The DCIT, Circle-3, Ahmedabad V. Smt. Neetaben Rajendra Seth, Ahmedabad

ITA 2554/AHD/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0835 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 30-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital receipt
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD , , BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ./ I.T.A. NO.2554/AHD/2013 ( / ASSESSMENT YEAR : 2010-11) DY.CIT 3, ROOM NO.109 PRATYAKSHYAKAR BHAVAN, PANJRAPOLE, AMBAWADI AHMEDABAD / VS. SMT.NEETABEN RAJENDRA SETH PROP.M/S.SHRADDHA MOTORS 4,5,6, CAPITAL COMMERCIAL CENTRE LAL DARWAJA AHMEDABAD $ ./ ./ PAN/GIR NO. : AEQPS 9091 H ( $& / APPELLANT ) .. ( '($& / RESPONDENT ) $&) / APPELLANT BY : SHRI JAMES KURIAN, SR.DR '($&*) / RESPONDENT BY : MS.URVASHI SODHAN, AR +* / DATE OF HEARING 29/07/2016 ,-./* / DATE OF PRONOUNCEMENT 09/08/2016 / O R D E R PER SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-VI, AHMEDABAD DATED 08/08/2016 FOR THE ASSESSMENT YEAR 2010-11. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- ITA NO.2554/AHD /2013 DCIT VS. SMT.NEETABEN RAJENDRA SETH ASST.YEAR 2010-11 - 2 - 2.1. ASSESSEE IS AN INDIVIDUAL STATED TO BE ENGAGE D IN THE BUSINESS OF TRADING OF HERO VEHICLES AND SPARES IN THE NAME OF PROPRIE TARY-CONCERN BY NAME SHRADDHA MOTORS. ASSESSEE ELECTRONICALLY FILED HE R RETURN OF INCOME FOR AY 2010-11 ON 24/09/2010 DECLARING TOTAL INCOME OF RS.94,85,510/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS 'THE ACT') VIDE ORDER DATED 17/12/2012 AND THE TOTAL INCOME WAS DE TERMINED AT RS.1,30,35,510/-. AGGRIEVED BY THE ORDER OF THE AS SESSING OFFICER (AO), ASSESSEE CARRIED THE MATTER BEFORE THE LD.CIT(A), W HO VIDE ORDER DATED 08/08/2013 (IN APPEAL NO.CIT(A)-VI/134/CIR.3/12-13) GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT (A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED FOLLOWING GROUNDS:- 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN CON SIDERING REVENUE RECEIPTS OF RS.35.50 LACS AS CAPITAL RECEIPTS. 2. THE CIT(A) HAS NOT CONSIDERED THE FACT THAT THE SAID PAYMENT OF RS.35.50 LACS WAS RECEIVED BY THE ASSESSEE AGAINST DELIVERY OF GOODS WHICH IS REQUIRED TO BE CONSIDERED AS PART OF SALE. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER TO THE EXTENT MENTIONED ABOVE SINCE THE ASSESSEE HAS FAILED TO DI SCLOSE HIS TRUE INCOME/BOOK PROFIT. 3. BEFORE US, BOTH THE PARTIES HAVE SUBMITTED THAT THE SOLITARY ISSUE IS WITH RESPECT TO DISALLOWANCE OF ADDITION OF RS.35.5 0 LACS. 3.