REGAL TRANSCORE LAMINATIONS PRIVATE LIMITED,JAIPUR vs. DCIT, CIRCLE- 7, JAIPUR , JAIPUR
Facts
The appeals involve cross-appeals by the assessee and the department concerning assessment years 2012-13 and 2014-15. The department's appeal (ITA No. 73JPR/2023) relates to the deletion of trading additions by the CIT(A). The assessee's appeals (ITA Nos. 33JPR/2024 & 714JPR/2023) challenge the confirmation of certain additions by the lower authorities.
Held
The Tribunal held that the CIT(A) was justified in deleting the trading additions, following the precedent set by the coordinate bench in the case of the assessee's sister concern, Udasee Stamping Private Limited. For the assessment year 2014-15, the Tribunal accepted the assessee's argument that a marginal decline in the GP percentage was justified due to increased turnover, and therefore, the sustained addition of Rs. 18,44,224 was deleted.
Key Issues
Whether the CIT(A) was justified in deleting trading additions made by the AO, and whether the sustained addition by the NFAC for AY 2014-15 was justified.
Sections Cited
145(3), 143(2), 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES “A” JAIPUR
Before: SH. SANDEP GOSAIN & DR. M. L. MEENA
Per Dr. M. L. Meena, AM:
The captioned cross appeals have been filed by the assessee and
department against the order of the ld. CIT(A) National Faceless Appeal
Centre (NFAC), Delhi dated 30.11.2023 in respect of Assessment Years:
2012-13 and assessee against separate order dated 29.09.2023 in respect
of the Assessment year 2014-15.
The Department has raised the following grounds in ITA No.
73JPR/2023 in respect of the Assessment Years: 2012-13:
On the facts and circumstances of the case, the CIT(A) has erred in deleting trading adition of �24,29,373/- made by the AO by applying GP rate of 16.99% as against 15.99% applied by the AO though he has upheld rejection books of accounts under section 145(3). 2. On the facts and circumstances of the case, the CIT(A) has erred in deleting trading addition of �37,32,246/- made by the AO by applying GP rate of 5% in respect of trading with measures Udasee Stamping Pvt Ltd as against 0.9% applied by the AO though he has upheld rejection books of accounts under section 145(3). 3. On the facts and circumstances of the case, the CIT(A) has erred in deleting trading addition of �2,56,026/- made by the AO by applying GP rate of 6.2% in respect of trading with sister concerns as against 5.22 % applied by the AO though he has upheld rejection books of accounts under section 145(3). 4. On the facts and circumstances of the case, the CIT(A) has erred in deleting trading addition of �55,04.911/-being interest attributable to the goods sold to the sister concerns.
3 I.T.A. Nos. 33&73JPR/2024 and 714JPR/2023 Assessment Years: 2012-13 & 2014-15
On the facts and circumstances of the case, the CIT(A) has erred in deleting trading addition of �63,60,825/-being claim of foreign exchange loss. 6. On the facts and circumstances of the case, the CIT(A) has erred in deleting trading addition of �38,46,258/- being b SAD refund. 3. Briefly the facts of the case are that the appellant is a company and
its return of income for assessment year 2012 -13 was filed on 27/09/2012 declaring total income at �19,53,520/-. The case of the appellant was
selected for scrutiny under CASS and notice under section 143(2) of the
act was issued to the appellant on 07/08/2013. Thereafter, other statutory
notices were issued and assessment under section 143(3) of the act was
completed on 30/03/2015 and thereby total income at Rs 2, 46, 80, 363/-
was determined.
Being agreed with the assessment order, the assessee filed appeal
before the National Faceless Appeal Center ["NFAC/CIT(A)"], who vide
order dated 30.11.2023, deleted all additions made by the 'd. AO except
one. Against the order passed by NFAC, department and have preferred
cross appeal before us. We first take up the department appeal in I.T.A.
Nos. 73JPR/2023 Assessment Years: 2012-13.
In ground no.1 to 6 revenue has objected to the deleting trading
addition and multiple additions of varying quantity made by the AO on
4 I.T.A. Nos. 33&73JPR/2024 and 714JPR/2023 Assessment Years: 2012-13 & 2014-15
multiple issue though the CIT(A) has upheld rejection books of accounts
under section 145(3) of the Act.
5.1 The appellant company has been engaged in manufacturing activities. The AO being not satisfied, 1st made trading addition of Rs. 22,29,373, after rejecting the books of accounts of the assessee company and, thereafter, applied GP% of 16.99%, as against 15.99% declared by
the assessee company, on tumover of manufactured goods. (AO Order Page 61). Similarly, the AO made various additions.
