PRODUCT FOR SELLING T O FORGECO LTD., U.K. AS WELL AS OTHER PARTY WAS FILED. THE P ERUSAL OF THE COMPARATIVE RATE CHART INDICATES THAT ASSESSEE HAD CHARGED SAME RATE WITH OTHER PARTIES AS COMPARED TO WHAT ASSESSEE WAS CHARGING FROM FORGECO LTD., U.K. THE A SSESSEE FILED BALANCE SHEET OF ASSOCIATE ENTERPRISES AS WEL L AS ITS OWN BALANCE SHEET TO SHOW THAT THERE IS A SUFFICIEN T GROSS PROFIT MARGIN CHARGED BY THE ASSESSEE. THEREFORE, N O PROFIT HAS BEEN TRANSFERRED TO FOREIGN COUNTRY THROUGH ANY ASSOCIATE ENTERPRISES. THE TPO, HOWEVER, NOTED THA T ASSESSEE HAD NOT MADE AVAILABLE ANY DIRECT COMPARAB LES FOR APPLICABILITY OF CUP METHOD AND THEREFORE, ASSESSEE WAS DIRECTED TO EXPLAIN THE SAME THROUGH VARIOUS ORDER- SHEETS AND DETAILS WERE CALLED FOR IN SUPPORT OF THE CUP M ETHOD. THE ASSESSEE, IN RESPONSE TO THE TPOS COMMUNICATIO N, FILED DETAILS OF GROSS PROFIT MARGIN AND NET PROFIT MARGI N WHICH IS NOTED IN THE APPELLATE ORDER. THE TPO, HOWEVER, PR OCEEDED TO CARRY OUT FRESH SEARCH IN ORDER TO DETERMINE THE APPROPRIATE ARMS LENGTH PRICING AND OBSERVED THAT ASSESSEE HAS CLAIMED THAT 90% OF THE PRODUCTS SOLD TO AES AR E 6 COMPARABLE WITH THE EXPORTS MADE TO NON AES. THE C LAIM OF ASSESSEE WAS NOT ACCEPTED. THE TPO, THEREFORE, DIS CUSSED THE TRANSACTION NET MARGIN METHOD (TNMM) WAS THE BE ST STUDY FOR THE CASE UNDER CONSIDERATION. THE SEARCH CARRIED OUT BY THE TPO FINALLY LED TO SELECTION OF SHRI GAN ESH FORGING LTD. AS THE FINAL CHOICE AND IT WAS PRESUME D BY THE TPO THAT ASSESSEE HAS NO OBJECTION ON THE SELECTIO N OF THE SAID COMPARABLE. THE OPERATING PROFIT/SALES MARGIN IN THE CASE OF SHRI GANESH FORGING LTD. WAS 6.64% WHEREAS THE SAME WAS CONCLUDED AT 1.26% IN THE CASE OF THE ASSE SSEE. THE TPO, THEREFORE, PROCEEDED TO WORK OUT THE ARMS LENGTH PRICE ON THE BASIS OF TNMM METHOD AND MADE THE ADDI TION OF 1.75CR. 4. THE ASSESSEE CHALLENGED THE FINDINGS OF THE TPO AND ADDITION BEFORE LD. CIT(APPEALS) AND DETAILED WRITT EN SUBMISSIONS OF THE ASSESSEE ARE REPRODUCED IN THE A PPELLATE ORDER IN WHICH THE ASSESSEE BRIEFLY EXPLAINED THAT GROUP OF ASSESSEE COMPANIES ARE MANUFACTURING UNITS AND THEY ARE SELLING 90% PRODUCTS TO MUNISH INTERNATIONAL. MUNI SH INTERNATIONAL IS EXPORTING VARIOUS FORGED AND CAST PRODUCT ITEMS IN U.K., GERMANY, FRANCE, AUSTRALIA, CANADA A ND USA. IN ORDER TO CREATE BETTER UNDERSTANDING WITH THE BU YER AND ALSO TO PROVIDE BETTER SERVICES, THE GROUP HAS OPEN ED WHOLLY OWNED SUBSIDIARY IN U.K., CANADA AND AUSTRALIA. TH E ASSESSEE IS SELLING ITS GOODS TO ALL ITS ASSOCIATE ENTERPRISES TO CATER TO THE NEED OF VARIOUS FOREIGN BUYERS. IN DOING SO, THE ASSOCIATE ENTERPRISES ARE IN POSITION TO ADDRES S VARIOUS 7 DIFFICULTIES FACED WHILE SELLING THE PRODUCTS. THE OTHER OBJECT BEHIND THIS WAS TO KEEP STOCK IN THOSE COUNT RIES SO THAT RETAIL KIND OF TRADING COULD BE POSSIBLE, SO T HAT THE DEMAND OF BUYERS IN DIFFERENT QUANTITY COULD BE FUL FILLED. THE INCOME ARISING FROM INTERNATIONAL TRANSACTION, WITH AN ASSOCIATE ENTERPRISE MUST BE COMPUTED HAVING REGARD TO THE ARMS LENGTH PRICE AND THE CALCULATION SHOULD BE MA DE BY USING THE MOST APPROPRIATE METHOD AND IN THE CASE O F THE ASSESSEE, CUP METHOD SHOULD BE APPLIED WHERE THE AS SESSEE BUYS OR SELLS THE SAME GOODS OR SERVICES TO ASSOCIA TED ENTERPRISE AND NON ASSOCIATE ENTERPRISE. THE DETAI LS OF THE SAME WERE FURNISHED AND WERE ALSO NOTED IN THE AUDI T REPORT. IT WAS, THEREFORE, SUBMITTED THAT TPO PASS ED THE ORDER WITHOUT CONSIDERING SUBMISSIONS OF THE ASSESS EE THAT TNMM METHOD