TaxTMI 
TaxTMI 
2013 (9) TMI 599
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....ngaged in any activities outside the books of account. Thus, the addition made on surmises and conjectures must be deleted. 2. The assessing authorities including the Dispute Resolution Panel erred in law and on facts in making an addition of Rs. 21,66,50,451 on account of undisclosed speculation business income though no evi dence of any nature whatsoever was found at the time of search showing that the appellant was engaged in such activities. Thus, the addition made on surmises and conjectures must be deleted. 3. The assessing authorities including the Dispute Resolution Panel erred in law and on facts in making a disallowance of Rs. 2,38,70,600 out of the advertisement and publicity expenses on surmises and con jectures without appreciating the exigencies of the business. Thus, the addition made on surmises and conjectures must be deleted. 4. The assessing authorities including the Dispute Resolution Panel erred in law and on facts in making an addition of Rs. 1,13,71,759 on account of alleged inflation in purchase price of raw spices by ignor ing the evidences on record. Thus, the addition made on surmises and conjectures must be deleted. 5.....
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....xes Instruction No. 3 dated May 20, 2003 rendering the said order void ab initio. (b) The transfer pricing proceedings initiated and undertaken are bad in law and on facts for the specific reasons mentioned below, also communicated to the Transfer Pricing Officer vide letter dated Janu ary 12, 2009, besides other reasons submitted later on : (i) The proceedings initiated referred to some name, which was a non-existent assessee. (ii) The same did not refer to each transaction for which the arm's length price was to be determined. (iii) The same was referred only for the sake of seeking exten sion of the limitation to complete the assessment by December 31, 2008. (iv) The reference was also not enterprise specific. (v) The international transactions were of a small amount of which no reference was desired as per the Central Board of Direct Taxes instructions. (c) The transfer pricing order computing the arm's length price at a higher figure than the actual figures is bad in law and on facts as the same does not consider the facts that the entire arm's length sales were made ....
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....rgument or information was submitted by the appellant. Thus, the same has to be annulled. 10. The assessment order framed without allowing an opportu nity to cross-examine the evidence collected and statements recorded at the back of the appellant is bad in law and must be annulled." I. T. A. No. 4577/Del/2010 (assessment year 2006-07) : 1. The assessing authorities including the Dispute Resolution Panel (DRP) erred in law and on facts and also by ignoring the evi dence on record in making an addition of Rs. 14,00,00,000 on account of alleged undisclosed profit though no evidence of any nature what soever was found at the time of search showing that the appellant was engaged in any activities outside the books of account. Thus, the addition made on surmises and conjectures must be deleted. 2. The assessing authorities including the Dispute Resolution Panel erred in law and on facts in making an addition of Rs. 25,01,66,669 on account of undisclosed speculation business income though no evi dence of any nature whatsoever was found at the time of search showing that the appellant was engaged in such activities. Thus, the addition made on surmises and con....
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.... which is challenged on the following grounds : (a) The transfer pricing order computing the arm's length price at a higher figure than the actual figures passed by the Transfer Pric ing Officer, Deputy Commissioner of Income-tax, Transfer Pricing Officer 1(6), New Delhi is bad in law and on facts as the same was passed without approval of the Director of Income-tax (Transfer Pric ing) in spite the Central Board of Direct Taxes Instruction No. 3 dated May 20, 2003 rendering the said order void ab initio. (b) The transfer pricing proceedings initiated and undertaken are bad in law and on facts for the specific reasons mentioned below, also communicated to the Transfer Pricing Officer vide letter dated January 12, 2009, besides other reasons submitted later on : (i) The proceedings initiated referred to some name, which was a non-existent assessee. (ii) The same did not refer to each transaction for which the arm's length price was to be determined. (iii) The same was referred only for the sake of seeking exten sion of the limitation to complete the assessment by December 31, 2008. (iv) The re....
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....d circumstances of the wholly owned subsidiaries overseas who are working to establish new market overseas for the products of the appellant and all such expenses were the sole responsibility of the appellant. 9. The directive order dated August 31, 2010 of the Dispute Reso lution Panel is bad in law and on facts as it does not mention the sub missions of the appellant on all the issues rather contains an incorrect averment that no argument or information was submitted by the appellant. Thus, the same has to be annulled. 10. The assessment order framed without allowing an opportu nity to cross-examine the evidence collected and statements recorded at the back of the appellant is bad in law and must be annulled. I. T. A. No. 4578/Del/2010 (assessment year 2007-08) : 1. The assessing authorities including the Dispute Resolution Panel (DRP) erred in law and on facts and also by ignoring the evi dence on record in making an addition of Rs. 9,02,38,560 on account of alleged undisclosed profit though no evidence of any nature what soever was found at the time of search showing that the appellant was engaged in any activities outside the books of account. Thu....
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....f evidence was a coercive and which was retracted immediately thereafter, and also while neither bringing on record any physical inventory of stock, if any, prepared during the course of search by the visiting revenue personnel nor pointing out any specific instances of the alleged discrepancies in the business transactions. Thus, the addition so made on surmises and conjectures must be deleted. 8. The assessing authorities including the Dispute Resolution Panel erred in law and on facts in making the addition of Rs. 73,000 towards unexplained advances on the basis of some statement of an accountant of some other firm that too in its case and not of the appellant recorded without providing a copy of the same to the appellant and also without affording opportunity of cross-examina tion of the said person to it. Thus, the said addition is bad in law and must be deleted. 9. The assessing authorities including the Dispute Resolution Panel erred in law and on facts in making the addition of Rs. 5,14,66,456 on account of arm's length pricing that too on an export turnover of Rs. 8,89,40,732 to the associated enterprises, which is challenged on the following grounds ....
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....anel has erred in law and on facts in ignoring that pricing of exports to each country varies due to several factors, e.g., packing, fumigation, shelf-life, local food control regulations, etc. Further no consideration has been taken while computing the arm's length price for the quantity supplied to associate enterprises and non-associate enterprises. It is well known that the rate of supplies for large quan tities is always lower than the rates at which supplies of small quan tities are made. The associate enterprises were supplied a very large quantity as compared to the other buyers. In a nutshell the entire exercise to compute the impugned arm's length price and the alleged difference by the Transfer Pricing Officer is incorrect and must be struck down. (f) The Transfer Pricing Officer/Assessing Officer/Dispute Resolution Panel has erred in law and on facts in rejecting the trans actional net margin method of computing the export price and sub stituting the same with comparable uncontrolled price though in the case of the appellant transactional net margin method is the most suitable method considering the factors and circumstances of the wholly owned su....