5.2 The Ld. DR stands by the impugned order and reiterated the text from page 61 of the Assessment order, However, he failed to rebut the facts and reason given by the Ld. CIT(A) in deleting the alleged GP%
addition and likewise other additions. The DR also failed to file contrary judgement to the ITAT Coordinate Bench on the issues raised by the Department.
5.3 Per contra, the Ld. AR reiterated the submission made before the CIT(A). The Id. CIT(A)/NFAC, after considering the elaborate submissions made by the appellant (APB, Pgs. 64-95), and relevant part of the same
submissions have been reproduced in his order from Page 8-19, deleted
5 I.T.A. Nos. 33&73JPR/2024 and 714JPR/2023 Assessment Years: 2012-13 & 2014-15
the entire addition by stating that the GP rate of the assessee was better in
comparison to the previous year’s vide observation on Pages 24-25, and
findings on Page 5.5 of the CIT(A) Order in a well reasons manner by
relying on the ITAT, Jaipur Bench, in the case of Udasee Stamping Private
Limited, ITA No. 12/JP/2017, wherein on identical set of facts, trading
additions deleted by Id. CIT(A), were upheld by the Hon'ble ITAT. It is
pertinent to mention that Udasee Stamping Private Limited is the sister
concern of the assessee company. [Copy of ITAT Order is placed on
record for reference]. Similarly, arguments made by the Ld. AR in rebuttal
to all other issues raised by the department,
5.4 Having heard both the sides and perusal of the matter, impugned
order and Coordinate Bench, it is undisputed facts that on identical set of
facts, trading additions deleted by Id. CIT(A), were upheld by the Hon'ble
ITAT in the case of Udasee Stamping Private Limited, ITA No. 12/JP/2017.
which is the sister concern of the assessee company. Thus, the Ld. CIT(A) has followed the Jurisdictional coordinate bench Judgement as per judicial
discipline on identical facts which remained unrebutted by the department.
In view of that matter, there are no merits in the grounds of the department.
The ground of appeal of the revenue would be liable to be rejected.
6 I.T.A. Nos. 33&73JPR/2024 and 714JPR/2023 Assessment Years: 2012-13 & 2014-15
5.6 In the present case, on identical facts, following the Coordinate
Bench decision, in the case of appellants sister concern M/s Udasee
Stamping Private Limited (Supra), we hold that there are no infirmity or
perversity in the order of the ld. CIT(A)/NFAC to the facts on record.
Therefore, the addition deleted by the ld. CIT(A) are sustained.
33JPR/2024 Assessment Year 2012-13:
The appellant assessee has not pressed the 2 grounds taken with the
memorandum of appeal and these grounds were dismissed as not pressed.
However, the appellant has raised an additional ground which reads as
under:
"....ln the facts and circumstances of the case and in law, National Faceless Appeal Centre ("NFAC") has erred in giving directions to the Id. AO, on account of sale of CRGO, made to ws Udasee Stamping Pvt. Ltd., yet accepting tie proposition of the assessee company that the transactions with ws Udasee Stamping Pvt. Ltd. were "Tax Neutral" and that also there could not be any addition on the sales made to related party, in accordance with the provision of law. The action of NFAC is illegal, unjustified, arbitrary and against the facts of the case. Relief and please be granted by deleting the entire addition of Rs. 37,32,246, made to the income of the assessee company..." 6. The Ld. AR submitted that additional ground of appeal is purely legal
in nature and that the factual position, as relevant for the Ground of Appeal
is emerging out of the respective orders of the lower authorities. The Ld. AR
referred to the Hon'ble Supreme Court Judgement in the case of National
7 I.T.A. Nos. 33&73JPR/2024 and 714JPR/2023 Assessment Years: 2012-13 & 2014-15
Thermal Power Co. Ltd. [19981 229 ITR 383 (SC) wherein it is held that
"...Under section 254, the Tribunal may, after giving both the patties to the
appeal an opportunity of being heard, pass such orders thereon as it thinks
fit. The power of the Tribunal in dealing with appeals is thus expressed in
the widest possible terms. The purpose of the assessment proceedings
before the taxing authorities is to assess correctly the tax liability of an
assessee in accordance with law. If, for example, as a result of a judicial
decision given while the appeal is pending before the Tribunal, it is found
that a non-taxable item is taxed or a permissible deduction is denied, there
is no reason why the assessee should be prevented from raising that
question before the Tribunal for the first time, so lonq as the relevant facts
are on record in respect of that item. Considering merits in the contention of
the appellant, the additional ground of appeal is purely legal in nature, we
admit the same for adjudication, accordingly.
