Pinkcity Jewelhouse Pvt. Ltd. Vs PCIT (Central) (ITAT Jaipur)
ITAT Jaipur held that exercise of revisionary power under section 263 of the Income Tax Act on the basis of audit objection is not tenable in law. Accordingly, initiation of proceedings liable to be quashed.
Facts- The assessee company derives income from manufacturing and export of mainly gold and silver jewellery studded with precious, semiprecious stones and diamond from its unit situated in SEZ Unit, Sitapura and domestic Unit at Mahapura.
While examining the books of account and details furnished by the assessee, it was noticed that there remained difference in the profit margin of SEZ unit and domestic unit in as much as net profit of Rs. 1,26,72,574/-has been shown on turnover of Rs.52,68,47,908/- for the domestic unit at Mahapura, giving a net profit rate of 2.41% whereas net profit of Rs. 11,50,08,372/- has been shown on turnover of Rs.64,83,44,075/-, giving a net profit rate of 17.74%.
AO considering the facts of the case in its entirety, he considered it fair and reasonable and to safeguard the interest of revenue to make a further addition @ 17.74% on the value of inter-unit transfer of Rs. 2,92,49,217/-, being the net profit rate disclosed by Sitapura Unit as profit, this was worked out at Rs. 51,88,811/- over and above the profit of Rs. 38,88,584/- as claimed by the assessee on inter-unit transfers from Mahapura Domestic Unit. Accordingly amount of Rs. 51,88,811/- was reduced from the profit of SEZ Unit and accordingly deduction u/s. 10AA revised by AO.
