ASST CIT CIR 27(1), NAVI MUMBAI V. DHARMESH RAJENDERA CHOKSHI, MUMBAI

ITA 2525/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2151 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 07-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHAY AGARWAL
• Assessee Lawyers: D G PANSARI
• Section: 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.2525/M/2017 ASSESSMENT YEAR: 2012-13 ACIT, CIR-27(1), ROOM NO.415, 4 TH FLOOR, TOWER NO.6, VASHI STATION COMPLEX, MUMBAI 400 703 VS. SHRI DHARMESH RAJENDRA CHOKSHI, 175-176, NEELKANTH VILLA, GARODIA NAGAR, GHATKOPAR (EAST), MUMBAI 400 077 PAN: AABPC7653A (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI D.G. PANSARI, A.R. REVENUE BY : SHRI ABHAY AGARWAL, D.R. DATE OF HEARING : 06.06.2019 DATE OF PRONOUNCEMENT : 24.06.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 25.01.2017 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2012-13. 2. THE ONLY ISSUE RAISED BY THE REVENUE IN THE VARI OUS GROUNDS OF APPEAL IS AGAINST THE DELETION OF ADDITI ON OF RS.2,43,97,120/- BY LD. CIT(A) AS MADE BY THE AO UN DER SECTION 40A(2)(B) OF THE ACT, 1961. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED T HE RETURN OF INCOME ON 24.09.2012 DECLARING INCOME OF RS.27,39,0 50/- WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT . THEREAFTER ITA NO.2525/M/2017 SHRI DHARMESH RAJENDRA CHOKSHI 2 THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND DURING THE COURSE OF ASSESSMENTS PROCEEDINGS THE AO NOTICED FR OM THE PERUSAL OF TAX AUDIT REPORT THAT ASSESSEE HAS MADE PURCHASES OF RS.4,48,55,000/- FROM M/S. RAJU STEEL CORPORATION W HICH ARE COVERED BY THE PROVISIONS OF SECTION 40A(2)(B) OF T HE ACT. ACCORDINGLY, THE ASSESSEE WAS ASKED TO SUBMIT THE C OMPARATIVE RATES OF PURCHASES FROM THE ABOVE MENTIONED SISTER CONCERN VIS- -VIS OTHER PARTIES WHICH WAS SUBMITTED BY THE ASSE SSEE VIDE LETTER DATED 17.03.2015. HOWEVER, THE AO REJECTED THE SAME BY OBSERVING FROM THE DETAILS FILED BY THE ASSESSEE TH AT THE ASSESSEE HAS MADE PURCHASES FROM THIRD PARTIES AT A VERY LOW RATE WHEREAS THE PURCHASES FROM THE SISTER CONCERN MADE AT A HIGHER PRICE OR VICE VERSA AND ULTIMATELY AN ADDITION OF RS.2,43,97,120/- WAS MADE TO THE INCOME OF THE ASSE SSEE ON THE GROUNDS THAT TRANSACTIONS WITH THE SISTER CONCERN A T NOT MADE AT COMPARABLE AND REASONABLE PRICES. 4. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) ALL OWED THE APPEAL OF THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER AFTER TAKING INTO ACCOUNT THE CONTENTIONS AND SUBMISSIONS OF THE ASSESSEE. 7.1.4 FROM THE QUANTITATIVE DETAILS, IT IS OBSERVE D THAT THERE ARE TOTAL 13 DIFFERENT VARIETIES OF IRON SHEETS VIZ, C.R. COILS/SHEETS , G.P. COII/SHEETS, HOT ROLLED CHEQUERED SHEETS, H.R. SHEETS & COILS, H:R. SHEETS-SECONDARY, M.S. ANGLE, M.S. BEAM, M.S. CHANELS, M.S. FLAT, M.S, PIPE, M.S. ROUND AND T.M.T . BARS. THE RATES OF PURCHASE AND SALES VARY SIGNIFICANTLY ACROSS VARIOUS PRODUCTS. F URTHER, PROFITS ALSO VARY FROM 0.96% TO 29.24% DEPENDING UPON THE PRODUCTS BEING T RADED. THEREFORE, THE AO'S ACTION IN PICKING UP ONE PRODUCT I.E., H.R. SHEET- SECONDARY AND APPLYING THE PROFIT EARNED ON IT WITH OTHER 12 DIFFERENT VARIETIES OF I RON PRODUCTS CANNOT BE ACCEPTED. 