M/s Machino Techno Sales Pvt. Ltd., Kolkata V. DCIT, CIR-11, KOLKATA, Kolkata

CO 55/KOL/2015

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 3276 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 10 month(s) 17 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 18-10-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 01-12-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Earning of tax free income; Proportionate interest
• Section: 143(3); 14A; 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA [BEFORE HONBLE SHRI ABY. T. VARKEY, JM & SHRI M. BALAGANESH, AM ] I.T.A NO. 1317/KOL/20 15 ASSESSMENT YEAR : 2011-1 2 DCIT, CIRCLE-11(1), KOLKATA -VS- M/S MACHINO TECHNO SALES PVT. LTD. [PAN: AACCM 2561 R] (APPELLANT) (RESPONDENT) C.O. NO. 55/KOL/2015 (ARISING OUT OF I.T.A NO. 1317/KOL/2015) ASSESSMENT YEAR : 2011-1 2 M/S MACHINO TECHNO SALES PVT. LTD. -VS- DCIT, CIRCLE-11(1), KOLKATA [PAN: AACCM 2561 R] (APPELLANT) (RESPONDE NT) FOR THE APPELLANT : SHRI DAVID Z. CHOW NGTHU, ADDL. CIT DR FOR THE RESPONDENT : SHRI S.M. SURANA, ADVOCA TE DATE OF HEARING : 27.09.2017 DATE OF PRONOUNCEMENT : 18.10.2017 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE REVENUE AND THE CROSS OBJECTI ON BY THE ASSESSEE ARISE OUT OF THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-4, KOLKATA [IN SHORT THE LD. CIT(A)] IN APPEAL NO. 1236/CIT(A)/CIRCLE-11/KOL/14- 15 DATED 04.08.2015 AGAINST THE ORDER PASSED BY THE DCIT, CIRCLE-11(1), KOLKATA [IN SHORT THE LD. AO] U/S 143(3) OF THE INCOME TAX ACT, 1961 [HEREINAFTER REFERRED TO AS TH E ACT] DATED 26.03.2014 FOR THE ASSESSMENT YEAR 2011-12. 2 ITA NO.1317/KOL/2015 M/S MACHINO TECHNO SALES PVT. LTD. A.YR.2011-12 2 2. THE FIRST ISSUE TO BE DECIDED IN THE APPEAL OF T HE REVENUE IS AS TO WHETHER THE LD CITA WAS JUSTIFIED IN DELETING THE DISALLOWANCE MADE U/S 14A OF THE ACT READ WITH RULE 8D(2)(II) OF THE INCOME TAX RULES (HEREINAFTER REFE RRED TO AS THE RULES) , IN THE SUM OF RS 28,25,249/- IN THE FACTS AND CIRCUMSTANCES OF TH E CASE. 2.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSE SSEE COMPANY IS A DEALER OF MARUTI VEHICLES, SPARE PARTS, DEALING IN SHARES AND SECURI TIES AND ALSO ENGAGED IN PROPERTY BUSINESS. THE RETURN OF INCOME FOR THE ASST YEAR 2 011-12 WAS FILED BY THE ASSESSEE ON 30.9.2011 ELECTRONICALLY DECLARING TOTAL INCOME OF RS 1,74,11,003/-. IN THE ASSESSMENT ORDER, THE LD AO OBSERVED THAT THE ASSESSEE SUBMITT ED VARIOUS DETAILS, LISTS AND PHOTOCOPIES OF VARIOUS DOCUMENTS IN SUPPORT OF ASSE SSEES CLAIM OF EXPENDITURE AND ON VARIOUS QUERIES RAISED IN THE COURSE OF HEARING. THE TAX AUDIT REPORT WAS FURNISHED BEFORE THE LD AO TOGETHER WITH ITS ANNEXURES. THE LD AO OBSERVED THAT THE ASSESSEE HAD RECEIVED DIVIDEND INCOME OF RS 19,53,720/- AND CLAI MED THE SAME AS EXEMPT INCOME. THE TAX AUDITOR IN HIS TAX AUDIT REPORT HAD MENTION ED THE AMOUNT INADMISSIBLE U/S 14A OF THE ACT IN RESPECT OF EXPENDITURE INCURRED I N RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME AT RS 5,22,194/-. HOWEVE R, THE LD AO OBSERVED THAT NO SUCH EXPENSES WAS DISALLOWED BY THE ASSESSEE IN THE RETU RN OF INCOME. THE ASSESSEE WAS SHOW CAUSED AS TO WHY THE DISALLOWANCE U/S 14A OF T HE ACT READ WITH RULE 8D OF THE RULES SHOULD NOT BE MADE IN THE FACTS OF THE INSTAN T CASE. THE LD INVOKED THE COMPUTATION MECHANISM PROVIDED IN RULE 8D(2) OF THE RULES FOR MAKING DISALLOWANCE U/S 14A OF THE ACT AND WORKED OUT THE DISALLOWANCE THEREON AS