TMI Blog2021 (9) TMI 1120X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT(A) has recorded his finding to this effect in the appellate order. Besides the Ld. CIT(A) also recorded a finding of fact that the revised rate of invoice was comparable with the international rate published by Argus - we do not find any infirmity in the order of Ld. CIT(A) and accordingly same is upheld by dismissing the ground of the Revenue s appeal. - ITA Nos.3888, 3889 & 3890/M/2019, ITA No.3892/M/2019 - - - Dated:- 17-9-2021 - Shri Rajesh Kumar, Accountant Member And Shri Amarjit Singh, Judicial Member For the Assessee : Shri Main Jain, A.R. For the Revenue : Shri Ajay Pratap Singh, D.R. ORDER PER RAJESH KUMAR, ACCOUNTANT MEMBER: The above titled appeals have been preferred by the Revenue against the orders dated 28.03.2019 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment years 2013-14, 2014-15 2015-16. All these appeals have common issue and therefore these are being decided together for the sake of brevity and convenience. First we shall take up assessment year 2013-14 for adjudication. ITA No.3888/M/2019 A.Y. 2013-14 2. The Revenue has raised the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y ignoring the fact that Shri Kunal Parekh Director of assessee company has accepted the same in the statement recorded.? v Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in allowing the appeal of the assessee in respect of the addition pertaining to over invoicing of purchases of ₹ 4,63,19,046/- from P T Almoudi, by ignoring the fact that the statement u/s 132(4) of the Act, of the Director of the assessee company Mr. Kunal Parkeh was recorded on oath and acknowledged as true and correct to the best of their knowledge believe, and that the said statement was given by him voluntarily, without any force, threat, coercion, any inducement, promise or any other undue influence? vi Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in allowing the appeal of the assessee in respect of the addition pertaining to over invoicing of purchases of ₹ 4,63,19,046/- from P T Almoudi, by ignoring the fact that the statement u/s 132(4) of the Act, of the Director of the assessee company Mr. Kunal Parkeh was recorded on oath inspite of the fact that the copy of incriminating (over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of over invoicing of imported coal of Indonesian as well as of South African origin imported through to foreign entities M/s. Glaxo International FZC, UAE and M/s. Global Petrochem FZC, UAE which were associated entities to the assessee. The show cause notice also referred to search action at the residential premises of Mrs. Riddhi Shah and exchange of message between Mrs. Riddhi Shah and Mr. Sourabh Parekh and Mr. Kunal Parekh (vice president, imports), on whatsapp on quality and specification of coal and also referred to question No.18, 19, 20, 21, 22 23 of the statement recorded under section 132(4) of the Act. The AO also noted that during pre-search enquiry three invoices pertaining to M/s. Global Petrochem FZC were collected by the department which indicated the price charged by Singapore supplier from Dubai entities was much lesser than what the assessee paid to Dubai entities for coal import. According to the AO this has resulted into over invoicing whereby enormous profit has been shifted to and accrued in the hands of Dubai entities. The AO noted that during the course of search, a statement under section 132(4) of the Act was recorded of Shri Kunal Parekh (vice presi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered the submissions, facts on record and details called in the appellate proceedings carefully. It is noted that the main basis for the addition made by the assessing officer is the statement recorded of Shri Kunal Parekh to whom the copy of three invoices of supply of coal by M/s Sandy Resources Pte. Ltd. to M/s Global Petrochem FZC. The relevant Q and answers are reproduced below for ready reference. Q.22 In this background, I wish to inform you that intelligence gathered by this office suggests that the procurement of coal of Indonesian origin was done partly through M/s Global Petrochem (FZC), UAE and Glaxo International (FZE), UAE, two of the Dubai based entities controlled by Mr.AnkitTandon and that the final price paid by your group against such consignments is significantly higher. For example, I am showing you commercial invoice No.SR-INV-13-002 dated 17th June, 2013 of Sandy Resources Pte Ltd, Singapore raised in the name of M/s.Global Petrochem (FZC), UAE which reflects shipment of 40,002 MTS of low sulphur Indonesian steam coal (non coking) in bulk @ US$ 18.750 per MT for a total billed amount of US $ 750,037.50. Similarly, I am showing you another comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, 