TMI Blog2014 (12) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... ) on facts qua the first addition has based his finding on the fact the sales tax debited to the P&L Account –this finding of the fact has not been assailed by the Revenue - Regarding the other addition made by way of disallowance of 40% of the expenses debited to the P&L Account pertaining to staff welfare; communication expenses and business promotion expenses debited to the P&L account - the expenses have come down and the disallowance on facts is an adhoc disallowance – assessee rightly relied upon COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT] and CIT(A) was fully justified in quashing the penalty order - the explanation offered was a bonafide and it most definitely was not a false explanation – Decided against revenue. - I.T.A .Nos. 4655 & 4656/Del/2012 - - - Dated:- 28-11-2014 - Sh. R. S. Syal And Smt. Diva Singh,JJ. For the Appellant : Sh. Peeyush Jain, CIT DR For the Respondent : Sh. S. C. Matta, CA ORDER Per Diva Singh, JM By these two appeals the correctness of the separate orders dated 08.06.2012 of CIT(A)-XXIX, New Delhi pertaining to 2006-07 2007-08 assessment years has been assaile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... related enterprise for the purchase and resale of property in the case of Compuage Infocom Ltd. was 11.4%, the assessee was required to explain why not this gross profit margin not be considered while computing the arms length price as per the provision of Rule 10B(1)(b) of the I.T. Act 1961, Rules 1962. As a result of which it was pointed out the gross profit of the assessee was worked out at ₹ 1,06,87,489/- as against the gross profit for the year of ₹ 68,04,962/-. He observed that as a result of this the arms length price of the purchase of trading goods would work out to ₹ 8,64,47,19/- as against the purchase price of ₹ 9,03,30,047/- which included the customs duty. 3.2. The assessee as per the assessment order is found to have offered a reply dated 17.12.2008 stating that although at the time of TP study, the data available was only of Compuage Infocom Ltd. however now the data of two other companies was also available and the arithmetic mean of the gross profit of the three companies for the financial year 2005-06 works out 6.26% as per the provisions of Rule 10B(4) of the IT Rules. On account of this fact it was submitted that the data placed in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot available at the time of the TP Study but was available in the public domain during the assessment proceedings. 5. Aggrieved by this the Revenue is in appeal before the Tribunal. 6. The Ld. CIT DR places heavy reliance upon the assessment order. The Ld. AR relied upon the impugned order. 7. We have heard the rival submissions and perused the material available on record. In the light of the facts on record, on a consideration of the same we are of the view that the reliance placed on the data available in the public domain at the time of the assessment proceedings which was not allowed by the AO and ultimately allowed at the Appellate stage cannot be faulted with. It is not the case of the Revenue that the three comparables taken by the assessee in the TP study as comparable were not comparable companies. This aspect not having been disputed, we see no reason why the Revenue should insist upon ignoring the updated relevant data for the period under consideration. Having accepted the fact that these companies taken in the TP study were comparable there can be no right vested in the Revenue to insist upon the incomplete data available at the time of TP study and refuse to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. The contention of the appellant that loss during the period under consideration is because of lesser sale and lesser quantum of gross profit appears to be correct. Though GP rate during AY under consideration has been 7.01% as compared to 6.74% as in preceding year, the total gross profit has come down to ₹ 68.05 lacs as compared to 102.50 lacs in preceding year because of fall in total sales from 1520.71 lacs to 971.58 lacs. Thus, financial results of the appellant do not show any increase in import price as alleged by the AO. The figures of sale and various expenses have not been doubted by the AO. 5.4. Further, TP study report as furnished by the appellant shows average GP margin of 8.80% considering three years data of Compuage Infocom Ltd. It is beyond appellant s control that current year s data of other two comparables was not available at time of preparing TP report. This is a genuine hardship faced by the appellant and the issue has been addressed to by Finance Act 2011 vide which due date for filing of return in case of company which is required to furnish a report u/s 92E has been extended to 30th September of the assessment year w.e.f 01.04.2011. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed and hence an addition of ₹ 2,14,352/- was made. 10. The explanation of the assessee was not accepted and penalty was imposed. In appeal before the First Appellate Authority the assessee is found to have contended that sales tax demand debited in P L Account is duly paid and evidence in regard to payments made by cheque was furnished by way of copy of cheques, bank statements etc. 10.1. Addressing the other addition which was subjected to penalty proceeding on account of disallowance of staff welfare communication and business promotion expenses in regard to which adhoc disallowance @ 40% had been made. It was contended that firstly the expenses were incurred for the business purposes of the assessee and secondly the expenses were comparatively lesser when compared to the immediately preceding assessment year. 10.2. Accordingly it was contended that disallowance of a claim of a genuine business expense does not amount to concealment of income nor of furnishing inaccurate particulars and merely because the additions were not challenged it was submitted it does not lead to the conclusion that it amounts to either concealment or of filing inaccurate particulars. Rel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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