DY CIT-3, THANE vs. M/S SATYA AGROLIS PV LTD, THANE

O R D E R

PER PAVAN KUMAR GADALE JM:

1. On the facts & in the circumstances of the case and in law, the Ld. 01(A) erred in not appreciating the fact that the assessee had suppressed sales by selling material to holding company at lower rate in comparison to unrelated parties thereby reducing the profitability of the company?

Satya Sai Agroils Pvt Ltd., Mumbai. - 2 -

2. "On the facts & in the circumstances of the case and in law, the Ld. CIT(A) erred in granting relief to the assessee inspite of the fact that the assessee failed to substantiate its claim with proper documentary evidence that the variation in rate with M/s Adani Wilmer Ltd to other parties was due to transportation cost of the material? 3. The order of the CIT(A) may be vacated & that of the Assessing Officer may be restored 4. The appellant craves leave to add, amend, alter or delete any ground of appeal

2. The brief facts of the case are that the assessee company is engaged in the business of extraction and refining of soya bean oil and related by-products. The assessee has filed the return of income electronically for the A.Y 2011-12 on 15.09.2011 disclosing a total loss of Rs.3,20,63,687/-and the return of income was processed u/s 143(1) of the Act. Subsequently, the case was selected for scrutiny and notice u/s 143(2) and 142(1) of the Act are issued. In compliance, the Ld. AR of the assessee appeared from time to time and filed the submissions. The Assessing officer (A.O) on perusal of the financial statements observed that the assessee company has disclosed a gross profit of Rs. 35,68,166/- being 0.28% of the total turnover and net loss was disclosed at Rs. 1,46,02,55/- being 1.15% of Satya Sai Agroils Pvt Ltd., Mumbai. - 3 - total turnover and the major sales transactions are with the Holding company i.e M/s Adani Wilmer Ltd. The A.O. required the assessee to file the comparative rate chart of purchase by M/s Adani Wilmer Ltd for purchase of soyadeoiled cake and unrelated parties and the reasons for less consideration received from Adani Wilmer Ltd.

3. The assessee has filed the details of purchase rate and quantity supplied to Adani wilmer Ltd and similar transactions with the unrelated parties. The A.O. found substantial variation in rate of purchase by holding company and required the assessee to provide month wise rate of purchase by the Adani Wilmar Ltd and show cause notice was issued. The A.O. has summarized the chart of purchases with few unrelated parties at page 2 of the order and found the differential rate adopted in respect of purchases by the unrelated parties on the same date or the nearest date in comparison to purchases by the Adani wilmer Ltd. The assessee has explained the variation due to purchases by the Adani Wilmer Ltd at the gate of the assesee factory and no transportation cost is borne by the assessee. But the A.O. was not satisfied with Satya Sai Agroils Pvt Ltd., Mumbai. - 4 - submissions, whereas in the case of purchases made by the Adani Wilmer Ltd from the other companies the transportation cost has to be borne by the sellers and the assessee has submitted the chart explaining the variation due to transportation cost.Accordingly worked out the suppression of sales at the rate of Rs.500/-per metric ton(MT) and arrived at income of Rs. 2,63,19,313/- and assessed the total loss of Rs. 57,44,374/- and passed order u/s 143(3) of the Act dated 30.03.2014.

Satya Sai Agroils Pvt Ltd., Mumbai. - 5 - cost is not included and made specific observations at Para 5 of the CIT(A) order and deleted the addition and partly allowed the assessee appeal. Aggrieved by the CIT(A)order, the revenue has filed an appeal before the Honble Tribunal.

4.4 The appellant further filed submissions dated 17.01.2019 along with a paper book consisting 40 pages containing chart showing gross reference numbers for Satya Sai Agroils Pvt Ltd., Mumbai. - 7 - purchase order of against the rate of purchase made by AWL from third party and copy of purchase order. The submission so made is reproduced as under: -

"1. During the course of appellate hearing, the Appellant has submitted detailed submission in which it was explained that there is substantial variation in the rate of purchases made byAdani Wilmar Ltd (AWL) from appellant- company and that made from unrelated parties due to the fact that sales made to AWL are based on Ex-Factory price wherein all the transportation cost is borne by AWL. in case of purchases from unrelated parties, AWL pays the price based on Free on Road i.e. expenditure relating to transportation is borne by sellers. Thus AWL pays higher price to unrelated sellers, as the transportation cost is borne by those sellers and not AWL.

parties. appellant requests your honour to kindly take note of the above mentioned data and delete the addition made by Ld. Assessing Officer."