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....pers were seized (marked as Annexure A-9/O-1) from the business premises of M/s. MDH Ltd. at 9/44, Kirti Nagar Industrial Area, New Delhi. As per these papers pages 48 to 57 were the printed papers titled "all India sales report" of MDH and the sales month-wise and state-wise had been recorded for the financial years 2000-01 to 2004-05. Similar printed statements had also been seized vide pages 26 to 42 of Annexure AA-9/O-2 seized in the business premises of M/s. Super Delicacy P. Ltd. Further similar statements were seized as per Annexure A-II/O-3 from business premises at 139, Udyog Vihar, Phase-I, Gurgaon. These printed statements contained all India sales report of MDH Ltd. for the years 2000-01 to 2005- 06 month-wise for each state in the country. The total sales as per these reports are tabulated on page 7 of assessment order as under : Financial year Turnover (Rs.) 2000-01 94,63,07,936 2001-02 111,45,48,904 2002-03 129,36,49,261 2003-04 146,44,65,482 2004-05 156,78,66,369 2005-06 181,90,67,134 As against this, the sales turnover declared by the assessee in its Income-tax returns for the relevant assessment year wer....
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.... which could be only for the purpose of a large undertaking like M/s. MDH Ltd. The peculiar feature of the entries recorded in note pad is that it has four columns where the first column contained the quantity, the second column contained the description of the item purchased, the third column contained the rate of the item and the fourth column contained the name of the party in codes from whom these items were purchased. Shri Prem Kumar Arora had admitted the commission income at one per cent. in his return of income on these transactions. This evidence established that these purchases were unaccounted. They were not reflected in the books of account of MDH Ltd. However, the evidence pointed to the fact that those purchases were cash purchases made for MDH Ltd. The facts that the details contained only the name of supplier such as SCS, RJCS, etc. but no name of the purchaser clearly showed that the only purchaser was MDH Ltd., whose name was not considered necessary to be recorded by Shri Arora as all the purchases were meant for the assessee-company. The availability of a huge amount of cash more than Rs. one crore with Shri Arora was also a pointer to the fact that he was handl....
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.... and without any evidence and should not be acted upon. 9. However, this explanation offered by the assessee was not found satisfactory by the Assessing Officer. The Assessing Officer observed that most of the purchases from Khari Baoli, Delhi were made through Shri Prem Kumar Arora. Shri Rajiv Gulati made disclosure under section 132(4) that the same was towards discrepancies found in the accounts of suppliers. The Assessing Officer further observed that the preponderance of probability weighed strongly in favour of the conclusion that those purchases were unaccounted cash purchases made by M/s. MDH Ltd. The totality of the evidences seized as per annexure A-6/H-6 and pages 14-22 of A-4/O- 18 showed that the assessee-company had used cash to make purchases through its suppliers. This modus operandi was noticed in the financial years 2003-04, 2004-05 and 2005-06. Therefore, existence of unaccounted purchases in the financial years 2004-05, 2005-06 and 2006-07 was not merely a strong possibility but a fact that could not be easily brushed aside. 10. The Assessing Officer further observed that in the completed assessments a procedure to determine the estimated income has been f....
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....de an addition of Rs. 11,00,00,000 on account of profit from unaccounted sales for the years under consideration. 12. The assessee objected to the estimated addition on account of profit before the Dispute Resolution Panel. The Dispute Resolution Panel sustained the addition on the ground that identical additions made in the assessment years 2001-02, 2002-03, 2003-04 and 2004-05 were confirmed by the Commissioner of Income-tax (Appeals). Since the additions made by the Assessing Officer were identical and objections and arguments of the learned authorised representative for the assessee were also identical, the objections raised by the assessee were rejected and the addition made by the Assessing Officer was confirmed. 13. Before us the learned authorised representative for the assessee submitted that the issue was squarely covered by the earlier decision of the Income-tax Appellate Tribunal wherein additions made by the Assessing Officer on estimate basis were deleted. On the other hand, the learned Commissioner of Income-tax-Departmental representative submitted that there was difference between All India MIS Sales Report and sales recorded in the books of account. During t....
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.... We have also gone through the copy of bills raised by the assessee. As per invoice No. L-0247 dated July 1, 2000 the sale value is Rs. 6,000 which goes to MIS statement. Trade discount was allowed at Rs. 720 and on balance of Rs. 5,280 cash discount at the rate of 2 per cent. amounting to Rs. 105.60 was allowed. The net sale price of the pro duct is Rs. 5,174.40 on which 10 per cent. sales tax at Rs. 517.44 was charged. The gross sales inclusive of sales tax thus comes to Rs. 5,691.84. This sale price is taken to books of account. Similarly, as per bill No. 0248 the sale price as per product value is Rs. 37,500 which goes to MIS report. On this amount trade discount inclusive of additional discount of Rs. 6,000 was allowed. On the balance of Rs. 31,500 cash discount at the rate of 2 per cent. amounting to Rs. 630 was allowed. On the balance of Rs. 30,870 sales tax at the rate of 10 per cent. was charged amounting to Rs. 3,087. Thus the total sale price is at Rs. 33,957. This amount goes to the books of account, as sale of the product as against Rs. 37,500 goes to the MIS report. Simi larly, bill No. L-0249 dated July 3, 2000 is for Rs. 1,92,012 and goes to MIS re....
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....arned Commissioner of Income-tax (Appeals). The learned Commissioner of Income-tax (Appeals) while confirming the addition has rejected the contention of the assessee on the grounds that no documentary evidence was filed to support the contention that trade discount was allowed by the assessee at the time of making sales. In view of the above facts, in our considered opinion, no adverse inference can be taken about the sales recorded in the books of account and the figures found recorded in MIS reports for all the years. As regards the unaccounted purchases determined by the assessee the learned Commissioner of Income-tax (Appeals) has not upheld the findings of the Assessing Officer. He has in paragraph 11.2 at page 30 of the order observed as under : 'I have considered the submissions of the appellant and do not find justification in the same in as much as evidence found at the premises of Mr. Prem Kumar Arora cannot be taken as any basis to hold that the assessee made unaccounted purchases. I have perused the seized paper, the same does not contain any name of the appellant. Neither in the statement, Mr. Prem Kumar Arora has alleged that such transactions p....
