TMI Blog2006 (5) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... ng disposed of by this common order for the sake of convenience. 2. Grounds raised by the revenue is identical in both the years; and hence, we reproduce ground raised by the revenue for assessment year 1997-98, which reads as under : "On the facts and circumstances of the case and in law, learned CIT(A) erred in holding that despite 100 per cent foreign ownership and close business connection between the assessee-company and its holding company, the Assessing Officer was not justified on facts, in invoking the provisions of section 92 of the Income-tax Act, 1961." 3. Learned DR of the revenue supported the assessment order in both the years and our attention was drawn to page Nos. 2 to 7 of the assessment order for assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t business, the Assessing Officer shall determine the amount of profits which may reasonably be deemed to have been derived therefrom and include such amount in the total income of the resident." It was submitted by him that the assessee was receiving commission income from Rohm and Hass, USA and Taiwan @ 5 per cent since, starting of activities some time in November, 1995; but when it was found that the same is not profitable, the matter was taken up with Rohm and Hass, USA and they agreed for 10 per cent commission from 1-1-1997. Our attention was drawn to page No. 21 of the paper book and it was submitted that prior to starting of business by the assessee-company, Rohm and Hass Company, USA was having agreement with Indofil Chemicals C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct has to be established that the business between the resident assessee-company and non-resident company were so arranged that the business transacted between them produces to the resident either no profit or less than the ordinary profits. The assessee-company has brought on record the agreement of the non-resident company with another Indian company i.e., Indofil Chemicals Company, Division of Modipon Limited and as per this agreement effective from 1-1-1992, commission was payable at 5 per cent of the net sales price and the assessee-company is also receiving 5 per cent commission from this non-resident company from beginning, which has been increased to 10 per cent from 1-1-1997 and this goes to show that there was no such arrangemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of 10 per cent was not reasonable and the transaction was not at arms length or arranged to bring either no profits or less than ordinary profits to the appellant-company. It is one of the principles of natural justice that the reason for estimating the income should be mentioned in the assessment order and this would require citing comparable cases. Therefore, I am of the view that the Assessing Officer has arbitrarily disregarded the expenses incurred by the appellant-company and assumed the income as 20 per cent of the commission receipts. Also, it was brought to my notice that the same Assessing Officer in the assessment year 1996-97 in his assessment order did not invoke the provisions of section 92 in the similar facts after cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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