Asst. Commissioner of Income Tax, Panaji V. M/s. Karishma Impex, Panaji

ITA 14/PAN/2013

• Counselvise Citation: 1424114 RSA 2013
• Duration Of Justice: 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 05-02-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AMRIT RAJ SINGH
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P. K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 14 /PNJ/201 3 (ASST. YEAR 20 09 - 10 ) ASST. COMMISSIONER OF INCOME - TAX APPELLANT CIRCLE - 2(1), PANAJI, GOA. VS M/S. KARISHMA IMPEX RESPONDENT 601/602, 6 TH FLOOR, GERA IMPERIUM, PATTO PLAZA, PANAJI GOA. PAN : AAGFK6969E APPELLANT BY : SHRI AMRIT RAJ SINGH (DR) RESPONDENT BY : SHRI JITENDRA JAIN (ADV.) DATE OF HEARING : 22 / 04 /2013 DATE OF ORDER : 26 / 04 /2013 O R D E R PER P.K. BANSAL : 1. THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DT. 18.12.2012 BY TAKING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL : 1) THE LD CIT(A) HAS ERRED IN ALLOWING THE ENTIRE ADDITION OF RS. 90,49,600/ - MADE U/S. 40A(2) BY THE AO, IGNORING THE EXCESS AMOUNT PAID BY THE ASSESSEE FOR PURCHASE OF IRON ORE TO ITS SISTER CONCERN M/S. KARISHMA EXPORTS AT RS. 5000/ - PMT AS COMPARED TO THE OUTSIDE PURCHASES FROM M/S. KALYANI STEEL LTD AT RS. 3640 PMT, EVEN THOUGH THE GRADE OF IRON ORE IS SAME AT 63.5% FOR BOTH THE PURCHASES. 2) THE LD CIT(A) HAS NOT CONSIDERED THE REMAND REPORT SUBMITTED BY THIS OFFICE ON 29.10.2012. 2. THE BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXPORT OF IRON ORE. RETURN WAS FILED DECLARING INCOME OF RS.62,55,610/ - . 2 ITA NO. 14/PNJ/2013 (ASST. YEAR : 2009 - 10) ASSESSMENT WAS MADE DETERMINING TOTAL INCOME AT RS.1,82,02,961/ - . DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFF ICER NOTED THAT THE ASSESSEE HAS MADE PURCHASE OF IRON ORE FROM KARISHMA EXPORTS WHICH IS A PROPRIETORSHIP CONCERN OF MR. AJIT PHATARPEKAR, SPOUSE OF THE PARTNER OF KARISHMA IMPEX MS. NEELAM PHATARPEKAR @ RS.5000/MT WHILE THE SAME GRADE IRON ORE I.E. 63.50 % WAS PURCHASED BY THE ASSESSEE FROM M/S. KALYANI STEEL LTD. , HOSPET ROAD, KOPPAL @ RS. 3 640/MT. WHEN ASKED FOR THE REASON, THE ASSESSEE EXPLAINED THAT THE MATERIAL WAS PURCHASED FROM KARISHMA EXPORTS @ RS.5000/MT BECAUSE KARISHMA EXPORTS SUPPLIED THE MATERIAL ON FOR BASIS WHILE M/S. KALYANI STEEL LTD. SUPPLIED THE MATERIAL ON AS WHERE AS BASIS AT THEIR PLANT @ RS.3640/MT AND FOR BRINGING THE MATERIAL TO THEIR PLANT THE ASSESSEE HAS TO INCUR TRANSPORTATION COST OF RS.1035/MT. THE ASSESSING OFFICER WORKED OUT THE TRANSPORT COST BEING INCURRED PER METRIC TON @ RS.956/ - AND AFTER ADDING THE