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....de by the assessee. These entries nowhere reflect that unaccounted purchases were made. Therefore, the learned Commissioner of Income-tax (Appeals) was correct in coming to the conclusion that the entries recorded on note pads/note books cannot represent the purchases made by the assessee. From the decision of the learned Commissioner of Income-tax (Appeals) it is evident that there was no material with the Assessing Officer to estimate the undisclosed purchases. The Revenue has not filed appeal against this finding of the learned Commissioner of Income-tax (Appeals). Therefore, no adverse inference can be drawn on the basis of entries recorded on the note pad maintained by Shri Prem Kumar Arora. 20. However, the learned Commissioner of Income-tax (Appeals) on the basis of undisclosed sales determined as per AISR report and as per books of account he applied gross profit rate of 2.45 per cent to sustain the addition. We have already held that there is no difference between the sales recorded in MIS reports and as per books of account. Therefore, no addition on account of undisclosed profit can be made. We accordingly delete the addition in all the four years." 15. Since....
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....aterial Anenxure A-4/O-18. Speculative trading in dhania has been carried out through M/s. Radhey Shyam and Co., Ramganj, Mandi for which evidences were recorded on pages 5 and 8 and pages 8 to 13 of Annexure A- 4/O-18. The evidences contained in pages 14-15 and 19 to 22 mentioned that the speculative trading in haldi and chillies through M/s. Karni Sons (KS), M/s. Karni Enterprises (KE), M/s. Jitesh Kumar Bhupesh Kumar and Co. (JB) and also one Balkishan. The profits from speculation trading consist of rate differences generated in the process of purchase price and the final price at which the stocks were recorded in the books of account. The assessee-company makes purchases when the peak season arrives but the stock is held by the parties and is sent to the premises of the assessee-company depending upon the actual requirements of inventory in the manufacturing process. The Assessing Officer further noted that the assessee was also engaged in speculation in gold trading reflected at pages 20 and 21 to Annexure AA-O1 for the period April 13, 2004 to October 1, 2004. For this limited period of 8 months the total turnover done by the assessee was in the range of Rs. 2 crores to Rs. ....
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....ounted for in the books of account of MDH Ltd. Copy of account of the said party for the financial year 2004-05 was also furnished by the assessee for verification. 17. The reply of the assessee was considered by the Assessing Officer. According to the Assessing Officer the assessee had tried to mislead by stating that entries represented stock of gold kept with the jeweller for making ornaments for the scheme floated by the company. It was not understood as to why the assessee-company had maintained stock of gold with a private jeweller for manufacturing ornaments when such purchases could be made by payment of cash. If the assessee wanted to have the jewellery according to its choice even then the final payment for the total cost of ornaments would be made rather than purchasing gold and alloy separately for the purpose. The explanation offered by the assessee was found to be misleading. The Assessing Officer further noted that a major element in the purchase transactions was a speculative profit in which deliveries were not taken and rate differences had accrued and arisen in the hands of the assessee-company but the same was not reflected in the books of account. The clinchi....
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....Appeals) was upheld. The learned Commissioner of Incometax-Departmental representative on the other hand supported the order of the Assessing Officer. 20. We have heard both parties and gone through the material available on record. The Income-tax Appellate Tribunal, Delhi Bench "E" New Delhi in the assessee's own case for the assessment years 2001-02 to 2004-05 discussed the issue relating to speculation activity in agricultural commodity and gold in the following words : "28. The first issue in the Revenues' appeal relates to deleting the addition made by the Assessing Officer on the basis of documents seized relating to speculation activity in agricultural commodity and gold. The Assessing Officer noted that there was evidence for specu lation in commodity trading during the course of search proceedings. Speculative trading in dhania has been carried through M/s. Radhey Shyam and Co., Ramganj Mandi. He also noted that speculative trad ing was also done in haldi and chillies through Karni Sons, M/s. Karni Enterprises and M/s. Jitesh Kumar Bhupesh Kumar and Co. and also one Bal Kishan. He also noted that various documents seized from the possession of Shri Sush....
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....haya Dharam Pal Gulati. Pages 20 and 21 of Annexure AA- 4/O-1 exhibits the transaction with M/s. Vijay Kumar Jewellers. Undisputedly the proof of delivery was in the seized material itself. In brief the assessee purchased gold and alloy for manufacture of gold chains. M/s. Vijay Kumar Jewellers after manufacture of gold chains gave the accounts which tallied with the books of account. Therefore, the contention of the Assessing Officer that the assessee was engaged in speculation business of gold is not correct. It was further submitted that the said statement related to the period for the assessment year 2004-05 and has been referred to by the Assessing Officer in order to support his presumed high-pitched assessments. The search did not yield in any evidence suggesting of receipt of any such income that too of such a large sum of Rs. 30 crores in the particular financial year 2006-07 and other amounts as have assessed in other years without any evidence. The Assessing Officer had placed reliance on statement of directors of the company for making addition though the same were retracted by them immediately thereafter during the continuation of search pro ceedings on November 28, 20....
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....y announces several sales promotion schemes. One of the scheme is pronounced on the birthday of Mahashaya Dharam Pal Gulati. On this date gold chains are distributed to the dealers, who achieve certain targets. For this purpose the assessee had purchased gold and alloy and got them converted from the jeweller, namely, Vijay Kumar Jewellers. The assessee had regular account with him for manufacturing of gold chains. From the details available on record whenever fresh gold was purchased the same was handed over to the jeweller for manufacture of gold chains. The expenditure incurred by way of making charges as well as purchase of gold is reflected in the books of account. We are unable to understand as to how such transactions can be treated as a speculation transaction. The assessee is not engaged in purchase and sale of gold on the basis of which it could be presumed that the asses see was engaged in speculative business. The surrender made by the directors during the course of search was retracted immediately thereafter. If the Revenue wanted to rely on the surrender made by the directors, necessary evidence should have been brought on record to justify that the surrender made by ....
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....o Dharam Pal Gulati. The ownership of the brand was not defined as on date. It was not clear whether the title to the brand was in the hands of the assessee-company. In the absence of the same certain portion of the expenditure attributable to the same could not be allowed. The Assessing Officer disallowed the expenditure on the ground that an attempt has been made by the company to promote Shri Dharam Pal Gulati and not the product. The Assessing Officer therefore, proposed the disallowance of 20 per cent. of the advertisement expenditure. However, the Dispute Resolution Panel upheld the addition on the ground that similar additions were made in the assessment years 2001-02 to 2004-05. The Dispute Resolution Panel further observed that these additions were deleted by the Commissioner of Income-tax (Appeals). However, the Department has filed appeal before the Income-tax Appellate Tribunal and has contested the deletion of disallowance by the Commissioner of Income-tax (Appeals). The Dispute Resolution Panel in order to protect the interests of the Revenue upheld the disallowances in the assessment years 2005-06, 2006-07 and 2007-08. 23. Before us the learned authorised represen....
