M/s. See Linkages Pvt. Ltd., Vadodara V. The ACIT, Circle-2(1)(1), Vadodara

ITA 33/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2429 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 04-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH SINGH
• Keywords: Fair market value; Arm length price
• Section: 143(3)

Judgement Text

, A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SMT. MADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NO. 33/AHD/2016 ( ASSESSMENT YEAR : 2012-13) M/S. SEE LINKAGES PVT. LTD. 623, GIDC INDUSTRIAL ESTATE, MAKARPURA, VADODARA - 390010 / VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2(1)(1), VADODARA ./ ./ PAN/GIR NO. : AAECS9430M ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : WRITTEN SUBMISSION / RESPONDENT BY : SHRI SAURABH SINGH, SR. D.R. DATE OF HEARING 19/06/2018 !'# / DATE OF PRONOUNCEMENT 06/09/2018 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-2, VADODAR A (CIT(A) IN SHORT), DATED 27.11.2015 ARISING IN THE ASSESSMENT ORDER DATED 30.12.2014 PASSED BY THE ASSESSING OFFICER (AO) U/S . 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING ASSESSMEN T YEAR 2012-13. ITA NO. 33/AHD/16 [M/S. SEE LINKAGES PVT. LTD. VS.ACIT] A.Y. 2012-13 - 2 - 2. THE SOLITARY GROUND OF APPEAL RAISED BY THE ASSE SSEE READS AS UNDER: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )-2, VADODARA [THE CIT(A)] ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 2(1)(1), VADODARA [ THE AO] IN MAKING AN ADDITION OF RS.35,37,371/- TO THE TOTAL INCOME OF THE APPELLANT ON ALLEGED GROUND OF INFLATION OF PROFIT OF THE COMPANY. 3. WHEN THE MATTER WAS CALLED FOR HEARING, THE LEAR NED AR SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSIN ESS OF MANUFACTURING OF ENGINEERING LINKAGE PRODUCTS AND C USTOM BUILT ELECTRO MECHANICAL PARTS AND ASSEMBLIES. THE AO IN THE COURSE OF SCRUTINY ASSESSMENT INVOKED PROVISIONS OF SECTION 4 0A(2)(B) OF THE ACT IN RESPECT OF TRANSACTIONS CARRIED OUT WITH THE SISTER CONCERN NAMELY SAMEER LINKAGE PVT. LTD. IN RESPECT OF LABOU R CHARGES PAID AND PURCHASES MADE FROM SISTER CONCERN. THE AO OBSERVE D THAT THE ASSESSEE FAILED TO JUSTIFY ARM LENGTH PRICE IN THE TRANSACTIONS CARRIED OUT WITH THE ASSOCIATE CONCERN. THE AO ACCORDINGLY DISALLOWED 10% OF THE TOTAL TRANSACTIONS OF RS.3,53,73,714/- BY AP PLYING THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. THE AO ACCORDINGL Y MADE AN ADDITION OF RS.35,37,371/- TO THE TOTAL INCOME. TH E ACTION OF THE AO WAS CONFIRMED BY THE CIT(A). 4. THE LEARNED AR SUBMITTED IN THIS REGARD THAT THE IDENTICAL ISSUE AROSE IN ASSESSEES OWN CASE IN AYS 2008-09, 2007-0 8, 2009-10 & 2010-11 WHICH WAS DISPOSED OF IN FAVOUR OF THE ASSE SSEE BY CO- ORDINATE BENCH IN ITA NOS. 1572 & 3071 TO 3073/AHD/ 2013 ORDER DATED 27.02.2017. THE LEARNED AR ACCORDINGLY SUBMI TTED THAT THE ISSUE IS ALREADY COVERED IN FAVOUR OF THE ASSESSEE AND DOES NOT REQUIRE ANY FRESH DELIBERATION IN VIEW OF SIMILARITY OF FAC TS. ITA NO. 33/AHD/16 [M/S. SEE LINKAGES PVT. LTD. VS.ACIT] A.Y. 2012-13 - 3 - 5. THE LEARNED DR RELIED UPON THE ORDER OF THE CIT( A). 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE DECISION OF THE CO- ORDINATE BENCH IN ITA NO.1572/AHD/2013 & ORS. RELIE D UPON ON BEHALF OF THE ASSESSEE. WE STRAIGHTWAY OBSERVE THAT IDENT ICAL ADDITION/DISALLOWANCE UNDER S. 40A(2)(B) OF THE ACT CAME UP FOR CONSIDERATION BEFORE THE CO-ORDINATE BENCH, THE OBS ERVATIONS OF THE BENCH IS REPRODUCED HEREUNDER: 11.A PERUSAL OF THE AFORE-STATED SECTION SHOWS THA T THE PROVISIONS ARE TRIGGERED WHEN THE A.O. FINDS THAT THE ASSESSEE HAS INCURRED ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT HAS BEEN MA DE WHICH IN THE OPINION OF THE ASSESSING OFFICER IS EXCESSIVE OR UN REASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS. THE F ACTS ON RECORD SHOW THAT THE ONLY ALLEGATION OF THE REVENUE AUTHOR ITIES IS THAT THE ASSESSEE HAS PURCHASED RAW MATERIAL FROM THE ASSOCI ATE CONCERN AT A PRICE WHICH IS LOWER THAN THE MARKET PRICE. WE FAIL TO UNDERSTAND, WHEN THE PRICE PAID BY THE ASSESSEE IS LOWER THAN T HE MARKET PRICE HOW THE PROVISIONS OF SECTION. A.YS. 2007-08 TO 201 0-11 40A(2)(B) APPLY ON THE GIVEN FACTS OF THE CASE IN HAND. IT IS ALSO TRUE THAT THE ASSESSEE HAS SHOWN BETTER PROFIT RESULTS THEN ITS A SSOCIATE CONCERN. THEREFORE THE TRANSACTION OF THE PURCHASE OF RAW MA TERIALS CANNOT BE SAID TO BE AT UNREASONABLE PRICE. WE ALSO DO NOT FI ND THAT DUE TO THE IMPUGNED TRANSACTION OF THE PURCHASE OF RAW MATERIA LS FROM THE ASSOCIATE CONCERN, THE TRANSACTION HAS PROVIDED MOR E THAN ORDINARY PROFITS, WHEN THE MARGINS OF PROFIT OF THE ASSESSEE AND THE ASSOCIATE CONCERN ARE ALMOST AT PAR. 12. IN OUR CONSIDERED OPINION, THE IMPUGNED TRANSAC TION HAS NOT RESULTED INTO ANY EXTRAORDINARY PROFIT TO THE ASSES SEE. FURTHER, IN OUR CONSIDERED OPINION, THE PROVISIONS OF SECTION 40A(2 )(B) OF THE ACT DO NOT APPLY ON THE FACTS OF THE CASE IN HAND. CONSIDE RING THE FACTS OF THE CASE IN HAND FROM ALL POSSIBLE ANGLES, WE DO NO T FIND ANY MERIT IN THE IMPUGNED ADDITIONS MADE BY THE A.O. WE, ACCORDI NGLY SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE A.O. TO DELETE THE ADDITIONS FROM ALL THE ASSESSMENT YEARS UNDER APPEA L. 7. THE OBSERVATION OF THE CO-ORDINATE BENCH IS SELF -EXPLANATORY AND DOES NOT REQUIRE ANY FURTHER EMPHASIS. THUS, WE FI ND THE ORDERS OF THE AO AND THE CIT(A) ARE MARRED WITH MIS-APPRECIATION OF FACTS AND LAW. ITA NO. 33/AHD/16 [M/S. SEE LINKAGES PVT. LTD. VS.ACIT] A.Y. 2012-13 - 4 - IN PARITY WITH THE DECISION OF THE CO-ORDINATE BENC H, WE DIRECT THE AO TO DELETE THE ADDITION MADE ON THIS SCORE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. SD/- SD/- (MADHUMITA ROY) (PRADIP K UMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 06/09/2018 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 06/09/2018