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A ND ON PERUSING THE BALANCE-SHEET, THE AO NOTICED THAT ASSESSEE HAD SHO WN AN AMOUNT OF ITA NO.2554/AHD /2013 DCIT VS. SMT.NEETABEN RAJENDRA SETH ASST.YEAR 2010-11 - 3 - RS.54,21,107/- AS TRADE DEPOSITS, THE DETAILS OF W HICH ARE LISTED AT PAGE 2 OF THE ASSESSMENT ORDER. AO WAS OF THE VIEW THAT TR ADE DEPOSITS RECEIVED FROM VARIOUS DEALERS SHOULD HAVE BEEN CONSIDERED A S INCOME AND ON DELIVERY OF VEHICLES THE SALES WAS COMPLETE. AO NO TICED THAT THOUGH THE VEHICLES WERE DELIVERED BY THE ASSESSEE THE DEPOSI TS WERE NOT INCLUDED IN THE SALES BY THE ASSESSEE. HE ALSO NOTICED THAT TH E TRADE DEPOSITS HAS NOT BEEN KEPT BY THE ASSESSEE IN A SEPARATE BACKGROUND BUT IT FORMED PART OF THE BUSINESS TURNOVER. THE ASSESSEE WAS THEREFORE A SKED TO SHOW-CAUSE AS TO WHY THE DEPOSITS NOT BE TREATED AS INCOME BY THE ASSESSEE. THE SUBMISSION OF THE ASSESSEE THAT THE DEPOSITS WERE I NTEREST-FREE AND REFUNDABLE DEPOSITS RECEIVED FROM HER SUB-DEALERS AND WERE NOT INCOME WAS NOT FOUND ACCEPTABLE TO THE AO. THEREAFTER, OU T OF THE TOTAL DEPOSITS, THE DEPOSIT OF RS.35,50,000/- WHICH WAS RECEIVED BY THE ASSESSEE DURING THE YEAR WAS CONSIDERED BY THE AO TO THE INCOME OF THE ASSESSEE AND ACCORDINGLY ADDED TO THE TOTAL INCOME. AGGRIEVED BY THE ORDER OF AO ASSESSEE CARRIED THE MATTER BEFORE THE LD.CIT(A) WH O DELETED THE ADDITION BY HOLDING AS UNDER:- 4.3. THE CONTENTIONS OF THE ID. A.R. ARE THAT THE APPELLANT IS CARRYING ON THE BUSINESS DIRECTLY AS WELL AS THROUG H AUTHORIZED REPRESENTATIVE DEALERS (ARDS) APPOINTED BY THE APPE LLANT AND SALES SERVICE PROVIDERS (SSPS) APPOINTED BY THE PARENT CO MPANY NAMELY HERO MOTORS LTD.; THE SALES THROUGH ARDS AND SSPS A RE MADE ON CONSIGNMENT BASIS; THE SALE INVOICES ARE ISSUED BY THE APPELLANT AND THE ENTIRE SALE CONSIDERATION IS ALSO DIRECTLY RECE IVED BY HER; COMMISSION WAS BEING PAID TO ARDS AND SSPS ON THE S ALES MADE ITA NO.2554/AHD /2013 DCIT VS. SMT.NEETABEN RAJENDRA SETH ASST.YEAR 2010-11 - 4 - THROUGH THEM; SINCE THE APPELLANT'S VEHICLES ARE KE PT WITH ARDS AND SSPS FOR DISPLAY, TEST DRIVE ETC. AT DIFFERENT LOCA TIONS, TRADE DEPOSITS WERE RECEIVED FROM THEM BY WAY OF SECURITY; CONFIRM ATION LETTERS IN THIS REGARD FROM ARDS AND SSPS WERE FURNISHED TO TH E AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS; WHEN THE SALES AC TUALLY TAKE PLACE, THEY ARE BOOKED BY THE APPELLANT AND CORRES PONDING TRADE DEPOSITS WERE RETURNED TO ARDS AND SSPS; THE OPENI NG CREDIT BALANCE IN THE NAMES OF SIX ARDS AND SSPS STOOD AT RS.44,71,107/-, DURING THE YEAR DEPOSITS OF RS.35.5 LAKHS WAS RECEI VED, AN AMOUNT OF RS.26 LAKHS WAS REPAID LEAVING THE BALANCE OF RS.5 4,21,107/- IN THE BOOKS OF ACCOUNTS; AO'S ACTION IN ASSESSING THE SEC URITY TRADE DEPOSITS RECEIVED DURING THE YEAR OF RS.35.5 LAKHS IS AGAINST THE BASIC ACCOUNTING PRINCIPLES AS THE SECURITY TRADE DEPOSIT S CANNOT BE TREATED AS SALES AND THE ACTION OF THE AO LEADS TO DOUBLE T AXATION AS THE APPELLANT IS ADMITTING THE SALE PROCEEDS AS AND WHE N THE ACTUAL SALE TAKES PLACE. 