ELDER EXIM P. LTD, MUMBAI V. DCIT CEN CIR 12, MUMBAI

ITA 5386/MUM/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0339 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Next Hearing Date: 26-04-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 26-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH DESHPANDE
• Assessee Lawyers: RONAK DOSHI SHRI MANTHAN SHAH
• Keywords: Business income; Transfer pricing; Document seized; International transaction; Documents seized
• Section: 92C; 143(3); 92B; 92A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH K, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.5385/MUM/2014, (A.Y. 2008-09) ITA NO.2744/MUM/2014, (A.Y. 2009-10) ITA NO.5386/MUM/2014, (A.Y. 2010-11) M/S.ELDER EXIM PVT. LTD., 401, THE SUMMIT, WESTERN EXPRESS HIGHWAY, HANUMAN ROAD, VILE PARLE (E), MUMBAI 400 021. PAN: AABCE 7398 H ...... APPEL LANT VS. DY.COMMISSIONER OF INCOME TAX,CEN. CIR.12, ROOM NO.803, 8 TH FLOOR, OLD CGO BLDG. ANNEXE, MK ROAD, MUMBAI 400 020 ..... RESPONDENT APPELLANT BY : SHRI RONAK DOSHI/ SHRI MANTHAN SHAH RESPONDENT BY : SHRI. SAURABH DESHPA NDE DATE OF HEARING : 18/05/2017 DATE OF PRONOUNCEMENT : 16/08/2017 ORDER PER G.S.PANNU,A.M: THE CAPTIONED THREE APPEALS FILED BY THE SAME ASSE SSEE RELATE TO DIFFERENT ASSESSMENT YEARS AND INVOLVES CERTAIN CO MMON ISSUES, THEREFORE, THEY HAVE BEEN CLUBBED AND HEARD TOGETHER AND A CO NSOLIDATED IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVITY. 2 ITA NO.5385/MUM/2014, (A.Y. 2008-09) ITA NO.2744/MUM/2014, (A.Y. 2009-10) ITA NO.5386/MUM/2014, (A.Y. 2010-11) 2. FIRST, WE TAKE THE APPEAL FOR ASSESSMENT YEAR 20 08-09, WHICH IS DIRECTED AGAINST THE ORDER OF CIT(A)-10, MUMBAI DAT ED 12/11/2015, WHICH IN TURN, ARISES OUT OF ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3)/153C R.W.S. 144C OF THE INCOME TAX ACT, 196 1 (IN SHORT THE ACT) DATED 31/01/2011. IN THIS YEAR, THE GROUNDS RAI SED BY THE ASSESSEE READ AS UNDER:- GROUNDS OF APPEAL BEFORE THE HON'BLE INCOME TAX A PPELLATE TRIBUNAL, MUMBAI GROUND I: TREATING TRANSACTIONS WITH GENERAL WOODS AND VENEERS LTD., CANADA AS 'INTERNATIONAL TRANSACTION' WITHIN THE MEANING OF SECTION 92B(1) OF THE ACT . 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-10, MUMBAI ['T HE CIT(A)'] ERRED IN UPHOLDING THE ACTION OF THE DY. COMMISSIONER OF INC OME TAX, CENTRAL CIRCLE 12 ('THE A.O.') IN NOT HOLDING M/S. GENERAL WOODS AND VENEERS LTD., CANADA ('GWVL') IS NOT AN ASSOCIATED ENTERPRISE ('AE') AS DEFINED U/S 92A OF THE ACT AND CONSEQUENTLY TRANSACTIONS BY THE APPELLANT WITH GWV L DO NOT FALL WITHIN THE MEANING OF INTERNATIONAL TRANSACTION AS DEFINED IN SECTION 92B(1)OF THE ACT. 2. THE APPELLANT PRAYS THAT IT BE HELD THAT GWVL IS NOT AN AE OF THE APPELLANT U/S 92A OF THE ACT AND CONSEQUENTLY, THE TRANSACTIONS B ETWEEN THE APPELLANT AND GWVL DO NOT FALL WITHIN THE MEANING OF 'INTERNATION AL TRANSACTION' UNDER SECTION 92B(1) OF THE ACT. GROUND II: TREATING TRANSACTIONS WITH DURIAN INDUSTRI ES LIMITED AS 'INTERNATIONAL TRANSACTION' WITHIN THE MEANING OF S ECTION 92B(1) OF THE ACT 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE ID. CIT(A) ERRED IN UPHOLDING THE ACTION OF THE A.O. IN HOLDING THAT TH E TRANSACTION BETWEEN THE APPELLANT AND THE BRANCH OF DURIAN INDUSTRIES LTD ( 'DIL') IN THE UNITED STATES OF AMERICA WAS AN INTERNATIONAL TRANSACTION WITHIN THE MEANING OF SECTION 92B(1) OF THE ACT. 2. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD T HAT: I. SECTION 92B{1) OF THE ACT APPLIES TO TRANSACTION S BETWEEN TWO OR MORE AE'S EITHER OF WHOM IS A NON-RESIDENT; 3 ITA NO.5385/MUM/2014, (A.Y. 2008-09) ITA NO.2744/MUM/2014, (A.Y. 2009-10) ITA NO.5386/MUM/2014, (A.Y. 2010-11) II. DIL BEING AN INDIAN COMPANY IS A RESIDENT OF IN DIA, THE TRANSACTIONS OF THE APPELLANT, THOUGH WITH THE BRANCH OF DIL IN USA, DO NOT FALL WITHIN THE PURVIEW OF SECTION 92B(1) OF THE ACT AT ALL . 3. THE APPELLANT, THEREFORE, PRAYS THAT IT BE HEL D THAT THE TRANSACTIONS BETWEEN THE APPELLANT AND OIL DO NOT FALL WITHIN THE MEANIN G OF 'INTERNATIONAL TRANSACTION' UNDER SECTION 92B(1) OF THE ACT. WITHOUT PREJUDICE TO GROUND I & II: GROUND III: MAKING ADJUSTMENT UNDER SECTION 92C OF THE ACT 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, ASSUMING WITHOUT ACCEPTING THAT THE ALLEGATION THAT THE ABOVE MENTIO NED TRANSACTIONS FALL WITHIN THE PURVIEW OF SECTION 92B(1) OF THE ACT, THE ID. CIT(A ) ERRED IN UPHOLDING THE ACTION OF THE A.O. IN MAKING TRANSFER PRICING ADJUSTMENT OF R S. 1,44,70,074/- TO THE TOTAL SALES REVENUE RECEIVED BY THE APPELLANT ON THE ALLE GED GROUND THAT THE IT WITH THE ALLEGED AE'S WERE NOT AT ARMS' LENGTH PRICE. 2. IN DOING SO, HE INTER-ALIA ERRED IN HOLDING THAT THE APPELLANT HAS NOT JUSTIFIED THE APPLICABILITY OF TRANSACTIONAL NET MARGIN METHO D {'TNMM'). 3. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT: I. THE COMPANIES SELECTED BY THE AO AS COMPARABLE A RE NOT FUNCTIONALLY COMPARABLE AND THEREFORE, NO RELIANCE CAN BE PLACED ON DATA OF COMPANIES WHICH HAVE NO FUNCTIONAL COMPARABILITY; II. THE PRICE CHARGED BY THE APPELLANT TO GWVL AND DIL WAS AT ARMS' LENGTH; 4. WITHOUT PREJUDICE, THE CIT(A) FURTHER ERRED IN H OLDING THE ACTIONS OF THE AO OF COMPUTING TRANSFER PRICING ADJUSTMENT WITH REFERENC E TO THE ENTIRE SALES AND NOT ONLY IN RESPECT OF SALES MADE TO THE ALLEGED AES. 5. THE APPELLANT PRAYS THAT IT BE HELD THAT THE TRA NSACTIONS BETWEEN THE APPELLANT AND GWVL AND DIL ARE ON AN ARMS' LENGTH BASIS AND, THEREFORE, THE ADDITION OF RS.1,44,70,074/- MADE BY THE AO BE DELETED OR BE AP PROPRIATELY REDUCED. GRQUNDIV: LEVYING INTEREST U/S. 234B, 234C AND 234 D OF THE ACT. 1. THE CIT(A) ERRED IN UPHOLDING THE ACTIONS OF T HE AO IN LEVYING INTEREST U/S. 234B, 234C AND 234DOFTHEACT. 