SRI.R. PRATAP,KOLLAM vs. THE ACIT, KOLLAM

PerCHANDRA POOJARI, AM:

These appeals by different assesses are directed against the different orders of the

CIT(A), Trivandrum and pertain to different assessment years.

1)The order of the Commissioner of Income tax (Appeals) Trivandrum, is against law, opposed to facts and the weight of evidence.

2)(a) CIT(A) grossly erred in sustaining the huge and arbitrary addition on sales to sister concerns on a selective picking of data and representing the difference between cost and selling price and terming it as an apparent loss under no commercial compulsion in the absence of a cogent finding by Assessing Officer to this effect.

(b) When the AO has failed to bring on record any defects, discrepancies or irregularities in trading results or to show that profit earned by the assessee was lower and thus with no material in his possession to show underselling, it was apparent that transactions with sister concerns were genuine or bonafide. CIT (A) erred therefore in concluding that the transactions with sister concerns

I.T.A. Nos.37 to 49/Coch/2016

were not genuine or bonafide resulting in a loss on Sale of Cashew Kernels to the sister concerns amounting to Rs.89,76,885/-.

(c) Both AO and CIT (A) failed to appreciate that the appellant had only followed Arms Length Price (ALP) and hence no loss incurred; ALP being cost + in the case of wholes(superior grades) and splits, butts and pieces (inferior grades) at prices corresponding to wt. average market price of direct exports of such grades accepted by the Dept. all these years. Elsewhere he has taken cognizance of the fact that pricing of direct exports can be relied upon. Purchases of various grades of kernels by the appellant from these sister concerns for export were also accepted.

d) CIT(A) ought to have appreciated that ALP does not necessarily mean a priceabove cost, maximum price or maximum profit in the range as rightly observed by Hon'ble Delhi Bench of ITAT in (2007) 109 ITD 101 & (2007) 288 ITR9(SC)

3) (a) CIT (A) erred in concluding that appellant has no case as he/she failed to discharge his/her onus that there was no diversion of profit to sister concerns to enable them to enjoy tax exemptions. He missed the vital point that 80HHC giving tax incentives to appellant and sister concerns went out of statute book from AY 2005-06.

(b) Both AO and CIT (A) presumed every grade of kernels whether superior or inferior to be sold above cost of production which is well-nigh impossible. It is a fact and which is verifiable on a comparison with peers in the industry that splits, butts and pieces designated as inferior grades have a market price below cost. Accordingly a part of stock consisting of such grades was valued at market price being lower than cost which has been accepted by the Dept. These compelling circumstances necessitating sale of inferior grades at market price which was below cost as also timing of contracts were also elaborated during assessment as well as appeal hearing with written evidence. Still CIT (A) concluded that appellant had not explained satisfactorily at any point of given time the business expediency for the pricing policy to sell below cost. (4) AO alleged that 'A' had a policy to sell below cost. This is not true since as is evident from his order, CIT(A) has observed that the higher grades were to sister concerns at prices above cost. Neither AO nor CIT(A) had established that any grade kernels were at any time sold below market price. Hence, the decision relied upon by CIT(A) did not apply to the appellant.

(5) Allegation by AO and CIT(A) that sales to sister concerns is a planned device to reduce tax incidence in the case of the appellant with no corresponding revenue yield to the recipient related units was not backed by any concrete evidence. They ought to have seen that both appellant and

I.T.A. Nos.37 to 49/Coch/2016

sister concerns were in the maximum tax rate slab and hence there was no favour shown to sister concerns in pricing of transfers to them.

(6) In the event of an addition alleging under pricing to sister concerns, corresponding addition in the purchase cost of the latter ought to have been recognized and benefit given in their assessment. Thus, the whole exercise becomes revenue neutral(2010) 236 CTR (SC) 113. Supreme Court decision was misconstrued.

(7) Having accepted the trading results filed by the appellant, no addition was made by the Sales Tax Dept. either on the assessee or sister concerns in any of these years.

For the above and other additional grounds that may be advanced and further evidence or records that may be produced at the time of hearing, the appellant prays that the appeal be allowed.

R. Pratap. As per details filed by the assessee, the Assessing Officer noticed that the

assessee had sold various grades of cashew kernels to concerns owned by near

relatives at values much lower than the cost of production in the course of export.

It was, therefore, proposed to disallow the loss on sale of cashew kernels incurred

by the assessee through such dealings and the loss was worked out as follows:

Sl. Name of sister Quantity Sale Price Average rate Cost of Cost of goods Difference No. concern sold (in Kg.) of sale production sold (Co. 7-4) (Col. 3x6) (1) (2) (3) (4) (5) (6) (7) (8) 1. Prakash 96253.9 18094830 187,99062 245.7 23849583.23 5554753.23 Exports 2. Nut Products 47333.1 9460960 199.88042 245.7 11629742.67 2168782.67 Company 3. Chethana 128640.9 30353720 235.95699 245.7 31607069.13 1253349.13 Cashew Corporation

According to the Assessing Officer, the rate ofsale to sister concerns ranged

between Rs.187.99 per Kg. to Rs.235.96 per kg, while the cost of production was

Rs.245.7/- per kg. which resulted in an apparent loss to the tune of Rs.89,76,885/-.

I.T.A. Nos.37 to 49/Coch/2016

Therefore, the Assessing Officer disallowed the above loss. According to the

Assessing Officer, any commercial activity must be for earning profit. The Assessing

Officer noticed that the entire sale in India had been to the concerns owned by near

relatives and the sales had been at rates lower than the cost of production. The

Assessing Officer did not accept the assessee’s argument that the sales were at the

prevailing market rate and that there had not been any preferential treatment

towards the sister concerns. According to the Assessing Officer, the method of

fixing cost of production and sales on weighted average method is appropriate. The

Assessing Officer noticed that there was no other appropriate method where all the

different grades of product came from the same raw material. The Assessing Officer

also rejected the argument of the assessee that the entire transaction among the

concerns of the group was revenue neutral. The Assessing Officer noticed that all

the concerns were independent units competing with each other in the open

export/local market and all concerns hadtheir own factories and independent

customers and they cannot therefore, be treated as sister concerns. The Assessing

Officer noticed that Mrs. Preetha Nair of Nut Products Company to whom the

assessee had sold products at rates less than cost of production had declared

income below the taxable limit. Thus, the Assessing Officer found that the assessee

had adopted a pricing policy whereby cashew kernels were sold to sister concerns at

a price below cost of production which is a planned device to reduce tax incidence.

Thus, the Assessing Officer concluded that the assessee had incurred an apparent

loss by resorting to the above strategy and loss of Rs.89,76,885/-was disallowed.

I.T.A. Nos.37 to 49/Coch/2016

The Assessing Officer made similar disallowance for all the assessment years in

respect of all the assesses.

3.1 For the assessment year 2010-11 in the case of R.Pratap, as per details filed

by the assessee, the Assessing Officer noticed that the assessee had sold various

grades of cashew kernels to concerns owned by near relatives at values much lower

than the cost of production in the course of export. It was, therefore, proposed to

disallow the loss on sale of cashew kernels incurred by the assessee through such

dealings and the loss was worked out as follows:

Sl. Name of sister Quantity sold Sale Price Average Cost of Cost of Difference No. concern (in Kg.) rate of production goods sold (Co. 7-4) sale (Col. 3x6) (1) (2) (3) (4) (5) (6) (7) (8) 1. Swathy Foods 23,814.000 60,90,000 255.73 269.20 64,10,729 3,20,729 2. Prakash Exports 77,737.780 2,03,29,000 261.51 269.20 2,09,27,010 5,98,010 3. Chethana 41,504.400 1,11,54,180 268.75 269.20 1,11,72,984 18,804 Cashew Corporation 4. Nut Products 49,215.600 1,15,92,620 235.55 269.20 1,32,48,840 16,56,220 Company 19,87,061.360 54,02,90,715

3.2 For the assessment year 2011-12, in the case of R.Pratap, as per details filed

by the assessee, the Assessing Officer noticed that the assessee had sold various

grades of cashew kernels to concerns owned by near relatives at values much lower

than the cost of production in the course of export. It was, therefore, proposed to

disallow the loss on sale of cashew kernels incurred by the assessee through such

dealings and the loss was worked out as follows:

I.T.A. Nos.37 to 49/Coch/2016

Sl. Name of sister Quantity Sale Price Average Cost of Cost of Difference No. concern sold (in Kg.) rate of production goods sold (Co. 7-4) sale (Col. 3x6) (1) (2) (3) (4) (5) (6) (7) (8) 1. Vijayalakshmi 2219497175 285 297 231157970 9660794 Cashew Co. 778309.660 2. Prakash Exports 41345.640 10171850 246 297 12279655 2107805 3. Chethana 14628.600 4126400 282 297 4344694 218294 Cashew Corporation 4. Nut Products 20003.76 5276150 264 297 5941116 664966 Company 5. Surya Exports 521.640 128800 247 297 154927 26127 6. Prathyush 1519.560 375200 247 297 451309 76109 Exports TOTAL 12754095

3.3 For the assessment year 2008-09 in the case of R.Prakash, as per details filed

by the assessee, the Assessing Officer noticed that the assessee had sold various

grades of cashew kernels to concerns owned by near relatives at values much lower

than the cost of production in the course of export. It was, therefore, proposed to

disallow the loss on sale of cashew kernels incurred by the assessee through such

dealings and the loss was worked out as follows:

