IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `D' NEW DELHI
BEFORE SMT DIVA SINGH, JUDICIAL MEMBER
AND
SH. INTURI RAMA RAO, ACCOUNTANT MEMBER
I.T.A .No.-957/Del/2005
(ASSESSMENT YEAR-2000-01)
ACIT, vs M/s Blue Precision Ltd.,
Range-II, Faridabad. Plot No.-111, Sector-59,
Faridabad
APPELLANT) (RESPONDENT)
CO-26/Del/2007
(In I.T.A .No.-957/Del/2005)
(ASSESSMENT YEAR-2000-01)
M/s Blue Precision Ltd., vs ACIT,
Plot No.-111, Sector-59, Range-II, Faridabad
Faridabad
(APPELLANT) (RESPONDENT)
Appellant by Sh.Gaurav Dudeja, Sr.DR
Respondent by None
Date of Hearing 29.04.2015
Date of Pronouncement 13
.05.2015
ORDER
PER DIVA SINGH, JM
The present appeal is listed before us as a result of order dated
03.08.2012 in MA.No.-580/Del/2009 by which order dated 06.09.2007 in ITA
no.957/Del/2005 in the first round was recalled by the Co-ordinate Bench.
2. By the present appeal filed by the Revenue the correctness of the order
dated 29.12.2007 of CIT(A)-Faridabad in 2000-01 has been assailed on the
following grounds:-
"On the facts and circumstances of the case, whether the Commissioner
of Income Tax(Appeals) was right in law:-
1. In deleting the addition of Rs.19,24,207/- on account of unexplained
low gross profit rate.
That the appellant craves for the permission to add, delete or amend the
grounds of appeal before or at the time of hearing of appeal."
I.T.A .No.-957/Del/2005 &
CO-26/Del/2007
3. The Co-ordinate Bench as observed vide its order dated 06.09.2007 had
dismissed the appeal of the Revenue against the said order. The department
thereafter had filed an MA No.-580/Del/2009 on the following grounds before
the Co-ordinate Bench on 09.01.2009:-
"That there is prima facie mistake in the order of ITAT as the assessing
officer has considered the issue of purchases made from its sister
concern to the tune of Rs.16458685/- [Rs.1,47,74,255/- from M/s blue
Stamping & Forgings Ltd.+Rs.1684430/- from M/s Blue Forgings (P.)
Ltd.] which assessee failed to justify the market rate vis-à-vis purchase
price paid to sister concern by the assessee and this was the one of the
main reasons for fall in G.P. The ITAT has not discussed or opined on
this issue.
In view of above, as the ITAT has not answered all the issue before it.
It is, therefore, respectfully prayed that the Tribunal decide the issue
referred to above and/or any other issue as the Tribunal may deem fit
on the facts and in the circumstances of the case and decide the case in
favour of the appellant and accordingly the M.A. be allowed."
3.1. Convinced with the plea taken, the MA filed by the department was
allowed by the Co-ordinate Bench holding that there was a mistake in the
aforesaid order of the Tribunal in as much as it did not consider this
contention of the Revenue based on the findings in the assessment order that
assessee failed to justify the market rate vis-à-vis the purchase price paid to
sister concern and this was one of the main reasons for fall in GP. The Co-
ordinate Bench on a perusal of the order under challenge accepted that this
fact has not been considered by the Co-ordinate Bench before arriving at a
conclusion. Considering this to be a mistake of fact the order under challenge
was recalled.
4. On the date of hearing, no one was present on behalf of the assessee.
On a perusal of the order passed by the Co-ordinate Bench in the
Miscellaneous Application and the order passed by the ITAT in the first round,
the assessee was represented by Sh.R.A.Gupta, FCA. Thus the recall of the
order is known to the assessee as the same counsel represented in the M.A.
also. However, in the present proceedings pursuant to the order in MA, the
assessee remained unrepresented. The record shows that notice for the specific
date of hearing has been issued to the assessee on 03.03.2015 for both the
assessee's appeal as well as the CO filed by the assessee. Despite this, no one
was present of behalf of the assessee. The record further shows that even on
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I.T.A .No.-957/Del/2005 &
CO-26/Del/2007
earlier occasion i.e. in response to notice dated 09.12.2014 intimating the date
of hearing on 05.02.2015, the assessee remained unrepresented. Accordingly
considering the material available on record, the appeal of the Revenue is being
decided after hearing the Sr. DR, Mr. Gaurav Dudeja who pointing to the
specific finding of the AO in page 2 & 3 of the assessment order submitted that
the assessee had failed to justify the purchase price paid to the sister concern
Blue Stamping and Forging Ltd on account of which the GP of the assessee
had fallen. For ready-reference, we reproduce the relevant portion from the
assessment order:-
"................The assessee company has no other explanation to offer for
the steep fall in g.p. The assessee company was also requested to
justify the purchase price paid to sister concerns as under:-
(i) Blue Stamping and Forging Ltd. : Rs.1,47,74,255/-
(ii) Blue Forging Pvt. LTd. : Rs.16,84,430/-
The above mentioned two companies are persons referred to in Section
40A(2B). As mentioned above huge purchases have been made from
sister concerns, the assessee company was requested to justify the
market rate vis-à-vis purchase price paid to the two sister concerns.