2013 of the same company, Sandy Resources Pte Ltd, Singapore raised in the name of M/s. Global Petrochem I ( FZC), UAE for shipment of 66,228 MTS @18.75 per MT as shown above; (iii) Commercial invoice GPFZC/06-2013-14 dated 14.06.2013 for supply of 41,615 MTS @ US $ 59.50 per MT which matches/corresponds with proforma invoice bearing No.SR-13-03 dated 7th June, 2013 of the same company, Sandy Resources Pte Ltd, Singapore raised in the name of again M/s. Global Petrochem (FZC), UAE for a shipment of 41,615 MTS @US$ 18.75 per MT as shown above. On going through the above instances, it is apparently clear that the similar coal of low sulphur Indonesian steam coal (non-coking), which has been supplied to Global Petrochem (FZC), UAE @ US$18.75 per MTS by Sandy Sources Pte Ltd. Singapore, has been received by GORIL directly at any of the Indian port, however the invoices were routed through Dubai based entities at a much higher average rate of US $ 59. In this regard, you are requested to go through the above invoices raised on GORIL by Global Petrochem (FZC), UAE and invoices raised by actual supplier in the name of Global Petrochem (FZC), t JAB, and offer your deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein the unit price is reflected at US$ 18.75 per MT, I am presuming that the entire material supplied by Mr. Ankit Tandon is of the same value. Further, I am taking an estimated freight of US$ 14 per MT for all CNF transactions and margin of Mr. AnkitTandon at a maximum of US$ 2 per MT. Thereafter, the differential amount is worked out to arrive at a disclosure of additional income of ₹ 98,53,75,297/- (Rupees Ninety Eight crores Fifty Three Lakhs Seventy Five thousand Two hundred Ninety Seven only) equivalent to US$ 158,93,150 in the hands of Gandhar group as per following description: Financial year Assessment Year Amount (in Rs.) 2012-13 2013-14 11,88,27,650 2013-14 2014-15 86,65,47,647 TOTAL: 98,53,75,297 I am submitting a detailed working of invoice-wise total estimated additional income Separately. However, I would like to add that this exercise has been undertaken by me to buy peace of mind and to avoid protracted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E EOT ORDER GORIL 13-14 1188,27,650 1188,27,650 - 156,86,000 156,86,000 - GORIL 14-15 7064,12,857 7472,13,146 408,00,290 824,28,628 416,28,339 408,00,289 GORIL 15-16 605,12,000 605,12,000 - 79,36,000 79,36,000 - GCM 14-15 996,22,790 588,22,500 408,00,290 114,06,016 522,06,306 408,00,290 Total 9853,75,297 9853,75,296 1174,56,644 1174,56,645 As can be noticed from above, the overall figures considered in the assessment order and that as per statement is same though in some of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1137,57,405 2161,12,007 1709,42,800 2291,82,899 6060,95,593 4696,00,304 3215,75,763 GP RATIO 12.53 11.64 10.07 9.07 10.89 10.18 11.82 NP RATIO 5.41 7.04 3.83 3.96 4.80 3.01 1.46 This shows that reasonable profits are shown by the appellant company. 20.4.7. The trading in coal for AY 2013-14 to AY 2015-16 is tabulated below. Rs/crores AY 2013- 14 2014-15 2015-16 TOTAL Sale 543.67 768.35 1379.89 2691.91 Purchases 423.66 719 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om UAE entities are 17 % of total imports in AY 2013-14. The position is similar in the other two AY 2014-15 and AY 2015-16. The variation in prices are informed by the variation in calorific value of coal, moisture and Sulphur content and impurities. The rate varies based on the gross calorific value based on As Driea Basis (ADB). The rate is lower when computed on As Received Basis (ARB) since it contains moisture but higher on ADB. A perusal of the invoices, when considered with information based on coal quality Specifications and surveyors report, does not indicate any evidence of over invoicing. 20.4.8 The appellant has also supported its prices of import from the two UAE entities with rates published by Argus. It is found from website that Argus is an independent media organisation with almost 950 staff. It is headquartered in London and has 21 offices in the world's principal commodity trading and production centres. Argus produces price assessments and analysis of international energy and other commodity markets, and offers bespoke consulting services and industry-leading conferences. Companies in 140 countries around the world use Argus data to index physical trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of over invoicing in respect of all purchases is not justified. Even at best the three invoices in question raised by M/s Global Petrochem FZC totaling to USD 87,43,662 is only ₹ 54 crores against total imports of over ₹ 300 crores over the years. The over invoicing as computed by the assessing officer on these three invoices is about ₹ 22 crores out of ₹ 98 crores estimated overall. The appellant also has merit in the contention that the allegation of the assessing officer could be equally compatible with under invoicing by the supplier of coal to M/s Global Petrochem FZC and the allegation that there was over invoicing of imports is mere presumption. 20.4.12. Shri Tribhuvandas Parekh is an account executive of the appellant. Some information relating to two bank accounts and ledgers of Global Petrochem FZG were found from his computer. This has been interpreted by the assessing officer as indicating that the appellant had control over Global Petrochem FZC. It is noted that the entries in such data pertained to period FY 11-12. The impugned purchases of the appellant are for AY 2013-14 onwards and not for the period to which the bank statements/ led ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of 3 invoices representing mere 15% of purchases has been used to extrapolate that all purchases are over invoiced. This is not justified. iii) There is no indication that customs authority have questioned the valuation of imports from the two UAE entities. iv) The rates at which coal was imported from the two UAE entities is comparable with other imports made by the company. It is also shown to be within the range of ARGUS prices at the relevant date for the relevant quality of coal. v) The appellant has mainly supplied the coal imported from two UAE entities to Bharat Oman Refineries Ltd. Profits have been earned on such transactions which are better than that on other similar imports. The appellant won the bid to supply to BORL through tenders. The customer has issued certificate that the supply was as per specifications. It is unlikely that such a large margin as indicated by the quantification done by the assessing would be available when bids are received through tendering process. vi) There is no evidence of any cash/profits coming back to appellant or its entities from alleged over invoicing of import. No evidence to suggest this was recovered in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entities, the coal was to be procured from the supplier at a margin of USD $ 2 per metric ton. It was also discovered that the price charged by the Dubai based entity from the assessee was much higher than the price charged by Singapore supplier from Dubai entities meaning thereby that enormous profit has accrued in the hands of Dubai entities which is nothing but shifting of profits from India to Dubai. The Ld. D.R. also referred to the statement recorded under section 132(4) of the Act of Shri Kunal Parekh Vice President(imports) in which he made disclosure on account of over invoicing and offered the additional income for the year under consideration of ₹ 11,88,27,650/-. The Ld. D.R. also termed as ridiculous and absurd the contention of the assessee that the assessee has been cheated by Dubai based entities by charging exorbitant price for the import of the coal and also referred to the admission of the assessee that this amount would be offered to tax after the same is received from the Dubai based entities. The Ld. D.R. also argued that assessee has not made any offer to recover the amount and it was just an excuse to circumvent the action by the department. The Ld. D.R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n not be assigned a different meaning. On the issue of whatsapp chat exchange between Mrs. Riddhi Shah and other directors of the assessee, the Ld. A.R. submitted that Mrs. Riddhi Shah has clearly explained in the statement recorded during the course of search that specification of coal was asked to be changed since they were not as per specifications decided in the contract. The Ld. A.R. also submitted that import of coal is subject to strict surveillance and strict procedure of customs authorities and therefore it is not in the hands of the assessee to change the specification of imports as per their conveniences or whims and fancies. The Ld. Counsel of the assessee also stated that pricing of purchases made from Dubai entities were comparable with the prices of other imports made by the assessee and also the price of imports of Dubai entities are comparable with the international coal prices and therefore it showed that there were no over invoicing of imports. The Ld. A.R. also referred to the gross profit returned by the assessee in the books of accounts for the year under consideration and submitted that it has offered a reasonable profit even more profit on sale of coal purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was a chat as to the change of specification of coal to be imported. Undisputedly, Shri Kunal Parekh (vice president, imports) who is also a director on the assessee offered to surrender an income of ₹ 