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....01-02 to 2004-05. The Income-tax Appellate Tribunal deleted the addition by observing as under : "34. We have heard both the parties and gone through the material available on record. There is no dispute that the expenditure incurred on advertisement is genuine. The disallowance has been made by the Assessing Officer merely on the ground that instead of products, the CMD of the company is being promoted. In our considered opinion, this is a silly proposition on the part of the Assessing Officer. Had the assessee engaged a big celebrity for promotion of its products, the assessee would have incurred huge expenditure and that would have been allowed in full by the Assessing Officer. The expenditure has been incurred on promotion of the product. Therefore, in our con sidered opinion, the learned Commissioner of Income-tax (Appeals) is justified in deleting the addition. Merely because Mr. Dharam Pal Gulati name comes to prominence, it cannot be said that the expen diture was not incurred for the purpose of business. The issue is cov ered in favour of the assessee by the decision of the Income-tax Appellate Tribunal, Mumbai Bench in the case of Star India P. Ltd. v. Addl. CIT ....
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....ssee also admitted that the raw material was purchased by the assessee at the invoice price only and not at inflated price. The Assessing Officer however, rejected the contention of the assessee. He observed that an attempt has been made by the assessee to shift the blame on Shri Sushil Kumar Trehan, son-in-law of Shri Dharam Pal Gulati. The explanation of the assessee-company could not be accepted for the reasons that Shri Sushil Kumar Trehan could not take such decision without the consent of the director of the company as he did not hold any position in the company and if he had indulged in such unauthorised activity, how it was not detected by the assessee for so long. The assessee-company had been in the business of procurement of raw material for decades and they could not have misled about the price at which two of the most important raw materials were being invoiced. Further, the utilisation of surplus generated was also in accordance with the directions of the directors of the assessee-company. Therefore, income earned in this process belonged to the assessee-company and should be taxed as income in its hands. The Assessing Officer estimated income by multiplying the quant....
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....sition that if a person accepts and owns the assets or seized material, addition cannot be made in the hands of the person from whose premises it was seized. On the other hand, the learned Commissioner of Income-tax-Departmental representative submitted that evidence was found during the course of search that purchases were inflated by Rs. 3 in respect of haldi and Rs. 5 in respect of chillies. Shri Rajiv Gulati had admitted in his statement that there was over invoicing in purchases. The parties from whom purchases have been made, i.e., Jitesh Kumar Bhupesh Kumar, M/s. Karni Sons and M/s. Karni Enterprises have also stated in their statements recorded under section 131 of the Act that they charged higher prices to M/s. MDH Ltd. but no explanation for such over invoicing was given. The explanation of the assessee that it was done by Shri Sushil Kumar Trehan was not acceptable. The Dispute Resolution Panel has confirmed the inflation of purchases. The learned Commissioner of Income-tax-Departmental representative placed reliance on the decision of the hon'ble Delhi High Court in the case of CIT v. A. K. Jain [2012] 349 ITR 236 (Delhi) for the proposition that even if income has ....
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....also a fact that Shri Sushil Trehan was not paid anything for the services rendered to the company. Moreover, the statement recorded by the Deputy Director of Income-tax was not confronted to the assessee. Therefore, it cannot be said that the amount of Rs. 3 per kg. and Rs. 5 per Kg. which has been admitted by Shri Sushil Trehan, in his return of income, has come to the assessee. No such evidence during the course of search was found from the possession of the assessee indi cating that actual beneficiary is the assessee. Since the addition has been made in the hands of Shri Sushil Trehan, the disallowance to that extent cannot be made in the hands of the assessee. Moreover, the transactions involving over invoicing was found in the assessment year 2004-05, but the Assessing Officer made addition of equal amount in the assessment years 2001-02, 2002-03 and 2003-04 also without any material found during the course of search. The addition made in the assessment years 2001-02, 2002-03 and 2003-04 is based on mere suspicion and presumption and is not supported by any evi dence found during the course of search that Shri Sushil Trehan has earned commission on purchase of haldi and chill....
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.... findings recorded by the Commis sioner (Appeals) and upheld by the Tribunal was based on appreciation of evidence and material on record and needed no interference. (iii) In the case of District Superintendent of Police, Chennai v. K. Inbasagaran [2006] 282 ITR 435 (SC) search in premises of public servant took place. Wife of public servant claimed the ownership of money and assets. The Department assessed her to tax. Evidence given by wife and others also were considered in proceedings. It has been held that public servant not guilty of charge under the Prevention of Corruption Act, 1988, section 13(1)(e) read with section 132(4) of the Income-tax Act, 1961. 33. In the case of the assessee the documents containing over invoicing by Rs. 5 and Rs. 3 on purchases of chillies and haldi were seized from the office of Sushil Kumar Trehan who has owned up the documents and income arising therefrom as commission for procurement services rendered by him and had admitted in the return of income. Since the issue is squarely covered by the decision of the Income-tax Appellate Tribunal, in our considered opinion, addition cannot be made in the hands of the assessee. Following the decisi....
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....definitely done by the assessee and execution of the same was carried out by the son-in-law of chairman of MDH Ltd., i.e., Shri Mahashiya Dharam Palji. The Assessing Officer further noted that no legal action was taken by the assessee-company against Shri Sushil Kumar Trehan for carrying out such activities. From this it was clear that Shri Sushil Kumar Trehan was carrying out such activities with the tacit/verbal approval of the assessee. As regards declaration of income on account of inflation of expenses by Shri Sushil Kumar Trehan in his return of income would not absolve the assessee-company from the addition because he was only acting on behalf of the assessee-company. The Assessing Officer therefore, added the amount of Rs. 54,48,600. 35. The assessee objected to the addition of Rs. 54,48,600 before the Dispute Resolution Panel. It was submitted that the entries recorded on seized paper were not by way of any inflation of purchases but it was the secret commission received by Shri Sushil Kumar in the supplies of haldi and chillies to the assessee. It was also submitted that Shri Sushil Kumar Trehan, son-in-law of the managing director of the company, was in-charge of proc....
