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2015 (8) TMI 114 - ITAT MUMBAI

2015 (8) TMI 114 - ITAT MUMBAI - TMI - Addition on account of income from joint venture - differential sale price and variation in the profit margin - addition in the profit of the assessee by the AO as the assessee has sold its product on different rates to various parties and there is a huge variation in the profit margin in different kinds of material sold - CIT(A) deleted addition - Held that:- It is undisputed fact that all the items have been imported by the assessee and the payment of the .....

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immediately or after a credit period of few months, whether the sales are inclusive of excise duty or not and host of other factors taking into consideration commercial and market factors are relevant for determining the sale price. The AO cannot disturb the sales figure as mentioned in the sale bill and substitute with his own price without carrying out any inquiry from the buyers as to whether the sale prices as mentioned in the bills have been inflated or suppressed. Even the net profit marg .....

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O to rebut the assessee’s explanation, then no addition on account of differential sale price and variation in the profit margin can be made. Thus, the entire finding of the CIT(A) is not only legally correct but also factually correct based on the material on record, and therefore, we do not find any reason to deviate from such a finding. Accordingly, the order of the CIT(A) is affirmed - Decided against revenue. - ITA No.6585/Mum/2012 - Dated:- 9-3-2015 - Shri D Karunakara Rao And Shri Amit Sh .....

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n of ₹ 28,63,816/- on account of income from joint venture was made by the assessing officer for the reason that the assessee failed to prove satisfactorily the reason of variations in profit on some transactions and loss in respect of other transactions for the same commodities sold on same date to different parties which was purchased at same price. 2. On the facts & in the circumstances of the case and in law, the Ld.CIT(A) has erred in not appreciating that the assessing officer ha .....

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e is a partnership firm engaged in the business of trading in chemicals and essence. During the year, the assessee had done business activity on its own as well as through a joint venture with M/s.Essen Corporation. On the perusal of the details furnished by the assessee, the Assessing Officer (AO) noted that in the joint venture account, the assessee had shown variations in the profits on some of the transactions and loss in respect of some other transactions for the same commodity sold on the .....

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gin in various items after incorporating the purchase rate, purchase cost, sales bill date and sales value, and thereafter, worked out the profit and loss in each and every transaction and also the profit margin. His detailed analysis has been incorporated from pages 5 to 10 of the assessment order. From the said analysis, he noted that the profit varied from 4.5% to 8.42% for a particular item and in another item, the profit varied from 13.4% to 19.6%. He also observed that the assessee has fai .....

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e business in a joint venture with M/s.Essen Corporation, which deals with essential oils and aromatic chemicals. These items are imported in bulk from various countries and sold locally to various parties, who are mainly the actual users in food, pharmaceutical, perfumery and flavour manufacturers. It was submitted that all the sales have been made to proper parties and are duly supported by sale bills, payment received through cheques and relevant entries in the books of account. The details o .....

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buyers, i.e., whether they are regular buyers or random buyers, terms of credit and creditworthiness of the customer and host of other factors. Regarding foreign currency fluctuation, the assessee submitted that in the financial year 2008-09 itself, the exchange rate between the dollars and rupees was extremely volatile inasmuch as it fluctuated from ₹ 39.75 to ₹ 52.18. Month-wise prevailing rate of exchange was also submitted. The assessee s detailed submissions in this regard have .....

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urchased and sold were given before him. All the sales have been made through cheques only and thereafter without pointing out any specific defect either in the method of accounting or on the correctness and completeness of the account, the AO cannot disturb the trading result. He also observed that the AO has not made any inquiry with the parties to whom sales were made in order to verify, whether the sale price mentioned by the assessee in its books are correct or not. The AO has also not doub .....

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inclusive of excise duty or not, fluctuation in foreign exchange rate, etc. The AO, without considering these factors and without any inquiry cannot allege that the assessee might have earned more profit from his trading transaction. Further the AO does not have any power to substitute the market value in place of actual price charged by a trader for sale of goods, unless it is found and established that the sale was sham or not bonafide. Accordingly, he deleted the said addition. 5. Before us, .....

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n proper analysis of the books of account and other material on record and therefore, should be confirmed. 6. On the other hand, the learned Counsel, reiterated the submissions made before the CIT(A) and submitted that one of the biggest factor in the fluctuation of the sale price was on account of fluctuation of foreign exchange rate, because all the items which have been sold were imported from various countries. The other main factor were the nature of the buyers, because if the assessee has .....

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he CIT(A). The main reason for making the addition in the profit of the assessee by the AO was that, the assessee has sold its product on different rates to various parties and there is a huge variation in the profit margin in different kinds of material sold. He worked out the average profit of each item and applied the maximum profit of the product on a single day to determine the profit of the various items sold by the assessee. It is undisputed fact that all the items have been imported by t .....

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