TMI Blog2016 (7) TMI 444X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses on the part of the assessee or to suppress sale price of products sold by the assessee. The allegations of the AO were duly met by the assessee in remand report/appellate proceedings as set out above. The Revenue is not in appeal before the Tribunal with respect to the relief’s granted by the learned CIT(A). Our view is consistent with the decision of Hon’ble Delhi High Court in the case of CIT v. Smt Poonam Rani (2010 (5) TMI 57 - DELHI HIGH COURT ). In our considered view, the additions made by the learned AO as sustained/confirmed by the learned CIT(A) to the tune of ₹ 1,38,47,120/- is not sustainable in law and we order deletion of the same. - Decided in favour of assessee - I.T.A. No. 999/Mum/2014 - - - Dated:- 22-6-2016 - Shri Sanjay Garg, Judicial Member And Shri Ramit Kochar, Accountant Member For the Assessee : Shri K.Gopal Ms Neha Paranjpe , AR For the Revenue : Dr. S.Pandian , DR ORDER Per Ramit Kochar, Accountant Member This appeal, filed by the assessee company, being ITA No. 999/Mum/2014, is directed against the appellate orders dated 23-12-2013 passed by the learned Commissioner of Income Tax (Appeals)-21, Mumbai (Hereinafte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les figure exclusive of excise duty, freight and transport charges to show that the assessee has sold at a higher price to its sister concern and at a lower price to outside parties. Thus, from the details submitted by the assessee, the AO observed that the assessee has sold items to its sister concern at a discount of around 30-50% as compared to outside parties. It was also observed by the AO that the assessee has manipulated the sales prices in the last quarter of the previous years to nullify the profits made in first three quarters. The assessee has made sales of ₹ 7.22 crores in the last quarter to its sister concern to make the stock NIL while purchases are ₹ 72.02 lacs during the last quarter of the previous year. The assessee has booked sales of ₹ 7.22 crores to sister concern excluding ₹ 13 lacs as sale of spares without giving description about the details of the spares it constituted. Thus it was observed by the AO that a net loss of ₹ 41 lacs was shown for the entire assessment year by manipulating the sales made to sister concern. In response, the assessee submitted before the AO that some of the sales to outside parties were inclusi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 45,63,127/- was made by the AO on sales of ₹ 19,01,35,203/- after giving credit of Gross Profit of 13.67% declared by the assessee in the Profit and Loss Account, vide assessment orders dated 10.12.2010 passed by the AO u/s 143(3)(ii) of the Act. It is pertinent to mention here that the AO made separate additions of ₹ 99 lacs in the afore-stated assessment order dated 10.12.2010 towards alleged bogus sales commission as discussed above in preceding para which was later deleted by the learned CIT(A) in the first appeal filed by the assessee before learned CIT(A) and thus is not an issue for adjudication in this second appeal filed by the assessee before the Tribunal as it is not brought on record that the Revenue is in appeal before the Tribunal to agitate and challenge the relief granted by the learned CIT(A) in first appeal filed by the asessee. 5. Aggrieved by the assessment order dated 10.12.2010 passed by the AO u/s 143(3)(ii) of the Act, the assessee filed first appeal before the learned CIT(A). 6. The learned CIT(A) called for remand report from the AO. The AO submitted remand report and accepted that the invoices raised to the sister concerns does not in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deleted. The learned CIT(A) observed that the assessee has merged its business in the financial year 2007-08 and major part of it was sold which are purchased as components for manufacturing plant and machinery on cost basis, hence , the gross profit margin of the impugned assessment year is lower. The details were called by the learned CIT(A) from the assessee for the financial year 2006-07 and 2007-08 to include the transfer of components which are sold at cost price only and only to include manufacture item as to show the gross profit which is reproduced below:- F.Y.2006-07 To Opening 1.80 By Sales 20.58 To Purchase Direct expenses 15.53 By Closing Stock 3.30 To Gross Profit 6.55 23.88 23.88 Gross Profit Margin : 31.82% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessee reiterated the submissions as made before the authorities below. It was submitted that the learned CIT(A) has made additions of ₹ 1,38,47,120/- to the income of the assessee by making addition of gross profit margin of 11.06% on sales of manufactured products made to outsider whereby gross profit margin of the impugned assessment year was calculated at 20.76% on sales of manufactured products made to outsider of ₹ 12.52 crores , which is then compared to gross profit margin rate of 31.82% of immediately preceding assessment year and thus addition was arrived at of gross profit margin of 11.06% being the difference between gross profit margin on manufactured products for the impugned assessment year under appeal vis-a-vis preceding year . The AO made additions of ₹ 3,45,63,127/- to the income of the assessee by estimating gross profit margin of 31.82% on total sales of the instant assessment year under appeal based on the gross profit margin of 31.82% of preceding assessment year. The learned counsel drew our attention to the orders of the authorities below. It was submitted that the learned CIT(A) called the remand report from AO which is placed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufactured products as well is inclusive of installation and commissioning whereas in the case of sister concern, the installation and commissioning was carried on by the sister concern itself. The AO rejected the contentions during assessment proceedings as the same were not based upon documentary evidences , while the assessee had duly submitted all the details before the authorities below. No particular defect was pointed out by the AO in the remand report proceedings with respect to this contention of the assessee. The submissions made before the AO with this regards are placed in paper book page 18-22. It was also explained by the assessee that the sale price to the sister concern was lower because excise duty and sales tax(against H form) was not included in the sale price for manufactured products as the products were procured by the sister concern which were meant for exports. This contention of the assessee was accepted by the AO in remand report proceedings . It was also accepted by the AO in remand report proceedings that the AO in the assessment proceedings while computing the gross profit margin has not included the other manufacturing costs such as labour, power and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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