UNDER:- UNDER RULE 8D(2)(II) 28,25,249/- UNDER RULE 8D(2)(III) 5,09,555/- ---------------- 33,34,804/- THIS WAS MADE AFTER PLACING RELIANCE ON THE DECISIO N OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF DHANUKA & SONS VS CIT REPORTE D IN 339 ITR 319 (CAL) THAT THE 3 ITA NO.1317/KOL/2015 M/S MACHINO TECHNO SALES PVT. LTD. A.YR.2011-12 3 ASSESSEE HAD NOT PROVED THE FACT WHETHER THE INVEST MENTS WERE MADE OUT OF OWN FUNDS OR BORROWED FUNDS IN THE RELEVANT YEAR AND HENCE TH E PROPORTIONATE INTEREST THEREON WOULD BE LIABLE FOR DISALLOWANCE UNDER RULE 8D(2)(I I) OF THE RULES IN THE SUM OF RS 28,25,249/-. THE LD AO ALSO OBSERVED THAT THE ASSE SSEE HAD EARNED TAXABLE INCOME AS WELL AS EXEMPTED INCOME AND MAINTAINS COMPOSITE ACC OUNT FOR THE SAME. 2.2. BEFORE THE LD CITA , THE ASSESSEE STATED THAT NO PART OF THE LOAN WAS USED FOR ACQUIRING SHARES OR MUTUAL FUNDS FROM WHICH THE EXE MPTED INCOME WAS EARNED AND ALSO STATED THAT NO SUCH DISALLWOANCE U/S 14A OF THE ACT UNDER THE SECOND LIMB OF RULE 8D(2) OF THE RULES WAS MADE IN THE PAST IN THE SCRU TINY ASSESSMENTS FRAMED FOR THE ASST YEARS 2009-10 AND 2010-11. IT WAS STATED THAT THE LD AO HAD NOT RECORDED ANY SATISFACTION THAT THE LOANS WERE UTILIZED FOR ACQUI SITION OF SHARES AND MUTUAL FUNDS. IT WAS FURTHER SUBMITTED THAT THE OWN CAPITAL AND RESE RVES OF THE ASSESSEE COMPANY WAS RS 29.55 CRORES , WHEREAS THE INVESTEMTNS IN SHARES AN D MUTUAL FUNDS WERE ONLY TO THE TUNE OF RS 10.90 CRORES, WHICH IS APPARENT FROM THE AUDI TED BALANCE SHEET . THE ASSESSEE PLACED RELIANCE ON SEVERAL DECISIONS IN SUPPORT OF ITS CONTENTIONS IN THIS REGARD. THE LD CITA APPRECIATED THE CONTENTIONS OF THE ASSESSEE AN D DELETED THE DISALLOWANCE MADE UNDER THE SECOND LIMB OF RULE 8D(2) OF THE RULES AT RS 28,25,249/- AND SUSTAINED THE DISALLOWANCE MADE UNDER THIRD LIMB OF RULE 8D(2) OF THE RULES AT RS 5,09,555/-. THE ASSESSEE DID NOT PREFER ANY APPEAL OR EVEN CROSS OB JECTION BEFORE THIS TRIBUNAL AGAINST THIS ACTION OF THE LD CITA. HOWEVER, THE REVENUE, BEING AGGRIEVED, HAD PREFERRED AN APPEAL BEFORE US ON THE FOLLOWING GROUND :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 28,25,249/- MADE U/S 1 4A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D(II) OF THE I.T. RULES, 1962. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THE ONLY ASPECT TO BE DECIDED IN THIS ISSUE IS WITH REGARD TO DELETION OF DISALLOWAN CE UNDER RULE 8D(2)(II) OF THE RULES. 4 ITA NO.1317/KOL/2015 M/S MACHINO TECHNO SALES PVT. LTD. A.YR.2011-12 4 FROM THE PERUSAL OF THE BALANCE SHEET AS ON 31.3.20 11 OF THE ASSESSEE, THE FINANCIALS OF THE ASSESSEE REFLECT AS UNDER:- 31.3.2011 31.3.2010 SHARE CAPITAL 4,00,00,000 4,00,00,000 RESERVES AND SURPLUS 25,54,74,637 24,26,49,245 SECURED LOANS 2,21,08,122 77,65,348 UNSECURED LOANS 2,19,00,000 1,05,06,250 INVESTMENTS 10,90,23,790 9,9 8,53,636 INTEREST PAID 38,33,786 44,46,763 APPARENTLY, THERE IS SUFFICIENT OWN FUNDS AVAILABLE WITH THE ASSESSEE COMPANY FOR MAKING THE INVESTMENTS. BUT WE FIND THAT THE INVES TMENTS WERE CARRIED OVER FROM THE EARLIER YEARS AND WHETHER THE SAME WERE MADE OUT OF OWN FUNDS OR OUT OF BORROWED FUNDS , THE DETAILS OF WHICH ARE NOT AVAILABLE BEFO RE US. THAT IS PRECISELY THE REQUIREMENT OF THE HONBLE JURISDICTIONAL HIGH COUR T IN THE CASE OF DHANUKA & SONS VS CIT REPORTED IN 339 ITR 319 (CAL), WARRANTING THE A SSESSEE TO PROVE THE SOURCES FOR MAKING THE INVESTMENTS IN THE RESPECTIVE YEARS AS T O WHETHER THE