WAS NOT THE MOST APPROPRIATE METHOD IN THE CASE OF THE ASSESSEE AND CUP METHOD SHOULD BE ADOPT ED WHICH WAS MOST APPROPRIATE METHOD. THE ASSESSEE HA S FILED COMPLETE DETAILS AND UNDERTAKEN AN ECONOMIC ANALYSI S DEMONSTRATING THAT THE TRANSACTIONS WITH ITS ASSOCI ATED ENTERPRISES ARE AT ARMS LENGTH. THE TPO HAS NOT P ROVIDED ANY EVIDENCE OR BACK UP DOCUMENTATION IN SUPPORT OF THE STATEMENT TO REJECT THE TRANSFER PRICING METHOD ADO PTED BY THE ASSESSEE. THE TPO HAS MADE ONLY GENERAL REMARK S AGAINST THE WORKING OF THE ASSESSEE. IN THE CASE O F ASSESSEE MORE THAN 70% OF THE PRODUCTS THAT ARE SOLD TO THE ASSOCIATED ENTERPRISES, ARE ALSO SOLD TO NON-ASSOCI ATED ENTERPRISES AT THE PRICE WHICH ARE LESS THAN OR EQU AL TO WHAT WAS SOLD TO THE ASSOCIATED ENTERPRISES. THE TPO HA S NOT 8 APPRECIATED THAT THE COMPANIES SELECTED BY HIM AS COMPARABLE IS A MUCH LARGER COMPANY WITH A HIGH MAR KETING AND HAS INDUSTRIAL BRAND AND INCUR R&D EXPENSES. T HE TPO HAS ACCEPTED COMPANIES THAT ARE ENGAGED IN MANUFACT URING OPERATION BUT IN THE CASE OF THE ASSESSEE, IT WAS O NLY TRADING. IT WAS SUBMITTED THAT IN THE EARLIER YEAR , THE SIMILAR TRANSACTIONS WERE CARRIED OUT AND NO ADVERS E INFERENCE HAD BEEN DRAWN AGAINST THE ASSESSEE. IN T HE YEAR UNDER CONSIDERATION, ASSESSEE WAS PRIMARILY ENGAGED IN BUYING FORGED ITEMS FROM THE DOMESTIC MARKET AND EX PORTING THEM OUTSIDE INDIA TO ITS ASSOCIATE ENTERPRISES AND NON ASSOCIATED ENTERPRISES ACROSS THE GLOBE. IT WAS, T HEREFORE, BUSINESS OF THE ASSESSEE IN TRADING/DISTRIBUTION. THE CUP METHOD WAS, THEREFORE, MOST APPROPRIATE METHOD IN T HE CASE OF THE ASSESSEE WHICH ARE ALSO APPROVED BY THE GUID ANCE NOTE ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTAN TS OF INDIA BEING THERE IS A TRANSFER OF GOODS IN THE CAS E OF THE ASSESSEE. THE ASSESSEE FURTHER SUBMITTED THAT ASSE SSEE MADE SUFFICIENT COMPLIANCE BEFORE TPO BY FILING THE ADEQUATE DETAILS. 4(I) THE TPO HAS CONSIDERED SHRI GANESH FORGING LT D. AS ONLY COMPARABLE COMPANY AND NO ADEQUATE OPPORTUNITY WAS PROVIDED TO THE ASSESSEE TO RAISE THE OBJECTION IN THIS REGARD. IN THIS COMPANY, THERE WAS MANUFACTURING B UT IN THE CASE OF THE ASSESSEE, THERE WAS NO MANUFACTURIN G, THEREFORE, IT COULD NOT BE CONSIDERED AS COMPARABLE . IN THE CASE OF SHRI GANESH FORGING LTD., WHICH IS A LIMITE D 9 COMPANY, HAS TURNOVER OF ABOUT 90 CRORES PLUS, WHIC H IS ABOUT 30% MORE THAN THE ASSESSEE, THEREFORE, ASSESS EE COULD NOT BE A COMPARABLE COMPANY. THE ADVERTISING AND MARKETING EXPENSES FOR SALES INCURRED BY ASSESSEE D URING THE YEAR IS 1.40% WHEREAS THE SAME IN THE CASE OF S HRI GANESH FORGING LTD. IS 5.78%. IN THE CASE OF SHRI GANESH FORGING LTD., IT HAS 90% MARKET SHARE IN INDIA AND ONLY 52% SHARE IN EXPORT BUT IN THE CASE OF THE ASSESSEE, IT IS 100% EXPORT UNIT. IT WAS ALSO SUBMITTED THAT 5% VARIATI ON FROM ARITHMETICAL MEAN IS ALLOWED, AS SUCH BENEFIT SHOUL D BE GIVEN TO THE ASSESSEE. IN SUBSEQUENT ASSESSMENT YE AR 2007- 08, THE ASSESSEE ENTERED INTO SIMILAR TRANSACTIONS PERTAINING TO SALE OF GOODS TO THE ASSOCIATED ENTERPRISES. TH E TPO AFTER EXAMINING THE DETAILS AND SCRUTINY ASSESSMENT , ACCEPTED THE TRANSFER PRICING OF THESE INTERNATIONA L TRANSACTIONS. IT WAS, THEREFORE, SUBMITTED THAT ON PRINCIPLE OF CONSISTENCY, THE ASSESSING OFFICER SHOULD NOT MA KE ADDITION AND ASSESSEE RELIED UPON DECISION OF THE H ON'BLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG VS CIT 193 ITR 321. 