DCIT, Ludhiana V. M/s Mansarover Impex (Regd.), Ludhiana

ITA 674/CHANDI/2011

• Counselvise Citation: 67421514 RSA 2011
• Duration Of Justice: 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-04-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 10-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Keywords: Maximum Marginal Rate; Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 674/CHD/2011 ASSESSMENT YEAR: 2006-07 THE DCIT, VS M/S MANSAROVER IMPEX (REGD), CIRCLE-II, LUDHIANA LUDHIANA PAN NO. AAFFM8111P (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. JAISHREE SHARMA RESPONDENT BY : SHRI ASHWANI KUMAR DATE OF HEARING : 09.04.2012 DATE OF PRONOUNCEMENT : 10.04.2012 ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF CIT(A)-II, LUDHIANA DATED 8.4.2011 RELATING TO ASSE SSMENT YEAR 2006-07. 2. IN THIS APPEAL THE REVENUE HAS TAKEN THE FOLLOWI NG GROUNDS: 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N DELETING THE ADDITION OF RS. 45,88,653/- MADE U/S 40A(2)(B) OF I.T. ACT, 1961. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S IN DELETING THE ADDITION OF RS. 45,88,653/- MADE U/S 2 40A(2)(B) OF I.T. ACT, 1961 WITHOUT APPRECIATING TH E FACT THAT NO PROOF REGARDING THE DIFFERENCE IN QUALITY O F PRODUCT PURCHASED FROM THE OUTSIDE PARTIES AND THOS E PURCHASED FROM THE SISTER CONCERN WERE PRODUCED BEFORE THE ASSESSING OFFICER JUSTIFYING THE HIGHER PURCHASE RATE. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TRADING IN HAND TOOLS I. E. SPANNERS OF VARIOUS KINDS, SCAFFOLDINGS, GATES AND WROUGHT IRON PRODUCT S. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS SHOWN TOTAL TURN OVE R OF RS. 10,83,69,111/- AS AGAINST TURNOVER OF RS. 12,27,01,527/- IN THE IMMED IATELY PRECEDING YEAR. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HA S SHOWN GROSS PROFIT OF RS. 82,89,988/- GIVING A GP RATE OF 7.65% AS AGAINS T GP RATE OF 6.69% IN THE IMMEDIATELY PRECEDING YEAR. AS PER THE AUDIT REPOR T, THE ASSESSEE HAD MADE PURCHASES FROM M/S MANSAROVAR FORGINGS PVT LTD, COV ERED U/S 40A(2)(B) OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') AMOUN TING TO RS. 2,13,85,343/-. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FILE CO MPLETE COPY OF ACCOUNT OF M/S MANSAROVAR FORGINGS PVT LTD AND ALSO ASKED THE ASSESSEE TO PRODUCE ALL THE BILLS OF M/S MANSAROVAR FORGINGS PVT LTD AND BI LLS OF INDEPENDENT PARTIES FOR JUSTIFICATION OF PAYMENT U/S 40A(2)(B). FROM T HE BILLS FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER FOUND THAT THE PURC HASES MADE FROM M/S MANSAROVASR