DCIT RG 9(1)(1), MUMBAI V. AGILITY LOGISTICS P.LTD, MUMBAI

ITA 1873/MUM/2015

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 7174 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: K
• Assessment Year: 2010-2011
• Appeal Filed On: 31-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRIAKHTAR H ANSARI
• Keywords: Gross profit estimation; Transfer pricing; Search and seizure; Corroborative evidences
• Section: 133A; 201; 13; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHR I MANOJ KUMAR AGGARWAL , ACCOUNTANT MEMBER IT (TP) A NO. 1873 / MUM . /20 1 5 ( ASSESSMENT YEAR : 20 1 0 11 ) ITA NO. 818 /MUM./201 6 ( ASSESSMENT YEAR : 201 1 12 ) DY. COMMISSIONER OF INCOME TAX RANGE 9(1)(1), MUMBAI . APPELLANT V/S AGILITY LOGISTICS PVT. LTD. POLARIS, 5 TH FLOOR, ANDHERI MUMBAI 400 059 PAN AAACL3717A . RESPONDENT C.O. NO.77/MUM./2015 ( ARISING OUT OF IT (TP) A NO. 1873 /MUM./201 5 ) ( ASSESSMENT YEAR : 201 0 11 ) C.O. NO.29/MUM./2016 ( ARISING OUT OF ITA NO. 818 /MUM./201 6 ( ASSESSMENT YEAR : 201 1 12 ) AGILITY LOGISTICS PVT. LTD. POLARIS, 5 TH FLOOR, ANDHERI MUMBAI 400 059 PAN AAACL3717A . CROSS OBJECTOR (ORIGINAL RESPONDENT) V/S DY. COMMISSIONER OF INCOME TAX RANGE 9(1)(1), MUMBAI . RESPONDENT (ORIGINAL APPELLANT) ASSESSEE BY : SHRI DHANESH BAFNA A/W SHRI KETAN VED REVENUE BY : SHRIAKHTAR H. ANSARI DATE OF HEARING 2 4 .0 8. 2020 DATE OF ORDER 03.09.2020 2 AGILITY LOGISTICS PVT. LTD. O R D E R PER SAKTIJIT DEY, J.M. THE CAPTIONED APPEALS BY THE REVENUE AND CROSS OBJECTIONS BY THE ASSESSEE AR ISE OUT OF TWO SEPARATE ORDERS/ DIRECTIONS OF LEARNED DISPUTE RESOLUTION PANEL, MUMBAI, PERTAINING TO THE ASSESSMENT YEAR S 2010 11 AND 2011 12. IT (TP) A NO. 1873 /MUM./201 5 ITA NO. 818/ MUM./201 6 REVENUES APPEAL S FOR A.Y. 2010 11 & 2011 12 2. T HE FIRST COMMON ISSUE AS RAISED IN GROUNDS NO.1 TO 4, IN BOTH THESE APPEAL S IS ASSAILING THE DECISION OF LEARNED DRP IN ACCEPTING COMPARABLE UNCONTROLLED PRICE (CUP) METHOD AS APPLIED BY THE ASSESSEE TO BE THE MOST APPROPRIATE METHOD AND THEREBY DELETING THE ADDITION MADE ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT. 3. BRIEF FACTS ARE, THE ASSESSEE, AS ST ATED BY THE REV ENUE AUTHORITIES IS A RESIDENT COMPANY OFFERING C OMPREHENSIVE PORTFOLIO OF INTER NATIONAL AND DOMESTIC AND SPECIALIZED FREIGHT HANDLING SERVICE S . DURING THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE HAD ENTERED INTO INTERNATIONAL T RANSACTIONS WITH ITS OVERSEAS ASSOCIATED E NTERPRISES (AES) AND IN COURSE OF SUCH TRANSACTION S HAS PAID FREIGHT EXPENSES TO THE AES AND HAS ALSO RECE IVED FREIGHT REVENUE FROM THE A E S . FOR 3 AGILITY LOGISTICS PVT. LTD. BENCHMARKING SUCH TRANSACTION, THE ASSESSEE HAS APPLIED CUP AS THE MOST APPROPRIATE METHOD. FOR CO MPARABILITY PURPOSE, THE ASSESSEE HAS RELIED UPON COMPARABLE AGREEMENT S ENTERED INTO BY THE G ROUP COMPANIES WITH THIRD PARTIES , WHEREIN , THE TERMS ARE SIMILAR TO THE TERMS OF AGREEMENT BETWEEN TH E ASSESSEE AND THE GROUP COMPANIES . BEFORE THE TRANSFER