2. THE APPELLANT DENIES ITS LIABILITY TO SUCH INT EREST AND PRAYS THAT THE AO BE DIRECTED TO DELETE THE LEVY OF AFORESAID INTEREST. 4 ITA NO.5385/MUM/2014, (A.Y. 2008-09) ITA NO.2744/MUM/2014, (A.Y. 2009-10) ITA NO.5386/MUM/2014, (A.Y. 2010-11) 3. AS A PERUSAL OF THE AFORESAID GROUNDS OF APPEAL REVEAL, THE SUBSTANTIVE DISPUTE ARISES FROM THE ACTION OF THE I NCOME-TAX AUTHORITIES IN MAKING AN ADDITION OF RS.1,44,70,074/- TO THE RETUR NED INCOME ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT. 4. BRIEFLY PUT, THE RELEVANT FACTS ARE THAT ASSESSE E IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF SPLICED DECOR ATIVE VENEER IN FLITCH FORM. IN THE IMPUGNED ASSESSMENT FINALIZED BY THE ASSESSI NG OFFICER UNDER SECTION 143(3) R.W.S. 153C OF THE ACT DATED 31/1/2011, IT W AS NOTICED THAT ASSESSEE HAD ENTERED INTO TRANSACTION OF PURCHASE/IMPORT OF RAW-MATERIALS AND ALSO SALE OF ITS FINISHED PRODUCTS WITH TWO CONCERNS NAM ELY M/S. GENERAL WOODS AND VENEERS LIMITED, CANADA (IN SHORT GENERAL WOOD S) AND DURIAN INDUSTRIES LTD. USA ( IN SHORT DURIAN). FOR THE REASONS NARRATED IN THE ASSESSMENT ORDER THE ASSESSING OFFICER TREATED THE TRANSACTIONS WITH TWO CONCERNS AS INTERNATIONAL TRANSACTIONS WITHIN TH E MEANING OF SECTION 92B OF THE ACT. ACCORDINGLY, THE ASSESSING OFFICER SO UGHT TO DETERMINE THE ARM'S LENGTH PRICE OF THE TRANSACTIONS ENTERED INTO WITH THE TWO PARTIES IN TERMS OF SECTION 92(1) OF THE ACT. THE ASSESSING O FFICER DETERMINED AN ADJUSTMENT OF RS.1,44,70,074/-, WHICH ACCORDING TO HIM, WAS REQUIRED TO BE MADE TO THE PURCHASE PRICE PAID BY THE ASSESSEE FOR THE TRANSACTIONS WITH THE AFORESAID TWO CONCERNS, SO AS TO BRING THE ST ATED VALUE OF THE TRANSACTIONS TO THEIR ARM'S LENGTH PRICE. THE ADDI TION SO DETERMINED BY THE ASSESSING OFFICER TO THE RETURNED INCOME WAS SUBJEC T MATTER OF APPEAL BEFORE THE CIT(A), WHO HAS PRIMARILY AFFIRMED THE S TAND OF THE ASSESSING OFFICER. NOT BEING SATISFIED WITH THE ORDER OF THE CIT(A), ASSESSEE IS IN FURTHER APPEAL BEFORE US ON THE AFORESTATED GROUND S OF APPEAL. 5 ITA NO.5385/MUM/2014, (A.Y. 2008-09) ITA NO.2744/MUM/2014, (A.Y. 2009-10) ITA NO.5386/MUM/2014, (A.Y. 2010-11) 5. THE FIRST AND FOREMOST SUBMISSION OF THE APPELL ANT IS THAT THE INCOME-TAX AUTHORITIES HAVE ERRED IN TREATING THE T RANSACTIONS WITH M/S.GENERAL WOODS AND DURIAN AS INTERNATIONAL TR ANSACTIONS WITHIN THE MEANING OF SECTION 92B OF THE ACT . MORE SPECIFICA LLY, IT IS SOUGHT TO BE ASSERTED BY THE APPELLANT THAT GENERAL WOODS IS NOT AN ASSOCIATED ENTERPRISE AS UNDERSTOOD FOR THE PURPOSES OF SECTI ON 92A OF THE ACT AND, THEREFORE, THE TRANSACTIONS WITH GENERAL WOODS DO N OT FALL FOR CONSIDERATION AS INTERNATIONAL TRANSACTIONS WITHIN THE MEANING OF SECTION 