M/S JIVRAJ TEA CO., SURAT V. THE JOINT CIT, SPL. RANGE -1, SURAT

ITA 1859/AHD/2003

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9230 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 12-08-2009
• Assessment Year: 1997-1998
• Appeal Filed On: 30-04-2003
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M C
• Assessee Lawyers: J P SHAH
• Keywords: Depreciation; Set aside

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, A-BENCH, AHME DABAD. BEFORE :SHRI H L KARWA, JUDICIAL MEMBER, AND SHRI D.C.AGRAWAL, ACCOUNTANT MEMBER. ITA NO.1859 & 2630/AHD/2003 (ASSESSMENT YEAR 1997-1998) M/S. JIVRAJ TEA COMPANY, 5/258-259, JIVRAJ CHAMBERS, RUWALA TEKRA, BARANPURI BHAGAL, SURAT 395003. VERSUS JT. C.I.T. SPL. RANGE-1, SURAT. ASST. COMMISSIONER OF INCOME TAX, CIRCLE-6, SURAT. M/S. JIVRAJ TEA COMPANY, 5/258-259, JIVRAJ CHAMBERS, RUWALA TEKRA, BARANPURI BHAGAL, SURAT. (APPELLANT) (RESPONDENT) PAN:AACFJ72236R FOR THE ASSESSEE: SHRI J.P. SHAH, AR FOR THE REVENUE: SHRI M.C. PANDIT, DR ORDER PER SHRI D.C. AGRAWAL: THESE ARE TWO APPEALS, ONE FILED BY THE ASSESSEE AND THE OTHER FILED BY THE REVENUE AGAINS T THE ORDER OF LD. CIT(A) DATED 03-03-2003. SINCE THE TWO APPEALS INV OLVED COMMON ISSUES, THEY ARE TAKEN UP TOGETHER FOR THE SAKE OF CONVENIENCE. 2. IN ASSESSEES APPEAL FOLLOWING GROUNDS HAVE BEEN RAISED: 1. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITIO N ON ACCOUNT OF ALLEGED UNDER STATEMENT OF SALE PRICE TO THE TUNE OF RS. 3,15,950/-. 2 ITA NO.1859&2630/AHD/2003 (ASSESSMENT YEAR 1997-98) 2. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADD ITION U/S 40A(2)(B) ON ACCOUNT OF ALLEGED EXCESS PURCHASE PRI CE PAID TO THE TUNE OF RS. 8,74,367/-. 3. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADD ITION U/S 40A(2)(B) ON ACCOUNT OF ALLEGED EXCESS PURCHASE PRI CE PAID TO THE TUNE OF RS. 1,96,267/-. 4. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DIS ALLOWANCE OF PORTION OF TELEPHONE EXPENSES TO THE TUNE OF RS. 15,097/-. 5. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DIS ALLOWANCE OF PORTION OF VEHICLE EXPENSES TO THE TUNE OF RS. 3 2,687/-. 6. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DIS ALLOWANCE OF 1/5 TH OUT OF BONI EXPENSES TO THE TUNE OF RS. 2,000/-. 7. IT IS, THEREFORE, PRAYED THAT BOTH THE ABOVE DET AILED DISALLOWANCES/ADDITIONS CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) MAY PLEASE BE DELETED. 3. WHEREAS IN THE DEPARTMENTAL APPEAL FOLLOWING GRO UNDS HAVE BEEN TAKEN: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, AND IN LAW, THE, LD. CIT(A)-IV, SURAT HAS ERRED IN DIRE CTING TO RESTRAIN 50% OF THE ADDITION MADE ON ACCOUNT OF UNDERSTATEMENT OF SALE PRICE. 