ACIT, Hyderabad V. Sri Ravinder Kumar Agarwal, Secunderabad

ITA 1036/HYD/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 6277 (ITAT-HYDERABAD)
• Duration Of Justice: 40 year(s) 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2010
• Appeal Filed By: Department
• Assessment Year: misc
• Appeal Filed On: 01-01-1970
• Court: TRIBUNAL
• Department Lawyers: VASUNDHARA SINHA
• Assessee Lawyers: K C DEVADAS
• Keywords: Additional evidence; Capital expenditure
• Section: 68; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B , HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA NO.1036/HYD/2009 ASSESSMENT YEAR 2005-06 THE ACIT, CIRCLE 10(1), HYDERABAD VS SHRI RAVINDER KUMAR AGARWAL, SECUNDERABAD (PAN AADHA 8097D) (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. VASUNDHARA SINHA, DR RESPONDENT BY : SHRI K.C. DEVADAS O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) TIRUPATHI, DATED 17.7. 2009 AND PERTAINS TO THE ASSESSMENT YEARS 2005-06 . 2. THE REVENUE RAISED THE FOLLOWING GROUND IN IT S APPEAL: THE CIT(A) WOULD HAVE APPRECIATED THE FACT THAT TH ERE IS HUGE VARIATION WITH REFERENCE TO THE DISCOUNTS RECEIVED FROM SUPPLIER AND DISCOUNTS ALLOWED TO BUYERS, THOUGH THE ITEMS P URCHASED AND SOLD BY THE ASSESSEE ARE ONE AND THE SAME AND T HE DISALLOWANCE IS MADE ONLY AFTER EXAMINING THE NATUR E OF ITS ENTRIES. 3. BRIEF FACTS OF THE CASE ARE THAT DURING THE C APTIONED ASSESSMENT YEAR, THE ASSESSEE HUF HAD RECEIVED AN A MOUNT OF RS.2,52,833/- TOWARDS DISCOUNTS FROM ITS PURCHASERS AGAINST AN AMOUNT OF RS.14,87,639/- ALLOWED AS DISCOUNTS TO ASSESSEE S CUSTOMERS MAKING A NET OUTGO OF DISCOUNT AT RS.12,34,806/-. THE ENTIR E DISCOUNT HAS BEEN ITA NO.1036/HYD/2009 SHRI RAVINDER KUMAR AGARWAL, SECUNDERABAD 2 2 ALLOWED TO FOUR CUSTOMERS ONLY AS GIVEN BY THE ASSE SSING OFFICER IN PARA 4.1 PAGE 2 OF THE ASSESSMENT ORDER. THE SAME HAS BEEN QUESTIONED BY THE ASSESSING OFFICER VIDE HIS LETTER DATED 29.11.2007 TO JUSTIFY AND THE ASSESSEE HAS REPLIED AS UNDER: DISCOUNTS ARE ALLOWED TO CUSTOMERS ON VARIOUS COMME RCIAL CONSIDERATIONS. MOST OF THE CASES, THE PARTY WILL INSIST ON DISCOUNT ON THE BASIS OF EITHER ON QUANTITY LIFTED/PURCHASED FROM US OR ON THE PAYMENT TERMS. IN ALL THE CASES OF DISCOUNTS ARE SUPPORTED BY CONFIRMATIONS FROM THE RECEIVING PARTI ES. 3.1. ON CONSIDERING THE ABOVE, THE ASSESSING OFF ICER RESTRICTED DISCOUNT ALLOWABLE UPTO THE NET PROFIT OF 0.58% . FOR THIS HE HAS GIVEN THE REASON THAT THE DISCOUNTS WERE CREDITED ON THE LAST DAY OF THE FINANCIAL