VIVEK P TALWAR, MUMBAI V. DCIT CEN CIR 46, MUMBAI

ITA 2336/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88504 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 27-11-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 25-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PAWAN KU MAR BEERLA
• Keywords: Fair market value; Onus to prove
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUM BAI , , BEFORE SHRI JOGINDER SINGH, JM AND SHRI SANJAY ARO RA, AM ./ I.T.A. NO. 2336/MUM/2013 ( / ASSESSMENT YEAR: 2003-04) VIVEK P. TALWAR 17-B, II PALAZZO, RIDGE ROAD, MALABAR HILL, MUMBAI-400 006 / VS. DY. CIT, CENTRAL CIRCLE 46, MUMBAI ./ ! ./PAN/GIR NO. AAAPT 3994 Q ( ' /APPELLANT ) : ( #$ ' / RESPONDENT ) ' % & / APPELLANT BY : SHRI VIMAL PUNMIYA #$ ' % & / RESPONDENT BY : SHRI PAWAN KUMAR BEERLA ' ()* % +, / DATE OF HEARING : 9.12.2014 -./ % +, / DATE OF PRONOUNCEMENT : 27.02.2015 0 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-38, MUMBAI (C IT(A) FOR SHORT) DATED 31.12.2012, DISMISSING THE ASSESSEES APPEAL CONTES TING ITS ASSESSMENT U/S.144 R/W S. 254 OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAF TER) FOR THE ASSESSMENT YEAR (A.Y.) 2003-04 VIDE ORDER DATED 15.12.2011. 2. THIS IS THE SECOND ROUND BEFORE THE TRIBUNAL. IN THE FIRST ROUND, IT FINDING ANOMALIES AND DISCREPANCIES IN THE SALES AND PURCHA SES OF MARBLE, I.E., AS BOOKED IN THE ASSESSEES PROPRIETARY CONCERN, M/S. MAHARSHTRA MARBLE CO., VIDE PARAS 11 TO 13 OF ITS ORDER DATED 04.11.2010 (AT PB-1 PAGES 47-55) , WAS OF THE VIEW THAT THE ISSUE 2 ITA NO. 2336/MUM/2013 (A.Y. 2003-04) VIVEK P. TALWAR VS. DY. CIT REQUIRES FURTHER EXAMINATION. THE ASSESSEE CONTENDI NG THAT THE TRANSACTIONS BETWEEN IT AND NITCO TILES LTD., AN ASSOCIATE CONCERN, AND WIT H WHOM THE BULK OF THE TRANSACTIONS OF PURCHASE AND SALE HAD TAKEN PLACE, WERE TRADING TRANSACTIONS, WITHOUT ANY PROCESSING, AND ONLY WITH A VIEW TO BOOK PROFIT IN THE ASSESSEE-FIRM AND AVAIL LOAN/S (RECORDED AT PARAS 14, 15 OF ITS ORDER), WHICH THE TRIBUNAL FOUND AS UN-EVIDENCED. WHETHER IT WAS SO, OR A CASE OF REAL SUPPRESSION O F SALES, AS CONTENDED BY THE REVENUE, WOULD REQUIRE BEING EXAMINED FROM THE STAN D-POINT AND IN VIEW OF THE TRANSACTIONS WITH NITCO TILES LTD. (PARA 15). IT, A CCORDINGLY, RESTORED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER (AO) FOR THE P URPOSE. IN THE SET ASIDE PROCEEDINGS, THE ASSESSEE FAILING TO FURNISH ANY DETAILS OR MATE RIALS, I.E., AS REQUIRED VIDE PARAS 14 & 15 OF THE TRIBUNALS ORDER DATED 04.11.2010, THE AS SESSMENT WAS FRAMED BY ADOPTING THE SUPPRESSION OF SALES AT RS. 1,01,57,840/-, I.E. , IN RESPECT OF THE TRADING TRANSACTIONS OF MAHARASHTRA MARBLE CO. WITH NITCO TILES LTD., BE ING THE ONLY ADJUSTMENT TO THE RETURNED INCOME, VIDE ORDER U/S. 144 OF THE ACT. IN APPEAL, THE LEARNED CIT(A) WAS OF THE VIEW THAT THE OBJECTIONS, IF ANY, TO THE MISTAK ES STATED BY THE ASSESSEE TO