6.1. The appellant challenged that The CIT(A)/NFAC has erred in giving
directions to the Id. AO, on account of sale of CRGO, made to M/s
Udasee Stamping Pvt. Ltd., yet accepting tie proposition of the assessee
company that the transactions with M/s Udasee Stamping Pvt. Ltd. were
"Tax Neutral" and that also there could not be any addition on the sales
8 I.T.A. Nos. 33&73JPR/2024 and 714JPR/2023 Assessment Years: 2012-13 & 2014-15
made to related party, in accordance with the provision of law. The action
of NFAC is illegal, unjustified, arbitrary and against the facts of the case.
Relief and please be granted by deleting the entire addition of Rs.
37,32,246, made to the income of the assessee company.
6.2. The AO made trading addition of Rs. 37,32,246, w.r.t sale of material
as part of traded goods to M/S Udasee Stamping Pvt. Ltd. Ld. after
rejecting the books of accounts of the assessee company and, thereafter,
applied GP% of 5%, as against 0.94% declared by the assessee company,
on turnover of traded goods of CRGO of Rs. 9,19,12,938. Thus, addition of
Rs. 37,32,246/- was made [AO Order Page 71]. The Id. CIT(A) deleted the
entire addition (Page 24-25, of the CIT(A) Order) by relying upon the
decision of ITAT, Jaipur Bench, in the case of M/s Udasee Stamping
Private Limited, ITA No. 12/JP/2017, wherein under identical set of facts,
trading additions deleted by Id. CIT(A), were upheld by the Hon'ble ITAT.
Udasee Stamping Private Limited, the sister concern of the assessee
company.
6.3. It is undisputed fact on record that the Transactions with M/s Udasee
Stamping Private Limited was a "TAX NEUTRAL" transaction as both the
entities, i.e. the assessee company and Udasee Stamping Private Limited
9 I.T.A. Nos. 33&73JPR/2024 and 714JPR/2023 Assessment Years: 2012-13 & 2014-15
paid tax, for the year under consideration, at the same rate as per
unrebutted assessee reply [Page 15-16 of the order of CIT(A)/NFAC].
Further, the additions were made by the Id. AO on the transaction with the
related party of the assessee, without following the due procedure as laid
down under the Transfer Pricing Law. In this regard, the Ld. AR contended
that the Domestic Transfer Pricing regulations through which additions, if at
all, could have been made to the income of the company, were not enforce
for the year under consideration as per unrebutted reply of the Assessee (
the [CIT(A)/NFAC Pages 14-15]. Without prejudice to above, we have
upheld the decision of the CIT(A) being passed as per judicial discipline in
deleting the said addition. Under the facts and circumstances of the case
and in law, CIT(A)/NFAC has no justification for giving directions to the Id.
AO, on account of sale of CRGO, made to M/s Udasee Stamping Pvt. Ltd.,
yet accepting the proposition of the assessee company that the
transactions with M/s Udasee Stamping Pvt. Ltd. were "Tax Neutral".
Meaning thereby that there would not be any addition on the sales made to
related party, in accordance with the provision of law.
6.7 In our view, the action of CIT(A)/NFAC is illegal, unjustified, arbitrary
and against the facts of the case. Accordingly, the entire addition of Rs.
10 I.T.A. Nos. 33&73JPR/2024 and 714JPR/2023 Assessment Years: 2012-13 & 2014-15
37,32,246, made to the income of the assessee company is deleted. Thus
the additional ground of appeal of the assessee is allowed.
714JPR/2023 Assessment Year 2014-15:
The appellant has taken following grounds of appeal:
In the facts and circumstances of the case and the Id. CIT(A)/National Faceless Appeal Center (NFAC) has erred in confirming the action of Id. AO in rejecting the books of accounts of the assesse company, by invoking the provisions of Section 145(3) of the Income Tax Act, 1961. The action of the Id. CIT(A)/NFAC in confirming the actions of Id. AO is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the entire assessment order passed b he Id. AO and confirmed by Id. CIT(A)/NFAC. 2. In the facts and circumstances of the case and in law, Id. CIT(A)/NFAC has erred in restricting the addition made by Id. AO to Rs. 18,44,224 to the income of the assessee company, without an cogent basis. The action of the Id. CIT(A)/NFAC in restricting the addition up to Rs. 18,44,224 is illegal, unjustified, arbitrary and against the facts of the case. Relief may be please be granted by deleting the entire addition made by Id. AO which is also confirmed by IdCIT(A)/NFAC. 3. In the facts and circumstances of the case and in law, Id. CIT(A)/NFAC has erred in confirming the addition made by Id. AO on account of employees contribution towards PF amounting to rupees 3,12,750/- to the income of the assessee company, on account of alleged delay in payment of the same. The action of the learned CIT appeal/NFAC in confirming addition is illegal, unjustified, arbitrary and against the facts of the case. Relief may be please be granted by deleting the entire addition made by Id. AO which is also confirmed by Id. CIT(A)/NFAC.
