1 IN HIGH COURT OF JUDICATURE AT MADRAS DATED: 02.02.2015 CORAM: HONOURABLE MR.JUSTICE R.SUDHAKAR and HONOURABLE MRS.JUSTICE S.VIMALA Tax Case (Appeal) No.1062 of 2014 Commissioner of Income Tax Chennai .. Appellant versus M/s.Cauvery Stone Impex Pvt. Ltd., 8, 2nd Street, Ganapathy Colony, Chennai - 600 086. .. Respondent PRAYER: Tax Case Appeal filed under Section 260A of Income Tax Act, 1961 as against order dated 20.06.2014 made in I..T.A..No.1210/Mds/2013 on file of Income Tax Appellate Tribunal, Madras 'B' Bench for assessment year 2009-2010. For appellant : Mr.T.Ravikumar Standing Counsel for Income Tax JUDGMENT (Judgment of Court was delivered by R.SUDHAKAR,J.) This Tax Case (Appeal) is filed by Revenue as against order of Income Tax Appellate Tribunal raising following substantial questions of law: 2 "1. Whether in facts and circumstances of case, Tribunal was right in deleting disallowance made under Section 10B of Income Tax Act? 2. Whether in facts and circumstances of case, Tribunal was justified in drawing conclusion that difference in sale price could be possible by merely relying on statement of assessee and failing to appreciate material evidence relied on by Assessing Officer, as to inflation of profit for 10B deduction? 3. Whether in facts and circumstances of case, Tribunal was right in not appreciating fact that Assessing Officer has fairly drawn his conclusion that there is shifting of profits to eligible undertaking based on material evidence in form of tax invoices, showing under billing by related party to assessee? 4. Is not finding of Tribunal that Assessing Officer had acted under apprehension of shifting of profits wrong and incorrect, when Assessing Officer had made very detailed analysis of sale prices of related party's sale to assessee and related party's sale to third parties and proved under billing by related party to assessee for purpose of inflating profits of unit eligible for deduction under Section 10B?" 3 2. brief facts of case are as follows: assessee is company engaged in manufacture and export of granite monuments. assessee filed its return of income for assessment year 2009-10 admitting taxable income at Rs.25,27,255/- after claiming deduction under Section 10B of Income Tax Act. It is seen that assessee had purchased Kashimiri White granite blocks from M/s.Coromandel Agencies, M/s.Gem Granites and M/s.Imperial Granites Pvt. Ltd. While completing assessment, Assessing Officer observed that sale value of granite blocks by these three companies to assessee at rate of Rs.25,000/- per CBM is lesser than value of sale by three companies to unrelated parties at Rs.30,000/- per CBM. For better clarity, we extract comparative chart as found in assessment order below: Tax invoice Description of Quantity in Rate per CBM Amount + No. & Date goods CBM Tax CA/CST/20/ Dimensional 9.2070 30,000 2,81,734 08-09 dated Granite Blocks 28.09.2008 CA/CST/21/ Dimensional 8.2258 30,000 2,51,709 08-09 dated Granite Blocks 06.11.2008 CA/CST/23/ Dimensional 17.6740 30,000 5,40,824 08-09 dated Granite Blocks 02.01.2009 10,74,267 abstract of transactions involved between these entities in 4 comparison with third parties is tabulated and provided below: Product Amount Sold to CSIPL Sold to others Slabs 39,470 723 Granite Blocks 82,578 10,000 30,000 Kashmir white 2,50,00,000 25,000 Total 2,51,22,048 3. reasoning given by Assessing Officer is that dimensions of items sold to related party was larger as compared to that of third parties and therefore, there could not be any difficulty in fixing rate on higher plank in respect of others. He further held that rates of granite blocks sold to assessee should be higher because of larger dimension. Hence, Assessing Officer completed assessment and reduced sum of Rs.50.00 lakhs from business profits of assessee and computed deduction allowable under Section 10B of Income Tax Act on balance profits on ground that profits to extent of Rs.50.00 lakhs has been shifted from M/s.Coromandel Agencies, which is related party to assessee. Assessing Officer also disallowed sales commission under Section 40(a)(i) of Income Tax Act paid to overseas agents on ground that assessee had not deducted TDS on such overseas commission. 