Sl. Name of sister Quantity Sale Price Average Cost of Cost of Difference No. concern sold (in rate of sale production goods sold (Co. 7-4) Kg.) (Col. 3x6) (1) (2) (3) (4) (5) (6) (7) (8) 1. Sunfood 275573.34 52249035 189.601197 190 52358935 109899.6 Corporation Ltd. 2. Nut Products 61689.6 9960590 161.463034 190 11721024 1760434 Company 3. Pratap Cashew 3061.8 456140 148.977726 190 581742 125602 Company 4. Pratyush 249.48 40920 164.021164 190 47401.2 6481.2 Exports 5. Surya Exports 1701 261000 153.439153 190 323190 62190 TOTAL 62967685 2064606.8

3.4 For the assessment year 2009-10 in the case of R.Prakash, as per details filed

by the assessee, the Assessing Officer noticed that the assessee had sold various

I.T.A. Nos.37 to 49/Coch/2016

grades of cashew kernels to concerns owned by near relatives at values much lower

than the cost of production in the course of export. It was, therefore, proposed to

disallow the loss on sale of cashew kernels incurred by the assessee through such

dealings and the loss was worked out as follows:

Sl. Name of sister Quantity Sale Price Average Cost of Cost of goods Difference No. concern sold (in rate of sale production sold (Co. 7-4) Kg.) (Col. 3x6) (1) (2) (3) (4) (5) (6) (7) (8) 1. Sunfood 154276.3 31561690 204.57899 229 35329272.7 3767582.7 Corporation Ltd. 2. Nut Products 48761.98 10862580 222.76741 229 11166493.42 303913.42 Company 3. Chethna 118911.2 26803600 225.40854 229 27230664.8 427064.8 Cashew Corporation 4. Pratyush 249.48 40920 164.021164 190 47401.2 6481.2 Exports 5. Surya Exports 1701 261000 153.439153 190 323190 62190 TOTAL 62967685 2064606.8

3.5For the assessment year 2010-11 in the case of R.Prakash, as per details filed by

the assessee, the Assessing Officer noticed that the assessee had sold various

grades of cashew kernels to concerns owned by near relatives at values much lower

than the cost of production in the course of export. It was, therefore, proposed to

disallow the loss on sale of cashew kernels incurred by the assessee through such

dealings and the loss was worked out as follows:

Sl Name of sister Quantity Sale Price Average Cost of Cost of Difference No. concern sold (in rate of production goods sold (Co. 7-4) Kg.) sale (Col. 3x6) (1) (2) (3) (4) (5) (6) (7) (8) 1. Nut Products 54052.840 1,32,04,380 244.29 270.83 1,46,39,131 14,34,751 Company TOTAL 48,8037,490 14,34,751

3.6 For the assessment year 2011-12, in the case of R. Prakash, as per details filed

by the assessee, the Assessing Officer noticed that the assessee had sold various

I.T.A. Nos.37 to 49/Coch/2016

grades of cashew kernels to concerns owned by near relatives at values much lower

than the cost of production in the course of export. It was, therefore, proposed to

disallow the loss on sale of cashew kernels incurred by the assessee through such

dealings and the loss was worked out as follows:

Sl. Name of sister Quantity Sale Price Average Cost of Cost of Difference No. concern sold (in Kg.) rate of production goods sold (Co. 7-4) sale (Col. 3x6) (1) (2) (3) (4) (5) (6) (7) (8) 1. Vijayalakshmi 881253.860 258808785 294 309 272307442 13498657 Cashew Co. 2. Sunfood 57068.680 14104900 247 309 17634222 3529322 Corporation 3. Chethana 13471.920 3799600 282 309 4162823 363223 Cashew Corporation 4. Nut Products 27034.560 6941950 257 309 83543679 1411729 Company 5. Surya Exports 385.560 95200 247 309 119138 23938 6. Prathyush 453.600 112000 247 309 140162 28162 Exports 7. Swathy Foods 17010 4050000 238 309 5256090 1206090 TOTAL 20061121

3.7 For the assessment year 2009-10 in the case of T.C. Usha, as per details filed

by the assessee, the Assessing Officer noticed that the assessee had sold various

grades of cashew kernels to concerns owned by near relatives at values much lower

than the cost of production in the course of export. It was, therefore, proposed to

disallow the loss on sale of cashew kernels incurred by the assessee through such

dealings and the loss was worked out as follows:

Sl. Name of sister Relation Quantity Sale Price Average Cost of Cost of Difference No. concern sold (in rate of production goods sold (Co. 7-4) Kg.) sale (Col. 3x6) (1) (2) (3) (4) (5) (6) (7) (8) (9) 1. Vijayalakshmi Husband 2313.6 470814 203 275 636240 165426 Cashew Co. 2. Vijayalakshmi Husband 34166.84 6564540 192 275 9395881 12831341 Cashew Co. 3. Vijayalakshmi Husband, 134200 Cashew Co. assessee (Firm) & Others 5139.92 9

I.T.A. Nos.37 to 49/Coch/2016

3.8 For the assessment year 2010-11 in the case of T.C. Usha, as per details filed

by the assessee, the Assessing Officer noticed that the assessee had sold various

grades of cashew kernels to concerns owned by near relatives at values much lower

than the cost of production in the course of export. It was, therefore, proposed to

disallow the loss on sale of cashew kernels incurred by the assessee through such

dealings and the loss was worked out as follows:

Sl. Name of sister Quantity Sale Price Average Cost of Cost of Difference No. concern sold (in Kg.) rate of production goods sold (Co. 7-4) sale (Col. 3x6) (1) (2) (3) (4) (5) (6) (7) (8) 1. Vijayalakshmi 82,041.320 2,13,44,440 260.17 310.83 2,55,00,903 41,56,463 Cashew Co. 2. Sunfood 18,438.840 53,53,590 290.34 310.83 57,31,345 3,77,755 Corporation 3 Nut Products 4,195,800 10,03,650 239.20 310.83 13,04,181 3,00,531 Company 4 Pratap Cashew 3,016,440 7,83,400 259.71 310.83 9,37,600 1,54,200 Company (P) Ltd. 5. Prakash Exports 18,711.000 52,26,175 279.31 310.83 58,15,940 5,89,765 6. Surya Exports 272.160 75,840 278.66 310.83 84,595 8,755 TOTAL 3,37,87,095 3,93,74,564 55,87,469

3.9 For the assessment year 2008-09 in the case of Shri Ravindranathan Nair, as

per details filed by the assessee, the Assessing Officer noticed that the assessee had

sold various grades of cashew kernels to concerns owned by near relatives at values

much lower than the cost of production in the course of export. It was, therefore,

I.T.A. Nos.37 to 49/Coch/2016

proposed to disallow the loss on sale of cashew kernels incurred by the assessee

through such dealings and the loss was worked out as follows:

3.9.1 For the assessment year 2009-10, in the case of M/s. Vijayalaxmi Cashew

Co., as per details filed by the assessee, the Assessing Officer noticed that the

assessee had sold various grades of cashew kernels to concerns owned by near

relatives at values much lower than the cost of production in the course of export.

It was, therefore, proposed to disallow the loss on sale of cashew kernels incurred

by the assessee through such dealings and the loss was worked out as follows:

Loss on sale in the course of export to sister concerns Rs.4,37,61,625/-

3.9.2 For the assessment year 2010-11, in the case of M/s. Vijayalaxmi Cashew

Co., as per details filed by the assessee, the Assessing Officer noticed that the

assessee had sold various grades of cashew kernels to concerns owned by near

relatives at values much lower than the cost of production in the course of export.

It was, therefore, proposed to disallow the loss on sale of cashew kernels incurred

by the assessee through such dealings and the loss was worked out as follows:

Sl. Name of sister Quantity sold (in Sale Price Average Cost of Cost of goods Difference No. concern Kg.) rate of sale production sold (Co. 7-4) (Col. 3x6) (1) (2) (3) (4) (5) (6) (7) (8) 1. Chethna Cashew 2,48,618,160 6,46,28,060 259.99 268.41 6,67,31,600 21,03,540 Corporation 2. Nut Products 3,61,541,880 8,42,41,320 233.01 268.41 9,70,41,456 1,28,00,136 Company 3. Prakash Exports 4,70,020,320 11,24,49,520 239.24 268.41 12,61,58,154 1,37,08,634 4. Prathyush Exports 13,335.840 29,98,800 224.86 268.41 35,79,473 5,80,673 5. Sunfood 6,07,086.940 16,04,89.080 264.36 268.41 16,29,48,206 24,59,126 Corporation Ltd. TOTAL 48,13,52,780 3,16,52,119

I.T.A. Nos.37 to 49/Coch/2016

3.9.3 For the assessment year 2011-12, in the case of M/s. Vijayalaxmi Cashew

Co., as per details filed by the assessee, the Assessing Officer noticed that the

assessee had sold various grades of cashew kernels to concerns owned by near

relatives at values much lower than the cost of production in the course of export.

It was, therefore, proposed to disallow the loss on sale of cashew kernels incurred

by the assessee through such dealings and the loss was worked out as follows:

Sl. Name of sister Quantity sold Sale Price Average Cost of Cost of Difference No concern (in Kg.) rate of production goods sold (Co. 7-4) . sale (Col. 3x6) (1) (2) (3) (4) (5) (6) (7) (8) 1. Prakash Exports 195037850 267.39 294.44 214767916 19730066 729411.480 2. Nut Products 64326800 267 294.44 70819121 6492321 Company 240521.14 3. Prathyush Exports 3404800 247 294.44 4060162 655363 13789.44 TOTAL 2,68,77,750

transaction is genuine, in view of diversion of profits to sister concerns which are

enjoying tax exemptions and the seller incurring huge loss in the process, is on the

assessee. According to the CIT(A), where a trader charges less than the market

price for the goods sold, the same would not render him liable to tax on the

differential amount if the transaction is genuine. The CIT(A) observed that there

was no material available on record to show that the output price is in parity with

the obtaining price in the international market. The CIT(A) observed that business

expediency to sell the cashew kernels at rates much below to the domestic rates

when the assessee is not entitled to the export benefits on sales to sister concerns

I.T.A. Nos.37 to 49/Coch/2016

nor having claimed deduction under section 80HHC of the Act, has not been

explained.