92B OF THE ACT. SECONDLY, WITH REGARD TO DURIAN IT IS SOUGHT TO BE POINTED OUT THAT IT IS AN INDIAN COMPANY, WHICH IS A TAX-RESIDENT OF INDIA AN D, THEREFORE, THE TRANSACTIONS WITH SUCH A CONCERN DO NOT FALL WITHIN THE MEANING OF INTERNATIONAL TRANSACTIONS FOR THE PURPOSES OF SE CTION 92B OF THE ACT. SINCE THE AFORESAID PLEAS OF THE ASSESSEE GO TO THE ROOT OF THE MATTER, THE SAME ARE BEING ADVERTED TO AT THE THRESHOLD ITSELF. 6. WE MAY FIRST TAKE UP THE PLEA OF THE ASSESSEE WI TH RESPECT TO DURIAN. IN THIS CONTEXT, THE RELEVANT FACTS ARE THAT ASSESS EE PURCHASED RAW MATERIAL IN THE SHAPE OF SPLICED DECORATIVE VENEER IN FLITC H FORM FROM USA BRANCH OF DURIAN, AND ALSO MADE SALE OF ITS FINISHED PRODUCT S TO THE SAID CONCERN. THE STAND OF THE ASSESSEE IS THAT DURIAN IS A COMPANY REGISTERED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND WAS INDEE D A TAX-RESIDENT OF INDIA. THE LD. REPRESENTATIVE FOR THE ASSESSEE POI NTED OUT THAT THE TRANSACTION WITH USA BRANCH OF DURIAN WAS A TRANSAC TION WITH AN INDIAN RESIDENT AND THAT DURIAN WAS ASSESSED IN INDIA ON ITS WORLDWIDE INCOME, BEING AN INDIAN RESIDENT. IT IS SOUGHT TO BE CANVA SSED THAT THE INTERNATIONAL TRANSACTIONS COVERED IN THE SCOPE OF SECTION 92B E NVISAGE THE TRANSACTIONS 6 ITA NO.5385/MUM/2014, (A.Y. 2008-09) ITA NO.2744/MUM/2014, (A.Y. 2009-10) ITA NO.5386/MUM/2014, (A.Y. 2010-11) BETWEEN TWO OR MORE ASSOCIATED ENTERPRISES, WHERE EITHER OR BOTH OF WHOM ARE NON-RESIDENTS. IN THE INSTANT CASE, NEITH ER ASSESSEE NOR THE OTHER CONCERN I.E, DURIAN IS A NON-RESIDENT. 7. THE LD. REPRESENTATIVE FOR THE ASSESSEE ALSO POI NTED OUT THAT THE SAID FACTUAL POSITION WAS HIGHLIGHTED BEFORE THE ASSESSI NG OFFICER AS WELL AS BEFORE THE CIT(A); AND, FOR THAT MATTER HE HAS REFE RRED TO PAGES 62-67 OF THE PAPER BOOK CONTAINING THE WRITTEN SUBMISSION DATED 27/12/2010 FURNISHED TO THE ASSESSING OFFICER . IT WAS CONTENDED THAT B EFORE THE CIT(A) ADDITIONAL SUBMISSIONS WERE ALSO FILED DATED 18/02/2014, WHI CH, INTER-ALIA, INCLUDED A COPY OF THE RETURN OF INCOME FILED BY THE SAID CONC ERN WITH THE INDIAN TAX- AUTHORITIES, COPIES OF WHICH HAVE BEEN PLACED AT PA GES 120 TO 133 OF THE PAPER BOOK. 8. ON THIS ASPECT, WE HAVE HEARD THE RIVAL SUBMISSI ONS AND FIND THAT THE CASE PUT UP BY THE ASSESSEE HAS BEEN UNJUSTLY BRUSH ED ASIDE BY THE LOWER AUTHORITIES. IN FACT, AT THE TIME OF HEARING, THE LD. DR HAS NOT CONTESTED ANY OF THE FACTUAL MATRIX BROUGHT OUT BY THE LEARNED RE PRESENTATIVE FOR THE ASSESSEE. SEC. 92B(1) OF THE ACT REFERS TO AN INT ERNATIONAL TRANSACTION TO BE A TRANSACTION BETWEEN TWO OR MORE ASSOCIATED ENT ERPRISES, EITHER OR BOTH OF WHOM ARE NON-RESIDENTS . IN THE PRESENT CASE, THE TRANSACTIONS HAVE BEEN ENTERED BY THE ASSESSEE WITH THE USA BRANCH OF DURIAN. BECAUSE THE TRANSACTIONS HAVE BEEN ENTERED INTO WITH THE