SAME WERE MADE OUT OF OWN FUNDS OR BORROWED FUNDS OF THE ASSESSEE. HENC E WE DEEM IT FIT AND APPROPRIATE , TO REMAND THIS ISSUE TO THE FILE OF THE LD AO, TO EXAM INE THE SOURCES FOR MAKING INVESTMENTS IN THE RESPECTIVE EARLIER YEARS OF MAKI NG INVESTMENTS AND DECIDE THE SAME IN ACCORDANCE WITH LAW. IF THE ASSESSEE IS ABLE TO PROVE THAT THE INVESTMENTS WERE MADE OUT OF OWN FUNDS IN THE RELEVANT YEARS, THEN NO DIS ALLOWANCE OF INTEREST UNDER RULE 8D(2)(II) OF THE RULES COULD BE INFLICTED ON THE AS SESSEE. ACCORDINGLY, THE GROUND NO. 1 RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 5 ITA NO.1317/KOL/2015 M/S MACHINO TECHNO SALES PVT. LTD. A.YR.2011-12 5 3. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD CITA WAS JUSTIFIED IN DELETING THE DISALLOWANCE MADE IN THE SUM OF RS 3,74,41,906/- TOWARDS DISCOUNT ALLOWED, IN THE FACTS AND CIRCUMSTANCES OF THE CASE . 3.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE LD A O OBSERVED THAT THE ASSESSEE CLAIMED DISCOUNT ALLOWED OF RS 3,74,41,906/- BEING DISCOUNT PAID TO CUSTOMERS FOR WHICH DETAILS WERE FURNISHED. THE LD AO ASKED THE ASSESSEE TO FUR NISH THE DETAILS OF SCHEMES UNDER WHICH THE DISCOUNT WERE ALLOWED AND DISCOUNT RECEIV ED FROM MARUTI UDYOG LTD. THE LD AO ALSO CALLED FOR THE RECONCILIATION OF DISCOUN T RECEIVED AND DISCOUNT ALLOWED. THE ASSESSEE VIDE ITS REPLY LETTER DATED 12.3.2014 SUBM ITTED AS UNDER:- THE CASH DISCOUNT VEHICLE IT IS BROUGHT TO YOUR NOTICE THAT MARUTI PROVIDES T O THE DEALER VARIOUS SCHEMES, EVERY MONTH, TO PROVIDE DISCOUNTS TO CUSTOMERS UNDE R VARIOUS HEARDS FOR DIFFERENT MODELS. THE HEADS ARE CLUBBED WHEN THE B ILL IS MADE THROUGH DMS (DEALER MANAGEMENT SYSTEM, A SOFTWARE PROVIDED BY M SIL THROUGH WHICH ONLY ALL MARUTI DEALERS HAVE TO DRAW SALE BILLS0. IT IS FUR THER BROUGHT TO YOUR NOTICE THAT MARUTI IS VERY STRICT AS FAR AS DISCOUNTS ON SALE I S CONCERNED. THEY HAVE A SYSTEM OF CONDUCTING AUDITS OF EACH DEALER TO FIND OUT THA T NO ONE HAS PROVIDED A DISCOUNT IN EXCESS OF WHAT HAS BEEN PRESCRIBED BY T HEM. AND IF ANY DEALER WANTS TO PROVIDE EXTRA DISCOUNT OTHER THAN APPROVED BY MS IL IT HAS TO BE VETTED BY THEM. A COPY OF AUDITORS BILL IS HEREBY PROVIDED FOR YOUR READY REFERENCE AND RECORD AND PROOF THAT SUCH AUDITS EXIST. WE ARE AL SO ENCLOSING APRIL MONTH CASH DISCOUNT LEDGER IN COLUMNAR FORM SHOWING SALES & VA RIOUS SCHEMES THAT MARUTI HAS PROVIDED TO ALLOW DISCOUNTS TO CLIENTS SHOWING THE PORTION THAT THEY WOULD BEAR (I.E REFUND TO US ON ONE HAND AND THAT PORTION WHICH WE HAVE TO BEAR AND HENCE COMES THE QUESTION OF DISCOUNT WHICH IS KNOWN AS CASH DISCOUNT, SPECIAL DISCOUNT, MSIL SCHEME DISCOUNT, CASH DISCOUNT ACCES SORIES, DISCOUNT ACCESSORIES (FOC) , CASH DISCOUNT FOR VEHICLE PRICE DIFFERENCE, CASH DISCOUNT VEHICLE (AFTER VAT). ENCLOSED IS THE LEDGER OF CASH DISCOUNT FOR THE MON TH OF APRIL AS A SAMPLE FOR YOUR KIND PERUSAL AND RECORD. .. ENCL: 1. DISCOUNT BREAK UP 6 ITA NO.1317/KOL/2015 M/S MACHINO TECHNO SALES PVT. LTD. A.YR.2011-12 6 2. CASH DISCOUNT LEDGER IN COLUMNAR FORM WITH DISCOUNT DETAILS FOR APRIL 2010 3. ISL DISCOUNT STATEMENT FOR APRIL 4. VARIOUS DISCOUNT SCHEME OF MARUTI 5. MARUTI AUDITOR BILL 3.1. THE ASSESSEE ALSO ENCLOSED A DETAILED NOTE ON EACH DISCOUNT ALLOWED BY IT AS UNDER:- 1. CASH DISCOUNT- VEHICLE THE COMPANY HAS GIVEN CASH DISCOUNT- VEHICLE AMOUNT ING TO RS. 3,17,97,164/- DURING THE YEAR. THE DISCOUNT HAS BEEN GIVEN TO CUSTOMERS AS PER DISCOUNT POLICY OF M/S MARUTI SUZUKI INDIA LTD. MONTH WISE DETAILED LEDGERS ARE E NCLOSED. THE DISCOUNT GIVEN TO THE CUSTOMERS ARE REFLECTED IN THE SALE BILL. FEW COPIE S OF SALE BILL ARE ALSO ENCLOSED. COPIES OF MONTHLY DISCOUNT SCHEME OF MSIL ARE ENCLO SED. 2. SPECIAL DISCOUNT (MSIL): THE COMPANY HAS GIVEN SPECIAL DISCOUNT (MSIL) AMOUN TING TO RS. 1,75,815/- DURING THE YEAR. THE DISCOUNT HAS BEEN GIVEN MAINLY THROUG H SALE BILL. DETAILED LEDGER IS ENCLOSED. (REFER VOUCHER NO.