4.1 Before the CIT(A), the assessee argued that assessee’s selling price has

nothing to do with cost of production since sales made to sister concerns consisted

of a mix of higher grades and inferior grades. The CIT(A) observed that while the

higher grades realized above cost, the inferior grades consisting of splits, butts and

pieces fetched a price below to the cost price which is akin to the international

price. According to the CIT(A), white wholes, scorched wholes, scorched wholes

seconds, dessert wholes etc. were considered to be higher grade cashew kernels

and similarly, splits, butts, large white pieces, scorched butts, scorched pieces,

scorched pieces seconds etc. were considered to be inferior grade cashew kernels.

The CIT(A) observed that the assessee claimed to have sold both the higher grade

and inferior kernels to the sister concerns and third parties in the domestic market

and the assessee also claimed to have had direct exports. Before the CIT(A), the

assessee filed unit wise and grade wise sales made to sister concerns and grade

wise direct export details for verification. According to the CIT(A), macro analysis of

such details revealed that sale price of cashew kernels was not static throughout the

year but varied mostly from Rs.128 per kg to Rs.310 per Kg. and the higher grade

kernels of white wholes (W-180, W-210, W-240, W-320 etc) and scorched wholes

(SW-180, SW-210, SW-240, SW-320 etc) were sold to sister concerns for a price

mostly between Rs.163 per kg and Rs.176 per kg. The CIT(A) observed that very

rarely the higher grade kernels were soldto sister concerns for Rs.300 and above

I.T.A. Nos.37 to 49/Coch/2016

per kg. It was observed that the lower grade kennels such as butts, splits and

pieces were mostly sold for a price between Rs.137 and Rs.147 per kg. Substantial

quantity of higher grade cashew kernels were sold to sister concerns and seeing

from the grade wise sales details filed, much of splits, butts and pieces were not

sold to sister concerns. The assessee had not explained as to why higher grade

kernels were sold to sister concerns at a price much below the cost price.

Contradicting the above, the assessee claimed to have exported directly higher

grade cashew kernels for a sale price between Rs.172 per kg and Rs.364 per kg

and inferior grade between Rs.137 per kg and Rs.150 per kg. From this, the

CIT(A) observed that the assessee had sold substantial quantity of higher grade

cashew kernels at a price below the cost price without explaining the business

expediency to do so and the assessee had also not explained the reason for the

pricing policy adopted to sell the kernels to sister concerns to a price below Rs.364

per kg.which is the maximum export price. According to the CIT(A) , the sister

concerns are entitled for deduction u/s. 80HHC of the Act and the damage caused

to the revenue in the circumstances above, is nothing but outcome of a planned

device to reduce the tax which is not tenable by law. The CIT(A) placed reliance on

the judgment of the Gujarat High Court in the case of Patel Chemical Works vs CIT

(265 ITR 273) wherein it was held that a sale to a sister concern at a price much

below to the market price was a device for tax avoidance.

4.2 According to the CIT(A), it is not disputed that the average cost of production

of cashew kernels was Rs.178 per kg and the sales to sister concerns were made

I.T.A. Nos.37 to 49/Coch/2016

between Rs.153 per kg to Rs.177 per kg. The CIT(A) observed that sales to sister

concerns fora price between Rs.153 to Rs.177 can be on arms length basisonly

when the price is closer to the export market price of the sister concerns. In the

absence of export price details of the sister concerns for verification, the CIT(A) felt

that export price to which cashew kernels were exported directly by the assessee

can be relied on. The assessee claimed to have exported higher grade cashew

kernels for a price between Rs.172 and Rs.364 and inferior grade between Rs.137

and Rs.150. According to the CIT(A), had the assessee followed arms length price,

he should have sold cashew kernels to sister concerns for a higher price than he

sold between Rs.153 and Rs.177. In view of the above, the CIT(A) was of the

opinion that the assessee had not followed the arms length price against the

cashew kernels sold to his sister concerns. According to the CIT(A), for the

purpose of assessment under the IT Act, each business entity and even if it is a

sister concern, it is to be treated as a separate unit of assessment and the profit

and loss is to be independently arrived at and assessed to. The CIT(A) was of the

view that in the event of underselling and the sales to the sister concerns were not

made on the basis of arms length price, then addition is to be made on the basis of

arms length price. The CIT(A) opined that the judgments of the Supreme Court in

the case of DIT (International Taxation) vs. Morgan Stanley and Co Inc (292 ITR

416), CIT vs Glaxosmithkline Asia (P) Ltd. (236 ITR 113) and CIT vs. Calcutta

Discount Company Ltd (91 ITR 8)relied on by the assessee cannot be applied to him

since the first decision is on the taxability of the permanent establishment under

the double taxation avoidance agreement and as ruled in the second decision, the 15

I.T.A. Nos.37 to 49/Coch/2016

concept of revenue neutral cannot be applied to the case of the assessee since all

the concerns of the assessee group were doing their business independently having

no access with each other and the profit the assessee otherwise would have earned

had he not resorted to underselling, wasdiverted towards the units (sister concerns)

on the lower side of tax i.e. the units which are entitled for deduction u/s 80HHC of

the Act. According to the CIT(A), the third decision also cannot be applied to the

case of the assessee since the transaction was carried out without following arms

length price and proved to be a planned device to reduce tax incidence and hence,

the transaction is not genuine and bonafide. In view of the above, the CIT(A) did

not find any infirmity in the order of the Assessing Officer and accordingly, the

addition of Rs.89,76,885/- was sustained.

assessee is engaged in the process of manufacture of cashew kernels from Raw

Cashew Nuts (RCN) which were imported as also locally procured mainly for

exports. The raw nuts were subjected to various processes like drying, roasting,

shelling, peeling, grading etc, and the end product was cashew kernels of various

grades like W180, W150,W210,W240, W320, W450 etc (wholes) and splits,

pieces/butts having different price realizations in the export market. The outturn

which represented production yield in Kg. per bag of RCN of 80Kg. included all

grades.

5.1 The Ld. AR submitted that since the outturn came from the same raw material

and the same production procedures, the average cost for each grade can only be 16

I.T.A. Nos.37 to 49/Coch/2016

arrived at by taking the average cost of production which was accepted by the AO.

It was submitted that the average cost of production of cashew kernels was arrived

at on total cost basis in accordance with generally accepted accounting principles

(GAAP). According to the Ld. AR, within the domain of Export quality cashew

kernels produced and exported by the assessee, there were superior grades

consisting of wholes and inferior grades consisting of (splits/pieces,butts). It was

contended that the assessee had been selling cashew kernels to firms and business

concerns owned by close relatives and the object behind such transfer was to help

them honour their export commitments on time.Superior Grades comprising

'Wholes' were generally sold at 'cost plus' having proximity with market prices of

direct exports by the assessee. However, it was submitted that grades representing

splits, butts and pieces have a market price below cost which is validated by the

monthly bulletin of international prices. Thus, it was submitted that 'Cost Plus'

pricing generally followed for direct exports or exports through sister concerns

cannot be automatically extended to pricing of inferior grades sold to them, a fact

which was evident also from grade wise details of sales of wholes as well as splits,

pieces and butts furnished each year to the Assessing Officer during regular

assessment u/s. 143(3) of the Act and which was verifiable on a comparison with

peers in industry which proved the commercial compulsion to invoice sales of such

inferior grades at prices below cost.

5.2The Ld. AR submitted that specimen export invoices of such grades, contracts

etc were produced for verification by Assessing Officer.It was submitted that the

I.T.A. Nos.37 to 49/Coch/2016

valuation of closing stock of cashew kernels is at cost or net realizable value (NRV)

whichever is lower with inferior grades valued at market price, being below cost as

per relevant Accounting Standard of ICAI which was duly disclosed in Significant

Accounting Policies. The Ld. AR submitted that in compliance of notices u/s. 143(2)

and 142(1), details of sales to sister concerns, grade wise, invoice wise & unit wise,

showing quantity and sales value were furnished to the AO for each Assessment

year even if not specifically called for, but were not mentioned in the assessment

order. It was submitted that the Assessing Officer presumed that every Kg. of

kernels irrespective of their grades should be sold at or above cost which was

impossible for the reason that splits etc. sold, had a market price below cost which

proved commercial expediency. The Ld. AR submitted that Assessing Officer as well

as CIT(A) ought to have been convinced beyond an iota of doubt that transactions

with sister concerns followed Arm's Length Pricing (ALP) with the prices of grades

charged to sister concerns having proximity to prices of exports to unrelated parties

and were comparable. Therefore, the addition is to be deleted. For this, the Ld. AR

relied on the judgment of the Punjab & Haryana High Court in the case of CIT vs.

Jyothi Industries (2011) 330 ITR 573 ( P & H ).