3 ITA NO.1859&2630/AHD/2003 (ASSESSMENT YEAR 1997-98) 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, AND IN LAW, THE LD. CIT(A)-IV, SURAT HAS ERRED IN IGNOR ING THE FACT THAT THE AFORESAID ADDITION MADE ON ACCOUNT OF FAILURE OF THE ASSESSEE TO FURNISH ANY EXPLANATION/REASON REGA RDING LOWER RATE OF TEA. 2. IT IS THEREFORE, PRAYED THAT THE ORDER OF THE CI T(A) BE SET ASIDE AND THAT OF THE A.O. BE RESTORED. 4. THE FACTS OF THE CASE ARE THAT ASSESSEE IS A PAR TNERSHIP FIRM AND CARRIES OUT BUSINESS OF TRADING IN TEA AFTER BLENDI NG VARIOUS TYPES OF TEA. THE ASSESSEE HAD FILED RETURN OF INCOME DECLARING I NCOME OF RS. 50,71,000/-. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASSE SSING OFFICER FOUND THAT THE ASSESSEE HAS MADE THE SALE OF TEA AT VARYING RATES SUCH AS RS. 80, 84, 85, AND 86 PER KG WHEREAS IN MAJORITY O F THE CASES SALE RATE PER KG IS WITHIN THE RANGE OF RS. 98 TO RS. 100 PER KG. THE ASSESSING OFFICER EXAMINED THE SALE BILLS. THOUGH IT IS CLAIM ED THAT ASSESSEE IS SELLING DUST TEA, BUT IT IS NOT SO MENTIONED IN THE SAID BILLS. IT WAS THEN CLAIMED BEFORE THE ASSESSING OFFICER THAT ASSESSEE HAS BEEN PURCHASING GARDEN TEA AT LOWER RATES AND AFTER BLENDING IT SEL LING IT AT VARYING RATES DEPENDING UPON BLENDING. THE ASSESSEE ALSO FURNIS HED THE QUANTITATIVE DETAILS OF SALE OF TEA AT LOWER RATES AS UNDER: RS. 80 PER KG. 16,205 KGS. RS.84 6,450 RS.85 430 RS.86 4,195 RS.88 6,760 RS.90 5,830 4 ITA NO.1859&2630/AHD/2003 (ASSESSMENT YEAR 1997-98) 6. THE ASSESSING OFFICER THEREAFTER REJECTED THE BO OKS OF ACCOUNT APPLIED UNIFORM RATE OF RS. 100 PER KG FOR SALE AND WORKED OUT ADDITION AS UNDER: 16,205 KGS. X RS.20 = RS. 3,24,100 6,450 KGS. X RS.16 = RS. 1,03,200 430 KGS. X RS.15 = RS. 6,450 4,195 KGS. X RS.14 = RS. 58,730 6,760 KGS. X RS.12 = RS. 81,120 5,830 KGS. X RS.10 = RS. 58,300 RS. 6,31,900 7. THE LD. CIT(A) ON THE OTHER HAND CONSIDERED SUBM ISSION OF THE ASSESSEE AND GAVE FOLLOWING FINDING. IT IS OBSERVED THAT:- (1) THERE ARE SEVERAL DISCREPANCIES IN THE SUBMISSIONS OF THE APPELLANT E.G. [I] ALTHOUGH APPELLANT CLAIMED TO HA VE SOLD DUST TEA @ RS. 80 PER KG., THE A.O. IN HIS ORDER HAS POI NTED OUT INSTANCES OF SALE OF THE SAME (BILL NO. 4-90 DTD. 6 .1.97, 4-91 DTD. 7.1.97, 4-93 DTD. 10.1.97, 4-95 DTD. 13.1.9, W HERE THE SALE PRICE OF DUST TEA IS RS. 99 PER KG. THE APPELLANT S EXPLANATION, AFTER DUE CONSIDERATION, HAS BEEN REJECTED. (2) THERE WAS ALSO NO PROOF, AS POINTED OUT BY THE A.O. THAT APPELLANT WAS BLENDING TEA OF GARDEN TEA INFERIOR Q UALITY BEFORE 28.1.97 AND WAS BLENDED FOR INFERIOR TEA. T HE APPELLANT HAS HOWEVER VEHEMENTLY OPPOSED THIS, STATES THAT BL ENDING HAS BEEN DONE RIGHT FROM THE INCEPTION OF BUSINESS AND DUE TO ITS IMPORTANCE, THE PARTNERS WERE DIRECTLY DOING THIS A ND ONE PARTNER S.J. SHAH WHOSE PREMISES WERE USED FOR THE PURPOSE WAS BEING PAID @ RS. 3.50 PER KG., WHICH TOOK CARE OF 5 ITA NO.1859&2630/AHD/2003 (ASSESSMENT YEAR 1997-98) INCIDENTAL EXPENSES OF THE PREMISES AT 5/258-59 RUW ALA TEKRA, BAGAL, SURAT. (3) MOREOVER THE GARDEN TEA BILL WAS MOSTLY FOUND TO BE PURCHASED @ RS. 86-99 EXCEPT ONLY ONE BILL OF RS. 81 PER KG. (BILL NO. 21 DTD. 31.1.97 AND ANOTHER RS. 83.45 (BILL NO. 018 DT D. 31.1.97) AND THESE PRICES WERE EXCLUSIVE OF C.S.T. @ 4%. (4) THE APPELLANTS CONTENTION THAT PURCHASE PRICE OF T EA VARIED BETWEEN RS. 60-90 AND NOT RS. 86-99 AS CONCLUDED BY THE A.O. IN THE CHART FILED SHOWING 7 BILLS THE RATES ARE VA RYING BETWEEN RS.73.66 TO RS. 80.69, THE BILL ALONG WITH QUANTITY /QUALITY ARE FILED. (5) MOREOVER, APPELLANT STATED THAT TO ASSUME A UNIFORM SALE PRICE OF RS. 100/- IS HIGHLY ERRONEOUS FOR THIS PRODUCE, WHICH VARIES WIDELY IN QUALITY. THERE IS PLENTY OF RESIDUAL FRO M TEA WHICH IS SOLD AS DUST TEA AT A LOWER RATE. IT IS ALSO PLEAD ED THAT OFTEN TEA WHICH IS NOT OF GOOD QUALITY DUE TO SPOILAGE ETC., IS SOLD CHEAP. IN FACT, UNLIKE WHAT THE A.O. STATES THAT ONLY JIVR AJ NO. 9 IS SOLD, IN FACT VARIOUS QUALITIES ARE SOLD TO CATER TO THE VARIOUS SECTIONS OF SOCIETY. (6) BOOKS OF ACCOUNTS WERE AUDITED AND EXAMINED BY THE A.O. IN DETAIL BUT NO REAL DEFECT OR IRREGULARITY IS UNDERL INED. THE G.P. RETURNED IS 8.38% AND RETURN OF INCOME OF RS. 50,71 ,000/- FILED. (7) ALTHOUGH, IT IS PREROGATIVE OF A BUSINESSMAN TO DEC IDE THE RATE AT WHICH HE WISHES TO SELL AND IT IS WRONG TO ASSUM E THAT APPELLANT MUST HAVE SOLD ALL TEAS @ RS. 100 PER KG. UNLESS THERE IS EVIDENCE TO THE CONTRARY. IN THIS CASE, THERE A RE ONLY SOME INSTANCES WHERE THE PRICE OF TEA ARE SEEMINGLY VERY LOW AS POINTED OUT BY THE A.O. TO COVER THE SAME, THE ADDI TION IS LIMITED TO 50% ONLY, REST IS DELETED. 6 ITA NO.1859&2630/AHD/2003 (ASSESSMENT YEAR 1997-98) THUS, HE RETAINED 50% ADDITIONS PROPOSES BY THE ASS ESSING OFFICER. 8. THE ASSESSEE AND DEPARTMENT BOTH ARE IN APPEAL A GAINST THE ABOVE ORDER OF LEARNED CIT(A). 9. THE LD. A.R. SUBMITTED THAT QUALITY OF TEA VARIE S FROM GARDEN TO GARDEN AND FROM PERIOD TO PERIOD WHEN THE TEA LEAVE S ARE PLUCKED FROM THE GARDENS AND PROCESSED. PRICES VARY DEPENDING UP ON WHETHER TEA COMING IN THE MARKET IS FRESH OR OLD. THUS, THERE CANNOT BE ANY UNIFORM STANDARD OF SALE PRICE. FLUCTUATIONS ARE COMMON AN D THEREFORE PRICES HAD TO VARY. THE ASSESSEE IS SELLING DIFFERENT TYPES O F BRANDS SUCH AS JIVRAJ NO. 9 TEA, JIVRAJ MAMRI TEA, JIVRAJ JANTA TEA, DUST TEA ETC. THUS, DIFFERENT VARIATIONS ARE CREATING BY BLENDING DIFFE RENT TYPE OF TEA DEPENDING UPON THE FLAVOR AND SIZE OF THE TEA LEAV ES AND ALSO DEPENDING UPON THE GARDEN FROM WHERE THEY ARE PURCHASED. 