-VSL10000005 DATED 06.0 4.2010 ATTACHED WITH DEALER DISCOUNT BEFORE VAT). 3.MSIL SCHEME DISCOUNT TO CSD CUSTOMERS: THE COMPANY HAS GIVEN MSIL SCHEME DISCOUNT TO CSD C USTOMERS AMOUNTING TO RS. 1,50,403/- DURING THE YEAR. THE DISCOUNT HAS BEEN G IVEN TO CUSTOMERS AS PER CSD DISCOUNT POLICY OF M/S MARUTI SUZUKI INDIA LTD. DET AILED LEDGER IS ENCLOSED. COPIES OF MONTHLY DISCOUNT SCHEME OF MSIL ARE ENCLOSED. 4. CASH DISCOUNT FOR VEHICLE PRICE DIFFERENCE: THE COMPANY HAS GIVEN CASH DISCOUNT FOR VEHICLE PRI CE DIFFERENCE CUSTOMERS AMOUNTING TO RS. 8,15,106/- DURING THE YEAR. THE DI SCOUNT HAS BEEN GIVEN TO CUSTOMERS WHEN PRICE OF VEHICLES ARE INCREASED BY MSIL BUT TH E VEHICLES WERE PURCHASED BY US AT OLD PRICE AS BECAUSE MSIL IMPLEMENTS THE NEW PRICES IN DMS AS AND WHEN PRICE CHANGES AND SALE BILLS ARE GENERATED AT NEW PRICE F OR THE VEHICLES OF OLD PRICE. 5. DEALER DISCOUNT AFTER VAT: THE COMPANY HAS GIVEN DEALER DISCOUNT AFTER VAT AMO UNTING TO RS. 5,80,024/- DURING THE YEAR. MONTH WISE DETAILED LEDGER OF OCTOBER, 20 10 IS ENCLOSED. THE DISCOUNT GIVEN TO THE CUSTOMERS ARE REFLECTED IN THE SALE BILL. FE W COPIES OF SALE BILL ARE ALSO ENCLOSED. 6. DEALER DISCOUNT BEFORE VAT: 7 ITA NO.1317/KOL/2015 M/S MACHINO TECHNO SALES PVT. LTD. A.YR.2011-12 7 THE COMPANY HAS GIVEN DEALER DISCOUNT BEFORE VAT AM OUNTING TO RS. 2,05,952/- DURING THE YEAR. DETAILED LEDGER IS ENCLOSED. THE D ISCOUNT GIVEN TO THE CUSTOMERS ARE REFLECTED IN THE SALE BILL. FEW COPIES OF SALE BILL ARE ALSO ENCLOSED. 7. DISCOUNT ALLOWED: THE COMPANY HAS GIVEN DISCOUNT ALLOWED AMOUNTING TO RS. 89,573.51 DURING THE YEAR. DETAILED LEDGER IS ENCLOSED. 8. DISCOUNT ON SPARE PARTS & OTHERS: THE COMPANY HAS GIVEN DISCOUNT ON SPARE PARTS & OTH ERS AMOUNTING TO RS. 8,88,996/- DURING THE YEAR. MONTH WISE DETAILED LEDGERS ARE EN CLOSED. THE DISCOUNT GIVEN TO THE CUSTOMERS ARE REFLECTED IN THE SALE BILL. FEW COPIE S OF SALE BILL ARE ALSO ENCLOSED. 9. DISCOUNT OF INSURANCE: THE COMPANY HAS GIVEN DISCOUNT ON INSURANCE AMOUNTI NG TO RS. 11,89,887.63 DURING THE YEAR. MONTH WISE DETAILED LEDGER OF APRIL, 2010 IS ENCLOSED. THE DISCOUNT GIVEN TO THE CUSTOMERS ON RENEWAL OF INSURANCE POLICY DUE TO MARKET COMPETITION. 8 ITA NO.1317/KOL/2015 M/S MACHINO TECHNO SALES PVT. LTD. A.YR.2011-12 8 3.2. THE LD AO OBSERVED THAT THE ASSESSEE COULD NOT FURNISH ANY SUPPORTING DOCUMENTS / DETAILS TO SUBSTANTIATE ITS CLAIM OF DISCOUNT ALLOW ED. FURTHER IT FAILED TO RECONCILE THE DISCOUNT RECEIVED FROM MUL WITH THAT OF DISCOUNT AL LWOED TO CUSTOMERS. THE LD AO FURTHER OBSERVED THAT IT IS NOTICED THAT THE ASSESS EE HAS ALLOWED DISCOUNT FOR INSURANCE, CASH DISCOUNT-ACCESSORIES, DISCOUNT ON SPARES AND O THERS ETC WHICH ARE NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCES. ACCORDINGLY, HE PROCEEDE D TO DISALLOW THE ENTIRE DISCOUNT ALLOWED IN THE SUM OF RS 3,74,41,906/- IN THE ASSES SMENT. 