5.3The Ld. AR submitted that no comparable cases were brought on record by the

Assessing officer to rebut the contentions of the assessee. Hence,addition solely on

conjectures and surmises not backed by material data is not warranted. For this, he

relied on the following case laws:

1) CIT vs. Modi Xerox Ltd.(2016) 41 DTR (All) 55,

I.T.A. Nos.37 to 49/Coch/2016

2) Vijay C. Kamdar vs. ITO (2007) 305 ITR (AT) (Mum) 163

3) Airtech (P) Ltd. vs. DCIT (2011) 139 TTJ (Del. Trib.) 318

5.4 The Ld. AR submitted that system of Accounting, books of account and

accounting policies were accepted by the AO which implied inter alia thatgrade wise

valuation of stock of kernels were recognized by the Dept, which proved commercial

expediency or compelling circumstances to sell inferior grades of kernels at a

market price below cost. This would imply that averaging cannot be done in a

scenario when quality is a crucial factor. For this, he relied on the judgment of the

Bombay High Court in the case of Director of Income Tax (International Taxation)

vs. Boston Scientific International B.V. (2013) 90 DTR (Bom.) 357. It was submitted

that the A.O. had accepted the pricing methodology of the assessee in the following

transactions

(a). Direct exports i.e. sales to unrelated parties consisting of wholes and splits having separate wt. average rates.

(b). Purchases from these very sister concerns consisting of wholes and splits.

It was submitted that he ought to have applied the same yardstick in the matter of

pricing of sales to sister concerns for their export. Notwithstanding the above, the

Assessing Officer reached an abrupt and negative conclusion that 'A' had a policy to

sell cashew kernels to sister concerns (related units) at below cost apparently under

'no commercial compulsion'. The Ld.AR contended that for A.Y. 2008-09 the A.O.

made an addition of a meagre amount of Rs. 43,494/- on account of'apparent loss'.

I.T.A. Nos.37 to 49/Coch/2016

Total TurnoverRs.106.72 crores Trading margin Rs. 10.79 crores Sales % of export to sister concerns Rs. 64.70 crores Wt. average price Rs.194 per kg. Cost of production Rs.178 per kg. Value of sales picked out by A.O. Rs.2.30 crores

5.5 The A.O. made the addition by observing as follows:

"Loss on sale in the course of Export to Sister Concerns:

As per details filed by the assessee, it was seen that the assessee has sold cashew

kernels to sister concerns in the course of export as under:

Sl. Name of sister Quantity Sale Price Average Cost of Cost of Difference No. coincerns sold (in rate of sale production goods sold (Col.7-4). Kg.) (co. 3x6) 1. Prakash Exports 127619.24 22711054 177.959483 178 22716225 5170.72 2. Pratyush Exports 589.68 96720 164.021164 178 104963.04 8243.04 3. Surya 1224.72 187920 153.439153 178 218000.16 30080.16 43493.92

5.6 The Ld. AR submitted that the rate of sale to sister concerns ranged between

Rs. 153.44 per Kg. to Rs. 177.96 per Kg. , while the cost of production was Rs.

178/- per Kg which resulted in an apparent loss to the tune of Rs. 43,494/-. It was

proposed to disallow the above loss. The Ld. AR submitted that vide letter dated

07/12/2010 a detailed reply giving the reason why the exports had been carried

out through sister concerns, how the market fluctuation varied and how the

different grades may have to be sold at lesser value than the cost of production was

filed before the Assessing Officer. It was represented that the assessee had

followed Arms Length Pricing corresponding to the prevailing market rate, whether

it be direct export or sales in the course of export to sister concerns. It was further

I.T.A. Nos.37 to 49/Coch/2016

explained that as in earlier years the assessee had effected sales to sister concerns

for their exports and these transactions were duly supported by Form 'H'/Form I8A

as the case may be. According to the Ld. AR, in sales tax terminology they are

termed as sales in the course of export and these sales are invoiced grade wise

corresponding to the grades exported by the sister concern and relevant export

contract price. Hence, it was submitted that timing of contract is very important.

The Ld. AR submitted that being for exports, the prices changed to sister concerns

grade wise vis-a-vis exports to unrelated parties are comparable andsales to sister

concerns in the course of export are at Arms LengthPrice(ALP). According to the

Ld. AR, for lower grades such as splits and pieces, the market price being lower

than the production cost, they cannot be sold above market price to sister concerns

and, if so, they will be hit hard by Section 40A(2). Hence, it was submitted thatthere

was no shifting of profits in favour of sister concerns for their benefit as the transfer

price was based on ultimate export price obtaining for respective grade(s) which

therefore, constituted ALP on the date of relevant export contract.

5.7 The Ld. AR submitted that it is virtually impossible to presume that sale price

remained constant throughout the year for every grade and for every kilogram so

that on the basis of average closing stock price the entire sales should be above this

price. Hence, it was submitted that weighted average price of entire sales was not

an appropriate method to conclude underselling as it had severe limitations. For

this, the Ld. AR relied on the Tribunal in the case of Vijay C. Kamdar vs. ITO(2009)

305 ITR (AT) 163 (Mum) where it was held as follows:

I.T.A. Nos.37 to 49/Coch/2016

(iii) that the Assessing Officer formed the belief that the assessee over invoiced the purchase by relying upon the statement of K in the income-tax proceedings. The disallowance was without making any further enquiry only for the reason that the supplier of the assessee did not appear before him. This statement was not relied upon by the Additional Commissioner of Customs and he had dropped the proceedings. These materials were not sufficient to hold that the assessee had over-invoiced the purchases. There were different varieties of pens available in the market whose costs differed according to quality and there were different factors to determine the cost of pens. Without bringing any material on record the disallowance made by the Revenue authorities was not justifiable.”

5.8 The Ld. AR submitted that the assessing officer had made the addition in

assessment year 2009-10 under ‘business head ' on the pretext that there was an

'apparent loss' of Rs. 89.76 lakhs on alleged policy of underselling in which event

there was an apparent gain in the books of sister concern(s).According to the ld.

AR, anyaddition under the head "income from business" becomes revenue neutralin

nature since any addition towards underselling in the hands of the assessee

becomes a corresponding deduction for purchase in the hands of sister concern(s),

as held by the Supreme Court in the case of CIT vs. Glaxo SmithklineAsia (P) Ltd.

(2010) 236 CTR (SC) 113. it was argued that when this judgment was brought to

his notice by filing a copy, the Assessing Officer took a dramatic U turn to hold that

units were independent. Hence, it was submitted that the addition on account

ofunderpricing was not warranted. According to the ld. AR, the assessing officer

relied heavily on his order in PreethaS. Nair for A.Y. 2009-10 to hold that there was

no revenue yield to the recipient sister concern and so, under pricing was done to

reduce tax incidence. According to the Ld. AR, the assessing officer missed the vital

point that income was below taxable limit after b/f losses were set off during the

I.T.A. Nos.37 to 49/Coch/2016

current year. Moreover, there was no finding by the department that sister

concerns benefited in any manner.

5.9 The Ld. AR submitted that priorto abolition of section 80HHC, there was an

apprehension that underpricing could be done to enable sister concerns claim

greater 80HHC benefit. This is no longer the case from A.Y. 2005-06. It was

submitted that both assessee & sister concern(s) paid tax at maximum marginal

rate. According to the Ld. AR timing of contracts is also an important parameter in

the matter of fixing transfer prices. For example when price of say W320 grade

contracted earlier was Rs. X which is less than cost or current price, assessee is

bound to sell atcontracted price only. It was submitted that A.O. wrongly presumed

that entire sales in India were to sister concerns. The sales wereeffected in the

domestic market through depots, consignment agents etc. The Ld. AR submitted

that in the absence of a clear finding by AO to the contrary, it was only fair and

reasonable to presume that the transactions with sister concerns were regarded

genuine and bonafide. The Assessing Officer relied on the judgment of the

Supreme Court in the case ofCIT vs. Calcutta Discount Company Ltd. (1973) 91 ITR

8, yet he stood by artificial loss to the assessee from alleged under pricing with no

revenue yield to the recipient sister concern(s).

5.9.1 The Ld. AR submitted that mere fact that sales were made at prices lower

than cost or even the market rates would not entitle the Incometax Department to

assess the difference between the cost/market price and the price paid by the sister

concern(s) as profits of the assessee. The Ld. AR relied on the judgment of 23

I.T.A. Nos.37 to 49/Coch/2016

theSupreme Court in the case of CIT vs. Calcutta Discount Company Ltd. (1973) 91

ITR 8 approving the decision of the Madras High Court in Shri Ramalinga

ChoodambikaMills Ltd vs. CIT reported in (1955) 28 ITR 952 (Mad). The Ld. AR

relied on the judgment of the Supreme Court in Collector of Central Excise New

Delhi vs. Guru Nanak Refrigeration Corporation Ltd. 2003 INDLAW SC 301 which

approved the decision of the Appellate Tribunal (CEGAT) to the effect that just

because sale price was less than cost of production there was no justification to

reject the valuation of goods sold for charging Central Excise Duty when the

transactions were at Arm's Length.

5.9.2 The Ld. AR submitted that CIT(A) picked a single highest price from the

details submitted to him and concluded that the transactions are not genuine and

not at ALP which was not correct. The Ld. AR relied on the decision of the Tribunal

in the case of ITW India Ltd. vs. ACIT (2015) 169 TTJ (Del) 60. According to the

Ld. AR, this underlines the need for determination of separate wt. average pricing

for wholes and splits with suitable adjustments and for a cogent and meaningful

comparison, the same cannot be aggregated. The Ld. AR submitted that ALP

therefore could be wt. average of direct exports and wholes and/splits, pieces and

butts respectively which can be a benchmark for comparison with suitable

adjustments factoring for following circumstances:

(1) The composition of grades in the sales mix even among low grades.

