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2024 (1) TMI 23

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..... the assessment procedure and has passed the assessment order u/s 143(3). The AO erred in not appreciating that issuance of credit note / debit note was a regular year end feature of the assessee to achieve such benchmarking of mark -up. Once such transaction is held to be at ALP, no further addition /attribution can be made to the assessee income. Hence, we hold that the AO cannot treat the amount of Rs. 94,00,610/- as an unaccounted sales Disallowance of Expenses - The argument of the assessee that the Ld. DRP has erred in not appreciating that the all the inward and outward entry in the SEZ Area must passed through the checking of another wing of Ministry of Revenue i.e., custom department and the SEZ authority cannot be accepted. Invoices pertaining to Modi Graphic, Bharat Safety House, Om Jyoti Engineering Enterprises, Inox Air Products Ltd. and Vikram Paints Sanitary Store have not been stamped proving their entry into the premises. Hence, the same cannot be considered as proven correctly. The disallowance on account of these expenses is hereby upheld. For other expenses, we find that they are very minor expenses, the AO erred in appreciating that nonreply of Section .....

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..... section 143 should be passed within 18 months from the end of the assessment year. Since this matter was not referred to the TPO in of section 92CA, therefore the extension of 12 months will not be available the revenue. Therefore, the assessment order under 143 should have been passed by 30.06 2022. However, the Ld. AO has passed the draft assessment on 30.06.2022 and not the assessment order under 143. The Madras High Court in the case of CIT. v. Roca Bathroom Products P. Ltd as reported in 445 ITR 537 has held that the limitation under section 153(1) is mandatory and includes the final assessment order passed under section 143(3) WS 144C (13). The period of limitation is qua the final assessment under section 143 and not the draft assessment order in terms of section 144C (1). 3. Because the impugned assessment order dated 21.06.2023 is perverse as the Ld. AO as well as the Ld. DRP, both didn't appreciate the evidence of the transaction of credit note issued by the assessee and corresponding adjustment made by the AE The allegation that the credit note was afterthought is baseless as the credit note was duly accounted in the sales for the purpose of benchmarking, .....

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..... t law. 8. Because the Ld. AO and subsequently Ld. DRP both, has erred in not appreciating that the all the inward and outward entry in the SEZ Area must passed through the checking of another wing of Ministry of Revenue Le, custom department and the SEZ authority. Almost all the invoices were entered in the customs gate and after that only it comes to the premises of the assessee. Not appreciating the above facts and relying on the irrelevant material without giving the opportunity to controvert makes the order perverse and devoid of Natural justice. 9. Because the Ld. AO has erred in not issuing the 133(6) notices to the customs and SEZ authorities to verify the entry of the material at the SEZ area rather than sued 133(6) notices to the small vendors, who were not familiar with the income tax proceedings and could not reply that notice. Because the Ld. AO erred in appreciating that non-reply of 133(6) notices cannot lead to disallowance of any expenses. The AO could have further probed it and notice could have been issued to customs department or the SEZ authority to have more retable evidence. 10. Because the Ld. AO and subsequently Ld. DRP both erred in not appre .....

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..... taxes in India. The actual sales of the assessee are Rs. 10,36,95,673/- and not Rs. 9,42,95,056/- as declared by the assessee in its return. Further, it is emphasized that the assessee has reported the correct figure of sales revenue i.e. Rs. 10,36,95,673/-in its GSTR-9 and has not reconciled any amount of credit/debit note while reporting the sales revenue in GSTR-9 which was filed on 26.02.2021 much later than the date on which the credit/debit note was issued i.e. 31.03.2020. Since the assessee has not reconciled the sales revenue as reported in GSTR-9, the assertions of the assessee are evidently false. The assessee has suppressed its sales revenue such as the fact that the issuance of credit/ debit note finds no mention in the notes-on account of the assessee. During the course of the assessment proceedings, the assessee had failed to provide the basic information such address, PAN etc. regarding seven of its sundry creditors. In this regard, the liability of Rs. 4,38,039/-was proposed to be disallowed. The assessee has failed to provide any information regarding the seven sundry creditors during the proceedings before the DRP. It shows that these creditors are bogus cre .....

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..... 10,26,90,930 10,26,90,930 2016-17 10,15,89,776 74,47,605 10,90,37,381 10,90,37,381 2018-19 9,78,41,160 1,16,47,255 8,61,93,905 8,61,93,905 2019-20 10,08,77,863 1,53,78,981 8,54,98,882 8,54,98,882 2020-21 10,36,95,673 94,00,617 9,42,95,056 9,42,95,056 2020-21 8,38,27,355 54,24,110 8,92,51,465 8,92,51,465 It was submitted that the TP Study report was always on cost plus 15% benchmarking and it has always been regularly assessed under section 143(3) by the department. Before the ld. DRP, the assessee has submitted through its TP Study Report where in it has been characterized .....

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..... is no dispute on this part nothing further can be attributed on the AE. The Supreme Court Has propounded this principle in the case of in the case of Morgan Stanley as reported in the 210 CTR 419 (SC). Therefore once the transaction is at Arm Length between the assessee and the AE and there is no dispute on that part, the credit note which has been issued to achieve such benchmark only and not be rejected on the basis mere clerical error or not matching with any other law which is not consistent with the TP provisions. 9. Disallowance of Purchase amounting to Rs. 4,38,039/- on the allegation that such a purchase is a bogus purchase. The AO has alleged that the purchase to the tune of 4,38,039/- is bogus purchase and the list of such purchase are as under: S.No. Vendor Name Amount Remarks 1 HK International 13,542/- Supplier of glass accessories 2 Rajveer Singh 37,792/- Supplier of Glass. 3 Manvi F .....

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..... INOX Air Products Ltd. AAACI5569D 7,23,087/- 360-371 10. Goel Craft House ACEPG1902H 50,000/- 372 11. Sam Engineers ABOFS4319R 9,670/- 373-375 12. N.K old Dhoti Suppliers AMLPN5191N 8,400/- 376-378 13. R.K. Handi Craft AGQPK7315Q 29,736/- 379-380 14. Sanjay Trading Co. AECPG1178B 52,000/- 381-382 15. Studio Prints AKXPR8535Q 17,333/- 383-386 16. Vikram Paints Sanitary Stores AVAPS1375D 73,000/ 387-389 17. V .....

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..... he credit note and debit note are been inserted by the assessee for account reconciliation which is not backed by actual transaction. Some of the argument to justify the credit notes being put forward by the assessee was on account of pricing difference with the parities. In fact with the issue of credit note the assessee sale figure of Rs. 9,42,950,56/- in the IT return is not reconciling with the correspondence figure of sales of amount Rs. 10,36,95,673/-disclosed by the assessee in the GSTR-9. Therefore, there is suppression of sale 94,00,617/-, for which no plausible exclamation has not been provided by the assessee. 14. On the issue of bogus creditor of Rs. 17,70,610/- disallowed by the AO, ld. DRP held that it is seen that the expenses were not backed proper documentations and are mostly supported only through self-made vouchers. The AO has also found out during investigation that the suppliers were non-existent in the addresses furnished by the assessee as notices issued to them came back unserved or returned. The assessee's argument that goods supplied, is marked by SEZ/Custom stamp on the invoices and therefore, have actually been purchased also falls flat as on m .....

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..... redit notes and debit notes has been already taken note and mentioned in the table in the preceding paragraph and repeated here. AY Sales as per Export Invoice Debit Note Credit Note Sales Turnover as book Corresponding Sales reported in ITR 2015-16 8,40,98,173 18,59,2757 10,26,90,930 10,26,90,930 2016-17 10,15,89,776 74,47,605 10,90,37,381 10,90,37,381 2018-19 9,78,41,160 1,16,47,255 8,61,93,905 8,61,93,905 2019-20 10,08,77,863 1,53,78,981 8,54,98,882 8,54,98,882 2020-21 10,36,95,673 94,00,617 9,42,95,056 9,42,95 .....

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