FORGINGS PVT LTD WERE MADE AT A HIGHER RATE AS COMPARED TO THE PURCHASE OF SAME ITEM FROM INDEPENDENT PARTIES. APP ROXIMATELY 24 SUCH INSTANCES WERE POINTED OUT TO THE ASSESSEE BY THE A SSESSING OFFICER. THE ASSESSING OFFICER ASKED THE ASSESSEE TO SUPPLY THE COMPLETE COPY OF BILLS OF PURCHASES FROM M/S MANSAROVAR FORGINGS PVT LTD AND OTHER PARTIES FOR 3 CALCULATION OF DISALLOWANCE U/S 40A(2) (B) OF THE ACT. IN THIS REGARD, THE ASSESSEE VIDE ITS LETTER DATED 10.10.2008 SUBMITTED THE COMPLETE COPY OF ACCOUNT OF M/S MANSAROVAR FORGINGS PVT LTD, COPIE S OF SALE INVOICES FOR COMPARISON OF SALE RATES OF THE ITEMS SOLD TO M/S MANSAROVAR IMPEX AND OTHER PARTIES BY M/S MANSAROVAR FORGINGS PVT LT D WERE ALSO FILED. THE ASSESSEE FURTHER SUBMITTED THAT IT HAD PURCHASED MA TERIAL AT A QUITE CHEAPER PRICE AS COMPARED TO THE MATERIAL SOLD BY M/S MANSA ROVAR FORGINGS PVT LTD TO THE OTHER PARTIES IN CONSIDERATION THAT THEY ARE PURCHASING MATERIAL BY GIVING ADVANCE TO THEM BEFORE SUPPLY. AS REGARDS T HE REASONS FOR MAKING THE PURCHASE OF IDENTICAL PRODUCTS FROM ITS SISTER CONC ERN AT A COMPARATIVELY HIGHER VALUE AS AGAINST THE OUTSIDE PARTIES, IT WA S SUBMITTED THAT THE GOODS PURCHASED FROM ITS SISTER CONCERN WERE NOT ONLY OF BETTER QUALITY BUT ALSO HEAVIER IN WEIGHT. THE PRODUCTS OF THE ASSESSEES SISTER CONCERN BEING HEAVIER BETTER FINISHED AND TECHNICALLY SUPERIOR EV EN AS ON DATE COMMAND HIGHER MARKET VALUE AS AGAINST THE GOODS OF ANY OTH ER MANUFACTURER. IT WAS ALSO SUBMITTED BY THE ASSESSEE THAT THE TRADING RES ULTS OF THE ASSESSEE WERE BETTER AND HIGHLY ENCOURAGING AS COMPARED TO EARLIE R YEARS EXCEPT FOR A MINOR FALL IN THE TURNOVER. THE ASSESSING OFFICER OBSERV ED THAT THE BOOKS OF ACCOUNT ALONG WITH THE SALE BILLS OF THE ASSESSEE W ERE PRODUCED ON 20.11.2008 AND IT WAS POINTED OUT TO THE ASSESSEE THAT AS REGA RDS THE DIFFERENCE IN WEIGHT THERE WAS NO MENTION OF THE SAME ON THE PURCHASE AN D SALE BILLS AND ALSO NO STOCK REGISTER OR ANY OTHER PRIMARY RECORD HAS BEEN PRODUCED TO SHOW THAT THE GOODS PURCHASED FORM SISTER CONCERN WERE OF HEAVIER WEIGHT. ACCORDING TO ASSESSING OFFICER, THE EXPORT SALE BILLS OF THE A SSESSEE REVEALED THAT RATE OF VARIOUS ITEMS MENTIONED IN THE EXPORT SAL E BILLS DID NOT SHOW ANY SIGNIFICANT VARIATION. THE ASSESSING OFFICER OBSERVED THAT 4 THERE WAS VARIATION IN THE RATE OF PURCHASES FROM T HE SISTER CONCERN AND THE INDEPENDENT PARTIES AND FURTHER THAT EXCESSIVE PAYM ENT HAS BEEN MADE ON ACCOUNT OF PURCHASES TO M/S MANSAROVAR FORGINGS PVT LTD. ACCORDING TO ASSESSING OFFICER, THERE