5. THE ASSESSING OFFICER SUBMITTED HIS COMMENTS ON THE SAME WRITTEN SUBMISSION OF THE ASSESSEE AND EXPLAIN ED THAT THE TRANSFER PRICING STUDY REPORT PREPARED BY THE A SSESSEE WAS VERY SKETCHY AND THAT THE EXPLANATION OF THE AS SESSEE THAT CUP METHOD WAS THE BENCHMARK WAS NOT SUBSTANTI ATED. IT WAS SUBMITTED THAT IN ASSESSMENT YEAR 2007-08, S INCE THE MARGIN OF THE ASSESSEE WAS BETTER, NO ADJUSTMENT WA S MADE. 10 6. THE ASSESSEE FURTHER FILED APPLICATION UNDER RUL E 46A OF IT RULES FOR ADMISSION OF THE ADDITIONAL DOCUMEN TS TO JUSTIFY THE APPLICATION OF CUP METHOD AND ALSO TO S HOW AS TO WHY SHRI GANESH FORGING LTD. WAS NOT A COMPARABLE C ASE EVEN UNDER TNMM METHOD. THE ASSESSEE ALSO EXPLAINED THAT AT THE ASSESSMENT STAGE, ASSESSEE FILED THE DETAILS AND SINCE THE ACCOUNTANT OF THE ASSESSEE WAS NOT WELL AND MET UNTIMELY DEATH ON 16.09.2011, THEREFORE, IT WAS NOT POSSIBLE TO EXACTLY POINT OUT WHICH DOCUMENT COULD NOT BE FU RNISHED BEFORE TPO IN THE DESIRED FORMAT. THE FOLLOWING IN FORMATION WHICH HAS ALSO BEEN FILED DURING THE COURSE OF ASSE SSMENT PROCEEDINGS, WERE ALSO FILED BY WAY OF ADDITIONAL E VIDENCE. THE SAME ARE NOTED AT PAGE 36 OF THE APPELLATE ORDE R AND READS AS UNDER : 1. SUMMARY OF COMPARABLE TRANSACTIONS WITH COPIES OF INVOICES AND DETAILS OF TOTAL SALE, THEIR TERMS, PAYMENT PERIOD. 2. SUBMISSIONS ON REJECTION OF SHREE GANESH FORGINGS LIMITED AS A COMPARABLE AND THE DIFFERENCE IN ARRIVING AT THE OPERATING MARGINS. 3. CERTIFICATION HELD ALONG WITH PROOF OF BRAND EXISTE NCE 4. WORKING OF SALES PROMOTIONS EXPENSES 5. LIST OF PRODUCT RANGE OF SHREE GANESH FORGING LIMIT ED 6. BALANCE SHEET OF SHREE GANESH FORGING LIMITED 6(I) IT WAS, THEREFORE, SUBMITTED THAT SINCE ASSES SEE WAS PREVENTED BY SUFFICIENT CAUSE, THEREFORE, THESE DOC UMENTS COULD NOT BE FILED BEFORE TPO. IT WAS FURTHER SUBM ITTED THAT THE CASE OF SHRI GANESH FORGING LTD. IS NOT A COMPA RABLE 11 CASE BECAUSE IT IS NOT FUNCTIONALLY COMPARABLE, THE REFORE, IT SHOULD BE REJECTED. IT WAS ALSO SUBMITTED THAT TNM M METHOD IS NOT APPLICABLE IN THE CASE OF THE ASSESSE E THEREFORE, ADDITION WAS UNJUSTIFIED. THE COMMENTS OF THE ASSESSING OFFICER WERE ALSO CALLED FOR IN WHICH THE ASSESSING OFFICER SUBMITTED THAT DESPITE GIVING AMPLE OPPORTU NITIES BY TPO, ASSESSEE HAS NOT FILED DESIRED DETAILS FOR USI NG THE CUP METHOD. SINCE DETAIL ON CUP METHOD WAS NOT FURNISH ED, THEREFORE, MADE FRESH SEARCH AND TNMM METHOD WAS ADOPTED. THE ASSESSING OFFICER, THEREFORE, REQUEST ED THAT ADDITIONAL EVIDENCE MAY BE REJECTED. WITH REGARD T O SELECTION OF SHRI GANESH FORGING LTD AS COMPARABLE, IT IS STATED THAT THIS COMPANY HAS MORE THAN 25% OF ITS I NCOME FROM TRADING ACTIVITIES. HOWEVER, IT IS A FACT THA T THIS COMPANY IS ALSO ENGAGED IN MANUFACTURING. THE PRES ENCE OF SOME MANUFACTURING IN THE TOTAL INCOME OF THE COMPA RABLE WILL NOT MAKE ANY DIFFERENCE. 7. THE ASSESSEE IN THE REJOINDER REITERATED THE SAM E FACTS AND IT WAS SUBMITTED THAT COMPARISON OF ONLY ONE CA SE IN THE CASE OF SHRI GANESH FORGING LTD. IS NOT APPROP RIATE BECAUSE IT WAS A MANUFACTURING COMPANY AND IN THE C ASE OF ASSESSEE, IT IS TRADING UNIT. IT WAS ALSO SUBMITTED THAT THE ADDITIONAL EVIDENCES NOW FURNISHED ARE RELEVANT DOC UMENTS AND EVEN THE SAME WERE SUBMITTED BEFORE TPO WHICH I S CLEAR FROM HIS ORDER-SHEET. TECHNICALLY THESE ADDITIONAL EVIDENCES ARE ONLY SUPPORTING EVIDENCES IN SUPPORT OF DETAILS FILED BEFORE ASSESSING OFFICER. IT WAS, THEREFORE, SUBMI TTED THAT 12 CUP METHOD IS APPROPRIATE METHOD TO BE APPLIED IN T HE CASE OF ASSESSEE, THEREFORE, ADDITION BE DELETED. 