SAME, HE WORKED OUT THE COST OF THE MATERIAL AT THE FACTORY SUPPLIED BY M/S. KALYANI STEEL LTD. @ RS.4596/MT. THE ASSESSING OFFICER, THEREFORE, NOTED THE DIFFERENCE BETWEEN RS.5000/MT AND RS.4596/MT FOR 22400 MT QUANTITY PURCHASED BY THE ASSESSEE FROM KARISHMA EXPORTS AND AFTER WORKING OUT THE DIFFERENCE, MADE ADDITION OF RS.90,49,600/ - UNDER SECTION 40A(2) OF THE INCOME TAX ACT. THE ASSESSEE WEN T IN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE MADE THE SUBMISSION IN SUPPORT OF REASONABLENESS OF THE PURCHASE PRICE PAID TO KARISHMA EXPORTS. HE MADE RELIANCE ON THE VARIOUS CASE LAWS. CIT(A) AFTER REPRODUCING THE SUBMISSION OF THE ASS ESSEE DELETED THE DISALLOWANCE. 3. THE LEARNED DR VEHEMENTLY CONTENDED THAT THE ORDER PASSED BY THE CIT(A) IS CRYPTIC AND HAS BEEN PASSED JUST PRODUCING THE SUBMISSION OF THE ASSESSEE. HE HAS NOT GONE INTO MERITS OF THE CASE. EVEN THE CASE LAW AS RELIED BY THE ASSESSING OFFICER WAS ALSO NOT DISCUSSED. THE REMAND REPORT SENT BY THE ASSESSING OFFICER WAS ALSO TOTALLY IGNORED. THE ASSESSING OFFICER DULY ALLOWED THE CREDIT TO THE ASSESSEE IN RESPECT OF TRANSPORT CHARGES WHATEVER HAS BEEN INCURRED IN RESPEC T OF THE MATERIAL WHICH HAS BEEN BOUGHT BY THE ASSESSEE FROM OUTSIDE PARTIES. THERE IS A LOT OF DIFFERENCE IN THE PRICE PAID BY THE ASSESSEE TO THE SISTER CONCERN AS COMPARED TO THE PRICE PAID TO THE OUTSIDE PARTY. 3 ITA NO. 14/PNJ/2013 (ASST. YEAR : 2009 - 10) 4. THE LEARNED AR ON THE OTHER HAND R ELIED ON THE ORDER OF CIT(A). HE REFERRED TO THE CONTRACT FOR SALE AND PURCHASE OF IRON ORE ENTERED INTO BETWEEN THE ASSESSEE AND CHINA PARTY TO WHOM THE ASSESSEE HAS TO SUPPLY 61 GRADE IRON ORE. THE DELIVERY OF THE SAID IRON ORE WAS TO BE MADE BEFORE 5 .5.2008. THE ASSESSEE WAS NOT GETTING THE MATERIAL FROM M/S. KALYANI STEEL LTD. JUST TO FULFIL HIS OBLIGATION FOR THE EXPORT OF THE IRON ORE, THE ASSESSEE HAD TO IMMEDIATELY SUPPLY THE MATERIAL BY PURCHASING IT FROM KARISHMA EXPORTS. FROM M/S. KALYANI S TEEL LTD. THE MATERIAL WAS PURCHASED, NO DOUBT, @ RS.3640/MT BUT THE ASSESSEE HAS TO INCUR TRANSPORT COST @ RS.1035/MT. THERE WAS LOSS IN THE QUANTITY IN THE TRANSPORTATION. THE QUANTITY PURCHASED WAS 990.89 MT EFFECTIVELY. THE ASSESSEE RECEIVED QUANTITY OF 938.39 MT. THE ASSESSEE HAS ALSO TO INCUR LOADING CHARGES @ RS.40/MT. EVEN OTHER ADMINISTRATIVE COST HAS ALSO TO BE INCURRED BY THE ASSESSEE @ RS.20/MT. DUE TO SHORTAGE AND THE TRANSPORTATION LOSS, THE ASSESSEE HAS TO INCUR COST @ RS. 193/MT AND IF ALL THESE COSTS ARE TAKEN INTO ACCOUNT, THE EFFECTIVE COST OF PURCHASE MADE FROM M/S. KALYANI STEEL LTD. COMES TO RS.4928/MT AS AGAINST RS.5000/MT PAID TO KARISHMA EXPORTS. TO SUPPORT HIS PRICE, HE RELIED ON THE INTERNATIONAL PRICE ALSO BUT THAT, IN OUR OP INION, CANNOT BE COMPARATIVE INSTANCE SO FAR AS DOMESTIC TRANSACTIONS ARE CONCERNED. RELIANCE WAS ALSO PLACED ON THE CIRCULAR OF THE DEPARTMENT NO. 6 - P DT. 6.7.1968 TO PROVE THE INTENTION FOR WHICH THE PROVISION OF SEC. 40 A ( 2 ) WERE INSERTED BY THE FINANCE ACT, 1968. IT WAS CONTENDED THAT IN THE CIRCULAR IT IS MENTIONED THAT THE ASSESSING OFFICER IS EXPECTED TO EXERCISE ITS JUDGEMENT IN A REASONABLE AND FAIR MANNER. THE PURPOSE OF BRINGING THIS PROVISION IS MEANT TO CHECK THE TAX EVASION THROUGH EXCESSIVE OR UNREASONABLE PAYMENT TO RELATIVES AND ASSOCIATE CONCERNS AND SHOULD NOT BE APPLIED IN A MANNER WHICH WILL CAUSE HARDSHIP IN A BONA FIDE CASE. THE TRANSACTION ENTERED INTO BETWEEN THE ASSESSEE AND KARISHMA EXPORTS WAS A BO NA FIDE ONE AS THE ASSESSEE HAD TO EXPORT THE IRON ORE TO CHINA IMMEDIATELY. IT IS NOT THE CASE WHETHER THERE WAS ANY LOSS TO THE REVENUE. IN THE CASE OF KARISHMA EXPORTS, RETURNED INCOME WAS ALSO RS.1,39,15,790/ - . THE LEARNED AR DID NOT DISPUTE THE FA CT THAT THE CIT(A) HAS PASSED THE 4 ITA NO. 14/PNJ/2013 (ASST. YEAR : 2009 - 10) ORDER WITHOUT GIVING CLEAR CUT FINDING BUT ONLY RELYING ON THE SUBMISSION OF THE ASSESSEE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. WE HAVE LOOKED INTO THE ORDER OF CIT(A). WE FIND THA T CIT(A) HAS NOT GIVEN ANY INDEPENDENT FINDING. ORDER PASSED IS NOT SPEAKING ONE BUT IS CRYPTIC ONE. CIT(A) SIMPLY RELIED ON THE SUBMISSION OF THE ASSESSEE AND ALLOWED THE GROUND OF THE ASSESSEE RELATING TO THE DISALLOWANCE MADE UNDER SECTION 40 A(2). EV EN THE REMAND REPORT OF THE ASSESSING OFFICER AND CASE LAWS RELIED BY THE ASSESSING OFFICER WAS NOT CONSIDERED. IN THE INTEREST OF JUSTICE AND FAIR PLAY TO BOTH PARTIES, WE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE ISSUE TO THE FILE OF CIT(A) WITH A D IRECTION THAT CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AS WELL AS THE REMAND REPORT OF THE ASSESSING OFFICER AS WELL AS THE CASE LAWS RELIED ON BY THE ASSESSING OFFICER WILL PASS A SPEAKING ORDER. WE, ACCORDINGLY SET ASIDE THE ORDER OF CIT (A) AND THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 6. ORDER PRONOUNCED IN THE OPEN COURT ON 26 .04.2013. SD/ - (D.T.GARASIA) JUDICIAL MEMBER SD/ - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 26 .04.2013 *SSL* COPY TO : ( 1 ) APPELLANT ( 2 ) RESPONDENT ( 3 ) CIT, PANAJI ( 4 ) CIT(A), PANAJI ( 5 ) D.R ( 6 ) GUARD FILE BY ORDER ASSISTANT REGISTRAR /SR. P.S ITAT, PANAJI, GOA