Principal Commissioner Of Income Tax 7 v. Sunshine Fasteners Pvt Ltd

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL No. 249 of 2018 ==============================================================PRINCIPAL COMMISSIONER OF INCOME TAX 7VersusSUNSHINE FASTENERS PVT LTD ============================================================== Appearance :Mrs MAUNA M BHATT, Advocate for the PETITIONER for the RESPONDENT(s) No. 1 ============================================================== CORAM:HONOURABLE Mr. JUSTICE AKIL KURESHIandHONOURABLE Mr. JUSTICE B.N. KARIA20[th] March 2018andHONOURABLE Mr. JUSTICE B.N. KARIA20[th] March 2018 ORAL ORDER(PER : HONOURABLE Mr. JUSTICE AKIL KURESHI) Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal, Rajkot Bench dated 23[rd] August 2017 raising following question of law for our consideration : “Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs. 70,04,560/= made under Section 40A[2](b) of the Income-tax Act, 1961 ?” Issue pertains to addition of Rs. 70.04 lacs [rounded off] made by the Assessing Officer under Section 40A[2](b) of the Income-tax Act, 1961 {“the Act” for short}. The Assessing Officer noted that the assessee had made purchases of certain raw materials from its sister concern namely Messrs. S.M.I, the total cost of which net of taxes came to Rs. 8.30 Crores [rounded off] during the relevant period. The average rate of purchase at gross was Rs. 95.00 per kilogram of wire and the average rate of purchase [net] was Rs. 84/= per kilogram. The assessee pointed out that the grades of the material purchased by the assessee and sold by M/s. S.M.I to other purchasers were different, and therefore, the rates could not be compared. The Assessing Officer accepted the issue in principle and reduced the proposed tax, nevertheless, sustained the addition of Rs. 70.04 lacs. The Tribunal carried out comparison of the assessee’s purchases of the same material from the sister concern-Messrs. S.M.I and from other co-related agencies and found that the rates offered by Messrs. S.M.I were substantially lower than the rate on which the assessee had purchased material from co-related parties. The Tribunal’s comparison can be seen from the below table which we have taken from the judgment of the Tribunal itself. From the above it can be seen that the Tribunal having due regard to the material on record found that there was no apparent justification for invoking the provision of Section 40A[2](b) of the Act. Entire issue is fact base, no question of law arises. Tax Appeal is dismissed. {Akil Kureshi, J.} Prakash {B.N Karia, J.}