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....on is incorrect because the income was disclosed by Shri Sushil Kumar Trehan as it was earned by him and documents mentioning the said income were seized from his possession. It is incorrect on the part of the Dispute Resolution Panel to conclude that the assessee had received kick-back through Shri Trehan since no document evidencing such receipt was found during the course of search operation from any of the premises of the assessee. However, this statement is contradictory to the earlier findings of the Dispute Resolution Panel that kick-back was received by the company. If the kick-back has been received by the directors then it should be added in their hands and not in the hands of the company. During the course of search no document has been found to show that said kick-back was received either by the assessee or by the directors of the assessee-company. Shri Sushil Kumar Trehan in reply to question No. 4 has stated that he looked after the procurement of raw material like chillies, haldi and jeera, etc. It has further been submitted that the Dispute Resolution Panel on one hand has held that no evidence was shown to prove that Shri Sushil Kumar Trehan worked for the procurem....
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....ng Officer shows that the quantities found recorded in the impugned seized documents stands accepted by the Department as duly recorded in the books of account. 37. On the other hand, the learned Commissioner of Income-tax-Departmental representative relying on the assessment order submitted that the parties such as Karni Sons, Karni Industries and Jitesh Kumar Bhupesh Kumar were systematically inflating the purchases at Rs. 3 per kg. in the case of haldi and Rs. 5 per kg. in the case of chilies. All the evidences in respect of such manipulation were seized from the custody of Shri Sushil Kumar Trehan either at his residence or at his business premises. He had admitted in his statement that there was inflation of purchases. He had also admitted that money was siphoned from the account of assessee-company and was invested by its suppliers as per the directions given by the assessee-company. Subsequently at the time of search Shri Rajiv Gulati admitted these facts when he confirmed the disclosure given by Shri Sushil Kumar Trehan. The fact that the directors of the company admitted to such discrepancies in the records and in the statements given by them where not only they admitte....
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....ing that over invoicing was done at the instance of the assessee was found. 39. We also find that entries recorded on page 89 are in respect of total quantity of supplies made to MDH (Delhi and Gurgaon) at 6225 kgs. whereas entries recorded on page 51 are in respect of 4672.20 kgs. The over invoicing in respect of entries recorded on page 51 amounting to Rs. 23,36,100 is included in the entries made at page 89 of Rs. 31,12,500. Therefore, once addition of Rs. 31,12,500 is made no separate addition in respect of Rs. 23,36,100 is to be made. Further, we also find that the Assessing Officer had made addition of Rs. 1,13,71,759 on account of inflation in purchases of chilies and haldi. The addition of Rs. 54,48,600 is also in respect of inflation of purchases which has been found to be recorded at pages 51, 52 and 89. Since the addition of Rs. 1,13,71,759 has been made which includes the sum of Rs. 54,48,600, in our considered opinion, no separate addition should have been made. We accordingly delete the addition of Rs. 54,48,600. 40. Ground No. 5(b) relates to addition of Rs. 35,99,840 made on the basis of pages 14 to 22 of Annexure A-4/O-18 for purchase inflation in haldi and c....
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.... 42. The assessee raised objections before the Dispute Resolution Panel. Since the issue was identical to the addition of Rs. 54,48,600, the Dispute Resolution Panel upheld the addition by rejecting the objections raised by the assessee. 43. Before us the learned authorised representative for the assessee submitted that the documents were seized from the possession of Shri Sushil Kumar from the premises of Mata Chanan Devi Hospital. The said pages have been owned up by Shri Sushil Kumar and income on the basis of such documents had been declared in his return of income and therefore, no addition could be made in the hands of the assessee. It was also submitted that the addition of Rs. 35,99,840 was part of overall addition of Rs. 1,13,71,759. Therefore, no separate addition could be made. Otherwise it would amount to double addition. The learned Commissioner of Income-tax-Departmental representative on the other hand submitted that contention of the assessee that both the papers were related to Shri Sushil Kumar is not correct. The assessee had inflated the purchases and therefore, the Assessing Officer had issued questionnaire to the assessee. The assessee's explanation wa....
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....18 was of Shri Sushil Kumar and not the assessee. If a particular income belongs to the assessee and if the same is declared by another person, even then it is assessable in the hands of the assessee. The words "MDH account" signifies that cash of Rs. 28,75,000 belonged to the assessee. Therefore, it should be added in the hands of the assessee. The Assessing Officer further observed that out of Rs. 28,75,000, Rs. 7 lakhs was paid on January 15, 2004 and the amount of Rs. 21,75,000 was relatable to assessment year under consideration. As regards entries recorded on page 41, the Assessing Officer observed that the assessee had not brought any evidence on record to show that the sum of Rs. 5 lakhs was duly recorded in the books of account. If that was so the assessee would have claimed the same for deduction under section 80G. Since the assessee was not able to explain the total cash of Rs. 15,60,000 (Rs. 10,60,000 + 5,00,000) pertaining to the assessment year 2005-06, true nature of these documents was not established. The presumption as per section 292C of the Act was that the paper belonged to the assessee and its contents were proved. The Assessing Officer therefore, made the add....
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....evi Hospital from the possession of Shri Sushil Kumar Trehan who had owned up the said documents. No evidence was found during the course of search to establish that the donations were made by the assessee out of undisclosed income. Rather Shri Sushil Kumar Trehan had owned up the entries recorded on pages 41 and 42 of Annexure A-4/O-18. Shri Sushil Trehan had donated the amount out of undisclosed income declared by him under section 153A of the Act. 49. We have gone through page 40 of Annexure A-4/O-18. On this page amount received relates to the assessment years 2003-04 and 2004-05. The total receipts are of Rs. 85,88,372 including the amount of Rs. 11.30 lakhs and Rs. 28.75 lakhs. Thus the source of income out of which the payment of Rs. 11.30 lakhs and Rs. 28.75 lakhs has been made exists in the earlier years. Therefore, the amount of Rs. 10.60 lakhs and Rs. 21.75 lakhs which is part of Rs. 11.3 lakhs and Rs. 28.75 lakhs respectively cannot be assessed in the assessment year 2005-06 as the source of the income pertains to the earlier years. As regards the amount of Rs. 5 lakhs, pages 540 and 541 are receipts of Rs. 5 lakhs which has been received by demand draft No.767248 da....
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....he presumption is that the said documents relate to Sh. Sushil Kumar Trehan and not to the MDH Ltd., the assessee. Hence the Assessing Officer has wrongly applies the provisions of section 292C. The provisions of section 292C support the case of Sh. Sushil Kumar Trehan. We accordingly delete the addition. 51. The next issue for consideration relates to addition of Rs. 44,98,279. During the course of search pages 45 to 49 were seized which formed part of Annexure A-4/O-18. Annexure A-4/O-18 was seized from the possession of Shri Sushil Kumar Trehan from the premises of Mata Chanan Devi Hospital and contains expenses incurred on construction of school building at Byadgi. The said school belongs to Mahashay Chunni Lal Charitable Trust, an independent assessee. On a query it was submitted that the assessee- company had no connection with the said papers which were found from the possession of Shri Sushil Trehan. It was also stated that it was incorrect to say that the assessee-company was inflating purchases in order to invest in construction. Shri Sushil Kumar Trehan in his statement recorded on oath on date of search had admitted while replying question No. 23 that expenses in sch....
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....ashya Chunni Lal Charitable Trust, an independent assessee to whom notice under section 148 was issued by the Assessing Officer for the assessment year 2005-06, a copy of which is placed at pages 566 to 568 of the paper book. It was further submitted that the amounts were spent out of donations of Rs. 11.30 lakhs and Rs. 28.75 lakhs received by the trust as mentioned on pages 40 to 42 of Annexure A-4/O-18. It was also submitted that Rs. 7 lakhs mentioned as cash from MDH account on January 15, 2004 and the same has been utilised for purchase of land on January 17, 2004 which means that the said investment in school building was out of the said sum. The donations were given by Shri Sushil Kumar Trehan out of his undisclosed income and therefore, no addition could be made in the hands of the assessee. It was further submitted that addition of Rs. 37,35,000 has been made in the year in which income was earned and therefore, no separate addition for the utilisation of the said amount could be made as it would tantamount to double addition which is not permissible by law. It was therefore, submitted that addition for utilisation of donations received by the trust in the hands of the ass....
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....a letter from M/s. Vinayak Traders giving the details of balance with New Delhi account (Rs. 1,22,17,083.00) and Gurgaon account (Rs. 34,44,461.00) totalling to Rs. 1,56,61,544 was found and seized. There is credit entry of Rs. 50 lakhs which has been divided equally between Mahashayaji and Shri Rajivji's capital account, i.e., Rs. 25 lakhs each. The assessee was asked to explain the source of Rs. 50 lakhs and also the source of the balance amount of Rs. 1,06,61,544. The assessee in response to the above noted query stated that the said transactions were duly recorded in the books of the assessee and hence no addition was required to be made. However, the Assessing Officer proposed the addition of Rs. 1,56,61,544. 57. Before the Dispute Resolution Panel it was explained that entries on seized page 82 were actually reflected in the books of account of the assessee. In support of his argument the learned authorised representative of the assessee referred to paper book pages 551 to 561 of the paper book. It was submitted that page 551 of the paper book is the account of M/s. Vinayak Traders a supplier of the assessee (Gurgaon office account of the assessee) and page 552 of the ....
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....sessee-company, no adverse cognizance could be taken against the assessee. Shri Dharam Pal Gulati and Shri Rajiv Gulati were two separate assessees than the company and were also assessed by the same Assessing Officer. If the Assessing Officer was not satisfied, then the addition, if any, could have been made in their hands and not in the hands of the assessee. It was also submitted that on perusal of the balance-sheet of M/s. Vinayak Traders as on March 31, 2005 at page 548 of the paper book, it would be seen that it shows that capital of Rs. 25,05,000 has been introduced by each of the partner and the assessee-company is not partner therein. The Dispute Resolution Panel accepted that said sum was paid by Mahashayaji and Rajivji as capital in the said firm. The learned authorised representative for the assessee, therefore, submitted that since the said amount was paid by two persons who are independently assessed, no addition could be made in the hands of the assessee. Thus the addition of Rs. 50 lakhs could not be made in the hands of the assessee. 59. The learned Commissioner of Income-tax-Departmental representative has submitted that the Assessing Officer proposed addition ....
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....nd Gurgaon office in the books of MDH Ltd. Therefore, the Dispute Resolution Panel was right in not approving the addition of Rs. 1,56,61,544. M/s. Vinayak traders is a partnership firm of three partners namely Shri Mahashaya Dharam Pal Gulati and Shri Rajiv Gulati and Sh. Suresh Patil. This firm was purchasing haldi and chillies for MDH Ltd. In the balance-sheet of M/s Vinayak Traders Capital accounts of Shri Dharam Pal Gulati and Shri Rajiv Gulati have been credited by sum of Rs. 25,05,000 each. The amount of Rs. 50 lakhs has been transferred from outstanding balance of M/s. Vinayak Traders in the capital account of Shri Mahashaya Dharam Pal Gulati and Shri Rajiv Gulati, i.e., Rs. 25 lakhs each. Sh. Suresh Patil has sent the account in layman's way after capital contribution by Sh. Dharam Pal Gulati and Sh. Rajiv Gulati amount due was Rs. 1,06,61,544. Because of this the amount of Rs. 50 lakhs has been reduced from the figure of Rs. 1,56,61,544. Therefore, the amount of Rs. 25 lakhs each in the names of the partners has been contributed them. In case the amount is not explainable the addition should have been in the hands of the partners and not in the hands of the assessee. ....
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.... and the assessee. He also noted that the assessee was avoiding the reply on the questions raised. Since the assessee was not able to discharge the onus of proving the source of investment in school building, the Assessing Officer made addition of Rs. 51,44,224. 64. Before the Dispute Resolution Panel it was argued by the learned authorised representative of the assessee that school was being constructed by a charitable trust. The addition was made on the basis of valuer's report in respect of investment in school building at Byadgi which was owned by the trust. Therefore, if any addition was required to be made it should have made in the hands of the trust. However, the Dispute Resolution Panel rejected the contention of the assessee. It was observed that pages 51, 82, 89, 14, 22, 41 and 42 of Annexure A-4/O-18 clearly showed that expenditure on construction of building had been made by the assessee. The school was being run in the name of family member of the managing director of the company. The Dispute Resolution Panel therefore, rejected the objections raised by the assessee and affirmed the draft assessment order on this ground. 65. Before us the learned authorised ....
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....hat the expenditure was incurred on school at Byadgi which was owned by the trust and therefore, no separate addition can be made in the hands of the assessee. 66. Before us the learned Commissioner of Income-tax-Departmental representative supporting the order of the Assessing Officer has submitted that additions based on DVO's report was unexplained investment which was only a quantification of undisclosed investment detected on the basis of seized material. The learned authorised representative of the assessee in rejoinder submitted that the school does not belong to the assessee and therefore, no addition can be made in its hands. Notice under section 148 had already been issued to the trust who is the owner of the said school. 67. We have heard both parties and gone through the material available on record. There is no dispute about the fact that the Assessing Officer had issued notice under section 148 on the basis of valuation report for the assessment year 2005-06. There is also no dispute that school is owned by the trust. No evidence was found during the course of search that MDH Ltd. has incurred expenditure on construction of school building at Byadgi. On the ....