8. THE LD. CIT(APPEALS), CONSIDERING SUBMISSION OF THE ASSESSEE, ACCEPTED THE CLAIM OF ASSESSEE AND DELETE D THE ENTIRE ADDITION. HIS FINDINGS IN PARA 16 OF THE AP PELLATE ORDER ARE REPRODUCED AS UNDER : 6. I HAVE CONSIDERED THE BASIS OF ARM'S LENGTH P RICING ADOPTED BY THE TRANSFER PRICING OFFICER, THE ARGUMENTS OF THE AR DURING THE ASSESSEE AS WELL AS APPELLATE PROCEEDING S, THE COMMENTS OF THE ASSESSING OFFICER IN THE REMAND REP ORT AND THE REJOINDER OF THE AR ON THE SAME. IT IS IMPORTANT TO APPRECIATE HERE THAT THE TPO HAD REJECTED THE TP STUDY CARRIED OUT BY THE APPELLANT ON THE GROUND THAT THE INFORMATION PROVIDE D TO SUPPORT THE SAME WAS SKETCHY AND THE ASSESSEE HAD NOT PROVIDED DETAILS OF INVOICES ON WHICH IT HAD CARRIE D OUT SAID ANALYSIS. THE TRANSFER PRICING OFFICER HAD CARRIED OUT A FRESH STUDY UNDER TNMM METHOD WHEREIN M/S GANESH FORGING LTD. HAD BEEN CHOSEN AS A COMPARABLE HAVING A PROFIT MARGIN OF 6.64%. IT HAD BEEN POINTED OUT BY THE AR OF THE APPELLANT DUR ING APPELLANT PROCEEDINGS THAT THE TP STUDY CARRIED OUT BY THE TPO WAS SERIOUSLY FLAWED AS M/S GANESH FORGING LTD WAS FUNCTIONALLY COMPLETELY DIFFERENT AS 50% OF ITS TURNOVER WAS ON ACCOUNT OF MANUFACTURING WHEREAS THE ASSESSEE HAD NO MANUFACTURING AT ALL. IT IS VITALLY IMPORTAN T TO NOTE THAT THE TPO IN RESPONSE TO AR'S SUBMISSIONS HAD CLEARLY ACCEPTED IN PARA 2 OF HIS REPORT DATED 07.03.2013 THAT SOME MANU FACTURING IN COMPARABLES CASE WOULD NOT MAKE ANY DIFFERENCE B UT SUBSTANTIALLY WOULD. IT THEREFORE BECOMES QUITE APPA RENT THAT M/S GANESH FORGING LTD HAVING 50% OF ITS TURNOVER FROM MANUFACTURING IS NOT FIT TO BE TREATED AS COMPARABLE UNDER TNMM M ETHOD. IT IS ALSO TO BE APPRECIATED THAT M/S GANESH FORGING LTD. H AS ABOUT 50% TURNOVER FROM EXPORTS WHEREAS THE ASSESSEE HAD 100% EXPORTS DURING THE YEAR UNDER CONSIDERATION. IN VIEW OF THES E TWO VITAL 13 DIFFERENCES, THE CASE OF M/S GANESH FORGING LTD ADO PTED BY THE ASSESSING OFFICER AS COMPARABLE UNDER TNMM METHOD CA NNOT BE SAID TO BE JUSTIFIED AT ALL. THIS BEING SO, THE TRA NSFER PRICING STUDIES CARRIED OUT BY THE TPO HAS NOT RESULTED INTO T HE DESIRED DETERMINATION OF CORRECT ARM'S LENGTH PRICING. FURT HER, IT IS SEEN THAT THE ASSESSEE DURING THE APPELLATE PROCEEDINGS HAS CLEARLY BROUGHT OUT AS TO HOW THE CUP METHOD WAS APPLICABLE TO THE FACTS OF THE CASE BEING THE MOST DESIRABLE METHOD. T HE ASSESSING OFFICER IN RESPONSE TO THE SAME HAS MERELY OBJECTED TO ADOPTION OF THE SAME ON THE GROUND THAT SUFFICIENT DATA DURING ASSESSMENT PROCEEDINGS TO SUPPORT THE SAME HAD NOT BEEN PROVIDE D. HOWEVER, NO INCONSISTENCY WITH REGARD TO THE MERITS OF CUP METHOD AS DETAILED DURING THE APPELLATE PROCEEDINGS HAS BEEN RAISED BY THE TPO IN HIS REMAND REPORT. IT IS QUITE CLEAR FROM TH E PERUSAL OF THE TP STUDY CARRIED OUT BY THE ASSESSEE THAT THE PRICES CHA RGED FROM THE UNCONTROLLED ENTERPRISES ARE EITHER EQUAL TO OR LOWE R THAN THE PRICES CHARGED FROM ASSOCIATED ENTERPRISES. HERE, I T IS IMPORTANT TO APPRECIATE THAT THE ASSESSEE DURING THE APPELLAT E PROCEEDINGS HAS PROVIDED THE DETAILED SUPPORTING DATA TO JUSTIF Y THE CUP METHOD WHICH HAD NOT BEEN DONE AT THE TIME OF ASSES SMENT STAGE. THE SAME WAS PROPOSED TO BE FILED DURING APPE LLATE PROCEEDINGS IN THE FORM OF ADDITIONAL EVIDENCE TO WHI CH THE ASSESSING 0FFICER HAD OBJECTED. I AM OF THE VIEW TH AT THE DATA SUBMITTED BY THE APPELLANT DURING THE APPELLATE PROC EEDINGS, TECHNICALLY TERMED AS ADDITIONAL EVIDENCE IS IN FACT MEANT TO SUPPORT THE DETAILS ALREADY FILED DURING ASSESSMENT PROCEEDI NGS. IT IS