5 4. Commissioner of Income Tax (Appeals), on appeal at instance of assessee, deleted disallowance made under Section 40(a)(i) on commission paid to overseas agents, but upheld reduction of profits to extent of Rs.50.00 lakhs while computing deduction allowable under Section 10B of Income Tax Act. 5. As against said order of Commissioner of Income Tax (Appeals), both Revenue as well as assessee went on appeal before Income Tax Appellate Tribunal. 6. Tribunal, after hearing both sides, allowed appeal filed by assessee and dismissed appeal filed by Revenue holding that it was only apprehension of Assessing Officer that assessee had shifted profits for purpose of claiming deduction under Section 10B of Act and analysis made by Assessing Officer was not conclusive proof to decline deduction under Section 10B of Act. Tribunal also upheld order of Commissioner of Income Tax (Appeals) with regard to deletion of disallowance made under Section 40(a)(i) of Income Tax Act. 7. Aggrieved by said order of Tribunal, Revenue is 6 before this Court raising above-mentioned substantial questions of law. 8. Heard learned Standing Counsel appearing for Revenue and learned counsel appearing for assessee and perused materials placed on record. 9. It is seen from order of Tribunal that Assessing Officer had not made any thorough investigation in this matter and had not adopted fair comparison at all. We find that investigation done by Assessing Officer is awry. Had Officer, who passed assessment order under Section 143(3) of Income Tax Act, took little more effort, case of Department would have been more foolproof and it will not suffer fate before Tribunal, against which Department is on appeal. 10. 'CBM' means Cubic Meter. 'Dimension', as per Concise Oxford Dictionary, means 'a measurable extent, such as length, breadth or height'. It is relevant to note that nowhere in assessment order, which is supposed to be detailed order based on enquiry and investigation, we find that there is any reference to 7 dimension of granite block in case of assessee and in case of third parties. It is not known that on what premise and presumption, Assessing Officer could come to conclusion that dimension in case of assessee is larger than that of other parties. Assessing Officer could not confuse dimension with CBM. There is nothing in assessment order to show that dimensional granite blocks is of particular size, so that it should be said as comparable for all purposes. This assumes importance. It is admitted case of assessee herein that assessee is engaged in manufacture and export of granite monuments. business of other parties is not known. 11. Tribunal had accepted plea of assessee that in granite dimensional blocks trade, price may vary depending upon size of block and uniformity in colour, defects etc., as granite is natural product and if there is any mole, crack or difference in colour, same could not be exported and hence there are lot of wastages. Tribunal while allowing appeal of assessee held that sale of dimensional granite blocks to assessee by three companies was 131.37 CBM, whereas sale of dimensional granite blocks by three companies to third parties at 8 to 17 CBM. 8 Hence, huge volume purchased by assessee could have tilted sale price in favour of assessee. Tribunal was of view that based on conjectures and surmises, Assessing Officer made comparison of sale price and reduced profit while computing deduction under Section 10B of Income Tax Act. 12. We find that on fact Tribunal had clearly come to right conclusion that there is no reason to accept findings of Assessing Officer, which is bereft of details and based on incomplete investigation. 13. Being pure question of fact, we find no question of law much less any substantial question of law arises for consideration in this appeal. Accordingly, this Tax Case (Appeal) stands dismissed. No costs. Index: Yes / No (R.S.,J.) (S.V.,,J.) Internet: Yes / No 02.02.2015 sl To 1. Income Tax Appellate Tribunal, Madras 'B' Bench. 2. Commissioner of Income Tax (Appeals) IX, Chennai 34. 3. Assistant Commissioner of Income-tax, Company Circle-I(3), Chennai 34. 9 R.SUDHAKAR,J. AND S.VIMALA,J. sl Tax Case (Appeal) No.1062 of 2014 02.02.2015 Commissioner of Income-tax, Chennai v. M/s. Cauvery Stone Impex Pvt. Ltd