HAVE CREPT IN THE ORDER BY THE TRIBUNAL SUPRA WHILE OBSERVING DISCREPANCIES OR ANOMALIES IN ITS PURCHASES AND SALES, COULD ONLY BE ADDRESSED IN THE RECTIFICATION PROCEEDINGS BEFORE THE TRIBUNAL. FURTHER, THE ASSESSEE WAS UNDER A LEG AL OBLIGATION TO FILE ALL THE RELEVANT DETAILS/MATERIAL AND PROVIDE PROPER ASSISTANCE TO T HE ASSESSING AUTHORITY, WHICH IT HAD FAILED TO. NITCO TILES LTD. (NTL) WAS A RELATED PA RTY U/S. 40A(2)(B) OF THE ACT AND, ACCORDINGLY, THE BURDEN OF PROOF WAS UPON THE ASSES SEE TO SHOW THAT THE PRICE PAID WAS NOT EXCESSIVE OR REASONABLE, RELYING ON THE DECISIO N IN THE CASE OF CIT V. SHATRUNJAY DIAMONDS [2003] 261 ITR 258 (BOM). THE ASSESSMENT BEING CON FIRMED THUS, THE ASSESSEE, AGGRIEVED, IS IN SECOND APPEAL. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. IT WOULD BE RELEVANT TO SUMMARIZE THE TRANSACTIONS OF PURCHASE AND SALE FOR THE YEAR, BEING THE SUBJECT MATTER OF CONTROVERSY ARISI NG IN THE INSTANT CASE, AS UNDER: 3 ITA NO. 2336/MUM/2013 (A.Y. 2003-04) VIVEK P. TALWAR VS. DY. CIT PARTICULARS OPENING STOCK PURCHASES PURCHASE RETURN SALES CLOSING STOCK REMARKS NO. SQ.FT. NO. SQ.FT. NO. NO. SQ.FT. NO. SQ.FT. C1 38 1403 (@ 120/-) 70 2583 (@ 120/-) 27 996 (@120/- ) 43 1586 (@ 350 /- ) 38 1404 (@ 120/-) C2 - - 180 4244 (@ 120/-) 180 4244 (@ 120/-) - - - - C3 - - 2250 104206 (@ 120/-) 40 1853 (@ 120/- 2210 102346 (@ 150/-) - - NOTE: 1. PARTICULARS REPRESENT THE DIFFERENT CATEGORIES (MARKE D C1 TO C3), WHICH ARE ESSENTIALLY THE DIFFERENT SIZES IN WHICH THE MARBLE PIECES ARE CUT, AS UNDER: C1 => 116.25 X 45.7 C2 => 67.90 X 50 C3 => 118.04 X 56.5 2. THE FIGURES ARE OF QUANTITY, BOTH IN TERMS OF THE NUMBER OF PIECES (SLABS) AND IN SQUARE FEET. 3. THE FIGURES IN BRACKETS ARE OF THE RATE PER SQ. FT. WE OBSERVE THAT THE TRANSACTIONS OF PURCHASE AND SA LE ARE NOT DISPUTED PER SE , BEING ONLY PER BILLS RAISED ON AND BY THE ASSESSEE. THE D ISPUTE IN FACT IS NOT WITH REGARD TO THE QUANTITY PURCHASED OR SOLD, BUT THE RATE/S AT W HICH IT IS. HERE, AGAIN, IT IS THE SALE RATE OF THE MARBLE, THE COMMODITY/PRODUCT IN WHICH THE ASSESSEE TRADES, SOLD TO NTL THAT STANDS IMPUGNED FOR BEING UNDER-PRICED AND, AC CORDINGLY, SUPPRESSION OF SALES AND, THUS, OF INCOME, INFERRED IN CONSEQUENCE. IN T HIS VIEW OF THE MATTER, THE DISCREPANCIES/ANOMALIES OBSERVED BY THE TRIBUNAL WO ULD BE OF LITTLE CONSEQUENCE; THE REVENUE NEITHER DRAWING ANY INFERENCE FROM, OR EVEN OTHERWISE THERE-FROM, NOR ISSUING ANY FINDING OF FACT ON THE BASIS OF, THE GI VEN DATA. ITS CASE CONTINUES TO BE ONE OF SUPPRESSION OF SALES. IN FACT, THE ENTIRE PURCHA SES AND SALES ARE FROM THE SAME PARTY, I.E., NTL, SO THAT, AS CLARIFIED BY THE LD. AR DURI NG HEARING, THE DISCREPANCIES WERE ONLY IN THE NATURE OF PRELIMINARY OBSERVATIONS BY T HE TRIBUNAL, AND NOT WELL-FOUNDED, HAVING ARISEN IN THE ABSENCE OF COMPLETE INFORMATIO N. EVEN OTHERWISE, IT STANDS TO REASON THAT IF THE SAID