SANJAY SALES CORPORATION, MUMBAI V. JCIT RG 18(2), MUMBAI

ITA 4103/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100970 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 22-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PRASAD BAPAT
• Keywords: Fair market value

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI N.K . BILLAIYA, ACCOUNTANT MEMBER AND RAM L AL NEGI, JUDICIAL MEMBER / I .T.A. NO. 4103/MUM/2013 ( / ASSESSMENT YEAR : 2008 - 09 M/S. S A NJAY SALES CORPORATION, ALTA BHAVAN, 532, SENAPATI BAPAT MARG, DADAR, MUMBAI - 400 028 / VS. THE JCIT RANGE 18(2), PIRAMAL CHAMBERS, LAL BAG, PAREL, MUMBAI - 400 012 ./ ./ PAN/GIR NO. : AAMFS 3154P ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI PRASAD BAPAT / RESPONDENT BY: SHRI NITIN WAGHMODE / DATE OF HEARING : 01 .0 9 .2015 / DATE OF PRONOUNCEMENT : 09 .0 9 .2015 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST THE ORDER OF THE LD. CIT(A) - 1 6, MUMBAI DT. 1. 3 .201 3 PERTAINING TO ASSESSMENT YEAR 2008 - 09. 2. THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 9,69,601/ - MADE BY THE AO ON ITA. NO. 4103/M/2013 2 ACCOUNT OF ALLEGED EXCESSIVE PAYMENTS MADE TO PARTIES SPECIFIED U/S. 40A(2)(B) FOR PURCHASE OF GOODS. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS IN THE BUSINESS OF EXPORT OF BULK DRUGS & PIGMENTS. RETURN FOR THE YEAR DECLARING TOTA L INCOME OF RS. 3,62,55,394/ - WAS FILED ON 29.9.2008. THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER CASS AND ACCORDINGLY STATUTORY NOTICES WERE ISSUED AND SERVED UPON THE ASSESSEE. DURING THE COURSE OF THE SCRUTINY ASSESSMENT, THE ASSESSING OFFIC ER OBSERVED THAT THE ASSESSEE HAS PURCHASED MOST OF THE GOODS FROM TWO PARTIES NAMELY M/S. ALTA LABORATORIES LTD., AND M/S. LONA INDUSTRIES LTD. THE AO WAS OF THE OPINION THAT THE PAYMENTS MADE TO THESE PARTIES ARE COVERED U/S. 40A(2)(B) OF THE ACT. THE ASSESSEE WAS ASKED TO SUBMIT THE DETAILS OF PURCHASES MADE FROM THESE TWO PARTIES. THE ASSESSEE WAS ALSO ASKED TO FURNISH THE SALES MADE BY THESE TWO PARTIES TO UNRELATED PERSONS. THE ASSESSEE FILED THE NECESSARY DETAILS. 3.1. ON GOING THROUGH THE NECE SSARY DETAILS, THE AO FOUND THAT THE SALE PRICE CHARGED BY M/S. ALTA LABORATORIES LTD IN RESPECT OF ASPRIN AND SODIUM SALICYLATE ARE AT RS. 140.71 AND RS. 125.70 WHEREAS THE SAME PRODUCTS HAVE BEEN SOLD BY M/S. ALTA LABORATORIES LTD TO UNRELATED PARTIES AT RS. 139.32 AND RS. 123.57. THE AO WAS CONVINCED THAT THE ASSESSEE HAS MADE EXCESS PAYMENT OF RS. 1.39 AND RS. 2.13 PER KG TO M/S. ALTA LABORATORIES LTD. 3.2. IN RESPECT OF M/S. LONA INDUSTRIES LTD., THE AO FOUND THAT THE PRODUCT LONOCYNINE GREEN WAS SOLD BY M/S. LONA INDUSTRIES LTD. TO THE ASSESSEE AT RS. 254.81 AS COMPARED TO RS. 254 CHARGED BY THE SAID ITA. NO. 4103/M/2013 3 M/S. LONA INDUSTRIES LTD. FROM OTHER UNRELATED PARTIES. THE AO ADDED RS. 9,69,601/ - BEING THE AMOUNT TREATED AS EXCESS PAYMENT BY THE ASSESSEE I N RESPECT OF PURCHASE FROM M/S. ALTA LABORATORIES LTD. , AND M/S. LONA INDUSTRIES LTD. 4. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY SUBMIT TED THAT THE REVENUE AUTHORITIES HAVE APPLIED SEC. 40A(2)(B) WITH WRONG SET OF FACTS. IT IS THE SAY OF THE LD. COUNSEL THAT THE AO HAS COMPARED THE SALE PRICE OF M /S. ALTA LABORATORIES LTD. AND M/S. LONA INDUSTRIES TO THE ASSESSEE WITH THE SALES MADE BY THEM TO UNRELATED PARTIES, THEREFORE THE ADDITIONS MADE ARE UNWARRANTED DESERVES TO BE DELETED. 6. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE FINDINGS OF THE REVENUE AUTHORITIES. 7. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. THE UNDISPUTED FACT IS THAT THE AO HAS APPLIED THE PROVISIONS OF SEC. 40A(2)(B) OF THE ACT. SEC. 40A(2)(B) READS AS UNDER: WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT HAS BEEN OR IS TO BE MADE TO ANY PERSON REFERRED TO IN CLAUSE (B) OF THIS SUB - SECTION, AND THE ASSESSING OFFICER IS OF OPINION THAT SUCH EXPENDITURE IS EXCESSIVE OR UNREASONABLE HAVING R EGARD TO THE FAIR MARKET VALUE OF THE GOODS, SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MADE OR THE LEGITIMATE NEEDS OF THE BUSINESS OR PROFESSION OF THE ASSESSEE OR THE BENEFIT DERIVED BY OR ACCRUING TO HIM THEREFROM, SO MUCH OF THE EXPENDITURE AS IS SO CONSIDERED BY ITA. NO. 4103/M/2013 4 HIM TO BE EXCESSIVE OR UNREASONABLE SHALL NOT BE ALLOWED AS A DEDUCTION. A ND IN CLAUSE (B) THE PERSONS HAVE BEEN DEFINED. 8. LET US NOW CONSIDER THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THE AFOREMENTIONED PROVISION. BY ASSESS ING OFFICERS OWN CALCULATION THE EXCESS PAYMENT MADE TO M/S. ALTA LABORATORIES LTD. IN RESPECT OF ASPRIN AND SODIUM SALICYLATE COMES TO RS. 1.39 AND RS. 2.13 PER KG AND IN RESPECT OF M/S. LONA INDUSTRIES FOR LONOCYNINE GREEN AT RS. 0.81 PER KG. WE DO NOT FIND ANY LOGIC IN CONSIDERING THESE PAYMENTS AS EXCESSIVE PAYMENTS AS THE PAYMENTS ARE AROUND 1% OF THE TOTAL PAYMENTS. FURTHER THE AO HAS COMPARED THE SALE PRICES OF M/S. ALTA LABORATORIES LTD. AND M/S. LONA INDUSTRIES WHEREAS THE CORRECT PROCEDURE S HOULD HAVE BEEN TO COMPARE THE PURCHASE PRICES PAID BY THE ASSESSEE TO UNRELATED PARTIES. THE AO HAS APPLIED THE PROVISIONS OF SEC. 40A(2)(B) IN IN CORRECT MANNER RESULTING INTO UNWARRANTED ADDITION WHICH HAVE BEEN CONFIRMED BY THE LD. CIT(A). WE, THEREFO RE, SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE AO TO DELETE THE IMPUGNED ADDITION OF RS. 9,69,601/ - . 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH SEPTEMBER , 2015 SD/ - SD/ - ( RAM L AL NEGI ) (N.K. BILLAIYA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 9 TH SEPTEMBER , 2015 . . ./ RJ , SR. PS ITA. NO. 4103/M/2013 5 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI