Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2021 (2) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (2) TMI 454 - AT - Income TaxAddition u/s 40A(2)(b) - purchases made by the assessee from related party - at arms length or Fair Market Value (FMV) and making adjustment thereto - HELD THAT:- Sale price of the impugned transaction in the hands of the related party is undoubtedly established to be at fair market value and consequently so the purchases in the hands of the assessee. The assessee we find has sufficiently established the reasonableness of the purchases made from sister concern. Reasoning of the Ld. CIT(A) holding the purchases to be inflated, we find, is based on surrounding circumstances and there is no direct evidence establishing the unreasonableness of the purchases. The entire case of the Revenue is that the assessee was unable to justify fall in gross profits during the year and that its explanation of having procured an order from the government which it outsourced to its related party for manufacturing the product, the assessee itself acting as a trader alone, resulting in larger share of the profit in the transaction being given to the related party and the assessee retaining only a small portion, was all unsubstantiated and make believe. The department itself having accepted the price/value of the impugned transaction in the hands of the related party in scrutiny assessment and nothing having been brought before us demonstrating any corrective action being initiated by the department against it in view of the impugned transaction being found to be at inflated prices, we find no force in the argument of the Revenue. Transaction of purchases made by the assessee with its related party stands established to be at fair market value and the addition u/s. 40A(2)(b) - Decided in favour of assessee.
|