OBSERVATIONS WERE FINDINGS, WHERE WAS THE NEED FOR THE TRIBUNAL TO RESTORE THE MATTER BACK TO THE FILE OF THE AO, S O THAT THE CLARIFICATIONS/INFORMATION FURNISHED BY THE ASSESSEE IN THE RESTORED PROCEEDIN GS WERE RELEVANT, AND COULD NOT HAVE BEEN, AS HE DID, BRUSHED ASIDE BY THE LD. CIT( A). WE HAVE IN ANY CASE CLARIFIED THAT THE ONLY ISSUE ARISING IN THIS APPEAL IS THE S UPPRESSION OF SALES, I.E., THE 4 ITA NO. 2336/MUM/2013 (A.Y. 2003-04) VIVEK P. TALWAR VS. DY. CIT UNDERPRICING, IF ANY, OF THE GOODS SOLD BY THE ASSE SSEE TO NTL, SO THAT THE QUANTITATIVE DETAILS OR DATES ON WHICH THE PURCHASES AND SALES T HERETO, OR FROM/TO OTHER PARTIES, WERE MADE, IS NOT IN DISPUTE. THE REVENUES CASE IS THAT THE GOODS SOLD TO NTL OU GHT TO HAVE BEEN AT A HIGHER RATE OF RS. 350 PER SQ. FT., I.E., AS AGAINS T THE BILLED RATE OF RS. 150 PER SQ. FT. THIS IS STATED ON THE BASIS THAT THE SALE OF THE SA ID GOODS TO ANOTHER CONCERN, M/S. AUTUM, HAS BEEN AT THAT RATE, WITH THE ASSESSEE BEI NG UNABLE TO ESTABLISH THAT EITHER THE SAID GOODS WERE OF A SUPERIOR QUALITY, OR PROCESSED PRIOR TO THEIR SALE THERETO, YIELDING IT, ON THAT ACCOUNT, A HIGHER RATE. WE COMPLETELY U NIMPRESSED. TRUE, IT IS APPARENT THAT THE SALES TO M/S. AUTUM, WHICH WERE CLAIMED TO BE, IN THE MAIN (38 PCS.), OUT OF OPENING STOCK, IS OF THE SAME GOODS (C-1), I.E., AS PURCHASED BY THE ASSESSEE, WHICH COMPRISE THE BALANCE SALE OF 5 PCS. OF THE SAID GOO DS SOLD TO THE SAID PARTY. THERE IS AS SUCH NO BASIS TO CLAIM THE GOODS LYING IN THE OPENI NG STOCK AS BEING OF A HIGHER QUALITY, WHICH CONTENTION OF THE ASSESSEE ALSO DID NOT FIND FAVOUR WITH THE TRIBUNAL IN THE FIRST ROUND, THOUGH ON ACCOUNT OF BEING UN-EVID ENCED, AND WHICH CONTINUES TO BE CASE EVEN IN THE SECOND ROUND AS WELL. SO, HOWEVER, FIRSTLY, THE SAID GOODS ARE OF A DIFFE RENT CATEGORY (C-1), NO PART OF WHICH STANDS SOLD TO NTL. TWO, EVEN CONSIDERING THA T THE DIFFERENCE BETWEEN THE DIFFERENT CATEGORIES, AS WE INFER FROM THE MATERIAL ON RECORD, IS ONLY OF THE SIZES IN WHICH THE MARBLE PIECES ARE CUT, CAUSING NO IMPACT, OR AT LEAST MATERIALLY, TO THE SALE PRICE, HOW WE WONDER COULD IT LEAD TO THE INFERENCE OF THE FAIR MARKET VALUE OF THE GOODS SOLD (C-3) TO NTL BEING AT RS. 350 PER SQ. FT . THAT IS, EVEN IGNORING THE DIFFERENCE IN THE PRODUCT, WHAT IS THERE, I.E., APA RT FROM A SOLITARY TRANSACTION OF SALES FOR A NOMINAL SUM, SO THAT IT COULD BE, AS CONTENDE D, A ONE-OFF TRANSACTION, TO SHOW THAT THE SAME REPRESENTS THE FAIR MARKET VALUE (FM V FOR SHORT) OF THE SAID GOODS. ONE FALLOW DOES NOT MAKE A SUMMER. THEN, AGAIN, THEIR A BNORMALLY LOW PURCHASE OF RS. 120/-, WOULD ITSELF CONTRADICT THE INFERENCE OF THE FMV, AND AT THE SAME TIME, BEING AT RS. 350/- , I.E., ABOUT 3 TIMES HIGHER. THAT IS, WHAT IS THE BASIS FOR THE SAID GOODS BEING PURCHASED AT A MUCH LOWER RATE OF RS. 46.31 IN THE FIRST PLACE ? COUPLE THIS WITH THE FACT THAT THE SAID GOODS WERE PURCHASED FROM NTL IT SELF, I.E., TO WHOM THE SUPPRESSED SALES IS ALLEGED, AND THE REVENUES CASE BECOMES A NON-STARTER. THIS IS AS UNDER- 5 ITA NO. 2336/MUM/2013 (A.Y. 2003-04) VIVEK P. TALWAR VS. DY. CIT PRICING OF SALES THERETO WOULD ONLY IMPLY A TRANSFE R OF PROFITS OF THE ASSESSEES ENTERPRISE TO THAT FIRM, WHILE BOTH THE PURCHASES A ND SALES ARE FROM THE VERY SAME CONCERN, SO THAT TREATING ONE OF THEM AS THE FAIR V ALUE, AS THE REVENUE DOES THE PURCHASES, DEFEATS ITS CASE INASMUCH AS THERE IS N O BASIS OR REASON FOR THE ABNORMAL PROFIT THAT WOULD ARISE TO THE ASSESSEE (66%), I.E. , ASSUMING THE SALE PRICE SOUGHT TO BE IMPUTED TO THE SALES. IN OTHER WORDS, THE REVENUE N OT DISPUTING THE PURCHASE RATE OF RS. 120/-, WHICH THEREFORE IS BE TAKEN AS THE FAIR MARKET VALUE OF THE SAID GOODS, AND WHICH IN FACT IS ALSO IN AGREEMENT WITH THE PURCHAS E COST OF THE SAID GOODS BY NTL, IMPORTED BY IT, WHAT COULD POSSIBLY LEAD TO A SUDDE N SPURT IN THEIR PRICE, RESULTING IN AN UNEXPLAINED, ABNORMAL PROFIT OF NEARLY 66%. WHY, IN THAT CASE, WOULD NTL SELL THE SAID GOODS TO THE ASSESSEE AT THE BELOW PAR RATE. A LL THIS GIVES CREDENCE TO THE ASSESSEES CLAIM THAT THE TRANSACTIONS WERE IN FACT BOOKED ONLY TO GENERATE SOME PROFIT IN THE ASSESSEES HANDS FOR SOME ULTERIOR PURPOSE, VIZ. TO OBTAIN LOAN/S, ETC., WHICH AGAIN HAS NOT BEEN IMPUGNED BY THE REVENUE. THERE I S ALSO, IT MAY CLARIFIED, NO BENEFIT ON ACCOUNT OF THE TAX RATES; RATHER, TO THE CONTRARY, A DISADVANTAGE, INASMUCH AS THE TAX RATE FOR NTL, A CORPORATE ENTITY, IS CONSTA NT IRRESPECTIVE OF THE INCOME LEVEL AND, FURTHER, AT THE MAXIMUM TAX RATE. THE RELIANCE ON THE DECISION IN THE CASE OF SHATRUNJAY DIAMONDS (SUPRA) BY THE LD. CIT(A) IS AGAIN MISPLACED INASM UCH AS THAT IS A CASE OF DISALLOWANCE U/S. 40A(2)(A), WHICH HAS NO APPLICATION IN THE INSTANT CASE, WHICH IS OF SUPPRESSION OF INCOME, ONUS TO PROVE WH ICH, IF ONLY PRIMA FACIE , IS ON THE REVENUE, AND NOT OF DISALLOWANCE U/S. 40A(2)(A), WH ICH COULD ONLY BE OF AN EXPENDITURE. WE HAVE IN ANY CASE DECIDED THE CONTRO VERSY ARISING BY ISSUING DEFINITE FINDINGS OF FACT. THE REVENUES CASE, ON WHOM THE B URDEN TO EXHIBIT SUPPRESSION IN SALES LIES, IS WHOLLY UNSUBSTANTIATED; RATHER, UNFO UNDED ON FACTS. WE DECIDE ACCORDINGLY. 4. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. 1/+2 (341+ % ) 5 + % + 6 ORDER PRONOUNCED IN THE OPEN COURT ON FEBRUARY 27 TH , 2015 SD/- SD/- (JOGINDER SINGH) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER 6 ITA NO. 2336/MUM/2013 (A.Y. 2003-04) VIVEK P. TALWAR VS. DY. CIT ' 7* MUMBAI; 8( DATED : 27.02.2015 ).(. ./ ROSHANI , SR. PS AND S.K. !' # $%&' (!'% / COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. #$ ' / THE RESPONDENT 3. ' 9+ ( ) / THE CIT(A) 4. ' 9+ / CIT - CONCERNED 5. <)= #+(3 , , 3/ , ' 7* / DR, ITAT, MUMBAI 6. ?4 @* / GUARD FILE !' ) / BY ORDER, */)+ , (DY./ASSTT. REGISTRAR) , ' 7* / ITAT, MUMBAI