RELIANCE WEBSTORE LTD, NAVI MUMBAI V. ADDL CIT 7(2), MUMBAI

ITA 2413/MUM/2010

• Counselvise Citation: 241319914 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 05-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 26-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Assessee Lawyers: ARVIND DALAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D : MUMBAI BEFORE SHRI R.V. EASWAR, (PRESIDENT) AND SHRI RAJENDRA SINGH,(ACCOUNTANT MEMBER) ITA NO. 2413/MUM/2010 ASSESSMENT YEAR : 2006-07 RELIANCE WEBSTORE LTD. H-BLOCK, DAKC THANE BELAPUR ROAD KOPERKHAIRNE NAVI MUMBAI-400 710. ..( APPELLANT ) P.A. NO. (AABCR 6947 H) VS. ASSTT. COMMISSIONER OF INCOME TAX-7(2) AAYAKAR BHAVAN MUMBAI-400 020. ..( RESPONDENT ) APPELLANT BY : SHRI ARVIND DALAL RESPONDENT BY : SHRI C. G.K. NAIR DATE OF HEARING : 21.7.2011 DATE OF PRONOUNCEMENT : 29 TH JULY, 2011 O R D E R PER RAJENDRA SINGH (AM). THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 16.12.2009 BY CIT(A) FOR THE ASSESSMENT YEAR 2006-0 7. THE ONLY DISPUTE RAISED IN THIS APPEAL IS REGARDING ADDITION MADE BY AO UNDER SECTION 145A OF THE INCOME TAX ACT. ITA NO.2413/M/10 A.Y:06-07 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE WAS PURCHASING AND SELLING MOBILE HANDSETS WHICH WERE S UBJECT TO SALES TAX/VAT AT THE RATE OF 4% ON SALES. THE ASSESSEE WAS FOLLO WING EXCLUSIVE METHOD OF ACCOUNTING IN WHICH SALES TAX/VAT WERE NOT TAKEN IN TO ACCOUNT IN THE PREPARATION OF TRADING ACCOUNT AT ANY STAGE. THE A O THEREFORE, ASKED THE ASSESSEE TO PREPARE THE ACCOUNTS ON THE INCLUSIVE M ETHOD AFTER TAKING INTO ACCOUNT TAXES AT EACH STAGE OF ACCOUNTING. HE COMPU TED GROSS PROFIT AS PER BOTH THE METHODS AND RESULTS WERE SUMMARIZED AS UND ER :- PARTICU -LARS EXCLUDING SALES TAX (AS PER P&L A/C.) INCLUDING SALES TAX/VAT @ 4% PARTICU- LARS EXCLUDING SALES TAX (AS PER P&L A/C.) INCLUDING SALES TAX/VAT @ 4% CLOSING STOCK 335226743 348635813 SALES 1762479935 1832979132 PURCHA -SES 1587030176 1650511383 CLOSING STOCK 256770012 267040812 GROSS PROFIT 96993028 100872749 2019249947 210019945 2019249947 2100019945 2.1 AO FOUND THAT GROSS PROFIT AS PER INCLUSIVE MET HOD WAS RS.10,08,72,749/-. HE, THEREFORE, ADDED RS.10,08,72 ,749/- TO THE TOTAL INCOME UNDER SECTION145A OF THE INCOME TAX ACT. IN APPEAL CIT(A) CONFIRMED ONLY THE ADDITION ON ACCOUNT OF DIFFERENC E BETWEEN THE PROFITS COMPUTED BY THE TWO METHODS WHICH CAME TO RS .38,79,721/-. AGGRIEVED, BY THE SAID DECISION THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. BEFORE US THE LD. AR SUBMITTED THAT RATE OF SALE S TAX/VAT VARIED 1 TO 4% FROM WHEREAS THE INCLUSIVE ACCOUNTING HAD BEEN D ONE AT THE RATE OF 4% AND THEREFORE, THIS DID NOT GIVE THE CORRECT PICTUR E. IT WAS ALSO SUBMITTED THAT IN CASE CORRECT ACCOUNTS WERE PREPARED, THERE WAS NO ADDITION TO BE ITA NO.2413/M/10 A.Y:06-07 3 MADE. IT WAS POINTED OUT THAT IN THE ACCOUNT PREPAR ED ON INCLUSIVE METHOD THE VAT CREDIT AVAILABLE RS.7,68,90,277/- WHEREAS T HE ACTUAL LIABILITY OF TAX DETERMINED WAS ONLY RS.7,04,99,197/-. IT WAS ALSO SUBMITTED THAT IN CASE OPPORTUNITY WAS GIVEN ASSESSEE WOULD BE ABLE TO WOR K OUT DIFFERENCE ON THE BASIS OF ACTUAL SALES TAX/VAT. THE LD. DR HAD NO O BJECTION IN CASE THE MATTER WAS RESTORED BACK TO AO FOR FRESH ADJUDICATION. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ADDITION TO TH E TOTAL INCOME ON ACCOUNT OF SALES TAX/VAT UNDER SECTION 145A OF THE ACT. THE S AID SECTION PROVIDES THAT VALUATION OF PURCHASE, SALE AND INVENTORY HAS TO BE DONE IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE WITH FURTHER ADJUSTMENT ON ACCOUNT OF ANY TAX, DUTY, CESS OR FEE S PAID OR INCURRED BY THE ASSESSEE TO BRING GOODS TO THE PLACE OF ITS LOCATIO N AND CONDITION AS ON THE DATE OF VALUATION. THE ASSESSEE WAS FOLLOWING EXCL USIVE METHOD IN WHICH TAXES WERE NOT ROUTED THROUGH TRADING ACCOUNT. AO HOWEVER, GOT THE ACCOUNTS RECAST ON INCLUSIVE METHOD AND FOUND THAT THERE WAS DIFFERENCE OF RS.38,79,721/- WHICH WAS REQUIRED TO BE ADDED UNDE R SECTION 145A. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE INCLUS IVE ACCOUNT HAD BEEN PREPARED ON THE BASIS OF FLAT RATE OF SALES TAX/VAT OF 4% WHEREAS ACTUAL RATE VARIES FROM 1 TO 4% AND, THEREFORE, IN CASE ACTUAL RATES WERE APPLIED, NO ADDITIONS WERE REQUIRED TO BE MADE. HE ALSO REFERRE D TO AUDITORS REPORT IN WHICH THE AUDITORS HAD REMARKED THAT THERE WOULD BE NO EFFECT ON THE PROFITS OF THE COMPANY BY WAY OF ADJUSTMENTS UNDER SECTION 145A OF THE ACT. IN OUR VIEW, MATTER REQUIRES FRESH EXAMINATION TO ARRIVE A T A FAIR DECISION IN THE ITA NO.2413/M/10 A.Y:06-07 4 MATTER IN VIEW OF THE REMARK OF THE AUDITORS AND AL SO THE CLAIM OF THE ASSESSEE THAT CORRECT RATE OF TAXES WERE NOT APPLIE D. WE THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE MATTER TO T HE FILE OF THE AO FOR FRESH ORDER AFTER NECESSARY EXAMINATION AND AFTER ALLOWIN G OPPORTUNITY OF HEARING TO THE ASSESSEE. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29.7.2011. SD/- SD/- (R.V. EASWAR) (RAJENDRA SINGH ) PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 29.7.2011. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.