USA BR ANCH OF DURIAN, IT IS SOUGHT TO BE TREATED AS AN INTERNATIONAL TRANSACTI ON WITHIN THE MEANING OF SEC.92B(1) OF THE ACT. IN OUR CONSIDERED OPINION, THERE IS NO DENYING THE FACT THAT DURIAN IS AN INDIAN TAX RESIDENT, BEING A COMP ANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 IN INDIA. AS ASSESSEE IS ALSO AN 7 ITA NO.5385/MUM/2014, (A.Y. 2008-09) ITA NO.2744/MUM/2014, (A.Y. 2009-10) ITA NO.5386/MUM/2014, (A.Y. 2010-11) INDIAN TAX RESIDENT, THEREFORE, NEITHER THE ASSESSE E AND NOR DURIAN ARE NON- RESIDENT SO AS TO INCLUDE THE TRANSACTIONS BETWEEN THEM AS INTERNATIONAL TRANSACTION FOR THE PURPOSES OF SEC. 92B(1) OF THE ACT. THEREFORE, IN OUR VIEW, THE LOWER AUTHORITIES ERRED IN APPLYING THE P ROVISIONS OF CHAPTER X WITH RESPECT TO THE IMPUGNED TRANSACTIONS. THUS, ON THI S ASPECT, ASSESSEE SUCCEEDS. 9. THE SECOND LIMB OF ASSESSEES PLEA IS THAT EVEN THE TRANSACTION ENTERED WITH GENERAL WOODS CANNOT BE SUBJECTED TO T HE PROVISIONS OF CHAPTER X OF THE ACT AS IT IS NOT AN ASSOCIATED EN TERPRISE AS UNDERSTOOD UNDER SEC. 92A OF THE ACT. IN THIS CONTEXT, THE RE LEVANT DISCUSSION IN THE ASSESSMENT ORDER REVEALS THAT THE ASSESSING OFFICER PROCEEDED ON THE PREMISE THAT ONE SHRI SATISH CHAWLA, WHO IS A MAJOR SHAREHOLDER IN ASSESSEE- COMPANY, WAS ALSO A DIRECTOR AND MAJOR SHAREHOLDER OF GENERAL WOODS. THE ASSESSING OFFICER ALSO NOTED THAT SHRI SATISH CHAWL A AND ONE SHRI STEVAN ELEFANT ARE DIRECTORS OF GENERAL WOODS AND THEY WER E ALSO SHAREHOLDERS IN ASSESSEE-COMPANY THROUGH TANTIKA INTERNATIONAL. SE CONDLY, THE ASSESSING OFFICER NOTES THAT THE SEIZED DOCUMENTS REVEAL THAT SHRI SATISH CHAWLA WAS ACTIVELY INVOLVED IN FIXING THE PRICES OF THE TRANS ACTIONS CARRIED OUT BETWEEN THE ASSESSEE AND GENERAL WOODS, CANADA. THIRDLY, T HE ASSESSING OFFICER ALSO NOTED THAT THE TOTAL PURCHASES MADE BY THE ASSESSEE FROM THE TWO CONCERNS, I.E. DURIAN AND GENERAL WOODS ON A COMBINED BASIS W ERE IN EXCESS OF 95.44% OF THE TOTAL PURCHASES AND, THEREFORE, ON TH IS GROUND ALSO IT WAS TO BE UNDERSTOOD AS AN ASSOCIATED ENTERPRISE. NOTABLY , THE ASSESSING OFFICER CONCLUDED THAT GENERAL WOODS WAS AN ASSOCIATED ENTE RPRISE HAVING REGARD TO CLAUSE (H), (I) AND (J) OF SEC. 92A(2) OF THE AC T. THE SAID STAND OF THE 8 ITA NO.5385/MUM/2014, (A.Y. 2008-09) ITA NO.2744/MUM/2014, (A.Y. 2009-10) ITA NO.5386/MUM/2014, (A.Y. 2010-11) ASSESSING OFFICER HAS SINCE BEEN APPROVED BY CIT(A) ALSO, AND IN THIS BACKGROUND ASSESSEE IS IN APPEAL BEFORE US. 10. AT THE TIME OF HEARING, THE FIRST PLEA SET-UP B Y THE ASSESSEE WAS THAT THE LOWER AUTHORITIES HAVE WRONGLY CONCLUDED THAT S /SHRI SATISH CHAWLA AND STEVAN ELEFANT ARE DIRECTORS OF GENERAL WOODS. IN THIS CONTEXT, THE LEARNED REPRESENTATIVE POINTED OUT THAT S/SHRI SATISH CHAWL A AND STEVAN ELEFANT ARE NEITHER THE SHAREHOLDERS AND NOR THE DIRECTORS IN G