TMI Blog2018 (1) TMI 930X X X X Extracts X X X X X X X X Extracts X X X X ..... issues are involved, we dispose-off the same by way of this common order for the sake of convenience and brevity. First we take up ITA No.3040/Mum/2014 which is revenue s appeal for Assessment Year [AY] 2004-05 by raising following grounds of appeal:- 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the commission paid to overseas agent M/s Khadlaj Perfumes LLC, for the A.Y.2004-05 without appreciating the fact that the assessee was unable to prove the need for commission @25% paid to M/s.Khadlaj Perfumes LLC, whereas commission incurred with other parties was @0.5% to 5.85% 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A), erred in deleting the addition made in respect of loan advanced to associated enterprises, M/s.Mellow Commodities SDN.BHD at arm s length price, without appreciating the fact that section 92 of the I.T. Act is clearly applicable to the transaction made with the associated entity. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A), erred in allowing the appeal of the assessee placing reliance on the decision of the jurisdiction Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the assessment order is a loose paper file comprising mainly of unaudited balance sheet and stock report as on 31/03/2008 in respect of various group companies. There is no incriminating document brought on record by the AO in respect of disallowance of commission expenses. The Commission was being paid even prior to AY 2004-05 and even in respect of Afzal Pandharpuri. Commission payment even at rate of 32% had been incurred in earlier years. Scrutiny assessments were made for AY 2004-05 and AY 2005-06, prior to search, and no disallowance of commission expenses were made. There is a generally accepted practice and requirement of appointing a local agent for business in Middle East. From the details of country wise exports called, it is observed that sales to UAE and Yemen fell at end of 2002-03 and beginning of FY 2003-04. The exports of Afzal Pandharpuri to UAE fell from ₹ 7.45 crores in FY 2002-03 to ₹ 6.36 crores in FY 2003-04. Similarly exports to Yemen fell from ₹ 2.53 crores in FY 02-03 to ₹ 1.61 crores in FY 2003-04. This corroborates the claim of the appellant that its sales were getting affected by availability of spurious and duplicate products ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... culous documentary evidences for commission expenses. The appellant is not incorrect in claiming that business is not run with an eye on creating documentary evidence for everything. The disallowance cannot be made for AY 2004-05 and AY 2005-06, sans incriminating documents, as per the ratio of the decision of the Special Bench in case of AI Cargo (supra). In view of the above facts and discussions, the action of the AO in disallowing the entire commission expenses is not tenable on merits. As regards the alternative contention of the assessing officer, I have already discussed earlier that the assessing officer has selectively considered the rates of commission without spelling out any reason. This action of the assessing officer is biased. Further, I am unable to agree with the view of the AO that even if the commission services is held as genuine, part of the payment should still be disallowed as unreasonable. Once the services is held to be genuine, it is not for the AO to sit in judgment on the reasonableness of the payment. In any case there is no evidence that the payment has been siphoned off. The commission agent is an independent third party. I therefore do not uphold the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the facts of case Perot Systems Ltd which has been relied upon by the AO. For the detailed reasons mentioned therein, the Tribunal came to the conclusion that no ALP adjustment was warranted in that case. 5.10.8 Coming to the case of the appellant, it is seen that the facts are similar to the case decided by ITAT Ahmedabad Bench. From the copies of audited accounts of the subsidiary filed in appellate proceedings, it is seen that the authorized capital of the subsidiary was 100000 MYR at beginning of calendar year 2003 which increased to 500000 MYR by the end of 2003. This again was increased to 1000000 MYR by end of calendar year 2004. In calendar year 2006, MYR 430300 was shown as share application money. In calendar year 2007, the total share capital went up to MYR 190,42,700 and the share application money was converted into equity. Further, the AO has made halfhearted attempt at determining the comparable. He has taken the LIBOR rate to be uniform 6% for the entire period of FY 2003-04 to FY 2007-08 on the dates when the amount was advanced without identifying the LIBOR rate for the specific dates on which the amount was advanced and for specific tenure. Further, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as the facts are concerned, it is un-controverted position as noted by Ld. CIT(A) that no incriminating material was found in the search operations qua the additions and the additions were not based on any incriminating material. The original assessment u/s 143(3) had already completed on 26/12/2006 whereas the search took place on 29/04/2008 which clearly reflect that no assessment was pending on the date of search operations and no proceedings have abated on the date of search. Therefore, we find that, at the moment, the issue stood squarely covered in assessee s favor by the cited decision of jurisdictional Bombay High Court as rightly noted by Ld. CIT(A). Similar view has been taken by Hon ble Delhi High Court in CIT Vs. Kabul Chawla [380 ITR 573]. Further, upon perusal of SLP No. 18560 of 2015 dated 12/10/2015 admitted by Hon ble Supreme Court against the decision of Hon ble Bombay High Court rendered in CIT Vs. Continental Warehousing Corporation [supra], we find that Hon ble apex court has only admitted SLP against the ruling of the Hon'ble Bombay High Court's finding that no addition can be made in respect of assessments which have become final if no incriminati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each A Y on the basis of the findings of the search and any other material existing or brought on the record of the A.O. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the Course of search which were not produced or not already disclosed or made known in the course of original assessment. Conclusion 38. The present appeals concern AYs, 2002-03, 2005-06 and 2006-07. On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. 39. The question framed by the Court is answered in fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall be made for each assessment year separately. Thus in case where assessment has abated the AO can make additions in the assessment, even if no incriminating material has been found. But in other cases the Special Bench held that the assessment under section 153A can be made on the basis of incriminating material which in the context of relevant provisions means books of account and other documents found in the course of search but not produced in the course of original assessment and undisclosed income or property disclosed during the course of search. In the present case, the assessment had been completed under summary scheme under section 143(1) and time limit for issue of notice under section 143(2) had expired on the date of search. Therefore, there was no assessment pending in this case and in such a case there was no question of abatement. Therefore, addition could be made only on the basis of incriminating material found during search. Further, the revenue s appeal against the said order of the Tribunal has been dismissed by Hon ble Bombay High Court in CIT Vs. Gurinder Singh Bawa [2015 79 Taxmann.com 398] finding no substantial question of law in the same. Hence, f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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