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....0,000 and Rs. 5,50,000 relate to the assessment years 2004-05 and 2005-06 and therefore, no addition can be made in the assessment year 2007-08. It was also submitted that Rs. 9,50,000 is payment out of Rs. 23,36,100 which was added in the assessment year 2005- 06. Therefore, when addition for source has already been made, then an addition for its utilisation cannot be made. It was further submitted that Rs. 6.25 lakhs was utilised for purchase of land and Rs. 3.25 lakhs aggregating to Rs. 9,50,000 was used for school construction as per details on page 48 of annexure A-4/O-18 for which separate addition has been made in the assessment year 2005-06 and therefore, no separate addition for this amount can be made in the assessment year 2007-08. Moreover, the payment has been made out of undisclosed income of Shri Sushil Kumar Trehan and hence, no addition can be made in the hands of the assessee. On the other hand, the learned Commissioner of Income-tax-Departmental representative supported the order of the Assessing Officer. 70. We have heard both parties and gone through the entries recorded on page 51 of annexure A-4/O-18. We find that the entrees on page 51 relate up to May 15....
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....th the diary seized as A-2/O-1. The entries on this page were recorded in a typical manner. On every date top entry represents cash balance for the date and middle entry is cash receipt for the day. None of the entries were reflected in the books of account. Total of cash receipts as per page 40 alone is at Rs. 12,46,90,000 for the period of four months in the financial year 2006-07 relevant to the assessment year 2007-08. 72. On a query it was explained by the assessee that page 40 of the annexure A-2/O-1 contained balances in the bank account of Ludhiana branch of MDH Ltd on the particular day mentioned therein. The assessee submitted photo copies of the bank statements in support of its contention. These figures were noted telephonically by Mr. Gupta, the accountant in Gurgaon branch of MDH Ltd. On comparison of entries with bank statements the Assessing Officer found that only one entry tallied completely date-wise and deposit-wise. The Assessing Officer test checked 33 entries. Except a deposit of Rs. 4,00,000 on August 22, 2006 none of the other entries tallied. Since the assessee had inflated purchase of haldi and chillies and was also indulging speculation of agricultura....
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.... Officer. 75. We have heard both parties and gone through the material available on record. The Assessing Officer had added the amount of Rs. 12,46,90,000 on the basis of entries recorded on page 40 of Annexure A-3/O-2 on the ground that the assessee was having large cash generated from unaccounted business. He also observed that the availability of cash date-wise recorded on page 40 was tallying with the bank statement. On the other hand, the contention of the assessee is that the accountant of the company used to obtain telephonically the availability of cash in HDFC Bank, Ludhiana, where the customers were depositing the cheques directly in the account. To demonstrate entries the learned authorised representative for the assessee explained entries before the Assessing Officer as below : To illustrate the same, on the front side of page 40/A- 3/O-2 (marked as side 'B' in the explanations given now), in the second column (marked as '1' now) closing balance of August 21, 2006 (i.e., of the previous day) is stated on the third row as Rs. 19,68,739.55, which is the clear/usable opening bank balance available on August 22, 2006, Rs. 4,00,000 stated just above it ....
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....55 stated right on top of the said two sums is the balance before adding Rs. 15,00,000 for cheque dated October 11, 2006, deposited on October 10, 2006 from the said available balance of Rs. 30,05,244.55 on October 11, 2006 which is again verifiable from the bank statement itself. Accordingly, in the explanatory statement prepared for reconciling the balances as per the bank statement and as per the seized loose paper, the said transactions for October 11, 2006 have been reconciled as under : Particulars Amount (Rs.) Opening balance as on October 11, 2006 as per bank statement 43,05,244.55 Add : Cheque dated October 12, 2006 deposited on October 11, 2006 5,50,000.00 48,55,244.55 Less: Cheque presented for payment 13,00,000.00 Closing balance as on October 11, 2006 as per bank statement (marked as A-1) 35,55,244.55 Less : Post dated value cheque 5,50,000.00 Closing Balance as on October 11, 2006 (marked as A-1) 30,05,244.55 Being the clear/usable balance available on the next day (i.e. on October 12, 2006) as recorded in column 'I' on 'A' side of the loose sheet 77. We have also verified the entri....
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....e contention of the assessee. As regards pages 78 to 82 of annexure A-6/O-1 it was explained by the assessee that the said pages were print out of stock summary for the assessment year 2005-06 in respect of Kirti Nagar factory. It was stated that the stock register was produced. However, the Assessing Officer observed that no such entries were recorded on the note-sheet. Therefore, the assessee could easily attach the copies of four pages of the stock register in support. The Assessing Officer therefore, treated the bunch of papers 78 to 82 as unexplained. As regards page 87 of annexure A-8/O-1 the assessee was asked to reconcile the stock as on October 30, 2006 for various items like aggarbatti (54 cases), dhoop fancy (3084 cases), hawan (375 cases), manjan (76 cases), mehandi (58 cases), papad (1 case), pouch (461 cases), pouch fancy (213 cases), sachettes (115 cases), soya tin (400 cases) totalling 4837 cases. The assessee gave the similar reply as was given in respect of pages 78 to 82 of annexure A-6/O-1. The Assessing Officer again rejected the explanation offered by the assessee. As regards annexure A-4/O-2 it was bunch of 147 papers. Pages 39 to 47 contained summary as on J....
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....rched where the goods were kept. The assessee contended that there was no discrepancy in the stock. The Assessing Officer referred to provisions of section 292C of the Act. He observed that there was presumption that the material found in the search belonged to the assessee and contents of the same are true and onus was on the assessee to prove otherwise. As regards mentioning of Ghaziabad factory along with Gurgaon and Kirti Nagar factory, the Assessing Officer noted that it was a mistake in typing. Such mistake could not vitiate the proceedings and also had no impact on admission of the assessee regarding the surrendering of stock valuing Rs. 11 crores due to discrepancies found. The Assessing Officer therefore, added the amount of Rs. 11 crores-Rs. 10 crores towards stock and Rs. 1 crore towards discrepancies. 80. The Dispute Resolution Panel rejected the objection raised by the assessee on the ground that the objections raised by the assessee were of general nature and were not substantiated before them. 81. Before us the learned authorised representative for the assessee submitted that the Dispute Resolution Panel rejected the objections of the assessee by simply mention....