ENERAL WOODS AND IN THIS CONTEXT, REFERRED TO A CERTIFICATE OBTAINED FROM TH E EXTERNAL ACCOUNTANT OF GENERAL WOODS, A COPY OF WHICH HAS BEEN PLACED IN T HE PAPER BOOK AT PAGE 69. FURTHERMORE, THE LEARNED REPRESENTATIVE POINTE D OUT TO A RECTIFICATION APPLICATION DATED 15.10.2011 MOVED BEFORE THE ASSES SING OFFICER IN THIS REGARD, WHICH IS ALSO PLACED IN THE PAPER BOOK. TH E LEARNED REPRESENTATIVE POINTED OUT THAT THOUGH THE APPLICATION OF THE ASSE SSEE HAS BEEN REJECTED BY THE ASSESSING OFFICER VIDE ORDER DATED 5.8.2014, A COPY OF WHICH IS ON RECORD, BUT NO REASONS HAVE BEEN ASSIGNED TO NEGATE THE ASS ERTIONS OF THE ASSESSEE. SINCE THE AFORESAID ASPECT WAS SOUGHT TO BE THRASHE D OUT INITIALLY, SAME WAS PUT ACROSS TO THE LD. DR WHEN THE MATTER WAS INITIA LLY HEARD ON 15.5.2017. THE LD. DR SOUGHT TIME SO AS TO REPLY APPROPRIATELY TO THE AFORESAID PLEA. HOWEVER, WHEN THE MATTER HAS BEEN FINALLY CONCLUDED ON 18.5.2017, NO MATERIAL HAS BEEN BROUGHT OUT BY THE REVENUE TO JUS TIFY THE ASSERTION OF THE ASSESSING OFFICER THAT S/SHRI SATISH CHAWLA AND STE VAN ELEFANT ARE THE SHAREHOLDERS AND DIRECTORS IN GENERAL WOODS. NOTAB LY, THE ASSESSEE HAS ALSO FURNISHED AN AFFIDAVIT OF SHRI SATISH CHAWLA, WHO IS A DIRECTOR OF THE ASSESSEE-COMPANY, DATED 10.6.2016 AVERRING THAT HE IS NEITHER A SHAREHOLDER NOR A DIRECTOR OF GENERAL WOODS. IN OUR CONSIDERED OPINION, THE 9 ITA NO.5385/MUM/2014, (A.Y. 2008-09) ITA NO.2744/MUM/2014, (A.Y. 2009-10) ITA NO.5386/MUM/2014, (A.Y. 2010-11) OBSERVATIONS OF THE ASSESSING OFFICER IN THIS REGAR D ARE QUITE BLAND AND DEVOID OF ANY FACTUAL SUPPORT. THEREFORE, WE PROCE ED FURTHER ON THE BASIS THAT NEITHER SHRI SATISH CHAWLA NOR SHRI STEVAN ELE FANT ARE THE SHAREHOLDER/DIRECTOR OF GENERAL WOODS. 11. THE OTHER ASPECT TAKEN BY THE ASSESSING OFFICER IS BASED ON CLAUSE (H) OF SEC. 92A(2) OF THE ACT TO SAY THAT ASSESSEE AND GENERAL WOODS ARE ASSOCIATED ENTERPRISES WITHIN THE MEANING OF SEC. 9 2A(1) OF THE ACT. IN THIS CONTEXT, THE CLAIM OF THE ASSESSING OFFICER IS THAT MORE THAN 90% OF THE RAW MATERIAL REQUIREMENTS ARE PURCHASED BY THE ASSESSEE FROM GENERAL WOODS AND DURIAN. IN THIS CONTEXT, THE LEARNED REPRESENT ATIVE POINTED OUT TO PAGE 49 OF THE PAPER BOOK WHEREIN IS PLACED THE DETAILS OF PARTY-WISE PURCHASES FOR THE YEAR UNDER CONSIDERATION. THE TOTAL PURCHA SE IN THIS YEAR IS RS.4,29,25,129/- OUT OF WHICH THE PURCHASE FROM GEN ERAL WOODS IS TO THE TUNE OF RS.1,65,86,802/-, WHICH IS APPROXIMATELY 38 % OF THE TOTAL PURCHASES. OF COURSE, IF THE PURCHASES EFFECTED BY THE ASSESSE E FROM DURIAN ARE INCLUDED, THE COMBINED PURCHASE FROM THE TWO PARTIE S WOULD EXCEED 90% OF THE TOTAL PURCHASES. SO HOWEVER, CLAUSE (H) OF SEC . 