Greenland Exports Pvt. Ltd., CHENNAI V. ACIT, CHENNAI

ITA 2633/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8071 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 12-09-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: G SEETHARAMANC A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI , ! ' . #$ % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.2633/MDS./2016 / ASSESSMENT YEAR : 2010-11 M/S.GREENLAND EXPORTS PVT. LTD., 14, SIR THEYAGARAYA ROAD, T.NAGAR, CHENNAI 600 017. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2(1), CHENNAI 600 034. [PAN AAACG 3488 P] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : SHRI G.SEETHARAMAN,C.A /RESPONDENT BY : SHRI SHIVA SRINIVAS, JCIT D.R / DATE OF HEARING : 14 - 12 - 2016 / DATE OF PRONOUNCEMENT : 25 - 01 - 2017 , / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-6,CHENNAI DATED 20.07.2016 PERTAINING TO ASSESSMENT YEAR 2010-11. 2. THE GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS WITH REGARD TO CONFIRMING THE LEVY OF PENALTY OF ` 20,44,580/- U/S.271AA OF THE ACT. ITA NO.222/15 :- 2 -: 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AS RIGHTLY POINTED OUT BY THE LD.A.R, TH E APPEALS FILED BY THE ASSESSEE AND THE REVENUE WITH REGARD TO QUANTUM I N ITA NOS.400 & 428/MDS./15 VIDE ORDER DATED 12.05.2016, THE ADDITI ON WAS REMITTED TO THE FILE OF AO BY THE TRIBUNAL WITH THE FOLLOWIN G OBSERVATIONS:- 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EI THER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE IS PURCHASING GARMENTS FROM LOCAL MARKET AND EXPORTING THE SAME TO ITS AES AND NON-AES. FOR MAK ING ADJUSTMENT, BOTH PARTIES ADOPTED TNMM HAS THE MOST APPROPRIATE METHOD. SELECTION OF METHOD IS NOT IN DISPUTE. WH AT IS IN DISPUTE IS SELECTION OF COMPARABLES. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHEN THE ASSESSEE IS EXPORTING GARMEN TS OUTSIDE THE COUNTRY, THE COMPARABLE COMPANIES ALSO SHOULD ENGAG E IN THE SAME LINE OF BUSINESS VIZ. EXPORT OF GARMENTS OUTSI DE THE COUNTRY. IN THE CASE BEFORE US, THE COMPARABLE COMPANIES ARE ADMITTEDLY SELLING THEIR PRODUCTS IN THE DOMESTIC MARKET AND T HEREFORE, NO EXPORT SALES. MERELY BECAUSE THE ASSESSEE HAS SEL ECTED SUCH COMPANIES FOR COMPARING THE TRANSACTION, THIS TRIB UNAL IS OF THE CONSIDERED OPINION THAT THAT WILL NOT MAKE THE COMP ANIES WHICH ARE HAVING ONLY DOMESTIC SALES AS COMPARABLE ONE. FUNC TIONAL SIMILARITY IS ONE OF THE FUNDAMENTAL THING WHICH NE EDS TO BE CONSIDERED WHILE SELECTING THE COMPARABLES. THEREF ORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE COMP ANIES WHICH ARE ENGAGED IN THE GARMENTS EXPORT OUTSIDE THE COUNTRY, ALMOST TO SIMILAR COUNTRIES, NEEDS TO BE FIND OUT. IT IS NOB ODYS CASE THAT THE ASSESSEE IS NOT EXPORTING GARMENTS OUTSIDE THE COUN TRY. WHEN SUCH IS A CASE, IT IS THE DUTY OF THE ASSESSEE AND THE TPO TO FIND OUT SUCH COMPANIES WHICH ARE EXPORTING GARMENTS AND THEREAFTER ITA NO.222/15 :- 3 -: MAKE NECESSARY ADJUSTMENT. SINCE SUCH AN EXERCISE W AS NOT DONE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RECONSIDERED BY THE ASSESSING OFFICER BY REFERRI NG THE MATTER ONCE AGAIN TO THE TPO. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ENTIRE ISSUE IS R EMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFIC ER SHALL RECONSIDER THE ISSUE BY REFERRING THE MATTER ONCE AGAIN TO THE TPO AND DECIDE THE SAME IN ACCORDANCE WITH LAW. IT IS MADE CLEAR THAT THE ASSESSEE SHALL ALSO FILE NECESSARY COMPARABLE CASES BEFORE THE TPO. THE TPO SHALL FIND OUT THE COMPANIES WHICH ARE EXP ORTING GARMENTS OUTSIDE INDIA FOR MAKING COMPARISON. 5. WITH THE ABOVE OBSERVATION, APPEAL OF THE ASSE SSEE IS ALLOWED FOR STATISTICAL PURPOSES. 6. NOW COMING TO THE REVENUES APPEAL I.T.A.NO.428 /MDS/ 2015, THE ONLY ISSUE ARISES FOR CONSIDERATION IS WHETHER THE EXPORT INCENTIVE WOULD FORM PART OF THE OPERATING INCOME OR NOT? 7. DR.B. NISCHAL, LD. DR SUBMITTED THAT EXPORT INC ENTIVE IS AN INCENTIVE GIVEN BY THE GOVERNMENT FOR EXPORTERS, THEREFORE, I T CANNOT FORM PART OF THE OPERATING INCOME. HOWEVER, SHRI G.SEETHARAM AN, LD. COUNSEL SUBMITTED THAT THE INCENTIVE WAS GIVEN TO THE ASSE SSEE ONLY BECAUSE OF THE EXPORT, THEREFORE, IT IS A PART OF THE OPERA TING INCOME. THEREFORE, THE CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. SIN CE THE MAIN ISSUE WITH REGARD TO SELECTION OF COMPARABLES IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER IN THE ASSESSEES APPEAL, T HIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ISSUE OF EXPORT INCENTI VE ALSO NEEDS TO BE RECONSIDERED BY THE ASSESSING OFFICER. ACCORDINGLY , THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ISSUE OF EX PORT INCENTIVE IS ALSO REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING ITA NO.222/15 :- 4 -: OFFICER SHALL RECONSIDER THE ISSUE IN THE LIGHT OF THE MATERIAL AVAILABLE AND THEREAFTER DECIDE THE SAME AFTER GIVING A REASO NABLE OPPORTUNITY TO THE ASSESSEE. IN VIEW OF THE ABOVE FINDINGS OF THE TRIBUNAL IN TH E CASE OF QUANTUM ADDITION, WE ARE INCLINED TO REMIT THE ISSUE RELATI NG TO LEVY OF PENALTY U/S.271AA OF THE ACT TO THE FILE OF AO TO DECIDE TH E SAME AFTER DECIDING THE ISSUE RELATING TO THE QUANTUM ADDITION . 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES ORDER PRONOUNCED ON 25 TH JANUARY, 2017, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) % / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 25 TH JANUARY, 2017. K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 3. - 1-!' / CIT(A) 5. /23- 4 / DR 2. / RESPONDENT 4. - 1 / CIT 6. 3&-5 / GF