WAS NO MUCH VARIATION IN T HE SALE PRICE ALSO TO SUPPORT THE CONTENTION OF THE ASSESSEE THAT GOOD QU ALITY AND HEAVIER MATERIAL HAS BEEN PURCHASED FROM THE SISTER CONCERN. THE AS SESSING OFFICER CONCLUDED THAT THE EXCESS AMOUNT PAID TO M/S MANSAROVAR FORGI NGS PVT LTD ON ACCOUNT OF PURCHASES VARIED FROM 6.55% TO 44.2%. THE ASSES SING OFFICER TOOK THE VIEW THAT THE RATES CHARGED BY M/S MANSAROVAR FORGI NGS PVT LTD WERE 21.46% HIGHER THAN THAT PURCHASES MADE FROM INDEPENDENT PA RTIES. THUS, THE DISALLOWANCE @ 21.46% ON PURCHASES AMOUNTING TO RS. 2,13,85,343/- COMES OUT TO RS. 45,88,653/-. THE ASSESSING OFFICER THER EFORE, DISALLOWED AN AMOUNT OF RS. 45,88,653/- U/S 40A(2)(B) OF THE ACT BEING EXCESS PAYMENT ON ACCOUNT OF PURCHASES FROM SISTER CONCERN. 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE SUBMITTED DETAILED WRITTEN SUBMISSIONS WHICH IS RE PRODUCED BY THE CIT(A) IN PARA 4 OF THE IMPUGNED ORDER. THE ASSESSEE FURTHER SUBMITTED BEFORE THE CIT(A) THAT THE SISTER CONCERN HAS MADE SALES TO TH E ASSESSEE AT LOWER RATES THAN THE SALE RATES MADE BY THEM TO THE OUTSIDE PAR TIES. IT WAS ALSO SUBMITTED BY THE ASSESSEE BEFORE THE CIT(A) THAT THE RATE OF PRODUCT DEPENDS UPON THE QUALITY, THE WEIGHT, THE FINENESS ETC. ETC AND AS T HE ASSESSEE WAS ENGAGED IN THE BUSINESS OF EXPORTS, A GENERAL STRESS WAS LAID ON THE QUALITY OF THE MATERIAL. THE ASSESSEE CONTENDED BEFORE THE CIT(A) THAT M/S MANSAROVAR FORGINGS PVT LTD IS ALSO A TAX PAYING UNIT AND BEIN G A CASE OF A COMPANY, THE 5 TAX IS PAID AT A MAXIMUM MARGINAL RATE. A COPY OF COMPUTATION CHART OF INCOME FOR ASSESSMENT YEAR 2006-07 IN THE CASE OF M /S MANSAROVAR FORGINGS PVT LTD WAS FURNISHED BEFORE THE CIT(A). THE ASSES SEE ALSO RELIED UPON THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V SIYA RAM GARG HUF REPORTED IN 49 DTR PAGE 129 WHEREIN TH EIR LORDSHIPS HAVE HELD THAT IN A CASE WHERE THE PURCHASES ARE MADE FR OM A SISTER CONCERN AND THE SISTER CONCERN IS ALSO PAYING TAX AT THE SAME R ATE, NO DISALLOWANCE U/S 40A(20(B) IS WARRANTED. 5. THE CIT(A) DELETED THE ADDITION OBSERVING AS UND ER:- 5. I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT OR DER, PERUSED THE RELEVANT RECORD AND ALSO THE WRITTEN SUBMISSION S FILED BY THE ID. COUNSEL FOR THE APPELLANT. A COPY OF THE WRITTE N SUBMISSION FILED BY THE APPELLANT ON 15.10.2009 WAS FORWARDED BY MY PREDECESSOR TO THE A.O. THE REPORT OF THE A.O. HAS ALSO BEEN RECEIVED VIDE LETTER DATED 20.12.2010 WHICH HAS BEE N PLACED ON RECORD. THE ONLY POINT OF DISPUTE WHICH HAS BEEN RA ISED BY THE APPELLANT BEFORE ME RELATES TO DISALLOWANCE OF A SU M OF RS.45,88,653/- BY RESORT TO PROVISIONS OF S.40(A)(2 )(B) ON THE GROUND THAT THE APPELLANT HAD MADE PURCHASES FROM I TS SISTER CONCERN M/S MANSROVER FORGINGS PVT. LTD. AT A HIGHE R PRICE THAN THE MARKET RATE. THE A.O. WHILE FRAMING ASSESSMENT HAS TRIED TO PIN-POINT THE DIFFERENCES IN THE RATES OF VARIOUS I TEMS PURCHASED BY THE APPELLANT FROM THE MARKET AND ALSO FROM ITS SISTER CONCERN AND HAS TRIED TO PROJECT THAT THE PURCHASE RATE PAI D BY THE APPELLANT ON ITS PURCHASES FROM THE SISTER CONCERN ARE COMPARATIVELY HIGHER VIS-A-VIS THE PURCHASE RATES O F THE APPELLANT MADE FROM OTHER PARTIES. THE APPELLANT WHILE DEALIN G WITH THE ISSUE HAS NOT DOUBTED CONTROVERTED THE FACTUAL POSI TION PUT FORWARD BY THE A.O. RATHER THE APPELLANT HAS ARGUED ON THE 6 DIFFERENT PRETEXT THAT THE SUPPLIER I.E. M/S MANSRO VER FORGINGS PVT. LTD. HAD SOLD THE GOODS TO THE APPELLANT AT LO WER RATE AS COMPARED TO THE SALES MADE BY THAT PARTY I.E. SISTE R CONCERN BUT OTHER CUSTOMERS IN THE MARKET. HE HAS ALSO STATED T HAT THE VARIATION IN THE RATES CAN BE BECAUSE OF SEVERAL FA CTORS SUCH AS THE QUALITY, THE WEIGHT OF THE PRODUCT, THE FINISH OF THE PRODUCT ETC. HIE HAS ALSO TRIED TO EMPHASIZE THAT THE APPEL LANT IS MAINLY ENGAGED IN THE EXPORT AND FOR THE PURPOSE, STRICT C ONTROL OVER QUALITY HAS TO BE MAINTAINED. HE HAS DRAWN A CHART SHOWING THE RATES OF PURCHASES MADE BY THE APPELLANT FROM THE O UTSIDE PARTIES, THE RATE OF PURCHASES MADE BY THE APPELLANT FROM IT S SISTER CONCERN AND ALSO THE RATES OF SALES MADE BY M/S MAN SROVER FORGINGS PVT. LTD. I.E. THE SISTER CONCERN TO OUTSI DE PARTIES. PERUSAL OF THIS CHART REVEALS THAT FACTUALLY WHATEV ER HAS STATED BY THE A.O. IS CORRECT IN AS MUCH AS THE RATES OF PURC HASES OF THE FIRM FROM THE SISTER CONCERN ARE HIGHER THAN THE RA TES OF PURCHASES FROM OUTSIDE PARTIES. BUT AT THE SAME TIM E, THE CONTENTION OF THE APPELLANT IS ALSO CORRECT THAT TH E SISTER CONCERN HAS BEEN MAKING SALES TO OUTSIDE PARTIES AT HIGHER RATE AS COMPARED TO THE SALE RATE OFFERED BY THE SISTER CON CERN TO THE APPELLANT. THE ASSESSING OFFICER IN HIS REMAND REPO RT HAS FAILED TO COMMENT UPON THIS IMPORTANT ISSUE RAISED BY THE ID. COUNSEL FOR THE APPELLANT. PERUSAL OF THE RECORD SUGGESTS T HAT THE APPELLANT HAS MADE THESE VERY SUBMISSIONS EVEN BEFO RE THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS VIDE LE TTER DATED 06.1 1.2008. 