3.3. BEFORE THE LD CITA, IT WAS SUBMITTED THAT THE DISCOUNT IS DEDUCTED DIRECT FROM THE VALUE BILLS RAISED ON THE CUSTOMERS WHILE BILLING FOR THE PRICE OF CAR AND ONLY NET PAYMENT IS RECEIVED AFTER DEDUCTION OF THE DISCOUNT AND FURTHER CREDIT ON ACCOUNT OF THE INITIAL ADVANCE OR DEPOSIT PAID BY THE CUSTOMER WHI LE BOOKING THE CAR. IT WAS EMPHASIZED THAT NO DISCOUNT WAS PAID SEPARATELY TO CUSTOMERS RATHER THE SAME WAS REDUCED FROM THE BILLS RAISED ON THE CUTOMERS AND C USTOMER MAKES THE FINAL PAYMENT OF THE PRICE OF THE CAR, ACCESSORIES, INSURANCE PREMIU M ONLY AFTER THE CREDIT FOR THE AFORESAID DISCOUNT ALLOWED TO THEM. INFACT VAT / SALES TAX IS ALSO CHARGED ON THE NET VALUE OF BILLS AFTER REDUCTION OF DISCOUNT ALLOWED TO CUSTOMERS. IT WAS STATED THAT THE MONTHLY STATEMENT OF SALE INVOICES VIS A VIS THE DI SCOUNT DETAILS PROVIDED BEFORE THE LD AO CLEARLY MENTIONS THAT FROM THE GROSS PRICE OF CA R, DISCOUNT AND OTHER DEDUCTIONS ALLOWED TO CUSTOMERS WERE REDUCED AND THEREAFTER TH E SALES TAX / VAT WAS CHARGED. THIS CONCLUSIVELY PROVED THAT THE DISCOUNT IS ALLOWED TO CUSTOERMS FROM THE GROSS VALUE OF CARS IN THE BILLS ITSELF AND NOT PAID SEPARATELY. SOME REIMBURSEMENT IS ALSO RECEIVED FROM PRINCIPAL. THE DETAILS OF REIMBURSEMENTS RECE IVED FROM PRINCIPAL WERE ALSO FILED BEFORE THE LD AO AS DISCOUNT RECEIVED. IT WAS SUB MITTED THAT IF THE LD AO HAD ANY DOUBT ON THE SUBJECT MENTIONED TRANSACTION, HE COULD HAVE ISSUED SUMMONS U/S 131 OF THE ACT TO MARUTI SUZUKI INDIA LTD (MSIL) AND UNDERSTOOD TH E FACTS CLEARLY. IT WAS SUBMITTED THAT SUCH DISCOUNT IS ALLOWED TO THE CUSTOMERS OF C ARES YEAR TO YEAR AND EVERY YEAR AS UNDER:- 9 ITA NO.1317/KOL/2015 M/S MACHINO TECHNO SALES PVT. LTD. A.YR.2011-12 9 ASST YEAR TURNOVER DISCOUNT AMT DISCOUNT % 2007-08 62,62,40,994 3,31,83,043 5.29% 2008-09 64,97,29,748 3,95,43,695 6.08% 2009-10 97,37,99,348 4,18,24,064 4.29% 2010-11 112,10,69,521 3,97,41,906 3.54% IT WAS SUBMITTED THAT NO DISALLOWANCE WAS MADE ON T HIS ACCOUNT IN THE EARLIER YEARS IN SCRUTINY ASSESSMENTS AND THE SAME BUSINESS WAS CONT INUING FOR MORE THAN 35 YEARS . IT WAS SUBMITTED THAT THE DISCOUNT PAID IN THIS YEAR I S MUCH MORE THAN COMPARED TO EARLIER YEAR. 3.4. THE LD CITA DELETED THE DISALLOWANCE BY OBSER VING AS UNDER:- 9.2. I HAVE CONSIDERED THE CONTENTION OF THE AR OF THE APPELLANT AND THE ASSESSMENT ORDER IN THIS REGARD. ON CONSIDERATION OF THE RIVAL CONTENTIONS ON THE ISSUE, I FIND THAT THE AO HAS DISALLOWED THE DISCOUNT ON THE GROUND TH AT THE ASSESSEE FAILED TO RECONCILE THE DISCOUNT RECEIVED FROM MUL. HOWEVER, FROM THE S UBMISSIONS MADE BY THE ASSESSEE AS QUOTED IN THE ASSESSMENT ORDER ITSELF, THE ASSES SEE SUBMITTED THE DETAILS OF THE SCHEMES UNDER WHICH MARUTI WAS TO BEAR THE DISCOUNT AND FILED DETAILS OF THE DISCOUNT ALLOWED TO CUSTOMERS. FURTHERMORE, AS STATED BY TH E ASSESSEE, AND FROM THE BILLS RAISED ON THE CUSTOMERS, AS EXAMINED BY ME, I FIND THAT TH E DISCOUNT HAVE BEEN ALLOWED IN THE SALES BILLS OF CARS ITSELF AND THE SAME IS NOT SEPA RATELY PAID WHETHER FOR CARS OR FOR ACCESSORIES OR CASH DISCOUNT AND DISCOUNT ON INSURA NCE. I ALSO FIND THAT DISCOUNT WAS BEING PAID YEAR TO YEAR ON A CONTINUOUS BASIS AND T HE SAME WAS NOT DISALLOWED IN THE PAST GIVEN THE FACT THAT THE ASSESSEE WAS IN THE SA ME BUSINESS OF DEALERSHIP OF MARUTI CARS FOR THE PAST 35 YEARS OR SO AND MOST OF THE AS SESSMENTS WERE COMPLETED UNDER SCRUTINY ASSESSMENTS. I FIND THAT THE AO HAS NOT BR OUGHT ON RECORD ANY COGENT MATERIAL THAT THE DISCOUNT WAS NOT PAID TO CUSTOMERS AND THA T THE SAME WAS REIMBURSED BY MUL. IN VIEW OF THIS, I DO NOT FIND ANY MERIT IN THE ACT ION OF THE AO IN DISALLOWING THE DISCOUNT PAID TO CUSTOMERS. THE DISALLOWANCE IS THE REFORE DIRECTED TO BE DELETED. THIS GROUND IS ALLOWED. 