Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2023 (9) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (9) TMI 879 - AT - Income TaxUndisclosed sales or suppressed income - Addition relating to lower price charged from HHPL as compared from the other parties - Assessee Company is engaged in manufacturing of thermoware products - As per AO assessee sold goods to HHPL at discount of 16.53% as compared to the price at which goods have been sold to others - contention of the assessee was that discounted sales was due to the fact that while making the sales to HHPL, assessee did not have to incur transportation cost, sales promotional activities or marketing of the product or any sales promotion expenses - HELD THAT:- From the above, it can be seen that from A.Y. 2015-16, sales made to HHPL have been increased from 92% to practically 100%. In fact, in 2017-18 and 2018-19, only sales made arte to the employees at a discounted price. Once there was no MOU till A.Y. 2013-14, almost 80% of the sales were made to HHPL and when MOU was entered into, assessee became contract manufacturer for HHPL and the sales to HHPL have increased. In A.Y. 2013-14, ld. AO observed that there is no agreement between assessee and HHPL, whereas in A.Y. 2014-15, when onwards there is an agreement, AO is stating that it is an afterthought and he has rejected MOU on the ground that it is not on some stamp or legal document, which is not the requirement of the law. Nothing has been pointed out by the department that any MOU or agreement between the parties needs to be on some stamp paper which needs to be registered with any authority. Thus, this reason of the ld. AO is out rightly rejected. Here it is not a case where provision of 40A (2)(b) is applicable, because it is not a case where assessee has incurred any expenses, in respect of which payment has been made to any person specified in clause (b) of sub-section 2 of 40A. Here it is a case of sales made on a discounted price to one particular party which is a bulk sale. If assessee has stated the reasons and circumstances as to why bulk sale has been made to HHPL and later on HHPL was the only buyer of the assessee; and the assessee was running into heavy losses because of unabsorbed depreciation and brought forward losses and even matter was referred to BIFR, then on these circumstances if the assessee has sold at a discounted price, we fail to understand why such discounted sale price is doubted. If the assessee to survive its business had decided to be a contract manufacturer of HHPL in subsequent years and in this year had made major supply to HHPL on a thin profit margin and in order to save various costs like transportation cost, advertisement and sales promotion cost etc. which is there in the case of sales made to the third parties, we do not find any reason to compare the sale price with the other parties to hold that assessee has to charge same price with the party who is major purchaser of the goods, when there is no deeming provision to tax the sale price or any kind of statutory SAAR provision. Also any prudent businessman will give heavy discount to a party who has made bulk purchase which is almost ranging from 80%-98%. The department cannot force the assessee that it should have not give discount or should have sold on a higher profit. Decided against revenue. Disallowance u/s. 14A - HELD THAT:- Admittedly, CIT(A) has restricted the disallowance to the exempt of income which issue now is covered by the following decisions of Ajit Ramakant Phatarpeka [2020 (11) TMI 70 - BOMBAY HIGH COURT] and PV HSBC Invest Direct (India) Ltd. [2019 (2) TMI 731 - BOMBAY HIGH COURT]
|