Tristar Remedies Pvt. Limited, Ahmedabad V. The Income Tax Officer, Ward-4(1)(1), Ahmedabad

ITA 1192/AHD/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4466 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 12-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K DEV
• Section: 133(6); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND MS. MADHUMITA ROY, JUDICIAL MEMBER ./ITA NO. 1192/AHD/2017 ( / ASSESSMENT YEAR: 2012-13) TRISTAR REMEDIES PVT.LIMITED URMIN HOUSE SINDHU BHAVAN ROAD OFF:SG HIGHWAY BESIDE HOF LIVING BODAKDEV, AHMEDABAD-380054 / VS. THE INCOME TAX OFFICER WARD-4(1)(1) AHMEDABAD ./ ./ PAN/GIR NO. : AABCB 6827 C ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI ASEEM L. THAKKAR, AR / RESPONDENT BY : SHRI S.K. DEV, SR.DR / DATE OF HEARING 16/05/2019 !'# / DATE OF PRONOUNCEMENT 31/05/2019 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS)7, AHMEDABAD [CIT(A) IN SHORT] VIDE APPEA L NO.CIT(A)- 7/131/14-15 DATED 16/02/2017 ARISING IN THE ASSESS MENT ORDER PASSED UNDER S.143(3) OF THE INCOME TAX ACT, 1961(HERE-IN- AFTER REFERRED TO AS 'THE ACT') DATED 19/12/2014 RELEVANT TO ASSESSMENT YEAR (AY) 2012-13. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- ITA NO.1192/AHD/2017 TRISTAR REMEDIES PVT.LTD. VS. ITO ASST .YEAR - 2012-13 - 2 - 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN CONFIRMING THE ADDITION OF RS.37,42,652/- MADE BY T HE ASSESSING OFFICER FOR ALLEGED EXCESS RATE DIFFERENCE & SPECIAL DISCOU NT EXPENSES. 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR MODIFY ANY OF THE GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING OF THE APPEAL. THE ISSUE RAISED BY THE ASSESSEE IS THAT THE LD.CIT (A) ERRED IN CONFIRMING THE ADDITION FOR A SUM OF RS. 37,42,652/- MADE BY T HE AO ON ACCOUNT OF RATE DIFFERENCE AND SPECIAL DISCOUNT EXPENSES. THE FACTS OF THE CASE ARE THAT THE ASSESSEE A PRIVA TE LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF TRADING IN BIO-MEDICAL P RODUCT AND EXPORTING OF VARIOUS TOBACCO PRODUCTS. THE AO DURING THE ASSE SSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE CLAIMED AN EXPENSE OF RS . 33,70,790/- AS RATE DIFFERENCE AND RS. 3,61,862/- AS A SPECIAL DISCOUNT IN ITS PROFIT AND LOSS ACCOUNT. SUCH A DISCOUNT WAS GIVEN TO M/S MARVEL MA RKETING AGAINST THE TOTAL SALE OF RS. 47,65,350/- ONLY. HOWEVER, THE ASSESSEE DID NOT FILE ANY RELEVANT DO CUMENTS TO SUBSTANTIATE HIS CLAIM. THE ASSESSEE ALSO DID NOT G IVE ANY SATISFACTORY REASON FOR ALLOWING SUCH A HUGE RATE DIFFERENCE AND DISCOUNT EXPENSES TO THE SAID PARTY. THUS THE AO WAS OF THE VIEW THAT THE ASSESSEE CLAIM ED SUCH EXPENSES TO REDUCE ITS PROFIT. THEREFORE THE AO DISALLOWED THE CLAIM OF RS. 37,42,652/- I.E. RATE DIFFERENCE RS. 33,70,790/- AN D RS. 3,61,862 AS DISCOUNT EXPENSES AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ITA NO.1192/AHD/2017 TRISTAR REMEDIES PVT.LTD. VS. ITO ASST .YEAR - 2012-13 - 3 - THE AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE T HE LD. CIT (A). THE ASSESSEE BEFORE THE LD. CIT (A) SUBMITTED THAT IT SALES GOODS IN MAHARASHTRA PARTICULARLY IN MUMBAI THROUGH M/S MARV EL MARKETING. AS SUCH, THE GOODS ARE TRANSFERRED TO MARVEL MARKETING AT THE UNIFORM SALE PRICE (USP), I.E. RS. 10 PER UNIT. AFTER THAT, MARV EL MARKETING SALES GOODS TO THE VARIOUS HOSPITALS/CUSTOMERS AT A DIFFE RENT RATE AND INTIMATES THE SAME TO THE ASSESSEE. ACCORDINGLY, THE ASSESSEE FOR THE DIFFERENCE BETWEEN THE USP AND ACTUAL RATE ON WHICH GOODS WERE SOLD ISSUES CREDIT NOTE TO M/S MARVEL MARKETING. THE ALLEGATION OF THE AO THAT THE RATE DIFFERENCE I S VERY HIGH AGAINST THE SALES MADE TO MARVEL MARKETING IS WITHOUT CONSIDERI NG THE FACT THAT IT MAY BE POSSIBLE THAT THE GOODS SOLD EARLIER TO MARV EL MARKETING WERE SOLD BY IT IN THE SUBSEQUENT YEAR. THEREFORE THERE WAS NO DIRECT NEXUS BETWEEN THE SALE SHOWN, AND RATE DIFFERENCE ACCOUNT ED IN THE BOOKS. THE ASSESSEE ALSO CLAIMED THAT THIS PRACTICE WAS FO LLOWED ONLY IN THE CASE OF M/S MARVEL MARKETING CONSISTENTLY SINCE THE INCE PTION OF THE BUSINESS, WHICH WAS ACCEPTED BY THE REVENUE. THE ASSESSEE FURTHER IN SUPPORT OF ITS CLAIM, FILED THE STATEMENT SHOWING THE DIFFERENCE IN RATE BETWEEN THE SALE TO MARVEL M ARKETING AND BY MARVEL MARKETING TO ULTIMATE CONSUMERS. THE ASSESSE E ALSO SUBMITTED ITA NO.1192/AHD/2017 TRISTAR REMEDIES PVT.LTD. VS. ITO ASST .YEAR - 2012-13 - 4 - THAT AS SUCH THERE WAS NO MAJOR DIFFERENCE IN RATE/ DISCOUNTS GIVEN TO THE OUTSIDERS/DIRECT CUSTOMERS BY THE M/S MARVEL MARKET ING. IN ADDITION, THE ASSESSEE ALSO FILED THE STATEMENT OF COMPARISON OF THE RATE OF DISCOUNT FROM EARLIER YEARS WHERE IT WAS SHOWING THAT IN THE EARLIER YEARS THE RANGE OF DISCOUNT WAS 82.97% TO 89.17% WH ILE IN THE YEAR UNDER CONSIDERATION THE RANGE OF DISCOUNT IS 59.53% TO 89.17%. THUS THE ALLEGATION OF THE AO THAT THE DISCOUNT GIVEN IN THE YEAR UNDER CONSIDERATION IS EXCESSIVE WAS WRONG. HOWEVER, THE LD. CIT (A) FROM THE SUBMISSION OF THE ASSESSEE ALONG WITH REJOINDER OBSERVED THAT THE ASSESSEE FILED ALL THE DOCUMENTS RELATING TO DISCOUNTS BUT DID NOT SUBMIT ANY WRITTEN AGREEME NT WITH MARVEL MARKETING. THEREFORE THE BASIS ON WHICH THE RATE DI FFERENCE AND DISCOUNT WAS PROVIDED WAS NOT ASCERTAINED. AS SUCH THE ASSES SEE FAILED TO JUSTIFY FOR GIVING SUCH AN ABNORMALLY HIGH RATE DISCOUNT EX PENSES OF RS. 37,42,652/- AGAINST THE SALE MADE TO MARVEL MARKETI NG OF RS. 47,65,350/- ONLY. AS SUCH NO ONE CAN GIVE SUCH A HUGE DISCOUNT WITHOUT ANY BASIS OR WRITTEN AGREEMENT OR INCREASE IN SALES AND IT CANNO T BE MADE ARBITRARILY. AS MERELY THE REVENUE ACCEPTED IT IN THE EARLIER YE ARS, DOES NOT MEAN THAT SUCH CLAIM OF THE ASSESSEE WAS CORRECTLY ALLOW ED. THEREFORE THE LD. CIT (A) DISREGARDED THE CONTENTION OF THE ASSESSEE AND CONFIRMED THE ADDITION AMOUNTING TO RS. 37,42,652/- MADE BY THE A O. AGGRIEVED BY THE ORDER OF THE LD. CIT (A), THE ASSE SSEE IS IN BEFORE US. ITA NO.1192/AHD/2017 TRISTAR REMEDIES PVT.LTD. VS. ITO ASST .YEAR - 2012-13 - 5 - 3. THE LD. AR BEFORE US FILED A PAPER BOOK RUNNI NG FROM PAGES 1 TO 89 AND DREW OUR ATTENTION ON THE INVOICES ISSUED BY TH E ASSESSEE TO THE PARTY AND THE CREDIT NOTE ISSUED TO SUCH PARTY WHICH ARE PLACED ON RECORD. 4. ON THE OTHER HAND, THE LD. DR VEHEMENTLY SUP PORTED THE ORDER OF THE AUTHORITIES BELOW. THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE AU THORITIES BELOW. 