5.1 THE ID. COUNSEL HAS TAKEN ME THROUGH THE WRITT EN SUBMISSIONS FILED BY HIM VIDE LETTER DATED 15.12.20 09. HE HAS HIGHLIGHTED THAT THE G.P. RATE OF THE APPELLANT HAS GONE UP TO 7.65% DURING THE YEAR UNDER APPEAL AS COMPARED TO 6 .69% DURING THE EARLIER YEAR. HE HAS ALSO TAKEN ME THROUGH THE COMPARATIVE CHARTS OF PURCHASE PRICE OF VARIOUS ITEMS PURCHASED FROM OUTSIDE PARTIES AND ALSO FROM THE SISTER CONCERN M/S MANSRO VER FORGINGS 7 PVT. LTD. AND ALSO COMPARISON WITH SALES MADE BY M/ S MANSROVER FORGINGS PVT. LTD. TO OTHER PARTIES. HE ALSO TOOK M E THROUGH PHOTO COPIES OF THE RELEVANT BILLS WHICH HAVE BEEN FILED ALONGWITH THE WRITTEN SUBMISSIONS. HE EXPLAINED IN DETAIL THA T THE VARIATION IN PRICES IS CONSEQUENTIAL UPON THE DIFFERENCE ARIS ING FROM THE THICKNESS, FINISHING, QUALITY OF NICKEL POLISHING, HARDENING, TEMPERING, BARRELING, GRINDING ETC. HE ALSO HIGHLIG HTED THE FACT THAT THE GOODS PURCHASED FROM ITS SISTER CONCERN WE RE OF A SUPERIOR QUALITY AND HEAVIER WEIGHT. HE SPECIFICALL Y DREW MY ATTENTION TO THE CHART SHOWING COMPARATIVE SALE RAT ES WHICH IS BEING REPRODUCED BELOW:- COMBINATION SPANNER PURCHASES BY ASSESSEE FROM OUTSIDE PARTIES PURCHASES BY ASSESSEE FROM MANSAROVER FORGINGS SALES BY MANSAROVAR FORGINGS TO OUTSIDE PARTIES 9 MM 3.66 3.90 4.24/4.45 1 0 MM 3.44/3.52 4.06 4.41/4.50 11 MM 3. 58 4.26 4.63/4.72 12MM 3,78 4. 54/481 4.88/5.19 13 MM 4.39/4.52 5.25 5.71/5.82 14 MM 4.51/4.69 5.50 5.98/6.10 17 MM 6.31/7.10 7.60 8.16/8.44 19MM 7.16/7.42 8.68 9.32/9.91 DOE SPANNER PURCHASES BY ASSESSEE FROM OUTSIDE PARTIES PURCHASES BY ASSESSEE FROM MANSAROVER FORGINGS SALES BY MANSAROVAR FORGINGS TO OUTSIDE PARTIES 12X3 3.28 4.07/4.35 4.29/4.78 14 X 15 4.03 4.74/5.06 5.00/5.57 16 X 17 4.60/4.68 5.75/6.14 6.06/6.75 18X 19 5.87/5.93 6.98 7.36 / 8.19 20X22 7.18/7.25 8.87/9.46 9.03.10.41 24X27 11.80 14.88 17.24 25 X 28 11.20 15.72/16.82 19.10 30X32 16.14 20.29/20.36 23.75 RING SPANNER PURCHASES BY ASSESSEE FROM OUTSIDE PARTIES PURCHASES BY ASSESSEE FROM MANSAROVER FORGINGS SALES BY MANSAROVAR FORGINGS TO OUTSIDE PARTIES 14X 15 7.58/16.14 8.75/10.60 10.11/11.42 16 X 17 10.04/15.27 10.04/12.72 12.15/12.86 18X 19 12.05 11.93/14.16 13.52/15.28 8 20X22 13.95 13.83/17.06 16.28/18.39 5.2 KEEPING IN VIEW THE FACTS AND ABOVE STATED POS ITION OF THE CASE, I AM OF THE VIEW THAT THE SUBMISSIONS MADE BY THE APPELLANT'S COUNSEL ARE FULLY JUSTIFIED. THE RATE OF A PRODUCT DEPENDS UPON THE QUALITY, THE WEIGHT, THE FINENESS ETC. FURTHER, M/S MANSAROVER FORGINGS PVT. LTD. MADE SALES TO OUTSIDE PARTIES AT HIGHER RATE THAN THE APPELLANT FIRM. MOREOVER, THE SAID SISTER-CONCE RN IS ALSO PAYING TAX AT THE SAME RATE AS THAT PAID BY THE APPELLANT, THERE