11,88,27,650/- when confronted with the invoices stated to be over invoiced and also expressed his complete lack of knowledge that these imports were over priced by Dubai entity and offered that same would be offered to tax as and when recovered from Dubai entities. We further note that the prices of coal supplied by the Dubai entities with the assessee are comparable with the other imports made by the assessee from various other entities and a findings of facts to this effect have been recorded by Ld. CIT(A) in para 20.4.7. The Ld. CIT(A) also noted that the assessee has offered reasonable profit during the year. The Ld. CIT(A) also referred to the prices of coal supplied by Dubai entities to be comparable with international prices as published by Argus an international organization in para 20.4.8. Besides, we note that most of the purchases made from UAE entities have been supplied to government organizations such as M/s. Bharat Oman Refinery Ltd. through a competitive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rked to Mr. Kunal Parekh with an attachment which was an invoice for vessel MV STX Clover for 77556 MT raised at US$ 57 wherein the total column of the invoice was changed in handwriting. Accordingly, Mrs. Riddhi Punil Shah was shown an agreement for sale and purchase entered into co-seller PT Almoudi Natural Resources Tradmin and the co-seller Saeed Pte. Ltd. and the buyer PT Infinite Mining Energy and the co-buyer the assessee M/s. Gandhar Oil Refinery India Ltd. dated 10.12.2012 with regard to the vessel MV STX Clover. As per the contract the price agreed upon was US $ 31 FOB + freight charges at actual PMT. So the search team asked Mrs. Riddhi Punil Shah the reason for changing the invoice when the agreed price was US $ 31, however, she failed to explain why US $ 31 has been changed to US $ 57 and further said that there was difference in the rate of contract and she carried out the changes at the direction of either Mr. Kunal Parekh or Mr. Sourabh Parekh and had nothing to do with the issuing of over invoicing. This was replied by Mrs. Riddhi Punil Shah by way of answer to question No.43 to 52 which is reproduced by the AO at page No.19 20. The search team while recording ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tificate of origin, copy of test report for discharge port, copy of bill of lading to substantiate the changed specification of the coal at the time of loading. The appellant also submitted the details of subsequent sale of goods which shows that the appellant had sold the coal in local market with a good profit margin. Further, the appellant also submitted the comparison of the final rate charged by M/s.PT Almoudi Natural Resources Tradmin with the international coal prices as reflected in the forum Argus . It was submitted that the price of $ 57 per tonne charged by M/s. PT Almoudi Natural Resources Tradmin is lower than the international price. The assessing officer has treated these explanations and documents as an afterthought. 20.4.19. I find that the earlier agreement entered into by the appellant with M/s. PT Almoudi Natural Resources Tradmin, Jakarta, Indonesia seller and the appellant, the buyer dated 10.12.2012 was for steam coal of Indonesian origin. The specification of coal was Gross Calorific Value 5100-5200 KCAL / Kg on Air Dried Basis. The FOB price was $31 per MT. There is an addendum of nol dated 18.12.2012. In this addendum specification of coal was chan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in Sweden and Morocco. Thus the entity M/s. PT Almoudi Natural Resources Tradmin, Jakarta, Indonesia, owned by Mohammed Hussein Ali Al-Amoudi is a well known business entity. The assessing officer has not made any verification to show that the Addendum was manipulated before implying so. The revision in price is justified and substantiated with evidence by the appellant. 20.4.20. In light of the facts and evidences on record, I find that the appellant has been able to substantiate the correction in invoice. The addition made of ₹ 4,63,19,046/- is therefore deleted. Ground of appeal no 3 in allowed. 12. After hearing both the parties and perusing the material on record, we observe that the AO made the addition on the basis of statement of the director of the company Mr. Kunal Parekh of ₹ 4,63,19,046/- wherein Mr. Kunal Parekh stated that he has forgotten as to why the invoice for vessel MV STX Clover for 77556 MT was raised to US $ 57 from US $ 31 FOB + fright charges at actual PMT in terms of agreement for sale and purchase dated 10.12.2012. This was revealed by an email sent by an employee of the assessee Mrs. Riddhi Punil Shah to Mr. Samsu Husain with cop ..... X X X X Extracts X X X X X X X X Extracts X X X X
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