PRICI NG OFFICER, THE ASSESSEE HAD SUBMITTED THAT AS PER CORPORAT E POLICY, AFTER PAYMENT OF COST THE PROFITS A RE SHARED EQUALLY BETWEEN THE A ES THAT HAVE PARTICIPATED IN TRANSACTIONS. IT WAS ALSO EMPHASIZED THAT THE TERMS OF CONTRACT BET WEEN THE GROUP COMPANIES WITH THE THIRD PARTIES AS WELL AS THE ASSESSEE REMAINS THE SAME AS PER WHICH THE RESIDUAL GROSS PROFIT IS SHARED BETWEEN THE ORIGINAL COMPA NY AND THE DESTINATION COMPANY AT 50:50 RATIO. IN SUPPORT OF SUCH CLAIM, THE ASSESSEE ALSO FURNISHED ALL RELEVANT AND NECESSARY INFORMATION AND EVIDENCES. FU RTHER, TO CORROBORATE THE BENCHMARKING UNDER CUP, THE ASSESSEE ALSO PROVIDED AN ALTERNATIVE ECONOMIC ANALYSIS BY APPLYING TRANSACTIONAL NET MARGIN METH OD (TNMM) WITH OPERATING PROFIT (OP)/ VALUE ADDED EXPENDITURE (VAE ) AS THE PROFIT LEVEL INDICATOR (PLI). UNDER TNMM, THE ASSESSEE SELECTED SEVEN CO MPARABLES WITH MEAN OP/VAE OF 30% AS AGAINST TH E OP/VAE SHOWN BY THE ASSESSEE AT 22.76%. THUS, IT WAS CLAIMED T HAT THE TRANSACTIONS WITH THE AES ARE AT ARMS L ENGTH . 4. THE TRAN SFER PRICING OFFICER, HOWEVER, DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE AND REJECTED CUP METHOD APPLIED BY THE 4 AGILITY LOGISTICS PVT. LTD. ASSESSEE. HOLDING THAT TNMM IS THE MOST APPROPRIATE METHOD, THE TRANSFER PRI CING OFFICER PROCEEDED TO BENCH MARK THE T RANSACTION WITH THE AE BY APPLYING TNMM WITH OPERATING PROFIT (OP) / TOTAL COST (TC) AS THE PLI. OUT OF SEVEN COMPARABLES SELECTED BY THE ASSESSEE, THE TRANSFER PRICING OFFICER REJECTED CERTAIN COMPARABLES AND ULTIMATELY PROPOSED ADJUSTMENT OF ` 51,35,70,591, IN ASSESSMENT YEAR 2010 11 AND ` 14,53,03,285, IN ASSESSMENT YEAR 2011 12 . I N TERMS WITH THE ADJUSTMENT PROPOSED BY THE TRANSFER PRICING OFFICER, THE ASSESSING OFFICER MADE ADDITION S IN THE DRAFT ASSESSMENT ORDER S . AGAINST THE DRAFT ASSESSME NT ORDER SO PASSED, THE ASSESSEE RAISED OBJECTION S BEFORE LEARNED DRP. 5. HAVING TAKEN NOTE OF THE FACT THAT UNDER IDENTICAL FACTS AND CIRCUMSTANCES IN ASSESSEES OWN CASE, THE TRANSFER PRICING OFFICER HIMSELF IN ASSESSMENT YEAR 2002 03 AND 2003 04 HAS ACCEP TED CUP AS THE MOST APPROPR IATE METHOD AND DID NOT PROPOSE ANY ADJUSTMENT AND FURTHER , THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR S 2004 05, 2005 06 AND 2006 07 HAS ACCEPTED THE BENCH MARKING DONE BY THE ASSESSEE BY APPLYING CUP METHOD , FOLLOWED THE SAME AND DELETED THE ADDITIONS MADE ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT IN BOTH THE ASSESSMENT YEARS UNDER DISPUTE. 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS A COMMON POINT BETWEEN THE LEARNED COUNSEL S 5 AGILITY LOGISTICS PVT. LTD. APPEAR ING ON BEHALF OF THE PARTIES THAT THE ISSUE IN DISPUTE IS COVERED BY VARIOUS DECISIONS OF THE TRIBUNAL RENDERED IN THE PRECEDING ASSESSMENT YEAR S . IN THIS CONTEXT, THE LEARNED COUNSEL FOR THE ASSESSEE HAS DREW OUR ATTENTION TO THE RELEVANT OBSERVATIONS OF THE TRIBUNAL IN THE ORDERS PASSED FOR TH E ASSESSMENT YEAR 2004 05 TO 200 9 10. ON A PERUSAL OF THE MATERIAL