(2) Those grades entering into direct export not forming part of sales to sister concerns and vice versa.

(3) Timing of contracts & price variation even among superior grades. 24

I.T.A. Nos.37 to 49/Coch/2016

(4) Exchange rate variation.

Accordingly, it was submitted that 15% allowance was considered for which a

working had been given on 21/11/2019 which can be broadly broken up as follows:

10% to account for such factors as composition of grades in the sales mix, quality of kernels, etc.

5% to cover Profit and indirect overheads of sister concern(s).

For this, the Ld. AR relied on the decision of the Tribunal in the case of Merck Ltd.

vs. DCIT (2016) 139 DTR (Mum Trib.) 1.

5.9.3 The Ld. AR submitted that ALP is determined by taking result of a

comparabletransactions in comparable circumstances and by making suitable

adjustments for the differences. For this, he relied on the decision of the Tribunal in

the case of Mentor Graphics (Noida) (P) Ltd. vs. DCIT 109 ITD 101 (Del.). The

Bench observed that ALP does not mean maximum price or maximum profit in the

range. Comparison has to be made with like entities – apples to be compared with

apples.

5.9.4The Ld. AR submitted that the Assessing Officer confined himself to a small

sample out of total sales to related units and banking on its wt. average when a

part of closing stock comprising inferior grades having a market price below cost will

not yield a fair result at all. He relied on the judgment of the Rajasthan High Court

in the case of Singhal Natural Stone (P) Ltd. (2011) 243 CTR (Raj) 414. The Ld. AR

submitted that by applying real income concept, the officer should have appreciated

I.T.A. Nos.37 to 49/Coch/2016

that only income which an assessee had earned or which had accrued to him should

be taxed. The Ld. AR relied on the judgment of the Supreme Court in the case of

CIT vs. Calcutta Discount Company Ltd. (1973) 91ITR 8 (SC). It was submitted

that no addition had been made by the sales tax Dept either on the assessee or

sister concerns in respect of such sales which were all documented. The Ld. AR

relied on the judgment of the Madras High Court in the case of CIT vs. Sakuntala

Devi Khetan (352 ITR 484) wherein it was held that Assessing Officer has to adopt

the figures and turnover finally assessed by the Sales Tax authorities. The Ld. AR

drew our attention to the following Annexures:

Annexure I - Bulletin of International Prices Annexure II - Comparison chart showing overall wt. average of sales Vs. Cost Annexure III- wt. average chart Vs. ALP Annexure IV - Comparison with peers in industry Annexure V - Comparison of sales by assess to sister concerns for - exports Vs. Exports by Latter.

5.9.5The Ld. AR submitted that sales mix has great relevance in the matter of wt.

average, a high % of superior grades boost up the wt. average whereas a higher

%of inferior grades in the total mix has an opposite effect. According to the Ld. AR

without examining the same and commercial compulsion for lower grades to be sold

below cost, wt. average of a selective pick up of sales to sister concerns and its

comparison with average cost of production would only lead to distorted results and

can never be a litmus test of under pricing/apparent loss. The Ld. AR relied on the

decisions of the Tribunal in the case of Henkel Adhesives Technologies India (P) Ltd.

vs. DCIT (2012)163TTJ (Pune), 491 and in the case of Intimate Fashions (India) (P)

I.T.A. Nos.37 to 49/Coch/2016

Ltd. vs. ACIT 149 TTJ (Chennai) 775. By this exercise, A.O. applied the average

cost of production on the sample sales taken out of entire sales. In other words, he

substituted cost for the market price realized which had no rationale. He relied on

the judgment of the Delhi High Court in the case of Satnam Overseas Ltd. &Anr vs.

Addl. CIT (2010) 228 CTR (Del) 121

5.9.6The Ld. AR submitted that even after appreciating the key issues and

summarizing them, CIT(A) upheld the addition made by A.O. holding that assessee

had no case. The Ld. AR submitted that his abrupt conclusions emanated from

following his order in A.Y. 2008-09 that lay at the core of dismissing all the 13

Appeals of the assessee/sister concern(s). The CIT(A) observed that the

transactions were carried out without following Arms Length Price (ALP) and proved

to be a planned device to reduce the tax incidence by diverting profits to sister

concerns(buyer) to enable them claim higher benefit through section 80HHC

overlooking the fact that section 80 HHC went out of statute from A.Y. 2005-06.

Hence,he concluded that the transactions were not genuine and bonafide and that

the judgment of the Supreme Court in the case of CIT vs. Calcutta Discount

Company Ltd. 91ITR 8 cannot be applied.

5.9.7The Ld. AR submitted that though CIT(A) professed that taxation is on real

profit and not on unearned profits which is at the core of above Apex Court

decision, still he held that this decision will not apply and upheld the addition on

imaginary profits on the pretext that there is no infirmity in the order ofA.O. The

CIT(A) brushed aside all the relevant decisions cited, copies thereof given. In so far 27

I.T.A. Nos.37 to 49/Coch/2016

as A.O. had accepted the veracity of documents produced before him/her during

assessment, the Ld. AR submitted that the CIT (A) should have deleted the addition

in the absence of any incriminating evidence to prove that transactions were

colourable& sham device to avoid tax. The Ld. AR relied on the decision of the

Tribunal in the case of ITO vs. PKS Holdings (2017) 152DTR (Kol.) (Trib.) 215.

5.9.8The Ld. AR submitted that unit wise, grade wise details of sales to sister

concerns had been furnished to A.O. for each year well before assessment and only

upon being advised by CIT(A), details were again reproduced in respect of one

assessee for 2008-09, 2009-10 and 2011-12, issue being common for all years and

for all assesses. However, CIT (A) remarked details were not given separately for

other assessment year(s).

5.9.9 The Ld. AR submitted that although the CIT(A) had maintained that the

export price at which cashew kernels were exported directly by the assessee can be

relied on to fixan ALP yet he did not peruse the specific chart prepared in this

regard as per his requirements showing such a comparison which would have

convinced him that asssessee's transactions with related unit were at Arm's Length.

The Ld. AR relied on the judgment of the Delhi High Court in the case of CIT vs.

Sumitomo Corporation India (P) Ltd. (2015) 127 DTR (Del) 323. He also relied on

the decision of the Tribunal in the case of Sona Okegawa Precision Forgings Ltd. vs.

Addl. CIT (2012) 143 TTJ (Del) 516. According to the Ld. AR, the CIT(A) strongly

felt that ALP means maximum price and it should be followed. To this, the Ld. AR

submitted that observation of Delhi bench of ITAT in the case of Mentor Graphics 28

I.T.A. Nos.37 to 49/Coch/2016

(Noida) (P) Ltd. vs. DCIT (2007) 109 ITD 101 (Del.)ought to have been appreciated

in the context of determination of ALPby taking result of comparable transactions in

comparable circumstances and by making suitable adjustments for difference. The

Delhi bench observed in page 144 that ALP does not mean maximum price or

maximum profit in the range. A willing buyer in an open market shall pay minimum

and not maximum price for goods and services . No business man can be compelled

to maximize his profit. The Ld. AR relied on the judgment of the SupremeCourt in

the case of S.A. Builders Ltd Vs. CIT 288 ITR 1, quoting from the judgment of the

Delhi High Court in the case of CIT Vs. Dalmia Cements Ltd (2002) 254 ITR 377.

5.9.9.1The Ld. AR submitted that the judgment of the Supreme Court on revenue

neutrality in the case of CIT vs. Glaxo Smithkline Asia (P) Ltd. (2010) 236 CTR (SC)

113 was misconstrued both by A.O. and CIT(A) taking a dramatic U turn that all

units are independent and separately assessed even while confirming addition on

sale of kernels to sister concerns.

voluminous data, the CIT(A) presumed that the assessee had sold substantial

quantity of lower grade kernels at a price below cost without explaining the

commercial expediency to do so and the assessee had not explained yet the reason

for the pricing policy adopted to sell the kernels to sister concerns at a price below

the ' maximum export price' assessee had got on direct exports.

I.T.A. Nos.37 to 49/Coch/2016

6.1 According to the Ld. AR, a sample consisting of inferior grades such as splits,

butts and pieces was chosen from the details furnished to the CIT(A) to conclude

that sale price was not static. It was submitted that the CIT(A) was not correct on

picking out a single invoice on maximum price pertaining to direct exports, and to

say why this price was not attainable on sale of all grades. For this, the Ld. AR

relied on the decision of the Tribunal in the case of ITW India Ltd. vs. ACIT (2015)

169 TTJ (Del) 60.The CIT(A) could not appreciate that superior higher grades sold

to sister concerns were at cost plus and were in tandem with export market price.

The Ld. AR submitted that pricing for exports cannot be equated with that for

domestic sales. For this, he relied on the decision of the Tribunal in the case of

(2011) 142 TTJ (Pune) 89.

6.2 Thus, it was submitted that both A.O. and CIT(A) failed to consider the quality

of kernels entering the sales before reaching an erroneous conclusion that assessee

did not follow ALP and cost was assumed to be ALP at all times leading to

distortedresults. The CIT(A) placed reliance on the judgment of the Gujarat High

Court in the case of Patel Chemical Works vs. CIT (2004) 265 ITR and 273, wherein

it was held that a sale to sister concern at a price below market price was a device

for tax avoidance. It was submitted that the judgment of the Supreme Court

(1973) 91 ITR 8 approving the judgment of the Madras High Court in Choodambika

Mills was not brought before Gujarat High Court. According to the Ld. AR, the

judgment of the Gujarat High Court cited supra was rendered in a different set of

facts and circumstances and was not therefore, applicable to the present case. It

I.T.A. Nos.37 to 49/Coch/2016

was submitted that neither Assessing Officer nor CIT(A) could establish that the

assessee had at any point of time sold kernels and in particular inferior grades

below their market price and their findings were based only on blanket comparison

with average cost which is not a litmus test to conclude under pricing.

6.3 The Ld. AR submitted that in particular, inferior grades fetch a market price

lower than cost, a fact accepted by the Assessing Officer. The Assessing Officer

accepted the system of Accounting, Books of Account & Accounting

Policies,valuation of kernels, gradewisepricing for Direct Exports and purchases in

the course of export from the sister concerns. Thus, it was submitted that it was

quite paradoxical therefore that while purchases from sister concerns was

accepted, sales to same sister concerns on a selective basis was held to

beunderpriced. When the Assessing Officer found that wt. average of entire sales to

related units was above average cost, he resorted to selective picking such method

which will never establish underpricing. According to the Ld. AR, the Assessing

Officer as well as the CIT(A) expected every Kg of cashew kernels to be sold above

cost and he substituted 'cost' for market price realized. The Ld. AR submitted that

sale price cannot remain static. Hence, the Ld. AR submitted that addition is to be

deleted for following reason:

I.T.A. Nos.37 to 49/Coch/2016

5 Sales Tax Department had accepted the Accounts each year.

6.4 The Ld. AR submitted that when additionis made under sales, corresponding

deduction has tobe given in purchases of sister concerns. Therefore, no addition is

warranted. When the judgment of the Supreme Court cited supra was pointed out,

the A.O. held that they were independent overlooking the fact that A.O. himself

branded it as underpricing of sales to related units (specified persons u/s. 40A(2) of

the Act). The Ld. AR submitted that the assessee as well as sister concerns were in

the maximum tax bracket and accordingly, the transactions between assessee

I.T.A. Nos.37 to 49/Coch/2016

&sister concerns were again revenue neutral. Hence, it was submitted that addition

was unjustified.

6.5 The Ld. AR submitted that the A.O. presumed the following:

(1) 'A' had a policy to sell kernels to sister concerns below cost just banking on a wt average. A.O. had no material in his possession to prove that there was underpricing. A.O. did not appreciate the limitations of wt. average.

(2) A.O. felt that underpricing can be done to reduce tax incidence for assessee with no corresponding revenue yield to sister concerns. This is unsubstantiated by the judgment of the Supreme Courtin the case of Calcutta Discount Company 91 ITR 8 relying on Madras High Court Decision in the case of Sri. Ramalinga Choodambika Mills Ltd Vs. CIT 28 ITR 952. On the contrary, A.O. relied heavily on his order in Preetha S. Nair forAssessment Year 2009-10 to hold that there was no revenue yield to thesister concern(s). Her income from business was Rs. 2.49 crores for Financial Year 2008-09. After set off of b/f losses it was below the taxable limit.

6.6 The Ld. AR submitted that the A.O. should have appreciated that taxation is

on real income and this was the essence of the above judgment of the Supreme

Court and other judgments. Though CIT(A) endorsedthis, he ignored the same and

on his insistence, wt. average price chart was prepared in the manner prescribed by

him which he simply ignored it. It was submitted that every year similar chart was

given to A.O and there was no categorical finding by the Assessing Officer in any of

the assessment years in question that there was shifting of profits by the assessee

in favour of his/her sister concerns.

6.7The Ld. AR submitted that the CIT(A) had an apprehension that diversion of

profits was possible to enable sister concerns only to enjoy higher 80HHC benefit.

Hence, he concluded that the transactions were not genuine and bonafide. 33

I.T.A. Nos.37 to 49/Coch/2016

Accordingly, the Ld. AR submitted that the judgment of the Supreme Court in the

case of Calcutta Discount Company cited supra was not applicable and that section

80HHC went out of statute from assessment year 2005-06.

6.8 The Ld. AR relied on the judgment of the Supreme Court in the case of

Calcutta Discount Co. Ltd Vs. (1973) 91 ITR 8 (SC) endorsing Madras High Court in

Sri. Ramalinga Choodambika Mills Ltd Vs. CIT (1955) 28 ITR 952 and the judgment

of the Supreme Court in the case of CIT vs. Virtual Soft Systems Ltd. (2018) 404

ITR 409 wherein it was held that transactions are genuine &bonafide& not sham.

Real income concept to be followed which CIT(A) had rightly observed. The Ld. AR

relied on the decisions of the Tribunal in the case of ITO vs. PKS Holdings (2017)

152 DTR 215 (Kol) (Trib.) and in the case of Flipkart India (P) Ltd. vs. ACIT (2018)

193 TTJ (Bang.) 685. The Ld. AR relied on the judgment of the Supreme Court in

the case of CIT & ANR vs. Glaxo Smithkline Asia (P) Ltd. (2010) 236 CTR (SC) 113

and the decision of the Tribunal in the case of Dy. CIT vs. Firstsource Solutions Ltd.

(2018) 168 DTR (Mumbai) (Trib.) 161 wherein it was held that exercise of addition

alleging underpricing is revenue neutral. The ld. AR relied on the decision of the

Supreme Court in the case of SA Builders vs. CIT (2006) 288 ITR 1 and the decision

of the Tribunal in the case of Mentor Graphics (Noida) (P) Ltd. vs. DCIT 109 ITD

101 (Del.)wherein it was held that no businessman can be compelled to maximize

his profits. The Ld. AR also relied on the following case laws wherein it was held

that prices of grades sold to sister concerns for their exports had a nexus with the

prices of direct exports (i.e. exports to unrelated parties) and hence, the said

I.T.A. Nos.37 to 49/Coch/2016

transactions were at Arm’s Length Price. Accordingly, the addition was to be

deleted:

1) CIT vs. Jyothi Industries (2011) 330 ITR 573 (P&H)

2) Fabula Trading Co. (P) Ltd. vs. ITO (2010) 123 ITD 557 (Mum. Trib.)

3) ITO vs. Kanchan Tara Exports (2011) 138 TTJ (JP) 592 (Jaipur Trib.)

6.9 The Ld. AR also relied on the following case laws on selective picking of data:

1) Henkel Adhesives Technologies India (P) Ltd. vs. DCIT (2014) 163 TTJ 491 (Pune Trib.)

2) Intimate Fashions (India) (P) Ltd. vs. ACIT (2012) 149 TTJ (Chennai) 775

3) ITW India Ltd. vs. ACIT (2015) 169 TTJ (Del) 60

6.9.1 The Ld. AR also relied on the following case law on price not remaining

static as per CIT(A).

1) Satnam Overseas Ltd. & ANR. vs. Addl. CIT (2010) 228 CTR (Del) 121

6.9.2The Ld. AR also relied on the following case law on absence of comparable

cases or any evidence on record.

1) JLC Electromet P. Ltd. vs. Addl. CIT (2016) 178 TTJ 28 (UO) (Jaipur Trib.)

2) CIT vs. Modi Xerox Ltd. (2010) 41 DTR 55 (All HC)

3) Airtech (P) Ltd. vs. DCIT (2011) 139 TTJ (Del) 318

I.T.A. Nos.37 to 49/Coch/2016

6.9.3 The Ld. AR relied on the decision of the Tribunal in the case of Merck Ltd. vs.

DCIT (2016) 139 DTR (Mum. Trib.) 1 wherein it was held that whole determining

ALP, adjustment for quality difference has to be considered.

6.9.4 The Ld. AR also relied on the decision of the Tribunal in the case of Dy. CIT

vs. Firstsource Solutions Ltd. (2018) 168 DTR (Mum. Trib.) 161 wherein it was held

that excessive or unreasonable payment to sister concern, the contention of

assessee that both assessee and payee sister concern are liable to pay tax at the

same rate, hence no disallowance u/s. 40A(2) is called for has merit.

Ld. DR reiterated the stand by the Revenue that the assessees shifted the profits to

the sister concerns, thereby reducing its tax liability. On the other hand, the

learned AR placed reliance on the judgment of the Hon’ble Supreme Court in the

case of CIT vs. Glaxo Smithkline Asia (P) Ltd. (2010) 236 CTR (SC) 113, wherein

held that even in the case of domestic transaction between the related persons it

was necessary to examine whether there was any motive to shift the profit making

concern to a loss making concern. It was submitted that in the present case, there

was no motive to shift profits from the hands of the present assessees to the sister

concerns and it was revenue neutral in the sense that the profits of the sister

concerns should be reduced to the extent the assessees’ profits is sought to be

reduced.Prior to abolition of section 80HHC, there was an apprehension that

I.T.A. Nos.37 to 49/Coch/2016

underpricing could be done to enable sister concerns claim greater 80HHC

benefit. This is no longer the case from A.Y. 2005-06. Both the assessees and sister

concern(s) paid tax at maximum marginal rate. The timing of contracts is also an

important parameter in the matter of fixing transfer prices. For example when price

of say W320 grade contracted earlier was Rs. X which is less than cost or current

price, assessee is bound to sell at contracted price only. The A.O. wrongly

presumed that entire sales in India were to sister concerns. The sales were effected

in the domestic market through depots, consignment agents etc. In the absence of

a clear finding by AO to the contrary, it was only fair and reasonable to presume

that the transactions with sister concerns were regarded genuine and bonafide.