92A(2) OF THE ACT DOES NOT PERMIT AGGREGATION OF PURCHASES FROM DIFFERENT PARTIES FOR THE PURPOSE OF TESTING THE LIMITS PRESCRIBED THEREIN. THEREFOR E, ON THIS COUNT ITSELF, IN OUR VIEW, CLAUSE (H) OF SEC. 92A(2) OF THE ACT IS NOT A TTRACTED IN THE PRESENT CASE. 12. FURTHER, THE ASSESSING OFFICER HAS REFERRED TO CLAUSE (I) OF SEC. 92A(2) OF THE ACT TO SAY THAT ASSESSEE AND GENERAL WOODS A RE ASSOCIATED ENTERPRISES. THE SAID CLAUSE READS AS UNDER :- 10 ITA NO.5385/MUM/2014, (A.Y. 2008-09) ITA NO.2744/MUM/2014, (A.Y. 2009-10) ITA NO.5386/MUM/2014, (A.Y. 2010-11) 92A(2) FOR THE PURPOSES OF SUB-SECTION (1), TWO ENT ERPRISES SHALL BE DEEMED TO BE ASSOCIATED ENTERPRISES IF, AT ANY TIME DURING THE PREVIOUS YEAR, ............. (I) THE GOODS OR ARTICLES MANUFACTURED OR PROCESSED BY O NE ENTERPRISE, ARE SOLD TO THE OTHER ENTERPRISE OR TO PERSONS SPECIFIE D BY THE OTHER ENTERPRISE, AND THE PRICES AND OTHER CONDITIONS RELATIN G THERETO ARE INFLUENCED BY SUCH OTHER ENTERPRISE A PERUSAL OF THE AFORESAID REVEALS THAT THE CLAUSE IS ATTRACTED ONLY IF THE PRICES AND OTHER CONDITIONS RELATING THERETO ARE IN FLUENCED BY SUCH OTHER ENTERPRISE . AS PER THE ASSESSING OFFICER, IT IS SHRI SATISH CHAWLA AND SHRI STEVAN ELEFANT WHO DETERMINE THE PRICES FOR SALE AN D PURCHASE FOR ASSESSEE AS WELL AS ON BEHALF OF GENERAL WOODS. IN THIS CON TEXT, THE LEARNED REPRESENTATIVE EXPLAINED THAT THE AFORESAID INDIVID UALS ARE THE DIRECTORS OF THE ASSESSEE-COMPANY, BUT ARE BASED IN CANADA. THE Y DETERMINED THE PURCHASE AND SELLING PRICES FOR AND ON BEHALF OF TH E ASSESSEE ONLY AND NOT FOR GENERAL WOODS. IN THIS CONTEXT, WE HAVE ALREADY CO NCLUDED THAT NEITHER SHRI SATISH CHAWLA NOR SHRI STEVAN ELEFANT ARE THE DIREC TORS OF GENERAL WOODS. APART FROM THE AFORESAID, THERE IS NO MATERIAL BROU GHT OUT BY THE ASSESSING OFFICER TO ESTABLISH THAT THE PURCHASE AND SELLING PRICES FOR AND ON BEHALF OF GENERAL WOODS ARE DETERMINED BY SHRI SATISH CHAWLA AND SHRI STEVAN ELEFANT. THEREFORE, IN THE ABSENCE OF ANY SUBSTANT IATION BY THE ASSESSING OFFICER, IT COULD NOT BE SAID THAT THE TEST PROVIDE D IN CLAUSE (I) OF SEC. 92A(2) OF THE ACT IS SATISFIED SO FAR AS IT CONCERNS THE T RANSACTIONS BETWEEN ASSESSEE AND GENERAL WOODS. 11 ITA NO.5385/MUM/2014, (A.Y. 2008-09) ITA NO.2744/MUM/2014, (A.Y. 2009-10) ITA NO.5386/MUM/2014, (A.Y. 2010-11) 13. THE OTHER ASPECT REFERRED TO BY THE ASSESSING O FFICER IS WITH REFERENCE TO CLAUSE (J) OF SEC. 92A(2) OF THE ACT, WHICH READ S AS UNDER :- 92A(2) FOR THE PURPOSES OF SUB-SECTION (1), TWO ENT ERPRISES SHALL BE DEEMED TO BE ASSOCIATED ENTERPRISES IF, AT ANY TIME DURING THE PREVIOUS YEAR, ............. (J) WHERE ONE ENTERPRISE IS CONTROLLED BY AN INDIVIDU AL, THE OTHER ENTERPRISE IS ALSO CONTROLLED BY SUCH INDIVIDUAL OR HI S RELATIVE OR JOINTLY BY SUCH INDIVIDUAL AND RELATIVE OF SUCH INDIVIDUAL ON THIS ASPECT, THERE IS NO MATERIAL LED BY THE REV ENUE AS TO HOW THE TEST PRESCRIBED IN THE SAID CLAUSE IS SATISFIED IN THE P RESENT CASE. BEFORE PARTING, WE MAY REFER TO ANOTHER ASPECT CONTAINED IN THE ASS ESSMENT ORDER. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS REFERRE D TO THE STATEMENT OF ONE MS. RITA DASGUPTA RECORDED IN THE COURSE OF THE SEA RCH TO JUSTIFY THAT SHRI SATISH CHAWLA WAS DECIDING THE SELLING AND PURCHASE PRICE. THE RELEVANT QUESTION PUT TO MS. RITA DASGUPTA IN THE COURSE OF THE SEARCH AND HER REPLY HAS BEEN REPRODUCED BY THE ASSESSING OFFICER AT PAG E 4 OF HIS ORDER. WE HAVE PERUSED THE SAME AND FIND THAT THERE IS NO JUS TIFICATION TO INFER THAT SHRI SATISH CHAWLA WAS DECIDING THE SELLING AND PUR CHASE PRICE ON BEHALF OF THE ASSESSEE AS WELL AS ON BEHALF OF GENERAL WOODS AND DURIAN. THEREFORE, IN OUR VIEW, THE ASSESSING OFFICER MISDIRECTED HIMS ELF IN UNDERSTANDING THE REPLY OF MS. RITA DASGUPTA IN A WRONG PERSPECTIVE A ND COUPLED WITH THE OTHER FACTUAL MATRIX BROUGHT OUT IN THE EARLIER PAR AGRAPHS, WE FIND NO REASON 12 ITA NO.5385/MUM/2014, (A.Y. 2008-09) ITA NO.2744/MUM/2014, (A.Y. 2009-10) ITA NO.5386/MUM/2014, (A.Y. 2010-11) TO HOLD THAT GENERAL WOODS WAS AN ASSOCIATED ENTER PRISE OF THE ASSESSEE WITHIN THE MEANING OF SEC. 92A OF THE ACT. THEREFO RE, FOR THE SAID REASONS, THE LOWER AUTHORITIES ERRED IN SUBJECTING THE TRANS ACTIONS OF THE ASSESSEE WITH GENERAL WOODS TO THE PROVISIONS OF CHAPTER X O F THE ACT. THEREFORE, ON THE BASIS OF THE PRELIMINARY ISSUE, WHICH IS CONTAI NED IN GROUNDS OF APPEAL NO. 1 & 2, THE IMPUGNED ADDITION DESERVES TO BE DEL ETED. WE HOLD SO. 14. SINCE WE HAVE DEEMED IT FIT TO DELETE THE ADDIT ION ON THE PRELIMINARY GROUND CONTAINED IN GROUND NOS. 1 & 2 ITSELF, THE G ROUND OF APPEAL NO. 3 RAISED BY THE ASSESSEE IS RENDERED ACADEMIC AND IS HEREBY TREATED AS INFRUCTUOUS. 15. THE LAST GROUND IS PERTAINING TO THE LEVY OF IN TEREST U/S 234B, 234C AND 234D OF THE ACT WHICH IS CONSEQUENTIAL IN NATUR E AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 16. THUS, SO FAR AS APPEAL OF THE ASSESSEE FOR ASSE SSMENT YEAR 2008-09 IS CONCERNED, THE SAME IS ALLOWED AS ABOVE. 17. IT WAS A COMMON POINT BETWEEN THE PARTIES THAT THE FACTS AND CIRCUMSTANCES IN ITA NOS. 2744/MUM/2014 AND 5386/MU M/201 PERTAINING TO ASSESSMENT YEARS 2009-10 AND 2010-11 RESPECTIVEL Y ARE PARI MATERIA TO THOSE CONSIDERED BY US IN ITA NO. 5385/MUM/2014 FOR ASSESSMENT YEAR 2008-09, THEREFORE, OUR DECISION THEREIN SHALL APPL Y MUTATIS MUTANDIS TO THE SAID APPEALS ALSO. 13 ITA NO.5385/MUM/2014, (A.Y. 2008-09) ITA NO.2744/MUM/2014, (A.Y. 2009-10) ITA NO.5386/MUM/2014, (A.Y. 2010-11) 18. RESULTANTLY, ALL THE APPEALS OF THE ASSESSEE AR E ALLOWED AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 16/08/2017 SD/- SD/- (PAWAN SINGH) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 16/08/2017 VM , SR. PS 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