Shree Navdurga Tobacco Co., Baroda V. The Income tax Officer,Ward-2(5), Baroda

ITA 518/AHD/2013

• Counselvise Citation: 51820514 RSA 2013
• Duration Of Justice: 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 30-10-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 27-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Assessee Lawyers: M K PATEL
• Keywords: Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO.518/AHD/2013 A.Y. 2009-10 SHREE NAVDURGA TOBACCO CO. POST DASHRATH, DIST. BARODA. PAN: AABFN 3564F VS ITO, WARD 5(2). BARODA. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI O. P. BATHEJA, SR.D.R . ASSESSEE(S) BY : SHRI M.K. PATEL. / DATE OF HEARING : 30/10/2013 / DATE OF PRONOUNCEMENT: 22/11/2013 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FRO M AN ORDER OF LEARNED CIT(APPEALS)-II, BARODA, DATED 10.12.2012 A ND THE SOLITARY GROUND IS AS FOLLOWS: THE LEARNED CIT(A)-II BARODA HAS WRONGLY UP HELD TH E ADDITION OF RS.161835/- ON ACCOUNT OF DISALLOWANCE U/S. 40A(2)( 6) OF THE IT ACT OUT OF PURCHASE FROM SPECIFIED PERSONS. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S. 143(3), DATED 22.12.2011 WERE THAT THE ASSESSEE FIRM IS IN THE BUSINESS OF TRADING OF TOBACCO. IT WAS NOTED BY THE AO THAT AS PER THE AUDIT REPORT THE ASSESSEE HAD MADE PURCHASES FROM SPECIFIED PERSON AS PER SECTION 40A(2)(B) OF IT ACT. THE PURCHASES MADE FROM THE ALLEGED RELATED PARTIES WERE AS UNDER:- ITA NO.518/ AHD/2013 SHREE NAVDURGA TOBACCO, BARODA VS. ITO BARODA. FOR A.Y. 2009-10 - 2 - SR. NO. NAME OF THE PERSON AMOUNT PURCHASE QTY. (IN KG.) 1. SHRI RAMANBHAI P. PATEL (HUF) 6,87,603/- 9517 2. SHRI BHANUBHAI R. PATEL (HUF) 15,25,595 21115 3. SHRI NILESH R. PATEL (HUF) 7,59,564 10513 4. SHRI DAXESHBHAI B. PATEL (HUF) 3,51,893 4870 5 SHRI BHAVESH B. PATEL (HUF) 2,29,393 3175 TOTAL 49190 2.1 FURTHER, IT WAS OBSERVED BY THE AO THAT THE PUR CHASE OF TOBACCO FROM THOSE PERSONS WAS AT THE RATE OF 7.25 PER KG, WHEREAS PURCHASES FROM UNRELATED PARTIES WERE IN AVERAGE 68.96 PER KG . THE AO HAS CONSIDERED IT REASONABLE TO ESTIMATE THE AVERAGE RA TE OF PURCHASE AT RS.68.96 PER KG. HENCE, THE DIFFERENCE OF RS.3.29 P ER KG (RS.72.25 RS.68.96) WAS APPLIED ON THE QUANTITY OF PURCHASE F ORM THE ASSOCIATE PERSONS 49,190 KG. ACCORDINGLY, AN ADDITION OF RS.1 ,61,835/- WAS MADE IN THE HANDS OF THE ASSESSEE. 3. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY, IT WAS PLEADED THAT ALL THOSE RELATED PERSONS WERE RES PECTIVELY ASSESSED TO TAX. THEY HAVE SHOWN THE SALE PROCEEDS AS RAW TOBAC CO IN THEIR RETURN OF INCOME. COPIES OF THEIR RETURN OF INCOME WERE ALSO FILED BEFORE THE COMMISSIONER. HOWEVER, LEARNED CIT(A) WAS NOT CONVI NCED AND HELD THAT THE EXPLANATION WAS NOT CONVINCED. THE ACTION OF THE AO WAS UPHELD. NOW, THE ASSESSEE IS FURTHER IN APPEAL. 4. WE HAVE HEARD THE SUBMISSION OF THE BOTH THE SID ES. WE HAVE ALSO PERUSED THE MATERIAL PLACED BEFORE US. THE MAIN EXP LANATION OF THE ITA NO.518/ AHD/2013 SHREE NAVDURGA TOBACCO, BARODA VS. ITO BARODA. FOR A.Y. 2009-10 - 3 - ASSESSEE WAS THAT THE QUALITY OF THE TOBACCO WAS NO T ALWAYS CONSISTENT AND WHEN THE QUALITY OF TOBACCO PURCHASED FROM THOS E SPECIFIED PERSONS WAS BETTER THAN THE QUALITY OF THE TOBACCO PURCHASE D FROM OTHER PERSONS, THEN NATURALLY THE PRICE OF PURCHASE WAS HIGHER THA N THE NORMAL MARKET PRICE. IT HAS ALSO BEEN ARGUED THAT THE AO HAD MERE LY ESTIMATED THE EXCESS RATE OF TOBACCO FOR THE PURPOSE OF ADDITION. BUT THERE WAS NO EXACT INVESTIGATION TO ASCERTAIN THE PRICE OF PURCHASE OF TOBACCO FROM THE SPECIFIED PERSONS. IT HAS ALSO BEEN ARGUED THAT T HE TOBACCO WAS PURCHASED FROM THE RANGE OF RS.55 TO RS.75.75 PER K G. THE VARIATION IN THE PURCHASE PRICE HAD DEPENDED UPON THE QUALITY OF THE TOBACCO. IT HAS ALSO BEEN ARGUED THAT TOBACCO BEING THE AGRICULTURE PRODUCE, THEREFORE, THE PURCHASE PRICE WAS NOT THE FIXED PRICE BEING DE PENDED UPON THE QUALITY OF THE PRODUCE. WE HAVE EXAMINED ALL THESE ARGUMENTS AND THEREUPON CONVINCED THAT MERELY ON ESTIMATION THE A O HAS HELD THAT THE AMOUNT PAID TO THESE SPECIFIED PERSONS WAS EXCESSIV E. ACCORDING TO US, THE AO HAS NOT EXACTLY ESTABLISHED THAT WHAT WAS TH E FAIR MARKET VALUE OF THE GOODS SO AS TO HOLD THAT IT WAS EXCESSIVELY PAI D TO THE RELATED PERSONS. THUS, UNDER THE TOTALITY OF THE CIRCUMSTANCES OF TH E CASE, WE HEREBY REVERSE THE FINDINGS OF THE AUTHORITIES BELOW AND D IRECT TO DELETE THE ADDITION. THE GROUND IS ALLOWED. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. SD/- SD/- (T.R. MEENA) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED 22/11/2013 PRABHAT KR. KESARWANI, SR. P.S. TRUE COPY ITA NO.518/ AHD/2013 SHREE NAVDURGA TOBACCO, BARODA VS. ITO BARODA. FOR A.Y. 2009-10 - 4 - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD