PANKAJ D. DEDHIA, MUMBAI V. ITO 19(2)(4), MUMBAI

ITA 2219/MUM/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1521 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 16-06-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 19-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T T JACOB
• Assessee Lawyers: D R RAIYANI
• Keywords: Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI SMC BENCH BEFORE SHRI T.R.SOOD, AM I.T.A.NO.2219/MUM/2010 - A.Y 2006-07 PANKAJ D. DEDHIA, 18 ARISTOCRAT C.H.S.PRABHAT COLONY, 1 ST YOGENDRA ROAD, SANTACRUZ [E] MUMBAI. PAN NO. AABP 8849 D VS. THE INCOME TAX OFFICER 19(2)(4), MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI D.R.RAIYANI. REVENUE BY : SHRI T.T.JACOB. O R D E R IN THIS APPEAL THE ASSESSEE HAS RAISED VARIOUS GRO UNDS, BUT AT THE TIME OF HEARING THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THERE ARE ONLY TWO DISPUTES, VIZ., [I] CONFIRMATION OF ADDITION OF RS.2,20,570/- ON ACCOUNT OF DIFFERENCE IN CLOSING B ALANCES IN THE NAME OF TWO CREDITORS, AND [II] CONFIRMATION OF DISALLOW ANCE OF SALARY AMOUNTING TO RS.1,08,000/-. 2. AS FAR AS THE FIRST ISSUE IS CONCERNED, AFTER HE ARING BOTH THE PARTIES, I FIND THAT DURING THE ASSESSMENT PROCEEDI NGS IT WAS NOTICED THAT ASSESSEE WHO IS ENGAGED IN THE BUSINESS OF WHO LESALE TRADER IN CLOTH, HAS DISCLOSED LIABILITY TOWARDS SUNDRY CREDI TORS AND WAS ASKED TO FILE CONFIRMATION FROM THESE CREDITORS. ON PERUSAL OF CONFIRMATION LETTER FROM M/S BIPIN SYNTHETICS PVT. LTD., IT WAS SEEN TH AT THEY HAD SHOWN DEBIT BALANCE OF RS.9,58,673/- AS ON 31-3-2006 WHER EAS THE ASSESSEE HAD DECLARED THE LIABILITY AT RS.8,95,723/-. SIMILA RLY, IN THE CASE OF 2 M/S.NALINIKANT & CO., THEY HAD SHOWN THE BALANCES A T RS.32,38,691/- AS ON 31-3-2006, AGAINST WHICH THE ASSESSEE HAS SHO WN THE LIABILITY OF RS.30,91,072/-. ON ENQUIRY IT WAS EXPLAINED THAT AS SESSEE HAD ENTERED THE PURCHASES NET OF DISCOUNT WHEREAS THE SUPPLIER HAD DEBITED THE GROSS AMOUNT AND DISCOUNT WAS ADJUSTED ONLY AT THE TIME OF PAYMENT. AFTER EXAMINATION OF THE SUBMISSIONS, AO WAS NOT SA TISFIED AND ADDED THE DIFFERENCE IN BOTH THESE CASES TO THE INCOME OF THE ASSESSEE. 3. BEFORE THE CIT [A], SIMILAR SUBMISSIONS WERE MADE . IT WAS FURTHER POINTED OUT THAT THE SUPPLIER HAD ACCOUNTED FOR THE DISCOUNT ONLY AT THE TIME OF RECEIVING THE PAYMENT AS A GENE RAL PRACTICE. THE STATEMENT OF RECONCILIATION WAS ALSO FILED. HOWEVER , CIT[A] WAS OF THE VIEW THAT RECONCILIATION IS NOT BACKED BY ANY EVIDE NCE AND, THEREFORE, HE CONFIRMED THE ADDITION. 4. BEFORE ME THE LD. COUNSEL OF THE ASSESSEE REFERR ED TO PAGES 1 AND 2 OF THE PAPER BOOK, WHICH IS A COPY OF THE ACC OUNTS OF M/S BIPIN SYNTHETICS PVT. LTD. AT PAGES 3 AND 4 IS THE COPY O F ACCOUNTS OF THE ASSESSEE IN THE BOOKS OF THE SUPPLIER. THEN HE REFE RRED TO VARIOUS ITEMS AND POINTED OUT HOW THE PURCHASES HAVE BEEN A CCOUNTED FOR ON GROSS RATES BY THE SUPPLIER, WHEREAS THE ASSESSEE H AS RECORDED THE NET PURCHASES AFTER REDUCING THE DISCOUNT. HE ALSO REFE RRED TO PAGE-8 WHERE DETAILS OF VARIOUS DIFFERENCES HAVE BEEN COMP ILED. PAGE-9 IS THE RECONCILIATION STATEMENT. SIMILARLY, COPIES OF ACCO UNTS IN THE ASSESSEES BOOK IN THE CASE OF M/S NALINIKANT & CO., AND COPY OF ASSESSEES ACCOUNT IN THEIR BOOKS AND RECONCILIATION STATEMENT ETC., WHICH ARE FILED 3 AT PAGES 10 TO 50, WERE REFERRED TO AND EXPLAINED. HE FURTHER SUBMITTED THAT THE REASONS FOR DIFFERENCE WERE SAME AND ADDITION IS NOT JUSTIFIED. 5. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE RS OF THE LOWER AUTHORITIES. 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND I A GREE WITH THE SAME. ONCE THE ASSESSEE HAS SHOWN LOWER LIABILITY W HICH IS BECAUSE OF RECORDING OF PURCHASES AT NET PRICES THAT IS AFTER THE DISCOUNT REVENUE WOULD NOT SUFFER ANY LOSS BECAUSE IT MEANS ASSESSEE HAS BOOKED LOWER PURCHASES. THERE IS NO FORCE IN THE OBSERVATION OF THE LD. CIT[A] THAT RECONCILIATION IS NOT BACKED BY ANY EVIDENCE BECAUS E THE SAME IS MADE ON THE BASIS OF THE COPY OF ACCOUNTS OF THE RESPECT IVE PARTIES IN ASSESSEES BOOKS AND ASSESSEES ACCOUNTS IN THE BOO KS OF THESE PARTIES. THEREFORE, THERE IS NOTHING WRONG IN THIS SYSTEM OF ACCOUNTING. HOWEVER, IN THE INTEREST OF JUSTICE, I SET ASIDE TH E ORDER OF THE LD. CIT[A] AND REMIT THE MATTER BACK TO THE FILE OF TH E AO WITH A DIRECTION TO VERIFY THE RECONCILIATION AND THEN DECIDE THE IS SUE. IF THE DIFFERENCE IS ONLY BECAUSE OF RECORDING OF PURCHASES AFTER DIS COUNT, THEN THE ADDITION SHOULD BE DELETED. 7. AS FAR AS THE ISSUE REGARDING SALARY PAID TO EL DER BROTHER IS CONCERNED, THE MAIN REASON GIVEN BY THE AO IS THAT THE SAME WAS NOT REFLECTED IN FORM NO.3CD BY THE AUDITORS WHERE WHIL E REFERRING TO PARTICULARS SPECIFIED SEC.40A[2][B], PARTICULARS OF PAYMENTS MADE TO THE MOTHER IN RESPECT OF WHICH INTEREST HAD BEEN GI VEN AND NO 4 PARTICULARS REGARDING SALARY PAID TO THE BROTHER HA VE BEEN GIVEN. IT WAS FURTHER NOTICED THAT ONLY A PART OF THE SALARY WAS PAID AND, THEREFORE, SALARY WAS DISALLOWED. 8. BEFORE ME, THE LD. COUNSEL OF THE ASSESSEE SUBMI TTED THAT SALARY WAS PAID TO THE ELDER BROTHER WHICH IS DULY REFLECT ED IN HIS RETURN. HE HAS OTHER SOURCE OF INCOME FROM WHICH WITHDRAWALS W ERE MADE. THEREFORE, SALARY SHOULD HAVE BEEN ALLOWED. 9. ON THE OTHER HAND, THE LD. DR, RELIED ON THE ORD ERS OF THE LOWER AUTHORITIES. 10. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND FIND FORCE IN THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESS EE. AN ITEM OF EXPENDITURE CANNOT BE DISALLOWED MERELY BECAUSE AUD ITORS PERHAPS BY MISTAKE, HAVE NOT REPORTED A PARTICULAR ITEM IN THE TAX AUDIT REPORT. THEREFORE, I SET ASIDE THE ORDER OF THE LD. CIT[A] AND DELETE THIS ADDITION. 11. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF JUNE, 2010. S D/- (T.R.SOOD) ACCOUNTANT MEMBER MUMBAI: 18 TH JUNE, 2010.