2020 (1) TMI 296 - AT - Income Tax

Tribunal upholds Transfer Pricing Officer's decision on disallowed transactions, deems transactions as bogus

M/s. Imperial Mark Trade (I) Pvt. Ltd Versus Dy. CIT, C.C. -7 (2), Mumbai

M/s. Imperial Mark Trade (I) Pvt. Ltd Versus Dy. CIT, C.C. -7 (2), Mumbai - TMI Issues Involved:1. Jurisdiction exercised by the Transfer Pricing Officer (TPO).2. Disallowance/transfer pricing adjustment of high seas purchases of Crude Palm Oil.3. Disallowance/transfer pricing adjustment of purchase of guar gum (split).4. Disallowance/transfer pricing adjustment of sales return of guar seeds.5. Disallowance of loss on high sea sales of crude palm oil.Issue-wise Detailed Analysis:1. Jurisdiction Exercised by the TPO:The appellant contended that the TPO exceeded his jurisdiction by characterizing specified domestic transactions (SDT) as bogus without undertaking any benchmarking/functional analysis. The Dispute Resolution Panel (DRP) upheld the TPO's actions, stating that verifying the genuineness of transactions falls within the TPO's obligations once a case is referred by the Assessing Officer (AO). The Tribunal found no fault in the TPO's jurisdiction exercise, affirming the adjustments made.2. Disallowance/Transfer Pricing Adjustment of High Seas Purchases of Crude Palm Oil:The TPO identified discrepancies in the dates of purchase invoices submitted by the assessee and the original buyer, leading to the conclusion that the transactions were bogus. The DRP upheld this finding, noting that the involved parties were from the same group, suggesting the transactions were arranged to deceive revenue authorities. The Tribunal agreed with the detailed examination and findings of the lower authorities, confirming the disallowance of Rs. 122,70,68,280.3. Disallowance/Transfer Pricing Adjustment of Purchase of Guar Gum (Split):The TPO observed a mismatch between the purchase date and the warehouse notification date, treating the transaction as bogus. The DRP supported this view, rejecting additional evidence from the assessee as self-serving and untimely. The Tribunal upheld the disallowance of Rs. 100,82,50,230, finding the lower authorities' conclusions well-founded.4. Disallowance/Transfer Pricing Adjustment of Sales Return of Guar Seeds:The TPO and DRP noted that the assessee mistakenly recorded sales returns as purchases. The DRP directed the AO to verify the genuineness of the sales booking and rectify the order if necessary. The Tribunal found the DRP's direction appropriate and upheld the decision.5. Disallowance of Loss on High Sea Sales of Crude Palm Oil:The AO found the high seas transactions to be bogus, noting that the assessee did not produce necessary documentation and that the transactions were actually executed by another company. The DRP concurred with the AO's detailed investigation and findings. The Tribunal, referencing a similar case involving the same parties, upheld the disallowance of Rs. 8,82,90,741, agreeing with the lower authorities' thorough examination and conclusions.Conclusion:The Tribunal dismissed the appeal, affirming the findings of the AO, TPO, and DRP that the transactions in question were bogus. The detailed and consistent examination by the lower authorities was deemed sufficient, and no interference was warranted. The appeal by the assessee was thus dismissed.