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2022 (9) TMI 1035 - Income Tax
Suppression of income - Deduction u/s.80IB - as said assessee has shifted profit to get tax benefit - suppression of income at Puducherry unit - difference between price charged by the assessee for own unit at Puducherry and price charged by M/s Aeroaroma Home Care Products, Puducherry - As per AO assessee has shifted profit from Puducherry unit to Guwahati unit to claim higher tax benefit by way of deduction u/s.80IC @ 100% profit which is evident from fact that Puducherry unit is claiming deduction u/s.80IB of the Act @ 25%, whereas Guwahati unit is claiming 100% deduction towards profit derived from the business - HELD THAT:- The assessee has paid Rs.0.77 per unit to product purchased from M/s.Aeroaroma Home Care Products, Puducherry and has carried out secondary operations at Guwahati unit. If you consider additional cost incurred by the assessee for product purchased from third party supplier at Guwahati unit, total cost per unit works out to Rs.0.91 per unit. If you compare both prices, there is minor difference of Rs.0.02 per unit, as against difference worked out by the Assessing Officer, which is on very high. The assessee has explained reasons for small difference in price of similar products purchased from third party supplier and manufactured at its own unit. In our considered view, explanation furnished by the assessee appears to be reasonable and bonafide.
As we have already noted in earlier paragraph of this order, pricing of any products cannot be compared on the basis of location alone, because it depends upon various factors, including functions performed, asset employed and risk involved. Since, there is minor difference of Rs.0.02 per unit, which is negligible may happen in any case. Therefore, we are of the considered view that there is no reason for the Assessing Officer to work out under-invoicing of products only on the basis of comparison of price charged by third party to the price charged by the assessee.
Under invoicing of products - In this case, central excise authorities have accepted valuation determined by the assessee for products manufactured at Puducherry unit and thus, in our considered view, said facts strengthen case of the assessee that there is no under-invoicing of products supplied by Puducherry unit to Guwahati unit. In this context, it is relevant to refer to the decision of the Hon'ble High Court of Madras in the case of Ananda Metal Corporation [2004 (7) TMI 49 - MADRAS HIGH COURT] where the High Court in the context of valuation of closing stock for the purpose of Sales Tax Act held that once there is no dispute from sales tax authorities for valuation of stock declared for the purpose of levy of sales tax, then the Assessing Officer does not have any jurisdiction to go beyond value of closing stock declared by the assessee and accepted by commercial tax department. As per SMT. SAKUNTALA DEVI KHETAN [2013 (3) TMI 270 - MADRAS HIGH COURT] unless and until competent authority under Sales Tax Act differs or varies with closing stock of the assessee, return accepted by said authority is binding on the Assessing Officer and in such case, the Assessing Officer has no power to scrutinize return submitted by the assessee.
In this case, the assessee has demonstrated with all possible evidences to prove that there is no difference between price charged by Puducherry unit, when compared to price charged by third party supplier on products purchased by Guwahati unit. Further, the assessee has also demonstrated with evidence that Guwahati unit has incurred further cost towards processing of semi-finished goods purchased from Puducherry unit. As we have already sated in earlier part of this order, If you consider total cost incurred for product supplied from Puducherry unit to total cost incurred for products purchased from third party supplier, there is minor difference of Rs.0.02 per unit and said difference may arise for various reasons and thus, in our considered view, the Assessing Officer has completely erred in making additions towards suppression of income. The learned CIT(A), without considering above facts has simply sustained additions made by the AO. Hence, we reverse findings of the learned CIT(A) and direct the Assessing Officer to delete additions made towards suppression of income on account of under valuation of stock supplied to Guwahati unit for the assessment years 2008-09 to 2012-13. Appeals filed by the assessee are allowed.