8.1 The Assessing Officer has to reject the books of account of the assessee before

estimating the income of the assessee. The primary condition for rejecting the book

results as laid down u/s. 145 of the Income Tax Act is that the Assessing Officer

should be satisfied that the books of accounts maintained by the assessees are not

complete and correct. As can be seen from the findings of the Assessing Officer in

the assessment orders, the Assessing Officer has merely proceeded on a surmise

that profits of the assessees were sought to be reduced by selling their products to

the sister concerns at a lesser price. There is no instance of falsity or

incompleteness of the books of account pointed out by the Assessing Officer in the

assessment orders. The books of account were duly audited by Chartered

Accountants and they reflected the true state of affairs of the assessees. The fact

that the assessees had sold their products to the sister concerns at a price lesser

I.T.A. Nos.37 to 49/Coch/2016

than the price at which the same product was sold to the third parties, in our

opinion, this would not be sufficient ground to come to the conclusion that the

books of account of the assessees are not complete and correct. There is no

evidence brought on record that over and above the price shown in the books of

account, the assessees received something more from the sister concerns or any

comparable cases were brought on record by the Assessing Officer. It is for the

businessman to decide the price at which he has to sell its products to its

customers. No businessman can be compelled to maximize its profits as held by the

Supreme Court in the case of S.A. Builders vs. CIT 288 ITR 1. The law is well-

settled that the Revenue cannot insist on the way in which the businessman should

conduct his business. The Revenue cannot compel a businessman to sell his

products at a particular price, so that the assessee derives maximum profits so as to

pay higher income tax. The calculation of cost of production on which the

Assessing Officer has placed reliance, has nothing to do with the completeness and

correctness of the books of account. This allegation is very vague and it is not

sufficient to reject the book results of the assessees. Being so, we cannot uphold

the conclusion reached by the lower authorities.

8.2 The transactions entered by the assessees with the sister concerns are genuine

and bona fide and there is no allegation by the Assessing Officer that they are sham

transactions. The price charged by the assessees to their sister concerns are in

conformity with the normal commercial practice whereby the assessees got huge

orders in large quantities with timely recovery of the debts. In our opinion, in the

I.T.A. Nos.37 to 49/Coch/2016

absence of specific findings by the Assessing Officer that the transactions were

entered into by the parties herein with the intention to defraud Revenue, the

additions made by the A.O. cannot be sustained. This view of ours is fortified by

the judgment of the Supreme Court in the case of CIT vs. Calcutta Discount Co. Ltd.

(91 ITR 8) wherein it was held that where a trader transfers his goods to another

trader at a price less than the market price, and the transaction is a bona fide one,

the taxing authority cannot take into account the market price of those goods,

ignoring the real price fetched, to ascertain the profit from the transaction.The

mere fact that sales were made at prices lower than cost or even the market rates

would not entitle the Incometax Department to assess the difference between the

cost/market price and the price paid by the sister concern(s) as profits of the

assessee. The above judgment of the Supreme Court in the case of CIT vs.

Calcutta Discount Company Ltd. (1973) 91 ITR 8 approved the decision of the

Madras High Court in Shri Ramalinga ChoodambikaMills Ltd vs. CIT reported in

(1955) 28 ITR 952 (Mad). Reliance is also placed on the judgment of the Supreme

Court in Collector of Central Excise New Delhi vs. Guru Nanak Refrigeration

Corporation Ltd. 2003 INDLAW SC 301 which approved the decision of the Appellate

Tribunal (CEGAT) to the effect that just because sale price was less than cost of

production there was no justification to reject the valuation of goods sold for

charging Central Excise Duty when the transactions were at Arm's Length.

8.3 It is not permissible for the Assessing Officer to make additions without

bringing any comparable cases on record. In this case, no comparable cases were

I.T.A. Nos.37 to 49/Coch/2016

brought on record by the Assessing Officer to counter the price fixation by the

assessee. In our opinion, the lower authorities must have been satisfied that the

price charged to the various grades by the assessees for their sales to sister

concerns have proximity to the price of export to unrelated parties and indeed the

Assessing Officer failed to compare the assessees’ price pattern with other

comparable cases and he cannot arbitrarily make addition on the basis of

guesswork. The Assessing Officer cannot disturb the sales pricing pattern of

transaction between the sister concerns, unless it was shown to be perverse. This

view of ours is fortified by the judgment of the Punjab & Haryana High Court in the

case of CIT vs. Jyothi Industries 330 ITR 573.

8.3.1 The addition made on conjectures and surmises cannot be sustained. All the

goods sold by the assessee are not of same quality. There were different grades of

kernels and also pieces and butts. Therefore, uniform rate cannot be applied and

the rates at which the sister concerns sold in the export market cannot be the basis

for determining the sale value of the assessee’s products. The Assessing Officer

computed the cost of production per kg. and observed that the assessee sold the

goods below the cost of production per kg. and thereafter compared it with price at

which the sister concerns sold the goods . There were no comparable cases

brought on record by the Assessing Officer. This is the only evidence on the basis

of which the Assessing Officer had formed the belief of shifting of profit and

observed that there was understatement of sale price. These material are not

sufficient to hold that the assessee had under-invoiced the sale price. We,

I.T.A. Nos.37 to 49/Coch/2016

accordingly, do not find any reason to agree with the finding of the lower

authorities. In these cases, there were different varieties of grades of kernels sold

by the assessee and there are different factors which influence the finalization of

sale price. Without bringing any material on record, the Assessing Officer is not

justified in making addition on account of lower sale price. This view of ours is

fortified by the order of Tribunal in the case of Vijay C. Kamdar305 ITR (AT) 163

(Mum.). As held by the Jaipur Bench of the Tribunal in the case of ITO vs. Kanchan

Tara Exports 138 TTJ 592, had the Assessing Officer given due rebate on account of

quality and size of kernels, there could not have been any addition made by the

Assessing Officer. Even while arriving at the sale price, the Assessing Officer has to

give due weightage of the employees cost, administrative cost, interest cost,

working capital cost, debt recovery cost, quality factor which has not been done by

the Assessing Officer. Had he given due weightage to these factors, then the sale

price charged by the assessees could be appropriate.

8.3.2 The CIT(A) picked a single highest price from the details submitted to him

and concluded that the transactions are not genuine and not at Arms Length Price

which was not correct. Reliance is placed on the decision of the Tribunal in the case

of ITW India Ltd. vs. ACIT (2015) 169 TTJ (Del) 60, wherein held that to arrive at a

fair rate of adjustment, it is appropriate to adopt quality adjustment of 10% with

regard to particle size and bulk density test, as the product imported by the

assessee is demonstrably superior to the locally manufactured drugs. This

underlines the need for determination of separate wt. average pricing for wholes

I.T.A. Nos.37 to 49/Coch/2016

and splits with suitable adjustments and for a cogent and meaningful comparison,

the same cannot be aggregated. The ALP therefore could be wt. average of direct

exports and wholes and/splits, pieces and butts respectively which can be a

benchmark for comparison with suitable adjustments factoring for following

circumstances:

(1) The composition of grades in the sales mix even among low grades.

(2) Those grades entering into direct export not forming part of sales to sister concerns and vice versa.

(3) Timing of contracts & price variation even among superior grades.

(4) Exchange rate variation.

Accordingly, at least 10% allowance to account for such factors as composition of

grades in the sales mix, quality of kernels, etc. and 5% allowance to cover Profit

and indirect overheads of sister concern(s), if considered, then no addition is

warranted.For this, reliance is placed on the decision of the Tribunal in the case of

Merck Ltd. vs. DCIT (2016) 139 DTR (Mum Trib.) 1.

8.4 Further, as held by the Madras High Court in the case of CIT vs. Anandha

Metals Corporation 273ITR 262 when the return of the assessee accepted by the

Commercial Taxes Department is binding on the Income Tax authorities, the

Assessing Officer is not justified to reject the value of the closing stock declared by

the assessees which was accepted by the Commercial Taxes Department and

consequently, no addition could be made in respect of unexplained differences

between closing stock as noted in the seized documents and the value determined

I.T.A. Nos.37 to 49/Coch/2016

by the assessee. By applying the above ratio, we are of the opinion that there is

no finding by the I.T. Department that the assesseees’ returns were rejected by the

Commercial Taxes Department and itwas duly accepted by the Commercial Taxes

Department and in the accepted accounts, the I.T. Department cannot find any

difference so as to make the additions. In our opinion, before rejection of books of

account, the Assessing Officer should prove that the books of account produced by

the assessees are not reliable and that once the books of account were audited and

were subject to scrutiny by other statutory authorities, simple rejection of the same

by the Assessing Officer without any reason is not acceptable.

8.5The Assessing Officer is not entitled to make a pure guesswork and make an

assessment without any reference to the evidences and material at all. There must

be something more than suspicion to support the assessment. A suspicion

however, strong may not take the place of proof. The conclusions which are based

on surmises and conjectures, cannot take the place of proof. Therefore, the

assessments made by the Assessing Officer which are pre-dominantly influenced by

suspicion cannot be upheld. In our opinion, mere surmises and conjectures that the

assessees had underpriced the sales value cannot be the basis for a pre-determined

approach without bringing any third party transactions on record by the Assessing

Officer. The available documentary evidences in the form of purchase invoice, sales

invoice, various bills and vouchers have not been found defective by the Assessing

Officer at any point of time. When the quantitative details certified by the statutory

authorities which are also part of the record subject to scrutiny by the Assessing

I.T.A. Nos.37 to 49/Coch/2016

Officer have not been rejected by him, then the Assessing Officer cannot presume

that the assesses had suppressed the profits. It is not the case of the Assessing

Officer that there were any material defects noticed at the time of examination of

the books of account and also that there was no change in the method of

accounting adopted by the assessees from what was regularly adopted.