11 I.T.A. Nos. 33&73JPR/2024 and 714JPR/2023 Assessment Years: 2012-13 & 2014-15
Facts of the case are that the Assessee company is engaged in the
business of manufacturing of laminations and for the A.Y. 2014-15, it had
declared income of Rs. 25,64,123 in its E-Return of Income filed on
16.11.2014. Assessment was completed u/s 143(3), vide order dated
19.12.2016 at an assessed income of Rs. 1,12,85,860, resulting into
addition of Rs. 87,21,737. Aggrieved with the additions made in
assessment, the assessee company preferred appeal before the National
Faceless Appeal Center ("NFAC"), who vide order dated 30.11.2023,
deleted addition made by the Id. AO, to the extent of Rs. 68,77,512 and
sustained the balance additions to the extent of Rs. 18,44,224. Against the
said additions sustained by the NFAC, present appeal has been preferred
by the assessee company before us.
The ground number 1 and ground number 3 are not pressed by the
Assessee Company and accordingly, both these grounds are dismissed as
not pressed.
The Ld. AR submitted that in respect of manufacturing activities, even
if books are rejected, the declared GP of 15.11% deserves to be upheld. In
the immediately preceding year the G.P. of 15.80% was declared on a
tumover of Rs. 2055.73 lacs. With the increase in tumover from Rs.
12 I.T.A. Nos. 33&73JPR/2024 and 714JPR/2023 Assessment Years: 2012-13 & 2014-15
2055.73 lacs to Rs. 2662.87 lacs, the reduced G.P. is justified because for
achieving higher tunover the margins are required to be sacrificed in the
overall interest of the business, which is evident from the fact of G.P. in
absolute terms increasing from Rs. 388.03 lacs in the last year to Rs.
402.29 lacs in the year under appeal. The Ld. AR Pleaded that addition of
Rs. 18,44,224 sustained by the NFAC may please be deleted.
Having heard both the sides, it is admitted fact that the appellant
there was marginal decline in fraction of percentage in the declared GP at
15.11% in comparison to the immediately preceding year the G.P. of
15.80%. However, the authorities below have ignored the increase in the
volume of turnover Rs. 2662.87 lacs to the preceding year turnover of Rs.
2055.73 lacs which is about more than 25% increase over the turnover
declared in the previous year. As per settled business principles and
Accounting Standard, with the increase in tumover by 25 % from Rs.
2055.73 lacs to Rs. 2662.87 lacs, the reduction in GP in fraction of % is
justified. Meaning thereby, that in order to achieve higher turnover the
certain margins would be required to be sacrificed in the overall interest of
the business, in absolute increasing in GP from Rs. 388.03 lacs in the last
year to Rs. 402.29 lacs in the present year under appeal. Accordingly, we
13 I.T.A. Nos. 33&73JPR/2024 and 714JPR/2023 Assessment Years: 2012-13 & 2014-15
hold that the decision of the Ld. CIT(A)/NFAC in restricting the addition up
to Rs. 18,44,224 is illegal, arbitrary and against the facts of the case and
the addition of Rs. 18,44,224 would be liable to be deleted.
In view of that matter, we accept the grievance of the assesse
appellant as genuine and as such, the addition of Rs. 18,44,224/- is
deleted.
In the result, the appeal filed by the assessee in I.T.A. Nos.
33/JPR/2024 and 714/JPR/2023 are allowed and that of revenue in ITA No.
73/JPR/2024 is dismissed.
Order pronounced in open court as on 10.04.2024
Sd/- Sd/- (Sandeep Gosain) (Dr. M. L. Meena) Judicial Member Accountant Member *DOC* Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The ld. CIT (4) The ld. CIT(A) (5) The DR, I.T.A.T., Jaipur (6) Guard File By Order, Asstt. Registrar
14 I.T.A. Nos. 33&73JPR/2024 and 714JPR/2023 Assessment Years: 2012-13 & 2014-15
Date Initial 1. Draft dictated on DOC Sr.PS/PS 2. Draft placed before author Sr.PS/PS 3. Draft proposed & placed before the 09.04.24 JM/AM Second Member 4. Draft discussed/approved by JM/AM Second Member 5. Approved Draft comes to the Sr. Sr.PS/PS P.S./P.S. 6. Kept for pronouncement on Sr.PS/PS 7. File sent to the Bench Clerk Sr.PS/PS 8. Date on which file goes to the Head Clerk 9. Date on which file goes to the AR 10. Date of dispatch of Order