7.1.5 IT IS FURTHER OBSERVED THAT ALTHOUGH THE AO I N PARA 3 HAS STARTED THE COMPARISON WITH THE RELATED PARTY. M/S RAJU STEEL C ORPORATION U/S 40A(2)(B) OF THE IT ACT, HE HAS ONLY SELECTED ONLY FIVE INSTANCES OF PURCHASES & SALES TO HIGHLIGHT THAT THE GP WORKS OUT TO (-)6%. WHEN THERE ARE HUNDREDS OF SUCH INSTANCES OF PURCHASES AND SALES UNDERTAKEN BY M/S. RAJU STEEL CORPORATION , DURING THE YEAR UNDER ITA NO.2525/M/2017 SHRI DHARMESH RAJENDRA CHOKSHI 3 CONSIDERATION, SELECTION OF ONLY 5 INSTANCES, THAT TOO OF DIFFERENT VARIETY OF STEEL PRODUCTS, CANNOT BE CONSIDERED AS A CORRECT METHODO LOGY. 7.1.6 FINALLY, NO REASON HAS BEEN GIVEN BY THE AO I N APPLYING THE GP @ 41.84% ON THE PURCHASES MADE FROM OTHER PARTIES TOO IN ADDITI ON TO THE RELATED PARTY, M/S RAJU STEEL CORPORATION. HENCE, IN MY CONSIDERED OPI NION, THE BASIS OF ADDITION IS NOT ONLY FAULTY BUT SUCH ESTIMATION IS TOTALLY UNWA RRANTED. 7.1.7 CONSIDERING THE TOTALITY OF FACTS AND CIRCUMS TANCES OF THE ISSUE INVOLVED, THE ADDITION OF RS. 2,43,97,120/- ON ACCOUNT OF DIFFERE NCE IN GP IS DELETED. HENCE, THE GROUND OF APPEAL NO. 1 IS ALLOWED. 5. THE LD. A.R. VEHEMENTLY SUBMITTED BEFORE THE BEN CH THAT THE SUBMISSIONS OF THE ASSESSEE AS MADE BEFORE THE AO WERE NOT CORRECTLY APPRECIATED BY THE AO BY REFERRING TO THE PAGE NO.15, 16 OF THE PAPER BOOK WHICH CONTAINED PARTY-WISE DET AILS OF PURCHASES AND SALES AND PERCENTAGE PROFIT ON THOSE TRANSACTIONS. THE LD. A.R. SUBMITTED THAT THE PROF IT OF THE ASSESSEE RANGES FROM 1.02% TO 21.737% AND THE AO HA S ONLY CHERRY PICKED THE GP OF THOSE ITEMS ON WHICH THE GP WAS HIGHEST THAT TWO OF DIFFERENT ITEMS THAN PURCHASED /SOLD FROM THE RELATED PARTIES. THE LD. A.R. THEREFORE SUBMIT TED BEFORE THE BENCH THAT THE ORDER OF AO IS FACTUALLY INCORRECT A S IT HAS NOT CONSIDERED THE CORRECT INSTANCES OF SALE AND PURCHA SE TO EVALUATE THE TRANSACTIONS WITH THE RELATED PARTIES. THE LD. A.R. WHILE RELYING HEAVILY ON THE ORDER OF LD. CIT(A) SU BMITTED THAT THE LD. CIT(A) HAS CORRECTLY ANALYSED AND APPRECIAT ED THE FACTS AND PASSED A VERY REASONED AND SPEAKING ORDER. 6. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE O RDER OF AO AND GROUNDS OF APPEAL BY SUBMITTING THAT THE ASSESS EE HAS BEEN PURCHASING GOODS FROM THE MARKET AT LOWER RATE WHE REAS AT HIGHER PRICES FROM THE RELATED PARTY THEREBY SUPPR ESSING THE INCOME OF THE ASSESSEE, THE LD DR SUBMITTED THAT TH E TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH THE ELATED PARTY ITA NO.2525/M/2017 SHRI DHARMESH RAJENDRA CHOKSHI 4 WERE MADE AT UNREASONABLE PRICES AND THEREFORE THE ORDER OF LD. CIT(A) MAY BE REVERSED AND THAT OF AO MAY BE UPHELD . 7. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT THE ASSESSEE HAS FILED BEFO RE THE AO THE STATEMENT OF COMPARATIVE PURCHASES AND SALES WITH GP RATES FROM RELATED PARTY VIS A VIS THIRD PARTIES. IN OR DER TO DEMONSTRATE THAT THE TRANSACTIONS WITH THE RELATED PARTY HAS BEEN MADE AT THE MARKET RATE WHICH ARE REASONABLE AND COMPARABLE, THE ASSESSEE FILED A CHART SHOWING GP O N VARIOUS ITEMS OF PURCHASES. THE AO, HOWEVER, CHERRY PICKED THE INSTANCES OUT OF THAT CHART THAT TOO OF VERY HIGH MARGIN AND ALSO OF DIFFERENT ITEMS THAN DEALT WITH BY THE ASSESSEE WITH THE RELATED PARTIES. WHEREAS, ON THE OTHER HAND, THE L D. CIT(A) HAS PROPERLY ANALYZED AND APPRECIATED THE SUBMISSIONS O F THE ASSESSEE AND TAKEN A VERY REASONED AND CORRECT VIEW BY HOLDING THAT THE TRANSACTION WITH THE AUDITED PARTY ARE AT MARKET PRICE AND THERE IS NO SUPPRESSION OF ANY PROFIT/INCOME OF THE ASSESSEE. UNDER THESE CIRCUMSTANCES, WE ARE IN AGR EEMENT WITH THE CONCLUSION DRAWN BY THE LD. CIT(A) THAT ASSESSE E HAS NOT MADE ANY TRANSACTION WITH THE RELATED PARTIES WHICH ARE COVERED UNDER SECTION 40A(2)(B) OF THE ACT AT A PRICE WHICH IS LOWER THAN THE MARKET PRICE. ACCORDINGLY, WE UPHOLD THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.06.2019. SD/- SD/- ( RAM LAL NEGI) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 24.06.2019. * KISHORE, SR. P.S. ITA NO.2525/M/2017 SHRI DHARMESH RAJENDRA CHOKSHI 5 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.