2018 (8) TMI 841

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....A)-II, Nashik be cancelled on the above issue and that of the A.O. be restored. 3. The appellant craves leave to add, alter, modify, delete, amend any of the grounds with prior permission of the Ld. Pr. CIT, as per the circumstances of the case. 4. The appellant prays to file any of the additional evidence, with the permission of Ld. Pr. CIT, appropriate to the grounds taken in appeal." 3. The brief facts of the case as emanating from records are : The assessee is engaged in manufacturing and trading of gold, silver, diamond ornaments/jewellery. During the course of scrutiny assessment proceedings, the Assessing Officer inter alia made addition/disallowance of Rs. 1,37,06,504/- u/s. 40A(2)(a) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). In First Appellate proceedings the Commissioner of Income Tax (Appeals) deleted the addition on the basis of remand report from the Assessing Officer dated 28-06-2016 and the order of Tribunal in the case of assessee's sister concern DCIT Vs. M/s. Rajmal Lakhichand in ITA No. 607/PN/2013 for assessment year 2009-10 decided on 16-01-2015. Now, the Revenue is in appeal before the Tribunal. 4. Dr. Sunil Pa....

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....es were made in the case of sister concerns of the assessee. The Co-ordinate Bench of the Tribunal upheld the findings of Commissioner of Income Tax (Appeals) in deleting such disallowances. For the sake of completeness relevant extract of the findings of Tribunal in the case of flagship concern of the assessee DCIT Vs. M/s. Rajmal Lakhichand in ITA No. 607/PN/2013 (supra) are reproduced here-in-below : "8.27 We now deal with the applicability of the provisions of section 40A(2)(b) of the Act. In this case, the assessee has entered into the transactions with the group entities. Hence, prima-facie the proposition are applicable. There is no dispute about this legal position but the core question is whether the assessee has paid excess price than the market rate to the related parties or to the sister concerns for the purchase of the bullion (99.50- standard gold). As per the argument of the Ld. Counsel for the assessee, even if there is a marginal difference in the market price of the Mumbai and the Jalgaon but that prices are covered in the transportation and delivery. The assessee has filed a chart at pages 42 to 55 of paper book No.1 in which assessee has given names of ....

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.... entity transactions are not correct or fictitious and that is also clear even from the chart and figures given by the Ld.CIT(A) in his order in respect of the transactions between the assessee and intra group entities. Another aspect to be considered here is that assessee is a very old firm in the gold market but in the preceding two years span the turnover of the assessee has exceeded 11.5 times from 82.55 crores in A.Y. 2007-08 to 955.78 crores in A.Y. 2009- 10. The assessee has given the justification of the same. Fictitious transactions were shown for inflating the turnover of the assessee. The argument of the Ld. Counsel for the assessee is that it was done to facilitate to obtain the finance. It is pertinent to note here that assessee has filed the chart showing the loans availed by the assessee and other group concerns, which is placed at pages 711 to 714 of the paper book. The assessee was enjoying the CC limit of Rs. 5.56 crores. At the same time, the other group concerns/sister concerns were enjoying the CC limit of Rs. 52.81 crores. The assessee has also filed a letter dated 25-04-2008 of the SBI (page 712 of paper book) in which one of the group concerns M/s. R.L. Gold....

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....orked out the difference of Rs. 40.96/gm but the Ld.CIT(A) has worked out the difference at Rs. 55.60/gm. The Ld.CIT(A) has also observed that unlike section 40A(2)(b) of the I.T. Act, there is no provision even if there is a sale at lower price comparing with the prevailing market prices of the commodity or goods. In our opinion as far as the issue of ornaments is concerned, approach of both the authorities below adopting the average price formula is not correct. As far as the ornaments are concerned, the price may vary from design to design, from item to item, from purity of gold etc. In case of the ornaments normally the sales are made from the 916 tounch (22 karat). The ornaments may be of 18karat, 20 karat and 21 karat also. We cannot take the average price of the ornaments to the entire sale of the year as different factors are also involved as mentioned above which changes the price of the ornaments. Moreover, there may be variation in the labour charges also. Hence, we do not agree with the average price formula adopted by both the authorities below for making the addition of Rs. 12,01,63,323/- on alleged selling of the ornaments to the sister concerns at lower price than t....