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE IN T HE PRESENT CASE HAS GIVEN A HUGE DISCOUNT TO ITS ONE OF THE PARTY NAMEL Y M/S MARVEL MARKETING WHICH WAS DISALLOWED BY THE AO ON THE GRO UND THAT THE ASSESSEE FAILED TO SUBSTANTIATE THE SAME BASED ON T HE DOCUMENTARY EVIDENCE IN SUPPORT OF SUCH HUGE DISCOUNT. HOWEVER, THE LEARNED CIT (A) SUBSEQUENTLY CONFIRMED THE VIEW OF THE AO BY OBSERV ING THAT THE ASSESSEE HAD NOT FILED THE COPY OF THE AGREEMENT BA SED ON WHICH SUCH HUGE DISCOUNT WAS GIVEN. FROM THE PRECEDING DISCUSSION, WE NOTE THAT INDEED THE ASSESSEE HAS GIVEN A HUGE DISCOUNT TO ITS PARTY, NAMELY M/S MARV EL MARKETING. BUT IT WAS THE DECISION OF THE ASSESSEE TO GIVE SUCH A HUG E DISCOUNT. NOW THE QUESTION ARISES WHETHER THE ASSESSEE CAN GIVE SUCH A HUGE DISCOUNT TO THE PARTY. IN THIS REGARD, WE NOTE THAT THE AO HAS NO A UTHORITY TO ENTER INTO THE SHOE OF THE ASSESSEE AND INTERFERES IN HIS DECI SION-MAKING PROCESS. ITA NO.1192/AHD/2017 TRISTAR REMEDIES PVT.LTD. VS. ITO ASST .YEAR - 2012-13 - 6 - THE ROLE OF THE AO IS TO ENSURE WHETHER SUCH EXPENS ES WERE INCURRED IN THE COURSE OF THE BUSINESS AND PURSUANCE TO THE PRO VISIONS OF SECTION 37(1) OF THE ACT. AS SUCH, THERE WAS NO TANGIBLE MA TERIAL AVAILABLE WITH THE REVENUE TO HOLD THAT SUCH DISCOUNT WAS BOGUS IN NATURE. WE ALSO NOTE THAT ALL THE RELEVANT DETAILS WERE AVAILABLE WITH T HE AO ABOUT THE PARTY. ON PERUSAL OF THE DETAILS FILED BY THE LEARNED AR I N THE PAPER BOOK ON PAGES 13 TO 53, WE NOTE THAT THE NECESSARY DETAILS FOR THE SALES BY THE MARVEL MARKETING TO THE CUSTOMER, ASSESSEE TO THE P ARTY AND CREDIT NOTES WERE FURNISHED. ALL THESE DETAILS WERE COMPILED ON PAPER WHICH IS PLACED ON PAGE 27 OF THE PAPER BOOK. BUT NO DEFECT WAS POI NTED OUT BY ANY OF THE AUTHORITY BELOW. WE FURTHER NOTE THAT ALL SUCH DOCUMENTS CANNOT BE I GNORED EVEN IN THE CASE OF NON RESPONSE FROM THE PARTY TO THE NOTICE I SSUED UNDER SECTION 133(6) OF THE ACT. IN OUR CONSIDERED VIEW, THE ASSE SSEE HAS DISCHARGED HIS OBLIGATIONS AFTER FURNISHING THE NECESSARY DETAILS ABOUT THE TRANSACTIONS AND THE PARTY WHICH HAS ALREADY BEEN DISCUSSED IN T HE PRECEDING PARAGRAPH. WE ALSO NOTE THAT THE DISCOUNT WAS GIVEN AGAINST TH E SALES MADE BY THE ASSESSEE TO THE PARTY. AS SUCH, THE AMOUNT OF SALE WAS DULY ACCEPTED. THERE WAS NO IOTA OF EVIDENCE SUGGESTING THAT THE A SSESSEE HAS RECEIVED ANY AMOUNT FROM THE PARTY OUTSIDE THE BOOKS OF ACCO UNTS AGAINST THE DISCOUNT AS DISCUSSED ABOVE. THE ARGUMENT OF THE LD . AR THAT SUCH ITA NO.1192/AHD/2017 TRISTAR REMEDIES PVT.LTD. VS. ITO ASST .YEAR - 2012-13 - 7 - DISCOUNT WAS GIVEN IN THE EARLIER YEARS HAS ALSO NO T BEEN CONTROVERTED BY THE LD. DR FOR THE REVENUE. IN VIEW OF THE ABOVE, AND AFTER CONSIDERING THE FAC TS IN TOTALITY, WE ARE OF THE VIEW THAT THE ADDITION MADE BY THE AO WHICH WAS SUBSEQUENTLY CONFIRMED BY THE LEARNED CIT (A) IS NOT SUSTAINABLE IN THE GIVEN FACTS & CIRCUMSTANCES. HENCE WE DIRECT THE AO TO DELETE THE ADDITION MADE BY HIM. THUS THE GROUND OF APPEAL OF THE ASSESSEE IS A LLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 31/05/2019 SD/- SD/- (MS. MADHUMITA ROY) (WASEEM A HMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 31/05/2019 &.., .(.. / T.C. NAIR, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. )*+ , / CONCERNED CIT 4. , ( ) / THE CIT(A)-7, AHMEDABAD 5. /01 ((*+ , *+# , ) / DR, ITAT, AHMEDABAD 6. 145 6 / GUARD FILE. / BY ORDER, / ( //TRUE COPY// / ( DY./ASSTT.REGISTRAR) $%, / ITAT, AHMEDABAD