The assessee company in reply to this query has simply filed copies of
purchase orders issued by the assessee for purchases from both the
above mentioned companies.
In sub-section (2) of Section 40A, expenditure incurred in a business or
profession for which payment has been or is to be made in the tax
payers relative or associate concern is required to be disallowed in
computing its profit of the business or profession to the extent the
expenditure is considered to be excessive or unreasonable. The
reasonableness of any expenditure is to be judged having regard to the
fair market value of the goods, services or facilities for which the
payment is made or the legitimate needs of the business or profession
or the benefit derived by, or according to the tax payers from the
expenditure. Such portion of the expenditure which is excessive or
unreasonable according to these criterias is to be disallowed in
computing the profit of the business or profession. Reliance is placed on
CIT vs Sky Line Inds. Pvt. Ltd. 154 ITR 373 and Ganesh Soap works
Vs. CIT 161 ITR 876 and Kumar Engineers vs CIT 223 ITR 18.
However, no separate addition is made on the account of purchases
from sister concerns as the payment above fair market value has also
contributed to the fall in gross profit and addition is being done on that
account.
In view of the above document and discussion, it is held that the
assessee company has not satisfactorily explained the steep fall in g.p.
rate. After giving credit to the explanation of the assessee, the
difference on account f fall in gross profit during the year, which
amounts to Rs.19,24,207, is therefore added to the income of the
assessee company from business."
3
I.T.A .No.-957/Del/2005 &
CO-26/Del/2007
5. Referring to the order of the CIT(A) which finding has been upheld by the
ITAT which has been recalled it was pointed out that the impugned order does
not make reference to those facts at all accordingly the finding arrived at not
considering the relevant facts as per the precedent laid down by the ITAT in the
Revenue's MA the same infirmity on facts is glaring in the impugned order
also. Accordingly it was his prayer that since the issue stands concluded
wherein this fact has not been considered in the impugned order which was
initially accepted by the ITAT thereafter reversed the only course of action is
that the issue may be restored to the file of the CIT(A) who may be directed to
consider the specific findings of the AO and call a Remand Report if need
from the AO before deciding the issue.
6. We have heard the submissions and perused the material available on
record. Taking into consideration the order of the Co-ordinate Bench passed
while deciding the appeal and thereafter the MA of the Revenue on a
consideration thereof we find that the findings arrived at by the CIT(A) in para
3.3 of the impugned order suffers from the defect that it does not make
reference to the findings in the assessment order, the issue has not been
addressed. For ready-reference we reproduce the finding under challenge:-
3.3. "The issue has been examined and the addition made by the AO
is deleted in as much as the same has been made without any material
or evidence on record. The appellant has with the aid of facts and
figures given an adequate and reasonable explanation for the fall in
gross profit both regarding the job work charges as also on account of
sales turn over. On the other hand the AO has simply pointed out to the
purchases being made from sister concerns which in-isolation cannot
become any ground for enhancing the profit of the appellant company.
The addition made by the AO is deleted."
7. Accordingly considering the judicial precedent laid down by the ITAT in
assessee's own case wherein the M.A. filed by the Revenue stands allowed on
similarity of facts, we find that the impugned order deserves to be set aside.
Ordered accordingly. The issue is restored back to the file of the CIT(A) with
the direction to decide the issue again after considering the relevant points
brought out by the AO in his order. Needless to say that the assessee shall be
afforded a reasonable opportunity of being heard. In the result the Revenue's
appeal is allowed for statistical purposes.
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I.T.A .No.-957/Del/2005 &
CO-26/Del/2007
8. A perusal of the consolidated order dated 06.09.2007 by which the
appeal of the Revenue and the CO of the assessee were decided it is seen that
the CO of the assessee was allowed and the MA was filed by the department
only qua its appeal. We find that the CO has wrongly been listed by the
Registry in the cause list and shown as pending as the order dated 06.09.2007
was concluded in assessee's favour vide para 3, relying upon the order of the
Tribunal in asessee's own case for earlier assessment year dated 29.12.2006 in
ITA No.-4759 & 4560/Del/2004. In the result the appeal of the Revenue is
allowed for statistical purposes and the CO filed by the assessee wrongly
included in the cause list as a pending appeal in terms of the afore-mentioned
order of the Tribunal stands allowed as orignilly concluded.
9. In the result the appeal of the Revenue is allowed for statistical purposes
and CO of the assessee is also allowed.
The order is pronounced in the open court on 13th of May 2015.
Sd/- Sd/-
(INTURI RAMA RAO) (DIVA SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 13/05/2015
*Amit Kumar*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
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I.T.A .No.-957/Del/2005 &
CO-26/Del/2007
Date
1. Draft dictated on 30.04.2015 PS
2. Draft placed before author 05.05.2015 PS
3. Draft proposed & placed before JM/AM
the second member
4. Draft discussed/approved by JM/AM
Second Member.
5. Approved Draft comes to the .05.2015 PS/PS
Sr.PS/PS
6. Kept for pronouncement on PS
7. File sent to the Bench Clerk .05.2015 PS
8. Date on which file goes to the AR
9. Date on which file goes to the
Head Clerk.
10. Date of dispatch of Order.
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