TMI Blog2018 (8) TMI 841X X X X Extracts X X X X X X X X Extracts X X X X ..... . Sunil Pathak Revenue by : Dr. Vivek Aggarwal ORDER Per Vikas Awasthy, JM : This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-2, Nashik dated 09-08-2016 for the assessment year 2010-11. 2. The Revenue in appeal has assailed the findings of Commissioner of Income Tax (Appeals) on the following grounds : 1. On facts and in circumstances of Law, the Ld. CIT(A) has erred in deleting the disallowance made u/s 40A(2)(a) of the Income Tax Act, 1961 and thus also failed in appreciating the fact thereto that disallowance u/s 40A(2)(a) was made by the then AO's after considering the facts of the case and quoting the substantial reasons for adopting the rate of 'Bombay Bullion Association . 2. On the facts and circumstances of the case and in law, the order of the Ld. CIT(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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee to the sister concerns for the purchase of ornaments. 5. Dr. Vivek Aggarwal representing the Department fairly admitted that the issue raised by the Department in appeal is identical to the one adjudicated by the Tribunal in the case of assessee s sister concerns. 6. We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. The primary issue in the appeal by Revenue is against deleting of disallowance u/s. 40A(2)(a). The Assessing Officer made disallowance u/s. 40A(2)(a) on account of alleged excessive payments made by the assessee to its sister concerns for purchase of gold ornaments. The additions were made by the Assessing Officer by applying Bombay Bullion Association rates as against Jalgaon rates adopted by the assessee. We find that similar additions / disallowances 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 Lakhich ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tanding the trading in the bullion and fluctuations in the market in the prices and worked out the average rate by comparing the same transaction on same dates and accordingly worked out the alleged difference. In our opinion, the approach of the AO is totally erroneous as he has totally discarded the trading in the bullion that takes place. He has also not considered the statement of the assessee that there are variations and fluctuations in the bullion market and even in the intra day transactions rate can be changed and sometimes rates may be stable and rates may swing like a wind. 8.28 When the matter reached before the Ld.CIT(A) though he did not agree with the approach of the AO but he also made the same mistake. He has again gone on the average method adopted by the AO. In this case it is also considered by the assessee that many of the intra 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er there is a lesser price paid that is also to be considered and not the excess price only. In our opinion, the average price method adopted by both the authorities is totally erroneous considering the market conditions of the bullion. 8.29 xxxxxxxxxx 8.30 xxxxxxxxxx 8.31 xxxxxxxxxx 8.32 We also find that again while making the addition in respect of sale of ornaments to the group concerns/sister concerns, both the authorities below have adopted the comparison formula based on the sale of ornaments to the unrelated parties and sale of ornaments to the related parties. It is stated that if the average price is taken then the assessee has charged ₹ 10,350/10 gms on the sale to the sister concerns as against the average price of ₹ 13,906/10 gms charged to the third parties/unrelated parties on the sale of gold ornaments. The AO has worked out the difference of ₹ 40.96/gm but the Ld.CIT(A) has worked out the difference at ₹ 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 goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see are partly allowed and the grounds of appeal No. 1 and 2 by the Revenue are dismissed. 7. It is an admitted fact that there is no change in the facts and the nature of transactions are identical. We further observe that similar disallowances were made in the case of other sister concerns of the assessee viz. Rajmal Lakhichand Jewellers Pvt. Ltd. and R.L. Gold Pvt. Ltd. The matter travelled up to the Tribunal and the Tribunal in the cases of Rajmal Lakhichand Jewellers Pvt. Ltd. Vs. Jt. Commissioner of Income Tax (supra) and R.L. Gold Pvt. Ltd. Vs. Dy. Commissioner of Income Tax (supra) has deleted the disallowances u/s. 40A(2) of the Act. 8. We further observe that the Assessing Officer in the remand report has accepted that after applying local rates, the assessee has not made any excessive payments to the sister concerns for the purchase of ornaments. The local rates as published in the local Newspapers have been compared with the rates applied by the assessee and on verification it is found to be in order. Thus, the Assessing Officer accepted that no excessive payments were made by the assessee to its sister concerns. Under such circumstances disallowance u/s. 40A(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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