10. IN ADDITION LD. A.R. FOR THE ASSESSEE SUBMITTED THAT ASSESSING OFFICER HAS NOT FOUND ANY MATERIAL TO SHOW THAT THE ASSESSEE IS SUPPRESSING SALE PRICES. THEREFORE, HE HAS NO JURI SDICTION TO MAKE ANY ADDITION. SO FAR AS GROSS PROFIT RATE IS CONCERNED , THE LD. A.R. SUBMITTED THAT ASSESSEE HAS SHOWN SALES OF RS. 8,92,63,958/- WITH A GROSS PROFIT OF RS. 74,81,755/- WHEREAS IN THE IMMEDIATELY PRECEDIN G YEAR THE SALES WERE RS. 3.96 CRORES WITH GROSS PROFIT OF RS. 36,34,000/ -. THE GROSS PROFIT DECLARED THIS YEAR IS 8.38% AS AGAINST 9.17% IN THE PRECEDING YEAR. THE MARGINAL FALL IN G.P. IS DUE TO INCREASE IN SALES. 11. AS AGAINST THIS LD. D.R. SUBMITTED THAT THERE I S NO EVIDENCE TO SHOW WHY SALE RATES ARE VARYING SO MUCH. HE RELIED ON T HE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT HIS ORDER SHOU LD BE UPHELD. 7 ITA NO.1859&2630/AHD/2003 (ASSESSMENT YEAR 1997-98) 12. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE MATERIAL ON RECORD, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO MATERIAL BROUGHT IN BY THE ASSESSING OFFICER TO SHOW THAT THE ASSESS EE HAS SUPPRESSED THE SALES OR UNDER STATED THE RATES. HE HAS NOT UNDERS TOOD THAT TEA AS SUCH HAS LARGE VARIETIES AND THE RATES VARY DEPENDING UPON Q UALITY OF THE TEA. THE RATES OF THE TEA MAY BE AS HIGH AS RS. 10,000/- PER KG. TEA IS SOLD IN AUCTION BY VARIOUS GARDENS AND MARKET RATES DEPEND UPON THE BEST BIDDING. A TRADER IN TEA MAY HAVE WITH HIM OLD STO CK WHICH HE MAY LIKE TO SALE IT AT LOWER RATES BECAUSE OF THE FLAVOR GET TING LOST WITH THE PASSAGE OF TIME. FRESH TEA WILL FETCH HIGHER PRICE AS COMP ARED TO OLD AND LEFT WITH THE ASSESSEE IN THE STOCK. TEA FROM SUPERIOR GARDE N WILL FETCH HIGHER PRICE AS COMPARED TO TEA GROWN IN GARDENS AT LOWER ALTITUDE. QUALITY OF TEA IS BETTER WITH IDEAL CONDITIONS OF HUMIDITY IN AIR AND HEIGHT OF THE GARDEN AND THEREFORE IT FETCHES HIGHER PRICE. THE TEA PLUCKED AT THE INITIAL GROWTH IS BETTER IN QUALITY AND THEREFORE WILL FETC H HIGHER PRICE. THE TEA PLUCKED FROM FRESH BUSHES WILL BE DIFFERENT THEN TH E TEA PLUCKED FROM OLD BUSHES. THEREFORE, PRICE WILL ALSO VARY ACCORDINGL Y. TEA BLENDED WITH FLAVOR WILL FETCH DIFFERENT PRICE. 