COULD HAVE BEEN NO INCENTIVE FOR THE SISTER CONCERN TO SUPPLY THE GOODS AT A HIGHER RATE THAN THE MARKET RATE BECAUSE IT WOULD G O TO INCREASE ITS PROFITS. I HAVE ALSO GONE THROUGH THE JUDGEMENT OF THE HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS . SIYA RAM GARG HUF REPORTED IN 49 DTR PE 126 ON THE SAME IDEN TICAL SITUATION. THE G.P. RATIO OF THE APPELLANT IS ALSO HIGHER THAN IN EARLIER YEARS. THE A.O. HAS NOT BEEN ABLE TO PIN-PO INT ANY DEFECT IN THE STAND PUT FORWARD BY THE APPELLANT. I AM, THUS, INCLINED TO AGREE WITH THE SUBMISSIONS OF THE APPELLANTS COUNSEL AND DIRECT TO DELETE THE ,DISALLOWANCE OF RS. 45,88,653/-. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIALS AVAILABLE ON RECORD. SMT. JAISHREE SHARM A, LD. DR SUBMITTED THAT CIT(A) HAS DELETED THE ADDITION WITHOUT APPRECIATIN G THE FACT THAT NO PROOF REGARDING THE DIFFERENCE IN QUALITY OF PRODUCT PURC HASED FROM OUTSIDE PARTIES AND THOSE PURCHASED FROM SISTER CONCERN WERE PRODUC ED BEFORE ASSESSING OFFICER JUSTIFYING HIGHER PURCHASE RATE. SHE, THER EFORE, SUBMITTED THAT THE ORDER OF THE CIT(A) MAY BE SET ASIDE AND THAT OF AS SESSING OFFICER BE RESTORED. SHRI ASHWANI KUMAR, LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. HE FURTHER INVITED OUR ATTENTION TO THE ASSESSEES LETTER DATED 6.11.2006 FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS UNDER WHICH COMPREHENSIVE IN FORMATION RELATING TO 9 THE SALE PRICE CHARGED BY M/S MANSAROVAR FORGINGS P VT LTD FOR ITS ENTIRE PRODUCTS FROM THE ASSESSEE AS WELL AS OUTSIDE PARTI ES HAS BEEN MENTIONED. SHRI ASHWANI KUMAR, LD. COUNSEL FOR THE ASSESSEE SU BMITTED THAT FROM THESE DETAILS IT IS CLEAR THAT M/S MANSAROVAR FORGINGS PV T LTD HAVE SOLD THE SAME PRODUCTS TO OUTSIDE PARTIES AT STILL HIGHER SALE PR ICE WHICH WERE SUPPLIED TO THE ASSESSEE AT SLIGHTLY LOWER PRICE. HE, THEREFO RE, SUBMITTED THAT IT WILL NOT BE PROPER OR OTHERWISE JUSTIFIED TO CONTEND THAT TH E PURCHASE MADE BY THE ASSESSEE FROM M./S MANSAROVAR FORGINGS PVT LTD ARE OVER VALUED IN ANY MANNER. HE FURTHER SUBMITTED THAT THE VARIATION IN THE RATE AT WHICH ITEMS HAVE BEEN PURCHASED FROM M/S MANSAROVAR FORGINGS PV T LTD AND FROM OTHER PARTIES STAND ADEQUATELY EXPLAINED IN AS MUCH AS TH E SAME IS ATTRIBUTABLE TO THE DIFFERENCE IN THE QUALITY AND WEIGHT OF THE UND ERLYING ITEMS PURCHASED. SHRI ASHWANI KUMAR FURTHER SUBMITTED THAT THE FIXAT ION OF THE SELLING PRICES IS TOTALLY AN INDEPENDENT DISCRETION OF THE INDEPEN DENT BUSINESSMAN AND IT IS NOT WITHIN THE JURISDICTION OR THE AUTHORITY OF THE ASSESSING OFFICER TO QUESTION OR EVEN ARRIVE AT ANY CONCLUSION FROM THE SELLING PRICES FIXED BY THE UNDERTAKING. IN THE CASE OF TRANSACTION UNDERTAKEN BETWEEN INDEPENDENT PARTIES SUCH AS THE SALE OF GOODS IN THE INSTANT CA SE, IT WOULD NOT BE CORRECT TO LINK THEM WITH THE UNDERLYING COST OF THE GOODS SOL D AND THEREBY ARRIVED ANY ADVERSE CONCLUSION AS TO THE DIVERSION OF THE PROFI T TO SISTER CONCERNS BY OVER INVOICING THE PURCHASES. SHRI ASHWANI KUMAR, LD. C OUNSEL FOR THE ASSESSEE ALSO REFERRED TO THE PROVISIONS OF SECTION 40A(2)(B ) OF THE ACT WHICH PROVIDES THAT WHERE EXPENDITURE BY WAY OF PAYMENT HAS BEEN OR IS TO BE MADE TO ANY PERSON REFERRED TO IN CLAUSE (B) OF THIS SUB SECTIO N, AND THE ASSESSING OFFICER IS OF OPINION THAT SUCH EXPENDITURE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS, SERVI CES OR FACILITIES FOR WHICH 10 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 THERE FROM, SO SUCH OF THE EXPENDITURE AS IS SO CONSIDERED BY HIM TO BE EXCESSIVE OR UNREASONABLE SHALL NOT BE ALLOWED AS A DEDUCTION. SHRI ASHWANI KUMAR, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE INSTANT CASE, NO NE OF THE PARAMETERS LAID DOWN AND DISCUSSED ABOVE ARE APPLICABLE TO THE ASSE SSEES CASE. ACCORDING TO HIM, M/S MANSAROVAR FORGING PVT LTD HAD SOLD IDE NTICAL GOODS TO OTHER PARTIES AT MORE OR LESS RATE WHICH THEY HAVE BEEN S OLD TO THE ASSESSEE WHEREBY THE ISSUE OF THE FAIR MARKET VALUE OF THE P RODUCTS GETS DECISIVELY SETTLED. IN SO FAR AS THE QUESTION OF LEGITIMATE N EEDS FOR THE BENEFIT DERIVED FOR ACCRUING FORM THE PURCHASES OF THE SAID GOODS, SHRI ASHWANI KUAMR LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSE E FIRM WAS DEALING IN SUCH ITEMS WHEREBY THE LEGITIMATE NEEDS GET DOCUMENTED. AS REGARDS THE QUESTION OF BENEFITS DERIVED THEREFORM, THE FACT THAT IT HAS SOLD ITEMS SUBSEQUENTLY AT A PROFIT WOULD CONFIRM THE BENEFITS WHICH HAD ARISEN TO THE ASSESSEE. HE, THEREFORE, SUBMITTED THAT NO ADVERSE INFERENCE MAY BE CALLED FOR ON THIS COUNT. 7. IT IS APPARENT FROM RECORD THAT M/S MANSAROVAR F ORGING PVT LTD HAS SOLD THE GOODS TO THE ASSESSEE AT LOWER RATES AS CO MPARED TO THE SALES MADE BY THAT PARTY TO OTHER CUSTOMERS IN THE MARKET. IT IS ALSO TRUE THAT THE VARIATION IN THE RATES CAN BE BECAUSE OF SEVERAL FA CTORS SUCH AS QUALITY, WEIGHT OF PRODUCT, THE FINENESS OF PRODUCT ETC. IT IS ALSO APPARENT FROM THE RECORD THAT THE ASSESSEE IS MAINLY ENGAGED IN THE B USINESS OF EXPORT AND FOR THE PURPOSE, STRICT CONTROL OVER QUALITY IS TO BE M AINTAINED. IT IS TRUE THAT THE SISTER CONCERN WAS MAKING SALES TO