YEAR AND WERE NOT DISPLAYED IN THE SALES INVOICES C ONCERNED. THERE IS NO BASIS FOR IT. ON APPEAL, CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE. AGAINST THIS THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. THERE IS NO POSITIVE MATERIAL TO SHOW THAT THE ASSESSEE NOT ALLOWED THE DISCOUNT TO ITS CUSTOMERS. WITHOUT ANY EVIDENCE, IT IS NOT POSSIBLE FOR US TO HOLD THAT TH E ASSESSEE HAS NOT ALLOWED DISCOUNT TO ITS CUSTOMERS. FURTHER, THE DISCOUNT R ECEIVED BY THE ASSESSEE CANNOT BE A BASIS TO DECIDE WHAT PERCENTAGE OF DISC OUNT THE ASSESSEE HAS ALLOWED. FURTHER, IN THE CASE OF CIT VS. DEVAYHI BEVERAGES LTD. (296 ITR 41) (DEL) WHEREIN IT WAS HELD THAT : REASONABLENESS OF EXPENSES COULD BE GONE INTO FOR THE PURPOSE OF DETERMINING WHETHER IN FACT THE AMOUNT WAS SPENT. BUT, IF THERE IS A NEXUS BETWEEN THE EXPENDITURE AND THE PURPOSE OF TH E BUSINESS, THE REVENUE CANNOT BE ALLOWED TO SUBSTITUTE ITS OPINION FOR THAT OF THE ASSESSEE, AS IF THE REVENUE WERE ITSELF THE BUSINES SMAN. ITA NO.1036/HYD/2009 SHRI RAVINDER KUMAR AGARWAL, SECUNDERABAD 3 3 5. IN VIEW OF THE ABOVE DISCUSSION, WE DECLINE TO INTERFERE WITH THE ORDER OF THE CIT(A). THE SAME IS CONFIRMED ON THIS ISSUE. 6. THE NEXT GROUND RAISED BY THE REVENUE IN ITS A PPEAL IS AS FOLLOWS: THE CIT(A) WOULD HAVE CONFIRMED THE ADDITION OF RS. 64,84,641/- MADE TOWARDS ADVANCE RECEIVED FROM M/S DHARMASHALA HYDRO POWER LTD., AS THE ASSESSEE FAILED TO PRODUCE ANY C ORROBORATIVE EVIDENCE. 7. AT THE TIME OF ARGUMENT IT WAS CONCEDED BY BOT H THE PARTIES THAT THE ISSUE IS RELATING TO DELETION OF ADDITION OF RS.13,29,781/- ONLY. 8. BRIEF FACTS OF THE CASE ARE THAT THE DISALLOW ANCE MADE BY THE ASSESSING OFFICER IS ON ACCOUNT OF DISCREPANCIES ON ADVANCE RECEIVED FROM CUSTOMERS U/S 68 OF THE IT ACT AT RS.1,82,73,302/- THESE AMOUNTS REFLECT ADVANCES RECEIVED FROM TWO PATIES M/S DHARMASALA HY DRO POWER LTD. FOR RS.64,84,641/- AND M/S LAXMI GAYATRHRI IRON AND STE EL PVT. LTD. FOR RS.1,17,88,666/-. IN RESPECT OF THESE PARTIES, THE ASSESSEE HAS STATED BEFORE THE ASSESSING OFFICER THAT HE HAS SUPPLIED M ATERIALS TO THEIR SISTER CONCERN WHILE THE PAYMENTS WERE MADE BY THESE CAPTI ONED CONCERNS AS THE SISTER CONCERNS WERE NOT HAVING FUNDS TO CLEAR THE DEBTS. THE ASSESSING OFFICER REJECTED THIS STATEMENT OF THE ASSESSEE AS NOTHING PREVENTED THE COMPANIES FROM GIVING CONFIRMATION LETTERS ABOUT TH E ADVANCES GIVEN AND ADDED THE SAME U/S 68. HE HAS FURNISHED ALL THE RE CONCILIATIONS DURING THE COURSE OF FIRST APPELLATE PROCEEDINGS EXPLAININ G EACH AND EVERY DISCREPANCY CREDIT SUPPLY OF MATERIAL ETC. SINCE TH IS IS ADDITIONAL EVIDENCE, THE CIT(A) ADMITTED THE SAME AFTER CALLING THE REMA RKS FROM THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS METICULOUSLY AN D PAINSTAKINGLY GONE THROUGH EACH AND EVERY ENTRY GIVEN IN THE RECONCILI ATION STATEMENTS, ITA NO.1036/HYD/2009 SHRI RAVINDER KUMAR AGARWAL, SECUNDERABAD 4 4 ACCOUNTS, DOCUMENTS ETC. BESIDES HE HAS ALSO MADE ENQUIRIES WITH THE OTHER CONCERNED PARTIES, VERIFIED THE BANK STATEMEN TS, CHEQUE NUMBERS, DEMAND DRAFT NOS. CREDIT CHEQUES ETC. AND HAS ACCEP TED ALL PAYMENTS EXCEPT THE FOLLOWING: I) RS.11,29,780/-: SALES EFFECTED BY THE ASSESSEE IN THE YEAR 2003-04 BUT RECORDED BY THE CUSTOMER M/S DHARMASALA HYDRO POWER LTD. IN THE YEAR 2007-08. THERE IS NO DISCREPANCY OF ADVERSE TAX EF FECT ARISING OUT OF THIS POSITION AS BOTH THE PARTIES HAVE ACCEPTED THE TRAN SACTION, THE ASSESSEE FOR INCLUDING IN HIS SALES AND THE CUSTOMER M/S DHARMAS ALA HYDRO POWER LTD., BEING A CAPITAL EXPENDITURE, HAS CAPITALIZED IN F.Y. 2007-08. HENCE THIS DISCREPANCY CANNOT BE ADDED BACK. THE DELETIO N OF ADDITION IS CONFIRMED. II) RS.2,00,000/- REPRESENTING DEBIT NOTE FOR RECO VERING LORRY FRIEND FROM M/S DHARMASALA HYDRO POWER LTD. THIS IS ACTUALLY A N OLD BALANCE ARISEN FROM DISPUTE WITH M/S DHARMASALA HYDRO POWER LTD. H ENCE NOT ACCEPTED BY THE SAID PARTY IN THE CONFIRMATION LETTER. THUS , THE SAME CAN BE ACCEPTED AS GENUINE. THE DELETION OF ADDITION IS C ONFIRMED. III) RS.2,54,390/-. THIS IS ON ACCOUNT OF SALES E FFECTED TO M/S LAXMI GAYATHRI IRON & STEEL (P) LTD., WHILE THE PAYMENT I S MADE BY A SISTER CONCERN, M/S GAYATHRI WARE HOUSING ENTERPRISES LTD. AS THE FORMER IS NO MORE IS BUSINESS. HENCE THIS DISCREPANCY IS ALSO R ECONCILED AND ACCEPTABLE. THE DELETION OF ADDITION IS CONFIRMED. IV) RS.20,00,000/- A DISCREPANCY IN M/S LAXMI GAY ATHRI IRON & STEEL PVT. LTD. SINCE THE SAME IS PAID BY M/S SULOCHANA ENGINE ERING, SISTER CONCERN OF THE FORMER. THE DELETION OF ADDITION IS CONFIRME D. ITA NO.1036/HYD/2009 SHRI RAVINDER KUMAR AGARWAL, SECUNDERABAD 5 5 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE C OURT ON : 30 .9.2010 SD/- SD/- G.C. GUPTA CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED THE 30 TH SEPTEMBER, 2010 COPY FORWARDED TO: 1. SHRI RAVINDRA KUMAR AGARWAL, 5-2-230/2, DISTILLE RY ROAD, RANIGUNJ, SECUNDERABAD 2. ACIT, CIRCLE 10(1), HYDERABAD 3. CIT(A)- HYDERABAD & THIRUPATHI 4. CIT, HYDERABAD 5. THE D.R., ITAT, HYDERABAD. NP