3.5. AGGRIEVED , THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND:- 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 3,74,41,906/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF DISCOUNT ALLOWED. 10 ITA NO.1317/KOL/2015 M/S MACHINO TECHNO SALES PVT. LTD. A.YR.2011-12 10 3.6. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE FACT S STATED HEREINABOVE REMAIN UNDISPUTED AND HENCE THE SAME ARE NOT REITERATED FO R THE SAKE OF BREVITY. WE FIND THAT THE ASSESSEE HAD FILED COMPLETE DETAILS OF DISCOUNT S PROVIDED TO THE CUSTOMERS BY WAY OF DEDUCTION FROM THE SALE BILLS UNDER AND DETAILS OF DISCOUNTS ALLOWED TO CUSTOMERS UNDER VARIOUS SCHEMES PROVIDED BY MARUTI. WE ALSO FIND T HAT THE ASSESSEE HAD EXPLAINED THE NATURE OF EACH SCHEME OF DISCOUNT BEFORE THE LD AO VIDE LETTER DATED 12.3.2014 TOGETHER WITH THE RELEVANT ANNEXURES INCLUDING THE LEDGER AC COUNTS, MONTHLY STATEMENT FOR APRIL 2010 (AS SAMPLE BASIS) AND SAMPLE SALE INVOICES. W E HOLD THAT THE LD AO HAD NOT APPRECIATED THE EVIDENCES SUBMITTED BEFORE THEM AND HAD NOT TAKEN ANY EFFORTS TO UNDERSTAND THE BUSINESS MODEL OF THE ASSESSEE AND P ROCEEDED TO DISALLOW THE ENTIRE DISCOUNT PAID TO CUSTOMERS IN THE SUM OF RS 3,74,41 ,906/-. THIS ACTION OF THE LD AO , IN OUR CONSIDERED OPINION, IS NOT APPRECIATED. WE FI ND THAT THE DETAILS FILED BY THE ASSESSEE IN THIS REGARD ARE ENCLOSED IN PAGES 24 TO 42 OF THE PAPER BOOK. WE FIND THAT THE LD CITA HAVING GONE THROUGH THE VARIOUS DETAILS THAT WERE AVAILABLE ON RECORD AND MORE SO THAT THE DISCOUNT ALLOWED WAS REDUCED IN TH E SALE BILLS ITSELF BY THE ASSESSEE AND THE CUSTOMERS HAD MADE THE PAYMENT FOR PURCHASE OF CARS AFTER REDUCING THE SAID DISCOUNT AMOUNT, HAD CATEGORICALLY OBSERVED THAT T HE ASSESSEE HAD SUBSTANTIATED THE CLAIM OF DISCOUNT ALLOWED TO CUSTOMERS AND HENCE IS SQUARELY ALLOWABLE AS AN EXPENDITURE THEREON. WE DO NOT FIND ANY JUSTIFIABL E REASON TO INTERFERE WITH THE SAID ORDER OF THE LD CITA IN THIS REGARD. ACCORDINGLY, THE GROUND NO. 2 RAISED BY THE REVENUE IS DISMISSED. 4. THE LAST ISSUE TO BE DECIDED IN THIS APPEAL OF T HE REVENUE IS AS TO WHETHER THE LD CITA WAS JUSTIFIED IN DELETING THE ADDITION MADE IN THE SUM OF RS 1,06,85,656/- TOWARDS ADVANCE FROM CUSTOMERS AS UNEXPLAINED CASH CREDIT U /S 68 OF THE ACT, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 11 ITA NO.1317/KOL/2015 M/S MACHINO TECHNO SALES PVT. LTD. A.YR.2011-12 11 4.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE LD A O CALLED FOR THE DETAILS OF ADVANCE RECEIVED FROM CUSTOMERS FROM THE ASSESSEE WHICH WER E REFLECTED IN THE LIABILITY SIDE OF THE BALANCE SHEET. THE LD AO OBSERVED FROM PERUSA L OF THE DETAILS FILED BY THE ASSESSEE, THAT IT HAD RECEIVED ADVANCES FROM DIFFERENT PERSON S OF RS 10,000/- EACH ON DIFFERENT DATES AGGREGATING TO RS 34,14,590/- . FURTHER, THE ASSESSEE HAS ALSO RECEIVED SUCH ADVANCES RANGING BELOW RS 10,000/- AGGREGATING TO R S 72,71,066/-. THUS THE TOTAL ADVANCES RECEIVED FROM VARIOUS PARTIES WAS RS 1,06, 85,656/- ( 34,14,590 + 72,71,066) WHICH WAS SOUGHT TO BE EXAMINED BY THE LD AO. IN RESPONSE, THE ASSESSEE FURNISHED A STATEMENT SHOWING REFUND OF ADVANCES MADE IN SUBSEQ UENT YEARS AND AMOUNTS ADJUSTED AGAINST SALES INVOICES IN SUBSEQUENT YEARS. THE L D AO OBSERVED THAT THE ASSESSEE FAILED TO FURNISH ANY FURTHER EXPLANATION AS TO WHY THE SU MS WERE RECEIVED AND PART REFUNDED. FURTHER HE OBSERVED THAT THE ASSESSEE COULD NOT FUR NISH ANY DOCUMENTARY EVIDENCE TO SUBSTANTIATE ITS CLAIM, I.E SCHEME UNDER WHICH SUMS WERE RECEIVED, NAME OF THE PARTY, COMPLETE ADDRESS, PAN, ASSESSMENT JURISDICTION ETC TO VERIFY THE GENUINENESS OF AFORESAID DEPOSITS OF RS 1,06,85,656/-. HE FURTHER OBSERVED THAT IT IS BEYOND THE HUMAN PROBABILITY THAT EVERY PARTY HAS ADVANCED A SUM OF RS 10,000/- ONLY TO THE ASSESSEE COMPANY. HE ACCORDINGLY ADDED THE ENTIRE ADVANCE FR OM CUSTOMERS IN THE SUM OF RS 1,05,85,656/- AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. 4.2. BEFORE THE LD CITA, THE ASSESSEE SUBMITTED TH AT FOR BOOKING ANY CAR, CUSTOMERS HAVE TO DEPOSIT INITIAL MONEY. THE LD AO HAS DOUBT ED THE BASIC RULE OF THE TRADE THAT FOR BOOKING ANY CAR, AN INITIAL BOOKING DEPOSIT HAS TO BE MADE ALONG WITH THE BOOKING FORM ITSELF WHEN ALL THE DETAILS OF THE CUSTOMERS INCLUD ING THEIR PAN ARE NOTED. ACCORDINGLY IT WAS STATED THAT THE DEPOSIT FROM THE CUSTOMERS FOR BOOKING OF THE VEHICLES WHICH REMAINED OUTSTANDING AT THE END OF T HE YEAR IS AN USUAL PHENOMENON. THE CUSTOMERS AT THE TIME OF DEPOSIT GIVE THEIR FUL L ADDRESS AS WELL AS THE PAN. THE DEALER CANNOT BOOK A CAR UNLESS FULL IDENTIFICATION OF THE CUSTOMER ALONG WITH HIS IDENTITY, ADDRESS PROOF AND PAN IS OBTAINED UNDER M OTOR VEHICLE RULES. LAST YEAR 12 ITA NO.1317/KOL/2015 M/S MACHINO TECHNO SALES PVT. LTD. A.YR.2011-12 12 SUCH SUNDRY CREDITORS WERE OF RS 1,16,14,097/-. ASS ESSMENT WAS COMPLETED FOR ASST YEAR 2009-10 U/S 143(3) OF THE ACT WHEREIN SIMILAR SUNDRY CREDITORS WERE RS 93,06,370/-. SIMILARLY ASSESSMENT FOR ASST YEAR 20 10-11 WAS COMPLETED U/S 143(3) OF THE ACT WHEREIN SIMILAR SUNDRY CREDITORS WERE RS 1, 16,14,097/-. IT WAS EXPLAINED THAT IN A CAR DEALERSHIP BUSINESS, THE CUSTOMERS ADVANCE WI LL ALWAYS BE THERE SINCE THE CARS BOOKED CAN BE DELIVERED GENERALLY AFTER 2-3 MONTHS BECAUSE OF COLOUR CHOICE, MODEL CHOICE AND SUCH CAR COMES FROM THE GURGOAN FACTORY OF MARUTI SUZUKI LTD. APART FROM THAT THE OTHER SUNDRY CREDITOR NAMELY EI DUPONT, AD VANCE AGAINST RENT AS WELL AS MARUTI TAXI ADVANCE WERE BROUGHT FORWARD FROM EARLIER YEAR S AS WAS EVIDENT FROM THE DETAILS FILED BUT EVEN THEN THE LD AO WITHOUT APPLYING HIS MIND HAS ADDED BACK THE SAME U/S 68 OF THE ACT. 4.3. THE LD CITA DELETED THE ADDITION U/S 68 OF THE ACT BY OBSERVING AS UNDER:- 10.2. THE RIVAL CONTENTIONS ON THE ISSUE HAVE BEEN DULY CONSIDERED IN COMING TO A DECISION. I FIND THAT THE AO HAS NOT TAKEN INTO ACC OUNT THE NATURE OF BUSINESS, THE EVIDENCE WHICH WAS TO BE SUBMITTED BY THE INTENDING CUSTOMERS AND THE SYSTEMS OF BOOKING THE CARS. THE PURPOSE OF DEPOSIT AND REFUND WAS OBVIOUS IN CAR DEALERSHIP BUSINESS. THE ASSESSEE MAINTAINED THE DETAILS OF CU STOMERS WHICH WERE SUBMITTED BEFORE THE AO. THE RECEIPT AND PAYMENT WERE ALL BY ACCOUNT PAYEE CHAEQUES. CONSIDERING THE NATURE OF BUSINESS, THE USUAL PHENOMENON AND THE PA ST RECORDS, THE ADDITION WAS NOT JUSTIFIED. THE ADDITION MADE WITHOUT ANY COGENT BAS IS CANNOT BE UPHELD AT THE APPELLATE STAGE AND HENCE THE SAME STANDS DELETED. 4.4. AGGRIEVED , THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND:- 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1,06,85,656/- MADE BY THE AO AS UNEXPLAINED CASH CREDIT U/S 68 OF THE I.T. ACT, 1961. 4.5. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THE ASSESSEE HAD SHOWN ADVANCE RECEIVED FROM CUSTOMERS IN THE LIABILITY SIDE OF THE BALANCE SHEET AND HAD FILED THE FOLLOWING DETAILS REGARDING THE SAME :- 13 ITA NO.1317/KOL/2015 M/S MACHINO TECHNO SALES PVT. LTD. A.YR.2011-12 13 A) STATEMENT OF ADVANCE RECEIVED FROM CUSTOMERS UND ER EACH HEAD AS ON 31.3.2011 AND AMOUNTS ADJUSTED THEREON EITHER BY WAY OF REFUND OR ADJUSTED WITH SALES INVOICES (ENCLOSED IN PAGE 43 OF PAPER BOOK) ; B) BREAK UP OF ADVANCE RECEIVED FROM CUSTOMERS AS O N 31.3.2010 DATE WISE AND PARTY WISE SPECIFYING THE AMOUNT RECEIVED THEREON (ENCLOS ED IN PAGES 44 TO 53 OF PAPER BOOK) ; C) BREAK UP OF ADVANCE RECEIVED FROM CUSTOMERS AS O N 31.3.2011 DATE WISE AND PARTY WISE SPECIFYING THE AMOUNT RECEIVED THEREON TOGETHE R WITH THE DETAILS OF AMOUNTS EITHER REFUNDED OR ADJUSTED WITH SALES INVOICES IN THE SUB SEQUENT PERIOD (ENCLOSED IN PAGES 54 TO 61 OF PAPER BOOK). WE ALSO FIND THAT THE ASSESSEE HAD BEEN SHOWING THE SIMILAR ADVANCES FROM CUSTOMERS UNDER VARIOUS HEADS AND REFLECTED THE SAME UNDER SU NDRY CREDITORS AND NO ADDITIONS WERE MADE IN THIS REGARD IN THE SCRUTINY ASSESSMENT S COMPLETED U/S 143(3) OF THE ACT FOR THE ASST YEARS 2009-10 AND 2010-11 BY THE LD AO. WE FIND THAT THIS ADDITION HAS BEEN MADE BY THE LD AO WITHOUT APPRECIATING THE BUSINESS MODEL OF THE ASSESSEE. IT IS VERY USUAL FOR A CAR DEALER SUCH AS ASSESSEE, TO RECEIVE BOOKING ADVANCE FROM VARIOUS PROSPECTIVE CUSTOMERS AT THE TIME OF BOOKING THE VE HICLE AND THE SAME WOULD BE REFLECTED AS ADVANCE FROM CUSTOMERS, WHICH WOULD GE T ADJUSTED WITH THE SALE INVOICE IN SUBSEQUENT PERIOD ON DELIVERY OF THE VEHICLE. IN CA SE IF THE CUSTOMER WISHES TO CANCEL THE ORDER, THE SAME WOULD BE REFUNDED AS PER THE TE RMS AND CONDITIONS AGREED UPON. THIS IS THE GENERAL PRACTICE FOLLOWED BY EVERY CAR DEALER IN THE COUNTRY. WE FIND THAT THE ASSESSEE HAD PROVIDED THE NAMES, ADDRESS AND PA N OF ALL THE PARTIES FROM WHOM ADVANCES WERE RECEIVED. THE ENTIRE DETAILS WERE VE RY MUCH AVAILABLE ON RECORD BEFORE THE LD AO REGARDING THIS ISSUE WHICH HAS NOT BEEN A PPRECIATED BY THE LD AO. WE FIND THAT THE LD CITA HAD APPRECIATED THE VERY SAME EVID ENCES AND DELETED THE ADDITION MADE U/S 68 OF THE ACT. WE FIND THAT THERE IS ABSOLUTEL Y NO CASE MADE OUT BY THE LD AO FOR FRAMING THIS ADDITION U/S 68 OF THE ACT. HENCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER 14 ITA NO.1317/KOL/2015 M/S MACHINO TECHNO SALES PVT. LTD. A.YR.2011-12 14 OF THE LD CITA IN THIS REGARD. ACCORDINGLY, THE GR OUND NO. 3 RAISED BY THE REVENUE IS DISMISSED. 5. DURING THE COURSE OF HEARING, THE LD AR SUBMITTE D THAT THE CROSS OBJECTIONS PREFERRED BY THE ASSESSEE ARE NOT PRESSED. THE SAME IS RECKO NED AS A STATEMENT FROM THE BAR AND ACCORDINGLY THE CROSS OBJECTIONS OF THE ASSESSEE AR E DISMISSED AS NOT PRESSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED FOR STATISTICAL PURPOSES AND CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 18.10.2017 SD/- SD/- [A.T. VARKEY] [ M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 18 .10.2017 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. DCIT, CIRCLE-11(1), KOL, P-7, CHOWRINGHEE SQUARE , KOLKATA-700069. 2. M/S MACHINO TECHNO SALES PVT. LTD., 8A, JINDAL HOUSE, ALIPORE, KOLKATA-700027 3. C.I.T(A)- 4, KOLKATA 4. C.I.T.- KOLKAT A. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S 15 ITA NO.1317/KOL/2015 M/S MACHINO TECHNO SALES PVT. LTD. A.YR.2011-12 15