TMI Blog2013 (9) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... o come to a conclusion that the books of account of the assessee are not complete and correct. There is no evidence brought on record that over and above the price shown in the books of account, the assessee received something more from M/s. Pragathi Automation P. Ltd. As rightly contended on behalf of the assessee it is for the businessman to decide the price at which he has to sell its products to its customers. The law is well-settled that the Revenue cannot insist on the way in which businessmen should conduct his business. The Revenue cannot compel a businessman to sell its products at a particular price, so that the assessee derives maximum profit. There is one allegation by the Assessing Officer in the order of assessment (point j) that the sale of raw materials, blackening sales and labour charges sales not tallying with the books and details furnished by the assessee before the Assessing Officer in the course of assessment proceedings. This is a very vague allegation. The Assessing Officer has ultimately concluded that there is no clarity in figures submitted by the assessee and the books of account - The Commissioner of Income-tax (Appeals) found that M/s. Pragathi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee, at a price which was much less than the price at which similar products were sold by the assessee to the third parties. The assessee submitted before the Assessing Officer that the assesseecompany was promoted by ex-employees of M/s. Pragathi Automation P. Ltd. and they hold shares to the extent of 50 percent The assessee further submitted that since the major customer of the assessee was M/s. Pragathi Automation P. Ltd. they have to sell to them at a lower price. The assessee further submitted that as a businessman, the assessee is free to decide the price at which the products were to be sold to a particular customer. The assessee also submitted that it cannot be presumed that the price at which the assessee sells products to outsider is a standard price and that products which were sold to sister-concerns at a price less than the price at which the products were sold to outsider is done with an intention to suppress income. The assessee also gave detailed calculation of costs and demonstrated before the Assessing Officer that the price charged to M/s. Pragathi Automation P. Ltd. was also profitable to the assessee. The Assessing Officer was of the view that he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Profit 6,21,269 Percentage 8.9% Average profit percentage 19.4% Thereafter, the Assessing Officer has drawn the following conclusion : "From the elaborate discussion above, the following issues become obvious ; (a) The assessee-company is the sister-concern of M/s. Pragathi Automation P. Ltd., (b) The assessee-company sells more than half its produce to M/s. Pragati and sometimes it sells at price lesser than the cost itself. For example, profit of BTH/ATH range of products, when sold to others is 28 percent whereas when sold to M/s. Pragati is 1.1 percent In some items, there is loss also as per the work sheets provided. All the tables, cost work sheets are part of the assessment record. (c) M/s. Pragati Automation P. Ltd., has disclosed profit of 12.5 percent (d) When this anomaly was enquired into the assessee vide letter dated September 25, 2009 sought to question the authority of the sister-concern to determine the actual business profits. Further, with regard to price differential to M/s. Pragati and others, the assessee sought to state that as the orders from M/s. Pragati are always higher than by others, the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09, the accountant submitted details of total sales of Rs. 3,85,63,300 vide letter dated November 11, 2009, the assessee has arrived at sales including labour charges at Rs. 5,96,48,000. Thus, no there is no clarity in the figures submitted by the assessee and the books of account. (k) Despite sufficient opportunities, the assessee has in writing, expressed its inability to give accurate statements as to cost and profitability. It only means that books of account of the company do not reflect the true income of the assessee and caste a shadow of doubt on correctness and completeness of the accounts of the assessee. (l) Though the assessee has furnished workings on October 20, 2009 and revised working on November 11, 2009, it states that nothing therein is indicative or has any bearing on the final taxable income. In that case, what is indicative of the final taxable income? The assessee has not clarified/answered the questions raised by this office, instead, it is doubting its statements filed before this office. (m) Vide letter dated November 11, 2009, the assessee requested for a questionnaire in writing. As per the assessee's request on November 13, 2009, a questionnaire, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mind inasmuch as it was based on mere suspicion and a pre-conceived notion that the transactions between the parties were entered into in such a way as to divert the profits of the appellant to Pragati, without bringing on record any evidence for the same. (d) Notwithstanding the above, there was nothing to be gained by diverting he profits of the appellant to another company, since both are resident tax paying companies which were not claiming any taxfree or exempt incomes. Under these conditions, profits in the hands of either company would be tax neutral." The Commissioner of Income-tax (Appeals) after considering the submissions of the assessee held as follows : "5. I have considered these submissions carefully and also perused the evidences and other documents filed. From the comparative table filed by the appellant, it is clear that the orders placed by Pragati in respect of majority of the products is substantially more than the quantity purchased by all other customers put together and have been given a higher trade discount on the list price as compared to others. As regards other customers too, I find that the appellant has allowed different rates of discount to dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the net profit ratio is unwarranted and accordingly, the addition made on this account is deleted." Aggrieved by the order of the Commissioner of Income-tax (Appeals), the Revenue has preferred the present appeal before the Tribunal. We have heard the submissions of the learned Departmental representative, who reiterated the stand of the Revenue as reflected in the order of the Assessing Officer. Learned counsel for the assessee reiterated the submissions as were made before the Commissioner of Income-tax (Appeals). Reliance was also placed on the decision of the hon'ble Supreme Court in the case of CIT v. Glaxo Smithkline Asia P. Ltd. [2010] 236 CTR 113 (SC). The hon'ble Supreme Court in the aforesaid decision expressed the view even in the case of domestic transaction between the related persons it was necessary to examine whether there was any motive to shift the profit making concern to a loss making concern. It was submitted that in the present case there was no motive to shift profits. It was also submitted that ultimately the exercise sought to be done by the Revenue will be revenue neutral in the sense that the profits of M/s. Pragathi Automation P. Ltd. should be r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and the books of account. This allegation on which the learned Departmental representative placed reliance, in our view, could not be sufficient to reject the book results. We agree with the conclusion of the Commissioner of Income-tax (Appeals) that the Assessing Officer has proceeded on the assumption that something is amiss, only because the assessee had offered its products to its different customers at different rates. The Commissioner of Income-tax (Appeals) found that M/s. Pragathi Automation P. Ltd. was not claiming any tax exemption which necessitates the assessee shifting profits to M/s. Pragathi Automation P. Ltd. In the circumstances, when there is no evidence regarding incompleteness and incorrectness of books of account or facts sufficient to come to a conclusion that the assessee has attempted to defraud the Revenue, we are of the view that the conclusion drawn by the Commissioner of Income-tax (Appeals) are correct and do not call for any interference. Consequently, the appeal filed by the Revenue is dismissed. In the result, the appeal filed by the Revenue is dismissed. The order pronounced in the open court on the September 28, 2012. - - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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