OUTSIDE PARTIES AT HIGHER RATES AS COMPARED 11 TO THE SALE RATES OFFERED BY THE SISTER CONCERN TO THE ASSESSEE. THERE IS NO DISPUTE THAT THE GP RATE OF THE ASSESSEE IS 7.65% D URING THE YEAR UNDER CONSIDERATION AS COMPARED TO 6.69% DURING THE EARLI ER YEARS. IT IS ALSO SEEN THAT THE CIT(A) HAS NOT CONTROVERTED THIS CONTENTIO N OF THE ASSESSEE THAT THE GOODS PURCHASED FROM ITS SISTER CONCERN WERE OF A SUPERIOR QUALITY AND HEAVIER WEIGHT. IT IS ALSO SEEN THAT M/S MANSAROVA R FORGINGS PVT LTD HAD MADE SALES TO OUTSIDE PARTIES DURING THE YEAR UNDER CONSIDERATION. IT IS ALSO AN ADMITTED POSITION THAT THE SISTER CONCERN HAS BE EN MAKING SALES TO OUTSIDE PARTIES AT HIGHER RATE AS COMPARED TO SALE RATE OFF ERED BY THE SISTER CONCERN TO ASSESSEE. THE CIT(A) HAS ALSO CATEGORICALLY STATED THAT THE SAID SISTER CONCERN HAS PAID TAX AT THE SAME RATE AS THAT PAID BY THE ASSESSEE. IN THE CASE OF CIT(A) V SIYA RAM GARG HUF REPORTED IN 49 DTR 12 6, THE HON'BLE PUNJAB & HARYANA HIGH COURT CONFIRMED THE FOLLOWING FINDINGS OF THE TRIBUNAL. 15 . ON THIS ISSUE, WE FIND THAT INDEED, THE DETAILS FIL ED BY THE ASSESSEE SHOWED THAT ITS SISTER CONCERNS WERE B EING TAXED AT THE SAME RATE AT WHICH THE ASSESSEE WAS BEING TA XED, PROVING THAT THERE WAS NOT REASON FOR THE ASSESSEE TO SHOW HIGHER RATE PURCHASES MADE BY THE ASSESSEE FROM IT S SISTER CONCERNS. THE ASSESSEES SISTER CONCERN HAD OFFERE D THEIR INCOME FROM SUCH SALES, WHICH FACT HAS NOT BEEN DIS PUTED. THEREFORE, THE ASSESSING OFFICER ERRED IN INVOKING THE PROVISIONS OF S. 40A(2)OF THE ACT AND THE LAD CIT(A ) HAS CORRECTLY DELETED THE DISALLOWANCE. 8. IN THE INSTANT CASE ALSO, IT IS CLEAR FROM THE R ECORDS THAT THE ASSESSEES SISTER CONCERN BEING TAXED AT THE SAME RATE AT WHIC H THE ASSESSEE WAS BEING TAXED, PROVING THAT THERE WAS NO REASON FOR THE ASSESSEE TO SHOW HIGHER RATE 12 PURCHASES MADE BY THE ASSESSEE FROM ITS SISTER CONC ERN. IN THE INSTANT CASE ALSO THE ASSESSEES SISTER CONCERN HAS ALSO OFFERED ITS INCOME FOR TAX FROM SUCH SALES, WHICH FACT HAS NOT BEEN DISPUTED. IN O UR VIEW, THE CIT(A) HAS CORRECTLY APPLIED THE RATIO OF THE HON'BLE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V SIYA RAM GARG HUF (SUPRA ). CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF CIT(A) AND ACCORDINGLY WE UPHOLD THE SAME AND DISMISS THE APPEAL OF THE REVENUE. 9. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF APRIL, 2012 SD/- SD/- (MEHAR SINGH) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : 10 TH APRIL, 2012 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR