M/s. Sameer Linkages (Exports) Pvt.Ltd., Baroda V. Income Tax Officer-4, Baroda

ITA 3496/AHD/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8428 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 30-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SHRADDHA
• Keywords: Fair market value
• Section: 143(3)

Judgement Text

ITA NO. 3496/AHD/2014 SAMEER LINKAGES (EXPORTS) PVT LTD VS. THE RECOVERY OFFICER ASSESSMENT YEAR: 2011-12 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND RAJPAL YADAV JM] ITA NO.3496/AHD/2014 ASSESSMENT YEAR: 2011-12 M/S. SAMEER LINKAGES (EXPORTS) PVT LTD ....... ......APPELLANT 623, GIDC INDUSTRIAL ESTATE, MAKARPURA, VADODARA-390010 [PAN: AAECS 9430 M] VS. THE TAX RECOVERY OFFICER-4 .......................RESPONDENT BARODA APPEARANCES BY: SHRADDHA FOR THE APPELLANT MUDIT NAGPAL FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 21.09.2017 DATE OF PRONOUNCING THE ORDER : 22.09.2017 O R D E R PER PRAMOD KUMAR, AM: 1. THIS IS AN APPEAL FILED BY THE ASSESSEE APPELLAN T AND IS DIRECTED AGAINST THE ORDER DATED 08.10.2014 PASSED BY THE CIT(A)-III, BA RODA IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME-TAX A CT, 1961 FOR THE ASSESSMENT YEAR 2011-12. 2. GRIEVANCE RAISED BY THE ASSESSEE-APPELLANT IS AS FOLLOWS:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-I II, BARODA [THE CIT(A)] ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION O F THE TAX RECOVERY OFFICER-4, BARODA (THE AO) IN MAKING AN ADDITION OF RS.29,75 ,670/- TO THE TOTAL INCOME OF THE APPELLANT ON ALLEGED GROUND OF INFLATION OF PROFIT OF THE COMPANY. 3. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE AB OVE GRIEVANCE IS COVERED, IN FAVOUR OF THE ASSESSEE, BY THE DECISION DATED 27.02 .2017 OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASS ESSMENT YEARS 2007-08 TO 2010- 2011 WHEREIN THE TRIBUNAL HAS, INTER ALIA, OBSERVED AS FOLLOWS:- 10. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO T HE ORDERS OF THE AUTHORITIES BELOW. IT IS TRUE THAT THE A.O. HAS EXAMINED THE TR ANSACTION WITH ASSOCIATE CONCERN WITHIN THE PARAMETERS LAID DOWN U/S. 40A(2) OF THE ACT WHICH READS AS UNDER:- (A) WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RE SPECT OF WHICH PAYMENT HAS BEEN OR IS TO BE MADE TO ANY PERSON REF ERRED TO IN CLAUSE ITA NO. 3496/AHD/2014 SAMEER LINKAGES (EXPORTS) PVT LTD VS. THE RECOVERY OFFICER ASSESSMENT YEAR: 2011-12 PAGE 2 OF 4 (B) OF THIS SUB-SECTION, AND THE [ASSESSING] OFFICE R IS OF OPINION THAT SUCH EXPENDITURE IS EXCESSIVE OR UNREASONABLE HAVIN G REGARD TO THE FAIR MARKET VALUE OF THE GOODS, SERVICES OR FACILIT IES FOR WHICH THE PAYMENT IS MADE OR THE LEGITIMATE NEEDS OF THE BUSI NESS OR PROFESSION OF THE ASSESSEE OR THE BENEFIT DERIVED BY OR ACCRUI NG TO HIM THEREFROM, SO MUCH OF THE EXPENDITURE AS IS SO CONSIDERED BY H IM TO BE EXCESSIVE OR UNREASONABLE SHALL NOT BE ALLOWED AS A DEDUCTION : [PROVIDED THAT NO DISALLOWANCE, ON ACCOUNT OF ANY EXPENDITURE BEING E XCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE , SHALL BE MADE IN RESPECT OF A SPECIFIED DOMESTIC TRANSACTION REFERRE D TO IN SECTION 92BA, IF SUCH TRANSACTION IS AT ARM'S LENGTH PRICE AS DEF INED IN CLAUSE (II) OF SECTION 92F.] (B) THE PERSON REFERRED TO IN CLAUSE (A) ARE THE FO LLOWING, NAMELY :- (I) WHERE THE ASSESSEE IS AN INDIVIDUAL ANY R ELATIVE OF THE ASSESSEE; (II)WHERE THE ASSESSEE IS A COMPANY, FIRM A NY DIRECTOR OF THE COMPANY, ASSOCIATION OF PERSONS OR HINDU UN- PARTNER OF THE FIRM, OR MEMBER DIVIDED FAMILY OF THE ASSOCIATION OR FAMIL Y, OR ANY RELATIVE OF SUCH DIRECTOR, PARTNER OR MEMBER; (III) ANY INDIVIDUAL WHO HAS A SUBSTANTIAL INTEREST IN THE BUSINESS OR PROFESSION OF THE ASSESSEE, OR ANY RELATIVE OF SUCH INDIVIDUAL; (IV) A COMPANY, FIRM, ASSOCIATION OF PERSONS OR HIN DU UNDIVIDED FAMILY HAVING A SUBSTANTIAL INTEREST IN THE BUSINESS OR PR OFESSION OF THE ASSESSEE OR ANY DIRECTOR, PARTNER OR MEMBER OF SUCH COMPANY, FIRM, ASSOCIATION OR FAMILY, OR ANY RELATIVE OF SUCH DIRE CTOR, PARTNER OR MEMBER [OR ANY OTHER COMPANY CARRYING ON BUSINESS O R PROFESSION IN WHICH THE FIRST MENTIONED COMPANY HAS SUBSTANTIAL I NTEREST]; (V) A COMPANY, FIRM, ASSOCIATION OF PERSONS OR HIND U UNDIVIDED FAMILY OF WHICH A DIRECTOR, PARTNER OR MEMBER, AS THE CASE MAY BE, HAS A SUBSTANTIAL INTEREST IN THE BUSINESS OR PROFESSION OF THE ASSESSEE; OR ANY DIRECTOR, PARTNER OR MEMBER OF SUCH COMPANY, FI RM, ASSOCIATION OR FAMILY OR ANY RELATIVE OF SUCH DIRECTOR, PARTNER OR MEMBER; (VI) ANY PERSON WHO CARRIED ON A BUSINESS OR PROFES SION,- (A) WHERE THE ASSESSEE BEING AN INDIVIDUAL, OR ANY RELATIVE OF SU CH ASSESSEE, HAS A SUBSTANTIAL INTEREST IN THE BUSINESS OR PROFESSION OF THAT PERSON; OR (B) WHERE THE ASSESSEE BEING A COMPANY, FIRM, ASSOCIATI ON OF PERSONS OR HINDU UNDIVIDED FAMILY, OR ANY DIRECTOR OR SUCH COM PANY, PARTNER OF SUCH FIRM OR MEMBER OF THE ASSOCIATION OR FAMILY, O R ANY RELATIVE OF SUCH DIRECTOR, PARTNER OR MEMBER, HAS A SUBSTANTIAL INTEREST IN THE BUSINESS OR PROFESSION OF THAT PERSON. EXPLANATION- FOR THE PURPOSE OF THIS SUB-SECTION, A PERSON SHALL BE DEEMED TO HAVE A SUBSTANTIAL INTEREST IN A BUSINESS OR PROFESSION, IF,- (A) IN A CASE WHERE THE BUSINESS OR PROFESSION IS C ARRIED DON BY A COMPANY, SUCH PERSON IS, AT ANY TIME DURING THE PRE VIOUS YEAR, THE ITA NO. 3496/AHD/2014 SAMEER LINKAGES (EXPORTS) PVT LTD VS. THE RECOVERY OFFICER ASSESSMENT YEAR: 2011-12 PAGE 3 OF 4 BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITL ED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICI PATE IN PROFITS) CARRYING NOT LESS THAN TWENTY PER CENT OF THE VOTING POWER; AND (B) IN ANY OTHER CASE, SUCH PERSON IS, AT ANY TIME DURING THE PREVIOUS YEAR, BENEFICIALLY ENTITLED TO NOT LESS THAN TWENTY PER CENT OF THE PROFITS OF SUCH BUSINESS OR PROFESSION. 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 MADE WHICH IN THE OPINION OF THE ASSESSING OFFICER IS EXCESSIVE OR UNREASONABLE HAVI NG REGARD TO THE FAIR MARKET VALUE OF THE GOODS. THE FACTS ON RECORD SHOW THAT THE ONLY ALLEGATION OF THE REVENUE AUTHORITIES IS THAT THE ASSESSEE HAS PURCHASED RAW MATERIAL FROM THE ASSOCIATE CONCERN AT A PRICE WHICH IS LOWE R THAN THE MARKET PRICE. WE FAIL TO UNDERSTAND, WHEN THE PRICE PAID BY THE A SSESSEE IS LOWER THAN THE MARKET PRICE HOW THE PROVISIONS OF SECTION 40A(2)(B ) APPLY ON THE GIVEN FACTS OF THE CASE IN HAND. IT IS ALSO TRUE THAT THE ASSES SEE HAS SHOWN BETTER PROFIT RESULTS THEN ITS ASSOCIATE CONCERN. THEREFORE THE T RANSACTION OF THE PURCHASE OF RAW MATERIALS CANNOT BE SAID TO BE AT UNREASONAB LE PRICE. WE ALSO DO NOT FIND THAT DUE TO THE IMPUGNED TRANSACTION OF THE PU RCHASE OF RAW MATERIALS FROM THE ASSOCIATE CONCERN, THE TRANSACTION HAS PRO VIDED MORE 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 TRANSA CTION HAS NOT RESULTED INTO ANY EXTRAORDINARY PROFIT TO THE ASSESSEE. FURTHER, IN OUR CONSIDERED OPINION, THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT DO N OT APPLY ON THE FACTS OF THE CASE IN HAND. CONSIDERING THE FACTS OF THE CASE IN HAND FROM ALL POSSIBLE ANGLES, WE DO NOT FIND ANY MERIT IN THE IMPUGNED AD DITIONS MADE BY THE A.O. WE, ACCORDINGLY SET ASIDE THE FINDINGS OF THE LD. C IT(A) AND DIRECT THE A.O. TO DELETE THE ADDITIONS FROM ALL THE ASSESSMENT YEARS UNDER APPEAL. 4. WE SEE NO REASON TO TAKE ANY OTHER VIEW OF THE M ATTER THAN THE VIEW SO TAKEN BY THE CO-ORDINATE BENCH. RESPECTFULLY FOLLOWING TH E SAME, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE AND DELETE THE IMPUGNED ADDITION OF RS.29,75,670/- MADE BY THE ASSESSING OFFICER ON THE GROUND OF INFLATION IN PRO FIT. 5. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUN CED IN THE OPEN COURT TODAY ON THE 22 ND DAY OF SEPTEMBER, 2017. SD/- SD/- RAJPAL YADAV PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, THE 22 ND DAY OF SEPTEMBER, 2017 **BT ITA NO. 3496/AHD/2014 SAMEER LINKAGES (EXPORTS) PVT LTD VS. THE RECOVERY OFFICER ASSESSMENT YEAR: 2011-12 PAGE 4 OF 4 COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD 1. DATE OF DICTATION: ........21.09.2017 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: ... 21.09.2017........ 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR . P.S./P.S.: 22.09.2017....... . 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: .. 22.09.2017....... 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : ... 25.09.2017... 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK : . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: ..