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TMI Blog2011 (1) TMI 941X X X X Extracts X X X X X X X X Extracts X X X X ..... of the stock transfer which is being essentially questioned by the Revenue. However, it disputes the business decision of re-organization of the operations within the group companies, of which the stock transfer is an integral part, on the basis of peculiar, undisputed circumstances, without any valid/cogent basis - The finding of suppression of income can only be validated on the basis of strong circumstantial evidence/s. There is no case of any tax avoidance, as (say) on account of differential rate of tax or there being losses in one firm which could be adjusted through the transfer of profits, or the transferee concern being exigible to a lower rate of tax, etc. In fact, there is no charge of tax avoidance in any manner. There is no basis to support a finding of accrual/earning of profit and, consequently, no case for suppression of income obtains so that we have no hesitation in reversing the findings of the ld. CIT(A) in the matter. In favour of assessee. - 39 AND 95 (COCH.) OF 2009 - - - Dated:- 18-1-2011 - N. VIJAYAKUMARAN, SANJAY ARORA, JJ. J. Krishnan for the Appellant. T.J. Vincent for the Respondent. ORDER Sanjay Arora, Accountant Member. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d non-accounting for the stock costing Rs. 21.48 lakhs. There had been, thus, a suppression of income inasmuch as the stock for the value of the difference Rs. 21.48 lakhs was not accounted stock. Further, the entire admitted stock transfer of Rs. 82.47 lakhs was effected at book value, while the same ought to have been at the market rate. The assessee's gross (trading) profit for the immediately preceding year and the current year as per its audited accounts is at the rate of 28 per cent and 20 per cent respectively. He, accordingly, applied a rate of 20 per cent on the value of the stock transfer, estimating the suppressed trading profit at Rs. 16,49,364, and assessed the assessee's income at Rs. 44,82,540 as against the returned income of Rs. 6,84,860 vide order dated 27-9-2007. 2.2 In appeal, the assessee was able to explain, with reference to its accounts, that the stock of raw materials and stores aggregating to Rs. 21,48,317 stood recorded in its accounts for the year ending 31-3-2002, duly shown under the head 'current assets' in its balance sheet as on 31-3-2002. Not routing the same through the P L account would not imply that the said stock was unaccounted. Accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The ld. DR would submit that the objection by the administration was qua the location of the assessee's production facility, which could at best justify discontinuance thereof, and not of the trading activity, for which no objection had been raised. In fact, the assessee had itself undertaken trading activity, reporting a trading profit at Rs. 3.33 lakhs, which stood also noted by the ld. CIT(A) vide para 13 of his order. 4. We have heard the parties, and perused the material on record. 4.1 At the very outset, we observe that the addition for Rs. 82.47 lakhs (as well as for Rs. 16.49 lakhs) has been made by the Assessing Officer on protective basis; he having brought the entire value of the stock transferred to tax in the assessment of the holding company for the current year - the year of transfer. The same stood deleted in appeal by the tribunal on finding that the entire stock stood duly accounted for in the books of the transferee-company. No finding qua the assessee, the transferor-company, however, stood rendered, the case in respect of which was to be decided on its own merits (para 3.8 of the order, copy on record, in ITA No. 319 CO 20/Coch/2007 dated 21-11-2008). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k in hand, which is what the argument by the ld. DR amounts to, we find as not valid both in law and on facts. The assessee is a manufacturer and not a trader, and the manufacturing facilities stand licensed out as these could not be carried out by it at its existing premises. Does the revenue imply that the goods being now produced by the holding company should be sold to the assessee, which in turn would supply the same to the overseas buyers? The revenue's case could only be for suppression of profit/income, and toward which we find that no case is made out. The discontinuance is essentially a matter of business decision over which the revenue cannot sit or judge, i.e., where bona fide, as in the instant case. Likewise, the revenue cannot dictate the price for which the assessee ought to have sold or transferred its goods, which is rather a part of the same decision. The goods have no ready market in India, as confirmed by the ld. AR on an enquiry by the Bench. What, if the holding company/sister concern had not come to the rescue, and refused to accept the goods or undertake the production operations? It is not the case that the holding company has not shown due profit to the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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