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TMI Blog2015 (11) TMI 1849X X X X Extracts X X X X X X X X Extracts X X X X ..... 1)(iii) - interest on the advances made to the sister concern - HELD THAT:- As in assessee s own case for assessment year 2006-07 we see that the additions in that year were also made on account of proportionate interest on the advances made to the sister concern M/s Gauri Shanker Co., Chandigarh and transactions with some other parties to whom sales were made. Since in this year also the transaction has been made with M/s Gauri Shanker Co., Chandigarh and the facts have not been distinguished by any of the lower authorities and even before us, the learned D.R. could not controvert the findings given by the learned CIT (Appeals). With regard to M/s Khandelia Udyog Pvt. Ltd., in the Paper Book filed by the assessee detailed ledger account of the said party has been filed and on perusal of which, we find that the regular sales and purchases are being made from this party through out the year.The ground of appeal raised by the Revenue is dismissed. Addition on account of suppression of sales - assessee has made substantial portion of the sales i.e. 38.42% to its sister concerns, which were at a very low rate as compared to the sales made to independent parties - HELD THAT:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplained to us during the course of hearing in great detail. We do not find any irregularity in the same. In view of this, the addition made by the Assessing Officer is hereby deleted Disallowance on account of commission expenses - HELD THAT:- Disallowance on account of commission paid to Shri Anil Rastogi on the basis that his address is in Delhi, while the assessee has not made any sale in Delhi is not correct. It may be that the address is of Delhi, but Shri Anil Rastogi must be operating in West Bengal also. This issue has not been dealt with by the lower authorities in right perspective. Further, the confirmations filed by the assessee before the learned CIT (Appeals) were not admitted. In the interest of justice, we restore the issue back to the file of the learned CIT (Appeals) to consider afresh. The assessee is at liberty to produce evidence and material to defend its case. It may be given proper opportunity of being heard. - ITA No. 775/Chd/2012, ITA No. 778/Chd/2012 - - - Dated:- 6-11-2015 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. RANO JAIN, ACCOUNTANT MEMBER For the Assessee : Shri Anil Khanna For the Department : Shri Manjit Singh, DR ORDE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. The learned D.R. while arguing before us relied upon the order of the Assessing Officer. The learned counsel for the assessee relied upon para 3.2 of the order of the learned CIT (Appeals) and further drew our attention to page 32 of the Paper Book filed by him to emphasize the fact that the rate of interest charged by the Market Committee was 18%. In view of this, it was prayed that the rate of interest charged by the assessee at 15% may be held to be reasonable. 7. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. Section 40A(2)(b) of the Act is meant to cover cases where interest paid to the related parties as defined in this section is in excess of the interest paid to unrelated parties. The undisputed fact is that the assessee has paid 15% interest on unsecured loan to persons covered under section 40A(2)(b) of the Act. This is also undisputed that the rate of bank loans are at around 10.5% but this is also a fact that the loans from banks are taken against the charge on the property and there are other opportunity costs involved in raising the loans from the banks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer. 11. The learned D.R. relied upon the order of the Assessing Officer, while the learned counsel for the assessee relied upon the order of the learned CIT (Appeals) and also of the I.T.A.T., Chandigarh Bench in assessee s own case for assessment year 2006-07 (supra). 12. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. From the perusal of the order of the I.T.A.T., Chandigarh Bench in assessee s own case for assessment year 2006-07 (supra), we see that the additions in that year were also made on account of proportionate interest on the advances made to the sister concern M/s Gauri Shanker Co., Chandigarh and transactions with some other parties to whom sales were made. Since in this year also the transaction has been made with M/s Gauri Shanker Co., Chandigarh and the facts have not been distinguished by any of the lower authorities and even before us, the learned D.R. could not controvert the findings given by the learned CIT (Appeals). With regard to M/s Khandelia Udyog Pvt. Ltd., in the Paper Book filed by the assessee detailed ledger account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that booking of freight expenses has no relation with the rate of product as the edible oil being volatile item the rate varies on the basis of demand and supply and rates of the product of the competition in the market at that time at a particular location. Agreeing with the said submission, the learned CIT (Appeals) deleted the addition made by the Assessing Officer. 16. Aggrieved by the same, the Revenue has come in appeal before us. 17. The learned D.R. relied upon the order of the Assessing Officer, while the learned counsel for the assessee relied upon the order of the learned CIT (Appeals). 18. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. The learned CIT (Appeals) has given a detailed finding with regard to this issue which reads as under : 5.3 I have considered the submission of the Ld. Counsel for the appellant and have gone through the detailed calculation made by the Assessing Officer. The basic point is that an assessee cannot be expected, much less be compelled, to make profit in every transaction of sale he makes. However, if the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even be viewed as a scheme for tax reduction. In view of this discussion, it is held that the Assessing Officer was not justified in making addition of ₹ 3,09,55,904/- on account of sales made to associated concerns at lower rate and the same is deleted. Ground of appeal No. 4 is allowed. 19. We do not find any infirmity in the order of the learned CIT (Appeals) in this regard. Before us, at Paper Book page 124 a chart explaining in detail the reasons for variation was filed. In fact, the Assessing Officer has tried to bring the provision of domestic Transfer Pricing in this case, where the internal comparables are used. We must mention that the said provisions are not applicable in the year under consideration. We see from the perusal of the detailed reasoning given by the assessee for the difference in rates, that there is no suppression of sales by the assessee. This ground of Revenue is dismissed. 20. The ground Nos.4 and 5 raised by the Revenue are general in nature, hence need no adjudication. 21. The result of the Revenue is dismissed. ITA No.578/Chd/201 : 22. The grounds of appeal raised by the assessee read as under : 1. As per the facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that cash flow from the operation of the assessee were to the tune of ₹ 4,74,33,029/- while the purchase of investments were amounting to ₹ 66,61,556/-. This was shown to us to emphasize the fact that no interest bearing funds were utilized for the purposes of investments. In this view, it was prayed that the interest part disallowed by the Assessing Officer under Rule 8D may be deleted. On the expenses part of the disallowance, it was submitted that all along the contention of the assessee before the lower authorities was that it had incurred expenses amounting to ₹ 24,288/- for earning exempt income and without recording his satisfaction on how the estimation so made by the assessee was wrong, the Assessing Officer straightaway made computation as per Rule 8D. Reliance was placed on the judgment of Hon'ble Jurisdictional High Court in the case of CIT Vs. Deepak Mittal. 36CCH 51 (2013) (P H). 26. The learned D.R. relied upon the order of the lower authorities. His submission was that it is a case of mixed funds being used, therefore, it cannot be said that interest bearing funds were not used for the purposes of investments. Rule 8D is applicable during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undervaluation of stock 30. The brief facts of the case are that the Assessing Officer during the assessment proceedings noticed that the assessee was valuing raw material and packing material at cost and the finished goods at estimated cost or net realizable value, whichever was lower. He also found that the assessee was not following any systematic method for valuation of closing stock, which should have been as per the FIFO method. He also noticed that a large number of expenses like, packaging, freight, faxes, etc. have not been loaded to the closing stock. After examining the sample of purchase and sale bills, the Assessing Officer concluded that there is an average undervaluation of stock @ 11.76% and this way, he made an addition of ₹ 61,53,868/-. 31. Before the learned CIT (Appeals), the assessee made detailed submissions and tried to find out the fallacy in the method adopted by the Assessing Officer to calculate the undervaluation of stock. The contention of the assessee was that the Assessing Officer had on the basis of arbitrary and illogical assumptions had calculated valuation of stock while the assessee has been adopting the same method consistently over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and considered the material available on record. First of all, the premises upon which the issue was initiated by the Assessing Officer, that the assessee should follow FIFO system of accounting for valuing closing stock itself is not correct. Nowhere in the Income Tax any such method is prescribed. Only requirement is to adopt a generally accepted accounting policy on a consistent basis. The assessee has been following the practice of stock valuation consistently, which has been accepted by the department in earlier years also. We also observe a contradiction in the stand of the Assessing Officer. He himself mandates to follow the FIFO method. However, he himself takes an average of the last few bills for valuing the stock of raw material. Further, he takes the bill of oil dated 6.3.2008 and not of 31.3.2008. We have perused the details filed by the assessee, whereby it is seen that all relevant expenses have been considered for valuing stock. Therefore, the observation of the Assessing Officer that expenses have not been loaded is also not correct. Further, the difference worked out in respect of oil, has been applied to all categories of stock i.e. oil cakes, de-oiled cakes, st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e directed to admit the additional evidences. While learned D.R. opposed the said stance of the learned counsel for the assessee. 40. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. We observe from the order of the lower authorities that the disallowance on account of commission paid to Shri Anil Rastogi on the basis that his address is in Delhi, while the assessee has not made any sale in Delhi is not correct. It may be that the address is of Delhi, but Shri Anil Rastogi must be operating in West Bengal also. This issue has not been dealt with by the lower authorities in right perspective. Further, the confirmations filed by the assessee before the learned CIT (Appeals) were not admitted. In the interest of justice, we restore the issue back to the file of the learned CIT (Appeals) to consider afresh. The assessee is at liberty to produce evidence and material to defend its case. It may be given proper opportunity of being heard. 41. The appeal of the assessee is partly allowed. 42. In the result, the appeal of the Revenue in ITA No.775/Chd/2012 is dismissed and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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