Accordingly, we are of the opinion that the Assessing Officer cannot blow hot and

cold at the same time and onus clearly lies on the Assessing Officer to prove that

the books of account maintained by the assessees suffers any defects. In the

absence of any documentary evidence indicating any lapse on the part of the

assessees in maintenance of books of account which were subjected to audit by the

statutory authorities, we are of the opinion that the additions made by the

Assessing Officer to the profits of the assessees only on the basis of surmises and

conjectures of low profits on account of higher cost of production and sales price

charged by the assessees’ sister concerns cannot stand the test of law leave alone

the Assessing Officer’s own logic . Accordingly, we are of the opinion that the basis

adopted by the Assessing Officer for making additions towards lower profits cannot

be sustained. As such, the additions made on this count are deleted in all the

assessment years. This ground of appeals of the assessees for all the assessment

years is allowed.

8.6The system of Accounting, books of account and accounting policies were

accepted by the AO which implied inter alia that grade wise valuation of stock of

kernels were recognized by the Dept, which proved commercial expediency or

I.T.A. Nos.37 to 49/Coch/2016

compelling circumstances to sell inferior grades of kernels at a market price below

cost. This would imply that averaging cannot be done in a scenario when quality is a

crucial factor. For this, reliance is placed on the judgment of the Bombay High

Court in the case of Director of Income Tax (International Taxation) vs. Boston

Scientific International B.V. (2013) 90 DTR (Bom.) 357. The A.O. had accepted the

pricing methodology of the assessee in the following transactions

(a). Direct exports i.e. sales to unrelated parties consisting of wholes and splits having separate wt. average rates.

(b). Purchases from these very sister concerns consisting of wholes and splits.

The Assessing Officer ought to have applied the same yardstick in the matter of

pricing of sales to sister concerns for their export. In the course of export and the

sales are invoiced grade wise corresponding to the grades exported by the sister

concern and relevant export contract price. Hence, the timing of contract is very

important. Being for exports, the prices charged to sister concerns grade wise vis-

a-vis exports to unrelated parties are comparable andsales to sister concerns in the

course of export are at Arms LengthPrice(ALP). For lower grades such as splits and

pieces, the market price being lower than the production cost, they cannot be sold

above market price to sister concerns and, if so, they will be hit hard by Section

40A(2). Hence, there was no shifting of profits in favour of sister concerns for their

benefit as the transfer price was based on ultimate export price obtaining for

respective grade(s) which therefore, constituted ALP on the date of relevant export

contract.

I.T.A. Nos.37 to 49/Coch/2016

8.7 It cannot stand to reason that the sale price of cashew kernels remained

constant throughout the year so that the basis of sale price could be arrived at. The

sale price has fluctuation due to demand and supply and market conditions. It does

not remain at constant level. This view is fortified by the judgment of the Delhi

High Court in the case of Satnam Overseas Ltd. vs. Addl. CIT 329 ITR 237 (Del.),

wherein held that where it cannot stand to reason that the price of sale of paddy /

rise / pulses remained constant throughout the year so that on the basis of an

average price of closing stock, the sale price for the entire year comprising of 12

months, 48 weeks and 365 days can be ascertained in that the same would have

remained fixed throughout this period. Even assuming that this logic is correct, it

was surely an exercise which the A.O. could have done on the basis of material

which he is now presently seeking to do because when the very same materials

were available with him in the relevant assessment years and merely because the

A.O. feels that he has failed to do what he ought to have done cannot be a valid

ground for seeking initiation of reassessment u/s 147 r.w.s. 148 of the Act.

8.8In view of the above discussion, in our opinion, it is virtually impossible to

presume that sale price remained constant throughout the year for every grade and

for every kilogram so that on the basis of average closing stock price the entire

sales should be above this price. Hence, the application of weighted average price

of entire sales was not an appropriate method to conclude underselling as it had

severe limitations. This view of ours is also supported by the order of the Tribunal

I.T.A. Nos.37 to 49/Coch/2016

in the case of Vijay C. Kamdar vs. ITO (2009) 305 ITR (AT) 163 (Mum) where it was

held as follows:

(iii) that the Assessing Officer formed the belief that the assessee over invoiced the purchase by relying upon the statement of K in the income-tax proceedings. The disallowance was without making any further enquiry only for the reason that the supplier of the assessee did not appear before him. This statement was not relied upon by the Additional Commissioner of Customs and he had dropped the proceedings. These materials were not sufficient to hold that the assessee had over-invoiced the purchases. There were different varieties of pens available in the market whose costs differed according to quality and there were different factors to determine the cost of pens. Without bringing any material on record the disallowance made by the Revenue authorities was not justifiable.”

8.9The assessing officer had made the addition in assessment year 2009-10 under

‘business head ' on the pretext that there was an 'apparent loss' of Rs. 89.76 lakhs

on alleged policy of underselling in which event there was an apparent gain in the

books of sister concern(s). Any addition under the head "income from business"

becomes revenue neutral in nature since any addition towards underselling in the

hands of the assessee becomes a corresponding deduction for purchase in the

hands of sister concern(s), as held by the Supreme Court in the case of CIT vs.

Glaxo Smithkline Asia (P) Ltd. (2010) 236 CTR (SC) 113. When this judgment was

brought to his notice by filing a copy, the Assessing Officer tooka dramatic U turn to

hold that units were independent. This action of the A.O. is unjustified. Hence, the

addition on account of underpricing was not warranted. The assessing officer relied

heavily on his order in Preetha S. Nair for A.Y. 2009-10 to hold that there was no

revenue yield to the recipient sister concern and so, under pricing was done to

reduce tax incidence. The assessing officer missed the vital point that income was

below taxable limit after b/f losses were set off during the current year. Moreover,

there was no finding by the lower authorities that sister concerns benefited in any 47

I.T.A. Nos.37 to 49/Coch/2016

manner. Being so, in our opinion, these cannot be any additions towards low selling

price charged to sister concerns. These grounds of appeals are allowed in all the

appeals of the assessees.

regard to charging of interest u/s. 244A of the Act.

Rs.3,84,680/- for the AYs 2006-07 & 2007-08 under section 244A of the Act but did

not offer the same for tax in the year in which it was received i.e. during the

assessment year under consideration. The same was not offered for tax because of

the accounting policy the assessee was following as per which on refund received

would be offered for tax only at the time of finalizing the assessment. As the

interest is to be assessed in the year of accrual or receipt, the Assessing Officer

brought to tax the said interest on refund as income from other sources.

assessable under the head other sources is to be taxed in the year in which the

right to such refund had been recognized by an order or the date on which it is

actually received. The matter came up for consideration before the ITAT, Chennai

in the case of DCIT vs. Seshasayee Papers and Bonds Ltd. (2 ITR (Trib.) 417)

wherein it was decided that it has to be taxed in the year of actual receipt. Having

received the interest on refund during the FY 2007-08, the CIT(A) observed that

the assessee should have offered the same for tax immediately then without

I.T.A. Nos.37 to 49/Coch/2016

following the accounting policy which has no legal sanctity. The CIT(A) confirmed

the Assessing Officer’s action in bringing to tax interest under income from other

sources.

the CIT(A) was not correct in confirming the addition on account of interest u/s.

244A as per 143(1), an intimation disregarding the consistent policy followed by

the assessee in the past to treat the same as income on regular assessment. The

Ld. AR submitted that the department had accepted the same in earlier years

(2013) (153 TTJ (Mum) 257) and (2012) 349 ITR 309 (Mum).

do not find any infirmity in the finding of the CIT(A) that the interest on Income tax

refund assessable under the head other sources is to be taxed in the year in which

the right to such refund had been recognized by an order or the date on which it is

actually received by placing reliance on the decision of the Tribunal in the case of

DCIT vs. Seshasayee Papers and Bonds Ltd. (2 ITR (Chennai Trib.) 417) wherein it

was decided that it has to be taxed in the year of actual receipt. Being so, we

dismiss this ground of appeal of the assessee in ITA No. 40/Coch/2016.

I.T.A. Nos.37 to 49/Coch/2016

41 to 43/Coch/2016, 44 & 45/Coch/2016, 46/Coch/2016 and 47 to 49/Coch/2016

are allowed. The appeal of the assessee in ITA No.40/Coch/2016 is partly allowed. Order pronounced in the open court on 03rd February, 2020.

Sd/- Sd/- (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER

Place: Kochi Dated:03rd February, 2020

GJ / Devadas G Copy to: 1.Shri R. Pratap,Sun Food Corporation, Kochupilamoodu, Kollam 2. Shri R. Prakash,Dhanya Foods, Kochupilamoodu, Kollam. 3.Smt. T.C. Usha, Chetana Cashew Corporation, Kochupilamoodu, Kollam. 4. Shri Ravindranathan Nair, M/s. Vijayalaxmi Cashew Co., Kochupilamoodu, Kollam. 5. M/s. Vijayalaxmi Cashew Co., Kochupilamoodu, Kollam. 6. The Assistant Commissioner of Income-tax, Circle-1, Kollam. 7. The Commissioner of Income-tax (Appeals), Trivandrum. 8. The Pr. Commissioner of Income-tax, Trivandrum. 9. D.R., I.T.A.T., Cochin Bench, Cochin. 10. Guard File. By Order

(ASSISTANT REGISTRAR) I.T.A.T., Cochin