ANOTHER MATTER THAT THE SAID DETAILS FILED DURING ASS ESSMENT PROCEEDINGS WERE SKETCHY AND NOT IN THE DESIRED FOR MAT TO PERMIT THE ASSESSING OFFICER TO SATISFY HIMSELF WITH THE AP PLICABILITY OF CUP METHOD. THE DETAILS FILED DURING APPELLATE PROC EEDINGS WHICH HAD BEEN REPRODUCED IN AR'S LETTER DATED 01.0 1.2013 ARE THEREFORE TAKEN INTO CONSIDERATION TO HOLD THAT CUP METHOD LEADS TO CORRECT DETERMINATION OF ARM'S LENGTH PRICING. SINCE IT HAS BEEN HELD THAT THE COMPARABLE USED BY THE TPO UNDER T NMM METHOD WAS FUNCTIONALLY SUBSTANTIALLY DIFFERENT FRO M THE APPELLANT, THEREFORE, COULD NOT LEAD TO CORRECT DET ERMINATION OF ARM'S LENGTH PRICE, THE ADDITION BASED BY THE TPO ON THE SAID 14 TNMM METHOD IS NOT JUSTIFIED. IN THIS BACKGROUND, T HE ARM'S LENGTH PRICE DETERMINED ACCORDING TO THE CUP METHOD AS CARRIED OUT BY THE ASSESSEE IS HELD TO LEAD TO CORRECT ARM'S LENGTH PRICING AS RECORDED IN THE ASSESSEE'S BOOKS OF ACCOUNTS. TH EREFORE THE ADDITION MADE ON THIS ACCOUNT IS DIRECTED TO BE DELET ED. 9. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PA RTIES. THE LD. DR RELIED UPON ORDER OF THE ASSESSING OFFIC ER AND SUBMITTED THAT THOUGH THE CUP METHOD IS IN FAVOUR O F THE ASSESSEE BUT DATA WAS NOT FILED BEFORE AUTHORITY BE LOW. IT WAS FILED ONLY BEFORE LD. CIT(APPEALS) AT APPELLATE STAGE. HE HAS SUBMITTED THAT TPO HAS CORRECTLY SELECTED ONE COMPARABLE IN THE CASE OF SHRI GANESH FORGING LTD. FOR THE PURPOSE OF MAKING THE ADDITION. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND SUBMITTED THAT CUP MET HOD IS APPROPRIATE METHOD TO BE APPLIED IN THE CASE OF THE ASSESSEE WHICH IS NOT DISPUTED BY ASSESSING OFFICER EVEN IN THE REMAND PROCEEDINGS BEFORE LD. CIT(APPEALS) AND EVEN LD. DR SUBMITTED THAT CUP METHOD IS APPROPRIATE IN THE CAS E OF ASSESSEE. HE HAS REFERRED TO TRANSFER PRICING ORDE R AND APPELLATE ORDER AND REFERRED TO THE FINDINGS OF THE LD. CIT(APPEALS) WITH REGARD TO CONSIDERATION OF APPLIC ATION UNDER RULE 46A OF IT RULES. PB-2 (203) IS THE APPLI CATION UNDER RULE 46A WHICH IS SUPPORTED BY ALL THE DATA A ND DOCUMENTS FROM PB-217 TO 333. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THESE DETAILS WERE FILED IN SUPPORT OF THE MATERIAL AND EVIDENCES PRODUCED BEFORE TPO O N WHICH 15 EVEN THE TPO FILED REMAND REPORT (PB-334) IN WHICH ALSO THE TPO HAS NOT OBJECTED TO THE MATERIAL FILED BY ASSES SEE ON MERITS. HE HAS SUBMITTED THAT SINCE CUP METHOD IS APPROPRIATE IN THE CASE OF ASSESSEE, THEREFORE, LD. CIT(APPEALS) CORRECTLY DELETED THE ADDITION. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MA TERIAL AVAILABLE ON RECORD. THE TPO REJECTED THE TRANSFE R PRICING STUDY CARRIED OUT BY THE ASSESSEE ON THE REASON THA T SAME WAS SKETCHY AND ASSESSEE HAS NOT PROVIDED DETAILS O F INVOICES ON WHICH IT HAD CARRIED OUT SUCH ANALYSIS. THE TPO, THEREFORE, MADE FRESH STUDY UNDER TNMM METHOD WHEREIN SHRI GANESH FORGING LTD. WAS CHOSEN AS COMPARABLE. THE ASSESSEE, HOWEVER, POINTED OUT THA T THE COMPARABLE IN THE CASE OF SHRI GANESH FORGING LTD. WAS FUNCTIIONALLY COMPLETELY DIFFERENT AS 50% OF ITS TU RNOVER WAS ON ACCOUNT OF MANUFACTURING BUT IN THE CASE OF THE ASSESSEE, THERE IS NO MANUFACTURING ACTIVITY. THIS VITAL POI NT HAS BEEN IGNORED BY TPO AND AS SUCH, COULD NOT BE CONSI DERED AS COMPARABLE. THE DETAILS FILED BY ASSESSEE SHOWS CUP METHOD WAS APPROPRIATE AND THERE ARE VITAL DIFFEREN CES IN FUNCTIONS OF M/S GANESH FORGING LTD. THEREFORE, IT WAS NOT COMPARABLE. 10(I) THE ASSESSEE HAS ALSO HIGHLIGHTED VARIOUS OTHER ISSUES IN THE WRITTEN SUBMISSIONS BEFORE LD. CIT(AP PEALS) TO SHOW THAT SHRI GANESH FORGING LTD. IS NOT A COMPARA BLE CASE TO BE ADOPTED FOR THE PURPOSE OF APPLYING TNMM METH OD IN THE CASE OF THE ASSESSEE. THERE IS NO OTHER COMPAR ABLE 16 BROUGHT ON RECORD TO JUSTIFY ADOPTION OF TNMM METHO D IN THE CASE OF THE ASSESSEE FOR THE PURPOSE OF MAKING THE ADDITION. THE LD. CIT(APPEALS), THEREFORE, ON CONSIDERATION O F THE RELEVANT MATERIAL ON RECORD, RIGHTLY REJECTED THE F RESH STUDY CARRIED OUT BY THE ASSESSING OFFICER TO ADOPT COMPA RABLE OF SHRI GANESH FORGING LTD IN THIS CASE. THE FINDINGS OF THE LD. CIT(APPEALS) ARE SUPPORTED BY THE FACT THAT IN SUBS EQUENT ASSESSMENT YEAR 2007-08, ASSESSEE CARRIED OUT THE S IMILAR TRADING ACTIVITIES WITH ASSOCIATE ENTERPRISES AND O N THE SAME TYPE OF STUDY AND MATERIAL ON RECORD, THE TPO DID NOT SUGGEST TO MAKE ANY ADDITION AGAINST THE ASSESSEE. SINCE FACTS ARE SAME AND IN SUBSEQUENT YEAR, CUP METHOD W AS FOUND APPROPRIATE METHOD TO BE APPLIED IN THE CASE OF ASSESSEE, THEREFORE, THERE IS NO QUESTION OF DEVIAT ION FROM THE STAND TAKEN BY THE REVENUE. THE ASSESSEE HAS P RODUCED SUFFICIENT MATERIAL AT THE APPELLATE PROCEEDINGS WH ICH CLEARLY BROUGHT OUT AS TO HOW THE CUP METHOD WAS APPLICABLE TO THE FACT OF THE CASE BEING THE MOST D ESIRABLE METHOD. THE ASSESSING OFFICER IN THE REMAND REPORT HAS MERELY OBJECTED TO THE ADMISSION OF THE SAME UNDER RULE 46A BECAUSE SAME DATA WAS NOT FURNISHED BEFORE ASSE SSING OFFICER/TPO. HOWEVER, ASSESSING OFFICER HAS NOT DI SPUTED THE CORRECTNESS OF THE MATERIAL PRODUCED BEFORE LD. CIT(APPEALS) IN SUPPORT OF THE MATERIAL ALREADY FIL ED AT THE ASSESSMENT STAGE TO SHOW THAT CUP METHOD WAS APPROP RIATE METHOD TO BE APPLIED IN THE CASE OF THE ASSESSEE. 17 10(II) FURTHER, LD. CIT(APPEALS) AFTER GIVING O PPORTUNITY OF BEING HEARD TO THE ASSESSING OFFICER HAS CONSIDERED THE ADDITIONAL EVIDENCES AT THE APPELLATE STAGE, WHICH IN THE OPINION OF THE LD. CIT(APPEALS), WAS NOTHING BUT TH E SAME MATERIAL FILED IN SUPPORT OF THE DETAILS ALREADY FI LED AT THE ASSESSMENT PROCEEDINGS. HON'BLE PUNJAB & HARYANA H IGH COURT IN THE CASE OF KULDEEP INDUSTRIAL CORPORATION 209 CTR 400 HELD THAT, WHEN ASSESSING OFFICER WAS PRESENT BEFORE LD. CIT(APPEALS) AND DID NOT RAISE ANY OBJECTION UN DER RULE 46A, RULE 46A NOT VIOLATED. SINCE IN THE PRESENT CASE, IT IS ADMITTED FACT THAT ASSESSEE FILED THE EVIDENCES AND MATERIAL BEFORE TPO IN SUPPORT OF THE STUDY CARRIED OUT BY ASSESSEE FOR APPLYING CUP METHOD WHICH, ACCORDING T O THE TPO WAS ONLY SKETCHY INFORMATION, WOULD CLEARLY SUG GEST THAT ASSESSEE HAS FURNISHED THE INFORMATION AND MATERIAL/STUDY BEFORE ASSESSING OFFICER/TPO IN SUPP ORT OF HIS CLAIM THAT CUP METHOD IS THE APPROPRIATE METHOD . IN SUPPORT OF THE SAME MATERIAL, THE ASSESSEE FURNISHE D FURTHER DETAILED MATERIAL BEFORE LD. CIT(APPEALS) AT APPELL ATE STAGE ON WHICH REMAND REPORT FROM THE ASSESSING OFFICER W AS ALSO CALLED FOR IN WHICH ASSESSING OFFICER HAS NOT POINT ED OUT ANY INFIRMITY IN THE MATERIAL/STUDY FURNISHED BY THE AS SESSEE AT THE APPELLATE STAGE IN SUPPORT OF THE APPLICATION O F CUP METHOD IN THE CASE OF THE ASSESSEE. THEREFORE, THER E IS NO ERROR IN THE ORDER OF LD. CIT(APPEALS) IN CONSIDERI NG THE EVIDENCES PRODUCED AT THE APPELLATE STAGE. THE ASS ESSEE WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING ADDITI ONAL EVIDENCES BEFORE TPO/A.O. BECAUSE THE ACCOUNTANT WH O WAS 18 LOOKING AFTER THE MATTER WAS NOT WELL AT THAT STAGE AND ULTIMATELY HE EXPIRED. THIS EXPLANATION OF THE ASS