PLACED BEFORE US, WE FIND THAT WHILE DECIDING IDENTICAL ISSUE IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2004 05 IN ITA NO.2000/ MUM./2010, DATED 25 TH JANUARY 2012, THE TRIBUNAL HAS ACCEPTED THE BENCH MARKING DONE BY THE ASSESSEE UNDER CUP METHOD AND HAS ALSO HELD THAT THE PROFIT SHARING RATIO OF 50:50 IS PREVALENT BOTH IN RESPECT OF AGREEMENT ENTERED INTO BETWEEN GROUP COMPANIES WITH UNRELATED PARTIES AS WELL AS THE ASSESSEE. THE SAME VIEW WAS EXPRESSED BY THE TRIBUNAL IN ASSESSMENT YEAR 2005 06 VIDE ITA NO.6004/MUM./2010, DATED 25 TH JANUARY 2012, IN ASSESSMENT YEAR 2007 08 VIDE ITA NO. 8648/MUM./2011, DATED 13 TH APRIL 2012, IN ASSESSMENT YEAR 2008 09 V IDE IT(TP)A NO.7508/MUM./2012, DATED 23 RD JULY 2013 AND IN ASSESSMENT YEAR 2009 10 VIDE IT(TP)A NO.1189/MUM./2014, DATED 19 TH NOVEMBER 2014. THERE IS NO DISPUTE BETWEEN THE PARTIES THAT THE FACTS ON THE BASIS OF WHICH THE TRIBUNAL HAS DECIDED THE ISSUE IN THE PRECEDING ASSESSMENT YEAR S REMAIN UNCHANGED IN THE IMPUGNED ASSESSMENT YEAR S AS WELL. IN FACT, LEARNED DRP FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSMENT YEAR S 2004 05 TO 2006 07 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 6 AGILITY LOGISTICS PVT. LTD. THEREFORE, RESPECTFULLY FOLLOWING THE CONSISTENT VIEW EXPRESSED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN PRE CEDING ASSESSMENT YEAR AS NOTED ABOV E, WE UPHOLD THE DECISION OF LEARNED DRP IN BOTH THE YEARS UNDER APPEAL . GROUNDS ARE DISMISSED. 7. THE NEXT COMMON IS SUE AS RAISED IN GROUND NO.5, OF BOTH THE APPEALS RELATES TO DELETION OF ADDITION MADE TO THE GROSS PROFIT. 8. BRIEF FACTS ARE, A SEARCH AND SEIZURE OPERATION UNDER SECTION 132 OF THE ACT WAS CARRIED OUT IN THE PREMISES OF CERTAIN ENTITIES AT NEW D E LHI , WHICH WERE AWARDED CONTRACT FOR RELAY ING WORK FOR THE COMMONWEALTH GAME S . AS A COROLLARY TO THE AFORESAID SEARCH AND SEIZURE OPERATION, A SURVEY UNDER SECTION 133A OF THE ACT WAS CARRIED OUT ON THE ASSESSEE FOR THE REASON THAT IT HAS PROVIDED SERVICE S/ MATERIAL TO THE CONCERNED PARTIES. IN THE COURSE OF SURVEY, A STATEMENT WAS RECORDED FROM THE VICE PRESIDENT OF THE ASSESSEE COMPANY . A FTER CALLING FOR LEDGER ACCOUNT COPIES , INVOICES AND OTHER INFORMATION, THE ASSESSING OFFICER OBSERVED THAT THE GROSS PROFIT IN FREIGHT FORWARDING DIVISION AND LOGISTIC DIVISION HAS DIMINISHED IN MARCH 2010. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE DECREASE IN GROSS PROFIT MIGHT BE DUE TO THE FACT THAT THE ASSESSEE MUST HAVE ADJUSTED PROFIT & LOSS ACCOUNT ON ACCOUNT OF TRANSACTION RE LATING TO COMMON WEALTH GAME S VIS A VIS THE PROFIT/ LOSS IN RESPECT OF OTHER TRANSACTIONS. ACCORDINGLY, AFTER REJECTING THE BOOKS OF ACCOUNT, THE 7 AGILITY LOGISTICS PVT. LTD. ASSESSING OFFICER COMPUTED THE GROSS PROFIT RATE AND PROPOSED ADDITIONS OF ` 10,70,21,929, IN ASSESSMENT YEAR 20 10 11 AND ` 2,67,86,959 IN ASSESSMENT YEAR 2011 12 ON IDENTICAL REASONING. THE ASSESSEE CHALLENGED THE AFORESAID ADDITION S BEFORE LEARNED DRP. 9. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND PERUSING THE EVIDENCE S FURNISHED, LEARNED DRP DID NOT FIND ANY WRONG DOING BY THE ASSESSEE AND ACCORDINGLY DELETED THE ADDITION S MADE BY THE ASSESSING OFFICER. 10. WHILE THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS STRONGLY RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER, THE LEARNED COUNSEL FOR THE ASSESSEE HA S DRAWN SUPP ORT FROM THE OBSERVATIONS OF LEARNED DRP. 11. HAVING CONSIDERED RIVAL SUBMISSIONS AND ON A CAREFUL READING OF LEARNED DRPS DIRECTION, IT IS SEEN THAT IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSE E HAD FURNISHED ALL THE DETAILS/ INFORMATION CAL LED FOR BY THE ASSESSING OFFICER INCLUDING COPIES OF LEDGER ACCOUNT, INVOICE S, COPIES OF AGRE EMENT IN CONNECTION WITH COMMON WEALTH GAMES. TH ERE IS A SPECIFIC FINDING BY LEARNED DRP THAT NEITHER THE ASSESSING OFFICER HAS MADE ANY ADVERSE REMARK ALLEGING NON FURNISHING OF ANY DETAILS BY THE ASSESSEE NOR REGARDING THE MAINTENANC E OF REGULAR BOOKS OF ACCOUNT BY THE ASSESSEE. IT ALSO 8 AGILITY LOGISTICS PVT. LTD. APPEARS FROM RECORD, THE ASSESSING OFFICER HAS EXAMINED THE BOOKS OF ACCOUNT AND THE MATERIALS FURNISHED BEFORE HIM AND HAS NOT MADE ANY ADVERSE REMARK REGARDING THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNT S . SIMPLY RELYING UPON A STATEMENT RECORDED FROM THE VICE PRESIDENT OF THE COMPANY, THE ASSESSING OFFICER HAS CONCLUDED THAT THE ASSESSEE MIGHT HAVE MANIPULATED ITS PROFIT. THU S, AS COULD BE SEEN FROM THE MATERIAL ON RECORD, THERE IS NO CONTRARY EVIDENCE BROUGHT ON RECORD BY THE ASSESSING OFFICER TO ESTABLISH THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE ARE UNRELIABLE OR THE ASSESSEE HAS MANIPULATED THEM. IT IS ALSO A FA CT ON RECORD THAT THE PARTIES WITH WHOM THE ASSESSEE HAS ENTERED INTO TR ANSACTIONS ARE NOT RELATED PARTIES . NONE OF THE FACTUAL FINDING RENDERED BY LEARNED DRP HAS BEEN CONTROVERTED BEFORE US WITH CORROBORATIVE EVIDENCES. THUS, IT IS VERY MUCH CLEAR , THE A DDITIONS ON ACCOUNT OF LOW GROSS PROFIT HAS BEEN MADE PURELY ON CONJECTURE AND SURMISES WITHOUT ANY SUPPORTING EVIDENCE. THAT BEING THE CASE, WE DO NOT FIND ANY REASON TO IN TERFERE WITH THE DECISION OF LEARNED DRP ON THE ISSUE. GROUND RAISED IS DISMISSED. 12. IN THE RESULT, BOTH THE REVENUES APPEALS ARE DISMISSED. C.O. NO.77/MUM./2015 C.O. NO.29/MUM./2016 9 AGILITY LOGISTICS PVT. LTD. 13. IN VIEW OF OUR DECISION IN THE CONTEXT OF REVENUES APPEALS IN THE PRECEDING PARAGRAPHS, THE GROUNDS RAISED BY THE ASSESSEE IN ITS CROSS OBJECTIONS HAVE B ECOME INFRUCTUOUS, HENCE DISMISSED. 14. IN THE RESULT, ASSESSEES CROSS OBJECTIONS ARE DISMISSED. 15. TO SUM UP, REVENUES APPEALS AND ASSESSEES CROSS OBJECTIONS ARE DISMISSED. ORDER PRONOUNCED THROUGH NOTICE BOARD UNDER RULE 34(4) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963 ON 03.09.2020 SD/ - MANOJ KUMAR AGGARWAL ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 03.09.2020 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI