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M/s. RSG Foods Pvt. Ltd. Versus Commissioner of Income Tax, Bathinda And Others

2015 (7) TMI 372 - PUNJAB & HARYANA HIGH COURT

Change in jurisdiction for the purpose of assessment - Held that:- Merely because the parties were doing business in the normal course inter se, would not be a ground as such to transfer the assessment in the absence of any major financial nexus, as such, a ground would result in transferring other assessments of assessees who were doing business with the Narula Group of Companies (NCG). The reasoning, thus, which has been resorted to by respondent no. 1 cannot be held to be justified in any man .....

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Single Bench of this Court in Rajesh Mahajan's case [2002 (7) TMI 94 - PUNJAB AND HARYANA High Court ] has held that even if the transferee is one of the Directors, it was not a valid justification for the transfer of income tax proceedings. - Decided in favour of assessee. - CWP No. 26503 of 2014 - Dated:- 8-7-2015 - S. J. Vazifdar, Acting Chief Justice And G. S. Sandhawalia,JJ. For the Petitioner : Mr. Sandeep Goyal, Advocate For the Respondent : Mr. Suneel Ranga, Advocate, for Mr. G.S. Hooda .....

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s and in the interest of administrative convenience. The subsequent notices dated 11.12.2014 (Annexures P-14 and P-15) which have been issued in pursuance to the transfer of the case under Section 127 and asking for information by the Deputy Commissioner of Income Tax, Central Circle, Amritsar and to appear before the said officer are also subject matter of challenge. The pleaded case of the petitioner is that it is engaged in the business of rice shelling at village Sandhe Hasham, Zira Road, Fe .....

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er-company. However, due to shortage of space, 31,589 bags of paddy had been stocked in the premises of M/s. Sat Kartar Solvex Pvt. Ltd. The rice bran, which is one of the by-products of the shelling, is also sold to the said company as a normal business transaction and there was otherwise no similarity or relationship with the NGC, who were not residents of Ferozepur. On 05.12.2013, search and seizure operation under Section 132 of the Act was carried out on the said NGC which is based at Guru .....

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ndent company and having a separate PAN number and there were no common premises and neither their premises had been searched. There were no family members of the above said group who were share holders and neither there was an introduction of any capital loan from the group or vice versa. Reliance was also placed upon the judgment of this Court in Rajesh Mahajan and others vs. CIT and others, (2002) 257 (ITR) 577. Information was also sought from the respondents as to on what basis they had rec .....

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tsar, as noticed above. The reasons and reply thereto read thus: Sr. No. Reasons Reply 1 The Stock of Paddy of 31,589 Bags of the concern of M/s. RSG Foods Pvt. Ltd. was found lying at the premises of M/s. Satkartar Solvex Pvt. Ltd., in Village Sandhe Hasham, Ferozepur That M/s. RSG Foods Pvt. Ltd. and M/s. Satkartar Solvex Pvt. Ltd. are dealing in the similar line of products doing regular business transactions and even the business premises of both the parties is opposite to each other. Hence, .....

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or in Narula Group) and Sh. Pankaj Garg (family member of Director of M/s RSG Foods Pvt. Ltd.) were recorded and they both admitted that no lease money or rent is being paid by the concern M/s RSG Foods Pvt. Ltd to M/s Sarkartar Solvex Pvt. Ltd. for utilizing the space provided by the concern M/s Satkartar Solvex Pvt. Ltd. to M/s RSG Foods Pvt. Ltd. Thus it is clear that the stock of Paddy was not lying there due to landlordtenant relation but due to close business relations between these concer .....

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re the concern M/s. Satkartar Solvex Pvt. Ltd. is functional, was earlier owned by M/s RSG Foods Pvt. Ltd. This land was purchased by M/s. Satkartar Solvex Pvt. Ltd. from M/s. RSG Foods Pvt. Ltd. about 3 to 4 yers back. This fact has been admitted by Sh. Ravi Narula in his statement which was recorded during the course of Survey operations u/s 133A of the Income Tax Act, 1961. That, the contention raised by the Assessing Officer regarding the sale of land by M/s. RSG Foods Pvt. Ltd. to M/s Satka .....

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s transactions relating to purchase and sale of Rice Bran with each other. The concern M/s. RSG Foods Pvt. Ltd. is selling Rice Bran to the concern M/s. Satkartar Solvex Pvt. Ltd. That, the parties doing business transactions with each other is in normal course of business as is done by numerous business entities with Satkartar Solvex Pvt. Ltd. But we are unable to comprehend how two parties doing normal business transactions can be termed as "CLOSLY INTERLINKED". It cannot lead to any .....

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as ever been searched/or any summons/search warrant has ever been made/issued against our Company iii) That, our Company is regularly assessed with the ACIT, Ferozepur & our list of share holders is on the official records of the Department, in which there is no family members/relatives of M/s Satkartar Solvex Pvt Ltd as a share holder. iv) That, there is no introduction of any capital/loans from the said group or vice/versa. v) That, it is further evidenced from the bank loan raised by our .....

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an opportunity of hearing was given after taking into consideration all the objections of the petitioner. Counsel for the petitioner has submitted that no valid reasons as such have been given for transferring the case and the order is not sustainable whereas, counsel for the revenue, on the other hand, had defended the said order and said that the detailed reasons have been mentioned and a well reasoned and speaking order has been passed, which is liable to be upheld. Section 127 of the Act pr .....

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s which have prevailed were that there were 31,589 bags of the petitioner firm lying in the premises of M/s. Sat Kartar Solvex and in the absence of any consideration and on account of no rent being charged, it is presumed that they are closely inter linked. The same land had been sold to M/s. Sat Kartar Solvex by the petitioner-assessee 3-4 years back and if there was shortage of land, why was it sold and since both entities were doing the similar business of manufacturing rice and its by-produ .....

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ngwith the NGC. Only if the authorities came to a valid conclusion such as on the basis of some substantiated material, either in the form of material documents or in the form of statements, the authorities would have a valid justification to transfer the cases under Section 127 of the Act. Merely because some stock of paddy was lying on the adjoining premises which is not disputed and there was no rent agreement as such inter se the parties would not be a ground to link the parties in such a ma .....

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the jurisdiction of the assessment proceedings had to be transferred to Amritsar. No finding had been recorded that the Directors of the petitioner-company were also Directors in the NGC and that there were large number of transactions inter se vide which the tax had been evaded and that the petitioner was a key associate. Merely because the parties were doing business in the normal course inter se, would not be a ground as such to transfer the assessment in the absence of any major financial ne .....

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