5.I have carefully perused the assessment order and the submission of the appellant as above, I find that the AO made the addition on account of suppressed sales without appreciating the facts of the case of the appellant and, in fact, without considering the relevant submissions of the appellant company made before him, wherein I find that the appellant vide its submission dated 26/02/2014, 21/03/2014 and 25/03/2014, had with cogent reasons and acceptable explanation demonstrated as to why the variation in the purchase of materials by Wilmar India Ltd. from the appellant was at a lesser price than the purchases made by the said company with some other unrelated parties. The appellant submitted before the AO a chart on 26/02/2014 showing the comparative purchase prices of soya oil cakes by Adani Wilmar Ltd. from the appellant and from third party during the year along with cross reference. The appellant also explained vide submission dated 21/03/2014 to the AO furnishing the details regarding month-wise purchases made by Adani Wilmar Ltd. from third parties. It was categorically stated that purchases were made by Adani Wilrnar Ltd. from the appellant company on ex-work basis and from other on free on road basis, thereby furnishing month-wise comparative chart of purchase prices from the appellant company and also the third party besides furnishing sample bills reflecting the same. I find that the AO had not bothered to examine the same and even did not consider any of the above materials in the assessment order, as to why such details and evidences furnished besides explanation given for Satya Sai Agroils Pvt Ltd., Mumbai. - 9 - sale of materials with a lesser price by the appellant company to Adani VVilmar Ltd. than the rates of materials purchased from other related parties by the said company, was not acceptable to the AO. It is pertinent to mention that the AO had calculated the suppressed sales in the case of the appellant at Rs. 2,63,19,313/- purely on estimate basis, ignoring the submission and explanation given by the appellant. The AO had contended in pare 6 of the assessment order as "Contention of the assessee cannot be ruled out, however the transportation costs shown by the assessee appears to be excessive. Hence, it cannot be ruled (the word 'out' omitted after rule) that there is suppression of sales at the rate of Rs.5001- per Mt. Tons. Accordingly, sales is increased by 500 x 40364 which works out to Rs. 2,63,19,313/-. Accordingly, the some is added to the income of the assessee". Why and how the amount of Rs. 500/- has been considered as suppressed sales is not conspicuous from the assessment order. The appellant during the appellate proceedings had demonstrated with facts and figures and submitting the summary chart showing comparison of freight expenses calculated from the data taken by the AO and actual expenses incurred, based on sample vouchers, ledger account of the books of AWL for freight expenses incurred for transportation of goods via Railway, sample copies of fright expenses vouchers in the books of AWL along with supporting Railway Receipts besides various charts in the submission dated 17/01/2019 in support of its claim that there were no suppression of sales on account of lesser sale price for the material purchased by M/s. Wilmar India Ltd. from the appellant. The reason is evident that the sales were effected on the factory gate without incurring any transportation expenses in such sales whereas in respect of other related parties the transportation charges had been borne and incurred by the said sellers and not the company Wilmar India Ltd.

Satya Sai Agroils Pvt Ltd., Mumbai. - 10 -

I am inclined to agree with the contention of the appellant. The,,,- appellant has cited a number of decision in the written submission dated 15/07/2017, filed on 27/07/2017. As the facts of the case of the appellant are clearly demonstrated there is no reason to make detailed discussion on the various judicial decisions case wise. it is pertinent to mention further that the accounts of the appellant company were audited u/s. 44AB and audit report in form no. 3CB and 3CD had been furnished by the appellant. The auditor did not point out any mistake /discrepancy pertaining to related party transactions u/s. 40A(2). The AO also had not pointed out any discrepancy in the accounts with reference to bills and vouchers etc. Therefore, the AO could not reject the result in the accounts of the appellant unless the books were rejected by invoking the provisions of section 145 of the Act. As seen from the assessment order, the AO had reproduced the chart furnished by the appellant and had decided arbitrarily while making the addition of Rs. 2,63,19,313/- on account of suppressed sales. The addition made of Rs. 2,63,19,313/- is therefore deleted. Ground nos. 1 & 2 raised by the appellant are accordingly allowed.

Satya Sai Agroils Pvt Ltd., Mumbai. - 11 - Prima facie on perusal of letters filed by the assessee referred in the CIT(A) order and the said letters contents read by the Ld.AR, proves that the said information was available with the A.O. which cannot be ruled out. We find that the assessee has filed details before the CIT(A) and the powers of the CIT(A) are co-terminus with the Assessing officer in adjudicating the issues. The assessee has substantiated the selling rate at ex-factory gate excluding transportation cost which is duly supported with the invoice and bills raised by the holding company. We find at page 20 & 21 of the paper book, were the Audited financial statements are placed and a disclosure at Schedule 18 notes on account, the statutory auditors have disclosed the related party transactions which includes the sale of goods to holding company and the A.O. has accepted the facts. The Ld.DR could not controvert the findings of the CIT(A) with any new cogent material evidence or information to take a different view. Accordingly we do not find any infirmity in the order of the CIT(A), who has considered the facts, provisions of law and passed

Satya Sai Agroils Pvt Ltd., Mumbai. - 12 - a reasoned and speaking order and uphold the same and dismiss the grounds of appeal of the Revenue.

Order pronounced in the open court on 18.04.2022.