ESSEE HAVE NOT BEEN CHALLENGED BY THE REVENUE THROUGH ANY MATE RIAL ON RECORD. THE LD. CIT(APPEALS) ON PERUSAL OF THE TRAN SFER PRICING STUDY CARRIED OUT BY THE ASSESSEE, CAME TO THE FINDING THAT PRICES CHARGED FROM THE UNCONTROLLED ENTERPRISES ARE EITHER EQUAL OR LOWER THAN THE PRIC ES CHARGED FROM THE ASSOCIATE ENTERPRISES. THE FINDINGS OF FA CT RECORDED BY LD. CIT(APPEALS) HAS NOT BEEN REBUTTED BY THE REVENUE THROUGH ANY MATERIAL ON RECORD. IT WOULD, THEREFORE, CLEARLY SUPPORT THE CONTENTION OF THE AS SESSEE THAT CUP METHOD WAS RELEVANT TO BE APPLIED IN THE C ASE OF THE ASSESSEE. THE LD. CIT(APPEALS) WAS, THEREFORE, JUSTIFIED IN HOLDING THAT THE COMPARABLE USED BY THE TPO UNDE R TNMM METHOD WAS FUNCTIONALLY AND SUBSTANTIALLY DIFF ERENT FROM THE STUDY OF ASSESSEE, THEREFORE, COULD NOT LE AD TO CORRECT DETERMINATION OF ARMS LENGTH PRICE. THERE FORE, ADDITION MADE BY THE ASSESSING OFFICER ON TNMM METH OD WOULD NOT BE JUSTIFIED. IN THIS BACKGROUND, THE AR MS LENGTH PRICE DETERMINED ACCORDING TO THE CUP METHOD AS CAR RIED OUT BY THE ASSESSEE IS CORRECT ARMS LENGTH PRICING REC ORDED IN ASSESSEE'S BOOKS OF ACCOUNT. THE LD. CIT(APPEALS), THEREFORE, ON PROPER APPRECIATION OF EVIDENCES AND MATERIAL ON RECORD, CORRECTLY DELETED THE ADDITION. 11. WE MAY ALSO NOTE HERE THAT THE SOLE CONTENTION OF LD. DR WAS THAT SINCE THE CUP DATA WAS NOT FURNISHED BE FORE ASSESSING OFFICER, THEREFORE, ADDITION SHOULD NOT B E DELETED. 19 THE LD. DR, HOWEVER, SUBMITTED THAT IN THE CASE OF ASSESSEE, CUP METHOD SHOULD BE APPLIED, WOULD CLEARLY SUGGEST THAT THE CUP METHOD WAS CORRECTLY APPLIED BY LD. CIT(APP EALS) IN THE IMPUGNED ORDER. THEREFORE, THERE IS NOTHING WRO NG IN THE ORDER OF LD. CIT(APPEALS) IN DELETING THE ADDITION. GROUND NOS. 1 AND 3 OF THE APPEAL OF THE REVENUE ARE DISMI SSED. 12. ON GROUND NO. 2, REVENUE CHALLENGED DELETION OF ADDITION OF RS.7,50,000/-. THE ASSESSING OFFICER I N THIS REGARD HAS OBSERVED THAT ASSESSEE DECLARED RS. 9,68 ,860/- AS INCOME FROM AGRICULTURE WHICH INCLUDES SALE OF P OPULAR TREES AMOUNTING TO RS. 7,50,000/-. THE ASSESSING O FFICER FURTHER OBSERVED THAT ASSESSEE FILED GIRDAWARI IN S UPPORT OF THE CULTIVATION OF KINNOWS BUT DID NOT FILE COPY OF THE LEASE DEED OR GIRDAWARI IN SUPPORT OF THE POPULAR TREES . ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSE E ONLY FILED AGREEMENT MADE WITH ONE SHRI ASHOK JUNEJA, ACCORDING TO WHICH THE AMOUNT HAD BEEN RECEIVED BY CHEQUE ON SALE OF POPULAR TREES. THE ASSESSING OFFICER HE LD THAT ASSESSEE COULD NOT SUPPORT THE CLAIM OF AMOUNT BEIN G ON ACCOUNT OF SALE OF POPULAR TREES AS NO EVIDENCE OF POSSESSION OF LAND AND CULTIVATION HAS BEEN FILED. THE LD. CI T(APPEALS), CONSIDERING THE SUBMISSION OF THE ASSESSEE, DELETED THE ADDITION. HIS FINDINGS IN PARA 18 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER : I HAVE CONSIDERED THE BASIS OF ADDITION MADE BY TH E ASSESSING LEER AND THE ARGUMENTS OF THE AR ON THE ISS UE. IT IS SEEN THAT THE ASSESSING OFFICER HAS DOUBTED THE 20 ASSESSEE'S CLAIM REGARDING EARNING OF AGRICULTURAL I NCOME ON ACCOUNT OF SALE OF POPULAR TREES ON THE GROUND T HAT THE ASSESSEE HAD NOT SUBMITTED THE PROOF OF OWNERSHIP/POSSESSION OF THE LAND AND CULTIVATION. IN T HIS REGARD, THE ASSESSMENT RECORD HAD BEEN PERUSED AND IT WAS SEEN THAT THE ASSESSEE HAD SUBMITTED THE SPECIF IC PROOF IN THIS REGARD VIDE HIS LETTER DATED 27.11.20 09 AS UNDER : THE LAND IN QUESTION, WHERE POPULAR TREE WAS PLANT, WAS TAKEN ON LEASE IN THE YEAR 1996. THE COPY OF THE LEASE DEED IS