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.... goods were kept. Then how the discrepancy in stock was computed was not understood. The statement of Shri Rajiv Gulati was recorded during the course of search proceedings on November 28, 2006 wherein reply to question No. 20, he stated that he was misled with the pressure and presumption that there was discrepancy in the stock. A general question was put with no actual figures suggesting that the disclosure be made to close the issue though no discrepancy in any premises was pointed out in the figures. It has been stated that even though surrender of Rs. 10 crores was made, the Assessing Officer was duty bound to work out the exact quantity of stock as on the date of search and to compare the same with the stock recorded in the books. He submitted that the Income- tax Appellate Tribunal in its decision for the assessment years 2001-02 to 2004-05 has held in paragraph 31 of page 25 that surrender made by the directors during the course of search was retracted immediately thereafter. If the Revenue wanted to rely on the surrender made by the directors, necessary evidence should have been brought on record to justify the surrender made by the assessee. In view of the above, it has b....
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....me also placed reliance on the following decisions : (i) Asst. CIT v. Espresso Investments [2006] 8 SOT 287 (Mum). (ii) Manmohansingh Vig v. Deputy CIT [2006] 6 SOT 18 (Mum). 82. We have heard both parties. During the course of search Shri Rajiv Gulati surrendered the amount of Rs. 10 crores towards difference in stock and Rs. one crore on account of certain discrepancies. Thus the total amount surrendered was Rs. 11 crores. During the course of search inventory of stock lying in different premises, i.e., factory at Kirti Nagar, Gurgaon Cold Storage, godown, etc., was made. As per stock inventory so made the total stock was Rs. 13,04,15,172. The authorised officers obtained the surrender by stating that there was difference in stock. The contention of the assessee is that during the course of search Shri Rajiv Gulati, director of the company was misled with the pressure due to search operation and presumption that there was a discrepancy in the stock. The general question was put with no factual figures suggesting that disclosure be made to close the issue without pointing out discrepancies in the stock found in various premises. Shri Rajiv Gulati had retracted....
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....eration relates to addition of Rs. 73,000 on the basis of statement of assistant accountant of M/s. Satvik Traders. Survey under section 133A was conducted at the premises of M/s. Satvik Traders, 6680 Khari Baoli, Delhi. Statement of Shri P.C. Sati, assistant accountant on oath had accepted that advances were received from the customers and the same were not entered in the books. At page 9 of the statement he accepted that Rs. 73,000 was accepted as advance on November 21, 2006. Further he admitted that this amount of Rs. 73,000 was unaccounted for. The Assessing Officer asked the assessee to explain as to why the amount of Rs. 73,000 should not be added as income of the assessee. It was submitted by the assessee that M/s. Satvik Traders was not concern of the assessee. It was no concern of the assessee whether M/s. Satvik Traders had accepted the sum as advance without recording the same in their books or not. The statement of Shri P. C. Sati was recorded because he was looking after the accounts of Satvik Traders and he happened to be there during the survey. The Assessing Officer however, treated the reply of the assessee as not correct. He made the addition of Rs. 73,000. 86....
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....d October 23, 2009 directing the Assessing Officer that arm's length pricing shown by the assessee for export to the associated enterprises, be increased by Rs. 52,91,986 in the assessment year 2005-06, Rs. 1,12,52,632 in the assessment year 2006-07 and Rs. 5,14,66,456 in the assessment year 2007- 08. During the assessment proceedings the assessee on October 30, 2009 admitted that copy of the said order had been received by the assessee. The Assessing Officer further noted that the Transfer Pricing Officer has observed that no documentation has been prescribed under rule 10D(1)(e) to 10D(1)(m) could be filed. No transfer pricing study/working in regard to the international transactions was undertaken and most of the method claimed to have been applied and reported in Form No. 3CED has been given. The Assessing Officer based on the report of the Transfer Pricing Officer made addition in the respective assessment years. 90. Before the Dispute Resolution Panel the assessee filed objections to the additions. The Dispute Resolution Panel upheld the additions worked out by the Transfer Pricing Officer. 91. Before us the learned authorised representative for the assessee submitt....
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....below also communicated to the Transfer Pricing Officer vide letter dated January 12, 2009 besides other reasons submitted later on and must be taken on record under section 292BB of the Act : (i) The same was referred in respect of some name, which was a non-existent assessee. (ii) The same did not refer to each transaction for which the arm's length price was to be determined. (iii) The same was referred to only for the sake of seeking extension of the limitation to complete the assessment by December 31, 2008. (iv) The reference was also not enterprises specific. (v) The international transactions were less than Rs. 5 crores of which no reference was desired as per instruction No. 3 dated May 20, 2003 of the Central Board of Direct Taxes placed at pages 722 to 724 of the paper book as followed in the decision of Sony India P. Ltd. v. Central Board of Direct Taxes [2007] 288 ITR 52 (Delhi). 94. Further the assessee is dealing in a number of products having different varieties, rates, packing, proportion of spices blended therein, cost, etc. A number of items having different value and packing are billed together in an expo....
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....ch was its margin on investment. Incurrence of all these expenses was the sole responsibility of the assessee as it was the assessee who was establishing its own marketing set up there. Thus more discounts was given to the associated enterprise who were catering to the small retail outlets overseas as compared to the non associate enterprises who were the large store chains overseas and could afford to buy one container load goods at a time. But the small retailers were also to be given the same margin as the big store chains as the consumer purchases the produce at the same rate from any nearest store and MRP is printed on each packet. If those subsidiaries had not been opened but branches were opened, then the expenses incurred there would have been met by the assessee only. The Transfer Pricing Officer/the Assessing Officer has erred in law and on facts in ignoring that pricing of exports to each country varies due several factors, e.g., packing size and quality, fumigation, shelf life, local food control regulations, etc. It is well known that the rate of supplies for large quantities is always lower than the rates at which supplies of small quantities are made. The associate e....
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....nted by RBI is only concerned with the foreign exchange regulations and not for arm's length price. He placed reliance on the decision of the hon'ble Delhi High Court in the case of CIT v. Nestle India Ltd. [2011] 337 ITR 103 (Delhi). Choice of the determination of the arm's length price is not unfettered choice on the part of the taxpayer and this choice is to be exercised on the touch stone of principles governing selection of most appropriate method set out in section 92C(1). Where the Assessing Officer finds that that selection of most appropriate is not correct, he has the power as well as corresponding duty to select the most appropriate method and compute the arm's length price by applying that method. In the absence of any comparables forthcoming from the assessee on the form of an appropriate transfer pricing report, the Assessing Officer has rightly adjusted the arm's length price and made the additions. He therefore supported the order of the Assessing Officer. 98. We have heard both parties and gone through the material on record. In this case the assessee has not given transfer pricing study report on the ground that there was no public domain co....