2 OR 3 TYPES OF DIFFERENT BLENDING WILL FETCH DIFFERENT PRICE. TEA WITH A RENOWNED BRAND L ABEL WILL FETCH HIGHER PRICE. THE PRICE OF DUST TEA WOULD BE LOWER AS COM PARED TO PRICE OF LEAF TEA. THEREFORE, THERE CANNOT BE ANY STANDARD OF FI XING THE PRICE OF A TEA WHICH DEPENDS UPON SO MANY FACTORS. THE ASSESSING OFFICER HAS NOT SHOWN THAT ASSESSEE HAS SUPPRESSED THE SALE RATES. THEREFORE, THE SALE RATES SHOWN BY THE ASSESSEE IN THE SALE BILLS CANNO T BE DISTURBED. AT BEST ON ACCOUNT OF NON VERIFICATION OF SALE PRICES BOOKS CAN BE REJECTED. BUT WHEN IT COMES TO ESTIMATING THE PROFIT THEN AGAIN T HERE IS NO MATERIAL TO HOLD THAT GROSS PROFIT SHOWN BY THE ASSESSEE IS LOW ER WARRANTING ADDITION. THE SALES OF THE ASSESSEE IS MORE THAN DOUBLED THIS YEAR WHEREAS THERE IS A 8 ITA NO.1859&2630/AHD/2003 (ASSESSMENT YEAR 1997-98) MARGINAL FALL IN THE G.P. RATE FROM 9.17% TO 8.38%. THE ASSESSEE HAS JUSTIFICATION FOR THIS FALL. 13. WE THEREFORE FIND NO REASON TO UPHOLD ANY ADDIT ION ON THIS GROUND. THEREFORE, ADDITION OF RS. 3,15,950/- SUSTAINED BY LEARNED CIT(A) IS DELETED. THIS ALSO DISPOSES OF THE GROUND RAISED B Y THE REVENUE IN ITS APPEAL WHICH IS ACCORDINGLY DISMISSED. 14. GROUND NO. 2 RAISED BY ASSESSEE IN ITS APPEAL R ELATES TO ALLEGED EXCESS PURCHASE PRICE PAID BY THE ASSESSEE TO HIS S ISTER CONCERNS. 15. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASS ESSING OFFICER NOTICED THAT ASSESSEE IS SHOWING PURCHASES OF TEA F ROM ITS SISTER CONCERNS. FROM ONE OF THE CONCERNS VIZ. M/S ISUJI ASSESSEE HA S SHOWN TOTAL PURCHASE OF RS. 10,35,377/-. THE AVERAGE PURCHASE RATE VIDE BILL NO. 17 DATED 28-01-1997, THE AVERAGE RATE IS RS. 86.33 PER KG WHILE VIDE BILL NO. 018 DATED 31-01-1997 THE AVERAGE RATE IS COMING TO RS. 95.19 PER KG. IN CASE OF PURCHASES FRO PURSHOTTAM K. PATEL AND CO. A ND OUTSIDE PARTY THE AVERAGE RATE IS 73.36 KG. VIDE BILL NO. AA183 DATE D 6-02-1997 AND RS. 72.46 PER KG VIDE BILL NO. AA189 DATED 0-02-1997. THE ASSESSING OFFICER GAVE A CHART IN PARA 5.2 IN ITS ORDER SHOWI NG AVERAGE PURCHASE RATE OF TEA PURCHASED FROM ITS SISTER CONCERNS WHICH IS REPRODUCED BELOW: NAME BILL NO./DATE QUANTITY RATE VALUE SURAJ SONS 30/96-97/28- 1-97 5,096.2 90.35 460,448.98 ISUJI 017/28-1- 1997 6,617.6 86.33 571,304.73 ISUJI 18/31-1-97 4,875.2 95.19 464,072.78 9 ITA NO.1859&2630/AHD/2003 (ASSESSMENT YEAR 1997-98) VIREN TEA CO. 018/28-1-97 5,619.3 90.72 509,793.48 -DO- 020/31-3-97 4,433.2 90.11 399,483.77 M/S DHEER 013/28-1-97 20,864.4 88.33 1,843,003.02 -DO- 014/31-1-97 4,989.8 94.19 469,977.51 M/S DHWANI 020/28-1-97 8,564.8 85.94 736,038.99 -DO- 021/31-1-97 5,139.8 88.95 457,208.75 M/S PATHIK TEXTILE IND. 020/4-2-97 1,316 93.6 123,177.6 M/S RUSHABH 022/15-2-97 5,411.4 92.19 498,894.52 KALI ENTERPRISE 017/15-2-97 2,823.8 95.23 268,916.21 KIRAN ENTERPRISE 035/15-2-97 3,272.4 94.91 310,570.89 PARAS TEA CORP. 027/15-2-97 4,661.2 97.26 453,362.75 VIJAY TEA AGENCY 020/31-3-87 810 83.6 67,720.54 TOTAL 84,495.1 1,366.9 7,633,974.52 16. THE ASSESSING OFFICER APPLIED A RATE OF RS. 80 PER KG. AFTER HOLDING THAT PURCHASES FROM THE SISTER CONCERNS ARE AT HIGH ER PRICES AND THUS MADE THE ADDITION OF DIFFERENCE ACCORDINGLY. HE INVOKED THE PROVISIONS OF SECTION 40A(2)(B). THE LD. CIT(A) REJECTED THE SUB MISSION OF THE ASSESSEE THAT IN THE CASES OF SISTER CONCERNS, THE ASSESSING OFFICER HAS MADE NO ADDITION. ACCORDINGLY THE LD. CIT(A) CONFI RMED THE ADDITION. BEFORE US IT WAS SUBMITTED THAT THERE IS NO MATERIA L TO SHOW UNDER HAND DEALING. THE SISTER CONCERNS HAVE ALREADY EARNED P ROFIT RANGING FROM 0.06% TO 5.64%. THEY ARE INVESTING THEIR MONEY IN M AKING PURCHASES DIRECTLY FROM THE TEA GARDENS. THE TEA RATES VARY DEPENDING UPON HIS QUALITY THE PRICE PAID BY THE ASSESSEE FOR PURCHASE OF TEA DEPENDS UPON THE QUALITY OF THE TEA PURCHASED. THEREFORE, IT CA NNOT BE SAID THAT ASSESSEE 10 ITA NO.1859&2630/AHD/2003 (ASSESSMENT YEAR 1997-98) HAS PAID PRICES TO THE SISTER CONCERNS MORE THEN MA RKET PRICE. FURTHER TAX RATES IN CASE OF THE ASSESSEE AND IN THE CASE OF SI STER CONCERNS IS THE SAME AND THEREFORE THERE IS NO SAVING IN TAXES. 17. ON THE OTHER HAND LD. D.R. RELIED ON THE ORDER OF THE AUTHORITIES BELOW. 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSING THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW, NO PRO PER CASE HAS BEEN MADE OUT FOR SUSTAINING ADDITION. WHAT WAS NECESSA RY TO BE SHOWN WAS THAT SISTER CONCERNS ARE CHARGING HIGHER PROFITS FR OM THE SALES TO THE ASSESSEE AS COMPARED TO THE PROFITS CHARGED BY THEM FROM THE SALES MADE TO OTHER PARTIES. ON THE PERUSAL OF THE CHARTS ANN EXED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN HIS ORDER IT IS CLEAR THAT SISTER CONCERNS ARE CHARGING NOMINAL PROFITS RANGING FROM 0.16% TO 3% AND IN FEW CASES 4.4%, 5.94% AND 4.1%. THUS, OUT OF 15 PA RTIES, PROFIT ABOVE 4% IS EARNED BY ONLY 3 SISTER CONCERNS WHEREAS MARG IN EARNED BY THE ASSESSEE IS AROUND 8% OR MORE. THEREFORE, IT CANNO T BE SAID THAT PROFIT OF THE ASSESSEE IS BEING DIVERTED TO THE SISTER CONCER NS. BY COMPARING THE RATES QUALITY VICE, IT SHOULD HAVE BEEN SHOWN THAT RATES CHARGED FROM THE ASSESSEE FOR THE SAME QUALITY OF TEA IS MORE AS COM PARED TO THE RATES CHARGED BY THE SISTER CONCERNS FOR SALE OF SOME QUA LITY OF TEA SOLD TO OTHERS. COMPARING AVERAGE RATE FOR WORKING OUT UND ER STATEMENT OF PRICES OF TEA SOLD TO THE ASSESSEE CANNOT STAND TO LOGIC P ARTICULARLY WHEN THERE ARE LARGE VARIETIES OF TEA PURCHASED BY THE SISTER CONCERNS AND SOLD TO THE ASSESSEES. THE ARGUMENT OF THE ASSESSEE IS THAT TA X RATES ARE UNIFORM AND THEREFORE THERE IS NO SAVING IN TAXES BY INFLATING BY THESE PRICES FOR THE PURCHASES MADE BY THE ASSESSEE FROM THE SISTER CONC ERNS. IT CANNOT BE IGNORED EASILY. THE ARGUMENT OF LD. A.R.IS THAT O N ONE HAND ASSESSING OFFICER IS ALLEGING THAT ASSESSEE HAS UNDERSTATED S ALES AND ON THE OTHER 11 ITA NO.1859&2630/AHD/2003 (ASSESSMENT YEAR 1997-98) HAND HE IS FIXING THE PURCHASE PRICE AT RS. 80 PER KG BY HOLDING THAT PURCHASES FROM SISTER CONCERNS ARE INFLATED IS CONT RADICTORY CANNOT BE REJECTED. THE ADDITION UNDER SECTION 40A(2)(B) IS A LSO WITHOUT ANY BASIS AND IS MADE ON HYPOTHETICAL PREMISES. ACCORDINGLY, ADDITION UNDER SECTION 40A(2)(B) ALSO CANNOT BE UPHELD. THEREFORE , THE SAME IS DELETED. THIS GROUND OF THE ASSESSEE IS THEREFORE ALLOWED. 19. THE NEXT GROUND RELATES TO ADDITION OF RS. 1,96 ,267/- ON ACCOUNT OF ALLEGED EXCESS PURCHASE PRICE. THE ADDITION HAS BEE N MADE UNDER SECTION 40A(2)(B) AND HAS BEEN CONFIRMED BY THE LD. CIT(A). DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FO UND THAT THE ASSESSEE HAS PURCHASED TEA FROM THE FOLLOWING SISTER CONCERN S. SR. NO. NAME OF THE SISTER CONCERN AVERAGE RATE PAID FOR PURCHASE OF TEA PER KG. EXCESSIVE PURCHASE PRICE CALCULATED CONSIDERING STANDARD RATE OF RS. 80/- KG. TOTAL INCOME RETURNED DURING THE A.Y. 1997- 98 1 JIVRAJ SIZE- O-FIL PVT. LTD. 84.73 69,294 NIL (DUE TO CLAIM OF DEPRECIATION) 2 MANALI TEA AGENCY 87.43 73,476 4,80.664 3 KAPS INTERNATIONAL 90.71 53,497 1,94,084 TOTAL DISALLOWANCE U/S 40A(2)(B) 1,96,267 20. WHILE CALCULATING SUCH EXCESS PURCHASE PRICE TH E ASSESSING OFFICER HAS APPLIED AVERAGE RATE OF RS. 80 PER KG AND WORKE D OUT THE DIFFERENCE. FOR THE REASONS IN RESPECT OF GROUND NO. 2 WE HOLD THAT ADDITION MADE BY THE ASSESSING OFFICER, IS HYPOTHETICAL AND DO NOT S TANDS TO REASONING. FOR THE SAME REASONS AS GIVEN IN GROUND NO. 2 WE DELETE THIS ADDITION ALSO. 12 ITA NO.1859&2630/AHD/2003 (ASSESSMENT YEAR 1997-98) 21. GROUND NO. 4, 5 AND 6 WERE NOT SERIOUSLY CONTES TED BY LD. A.R. AND FROM THE DISCUSSION MADE BY THE LD. A.O. AND LD. CI T(A), WE HOLD THAT ADDITION TO THIS EXTENT IS JUSTIFIED. ACCORDINGLY, THESE ADDITIONS ARE SUSTAINED. THE THREE GROUNDS ARE THEREFORE REJECTE D. 22. GROUND NO. 7, 8, 9 ARE GENERAL IN NATURE AND TH EREFORE DO NOT REQUIRE ANY SPECIFIC ADJUDICATION AND THEY ARE REJE CTED. 23. AS A RESULT, APPEAL FILED BY THE ASSESSEE IS PA RTLY ALLOWED, WHEREAS THE APPEAL FILED BY THE REVENUE IS DISMISSED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DATED 28 TH AUGUST, 2009. SD/- SD/- (H L KARWA) (D.C . AGRAWAL) JUDICIAL MEMBER ACCOUN TANT MEMBER AHMEDABAD; DATED: 28/08/2009 ANKIT* COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CONCERNED 4. THE CIT, 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, ASSTT. REGISTRAR/ DEPUTY REGISTRAR ITAT, AHMEDABAD BENCHES, AHMEDABAD.