Case Law Details
ITO Vs Bajaj Herbals Pvt. Ltd. (ITAT Ahmedabad)
Conclusion: Addition made on account of under-invoicing of sales to sister concern was not justified unless and until export sales to sister concern were sham transaction.
Held: During the previous year assessee-company made export sales of Rs. 34,72,784/- to M/s. Bajaj Herbal FZE LLP (BHFZE) which was appellant’s associated concern. Assessee also exported similar product to third parties. AO compared the sale prices made to the sister concern i.e. M/s. BHFZE and other such concern and tabulated the average price of sales with difference and worked out percentage of under-invoicing and its average. AO determined that the average difference of percentage of under-invoicing was 50% made to the sister concern rejecting the explanation of assessee that sale price to the sister concern was as per prevailing market price of that relevant time including other factors like terms of payment, quantity supplied, debtors realization, quality of product etc. In appeal assessee objected the methodology adopted by AO to work out such 50% under-invoicing on the basis of average. The appellant before the First Appellate Authority submitted the brake up export sales with comparison, sample copy of the bills of sister concern, the ledger account of the sister concern namely M/s. BHFZE and the other such concern too. Assessee objected before the appellate authority the method of comparison and estimation adopted by AO in making such huge addition. It was held that as per settled legal preposition AO could not entered in the shoes of any business man and could direct/dictate about how to conduct such business. All the export transaction were genuine and in comparison to such export to other parties of Rs. 18.88 crore the export to M/s. M/s. BHFZE was only Rs. 0.35 crore. It was important to note here that during survey proceedings u/s. 133A no evidences reflecting such modus operandi were found . Unless and until such export were sham transaction no addition for under invoicing could be made. It was therefore the addition so made by AO were not legally sustainable.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The appeal filed by the Revenue is directed against the order dated 18.05.2015 passed by the CIT(A)-1, Ahmedabad arising out of the order dated 28.03.2013 passed by the ITO Wd-1(2), Ahmedabad under Section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for Assessment Years 2009-10. The Revenue has filed the appeal with the following grounds:-
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