ALREADY FILED. THE SAPLING OF POPULAR TR EE WAS DONE IN THE YEAR IN WHICH LAND WAS TAKEN ON LEASE. THE TRANSPORTATION BEAR BY THE BUYER.' IT IS ALSO SEEN FROM THE ASSESSMENT RECORD THAT THE ASSESSEE HAD FILED COPY OF THE CERTIFICATE ISSUED BY THE WAKF BOARD TRANSFERRING THE LEASE IN FAVOUR OF THE APPELLANT. T HE ASSESSING OFFICER HAS CLEARLY OMITTED TO TAKE COGNIZ ANCE OF THESE VITAL DOCUMENTS FILED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS AND HAD PROCEEDED TO MAKE THE RIGHT PRESUMPTION ON WRONG FACTS. IT IS ALSO SEEN THAT THE ASSESSEE HAD BEEN DECLARING HIS AGRICULTURAL INCOME FOR THE LAST SIX YEARS IN THE FOLLOWING FASHION : 1999-2000 270616 2000-2001 138165 2001-2002 238779 2002-2003 321250 2003-2004 371734 2004-2005 221175 THE PERUSAL OF THE ABOVE DETAILS SHOWS THAT NO AGRICULTURAL INCOME IN RESPECT OF THE LAND TAKEN ON LEASE FROM WAKF BOARD HAS BEEN REFLECTED AS THE INCOME IS GENERALLY OF SAME LEVEL AS REFLECTED IN CURRENT ASS ESSMENT YEAR PERTAINING TO SALE OF KINNOW FRUIT. IN THE CIRCUMSTANCES, IT BECOMES CLEAR THAT THE AS SESSEE HAD BEEN IN POSSESSION OF LAND OF THE WAKF BOARD SINCE 1996 21 AND THE SAID LAND HAD NOT SEEN PUT TO USE FOR REGUL AR AGRICULTURAL OPERATIONS. THE TREES HAD BEEN PLANTED I N THE YEAR 1996 WHICH WERE LATER CUT AND SOLD IN THE UNDE R CONSIDERATION. THE ASSESSEE HAS ALSO FILED EVIDENCE OF HAVING SOLD THE POPULAR TREES FOR WHICH PAYMENT HAD BEEN RECEIVED THROUGH CHEQUE FROM THE CONCERNED BUYER. IN THE CIRCUMSTANCES, THERE IS NOTHING TO HOLD THE VIEW THAT THE INCOME SHOWN BY THE ASSESSEE AS AGRICULTURAL INCOME W AS IN FACT INCOME FROM UNEXPLAINED SOURCES. THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER IS DIRECTED T O BE DELETED. 13. AFTER HEARING RIVAL CONTENTION, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. THE LD. CIT(APPEALS) FOUND THAT ASSESSING OFFICER HAS DOUBT ED THE ASSESSEE'S CLAIM REGARDING EARNING OF AGRICULTURE I NCOME ON THE GROUND THAT ASSESSEE HAD NOT SUBMITTED THE PROO F OF OWNERSHIP/POSSESSION OF THE LAND AND CULTIVATION. THE LD. CIT(APPEALS), ON PERUSAL OF THE ASSESSMENT RECORD F OUND THAT ASSESSEE HAS FILED COPY OF THE LEASE DEED AND SAPLING OF POPULAR TREES WAS DONE IN THE YEAR IN WHICH LAND WA S TAKEN ON LEASE. THE RECORD ALSO SHOWS THAT ASSESSEE HAS FILED COPY OF CERTIFICATE ISSUED BY WAKF BOARD TRANSFERRING TH E LEASE IN FAVOUR OF THE ASSESSEE WHICH WAS NOT CONSIDERED BY THE ASSESSING OFFICER. IT WAS ALSO FOUND THAT IN EARLI ER YEARS, ASSESSEE HAS SHOWN AGRICULTURE INCOME WHICH IS ACCE PTED. THE LAND WAS SAME WHICH WAS TAKEN FROM WAKF BOARD. THE LD. CIT(APPEALS), FROM THE DETAILS ON RECORD FOUND THAT NO AGRICULTURE INCOME IN RESPECT OF THE LAND TAKEN ON LEASE FROM WAKF BOARD HAS BEEN REFLECTED IN THE INCOME WH ICH 22 MAKES IT CLEAR THAT ASSESSEE HAD BEEN IN POSSESSION OF THE LAND OF THE WAKF BOARD SINCE 1996 AND LAND HAD NOT BEEN PUT TO USE FOR REGULAR AGRICULTURE OPERATIONS. THE TREES HAD BEEN PLANTED IN THE YEAR 1996 AND WERE LATER ON SOL D IN THE ASSESSMENT YEAR UNDER APPEAL. THE AMOUNTS OF SALE OF POPULAR TREES WERE RECEIVED THROUGH CHEQUE. THE LD . CIT(APPEALS) WAS, THEREFORE, JUSTIFIED IN DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE. THIS GROUND OF APPEAL O F THE REVENUE HAS NO MERIT AND THE SAME IS ACCORDINGLY DI SMISSED. 14. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (ANNAPURNA MEHROTRA) (BHAVNESH SAI NI) ACCOUNTANT MEMBER JUDICIAL MEMB ER DATED: 15 TH OCT., 2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR ITAT/CHD