4.4. HAVING CONSIDERED THE FACTS OF THE MATTER, I A M INCLINED TO ACCEPT THE CONTENTIONS OF THE ID. A.R. WITH A VIEW TO ENSURE THE SAFETY OF THE VEHICLES KEPT WITH ARDS AND SSPS AT DIFFEREN T LOCATIONS, APPELLANT RECEIVED AD-HOC AMOUNTS BY WAY OF SECURIT Y DEPOSITS. THESE AMOUNTS HAVE NOTHING TO DO WITH THE ACTUAL MARKET P RICE OF THE VEHICLE. AS AND WHEN THE SALE TAKES PLACE THROUGH T HE ARDS AND SSPS, APPELLANT ADMITS THE SALES PROCEEDS IN THE BO OKS OF ACCOUNTS AND REFUNDS THE CORRESPONDING SECURITY DEPOSITS TO THE ARDS AND SSPS. THIS METHOD HAS BEEN CONSISTENTLY FOLLOWED OV ER THE YEARS. AS SEEN FROM THE ASSESSMENT ORDER U/S.143(3) PASSED IN THE APPELLANT'S CASE FOR THE IMMEDIATELY PRECEDING A.Y. 2009-10, TH E INCOME RETURNED WAS ACCEPTED AND NO ADDITION IN RESPECT OF TRADE DEPOSITS RECEIVED WAS MADE. TREATING THE SECURITY DEPOSITS A S SALE PROCEEDS WITHOUT THE ACTUAL SALES TAKING PLACE IS AGAINST TH E PRINCIPLES OF ACCOUNTANCY. MOREOVER, GIVEN THE CONSISTENT METHOD FOLLOWED BY THE APPELLANT, SUCH AN EXERCISE WILL BE REVENUE NEUTRAL . TO BE SPECIFIC IN THE YEAR UNDER CONSIDERATION AS AGAINST THE TRADE D EPOSITS OF RS.35.5 LAKHS RECEIVED, APPELLANT HAD RE-PAID RS.26 LAKHS OUT OF THE TRADE DEPOSITS. IN EFFECT THE NET TRADE DEPOSITS RE CEIVED DURING THE ITA NO.2554/AHD /2013 DCIT VS. SMT.NEETABEN RAJENDRA SETH ASST.YEAR 2010-11 - 5 - YEAR WERE ONLY TO THE TUNE OF RS.9.5 LAKHS. KEEPING IN VIEW THE FACTS OF THE CASE, IMPUGNED ADDITION IS DELETED. THIS GRO UND OF APPEAL IS ALLOWED. 4. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 4.1. BEFORE US, LD.SR.DR SUPPORTED THE ORDER OF AO. LD.AR, ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND SUPPORTED THE ORDER OF LD.CIT(A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO TH E CONSIDERING THE TRADE DEPOSITS RECEIVED BY THE ASSESSEE AS THE INCOME OF ASSESSEE. WE FIND THAT THE LD.CIT(A) WHILE DELETING THE ADDITION HAS NOTED THAT ASSESSEE IS CARRYING ON THE BUSINESS SALES THROUGH AUTHORIZED R EPRESENTATIVE DEALERS (ARDS) APPOINTED BY THE ASSESSEE AND SALES SERVICE PROVIDERS (SSPS) APPOINTED BY HERO MOTORS LTD. SINCE ASSESSEES VEH ICLES ARE KEPT WITH ARDS AND SSPS FOR DISPLAY, TEST DRIVE, ETC. TRADE D EPOSITS ARE RECEIVED FROM THEM BY THE ASSESSEE BY WAY OF SECURITY DEPOSI TS. THE LD.CIT(A) WHILE DELETING THE ADDITION HAS GIVEN A FINDING THA T AS AND WHEN THE SALES TAKE PLACE THROUGH ARDS AND SSPS, THE SALE PROCEEDS ARE ACCOUNTED AS INCOME BY THE ASSESSEE AND THIS METHOD OF ACCOUNTIN G HAS BEEN CONSISTENTLY FOLLOWED BY THE ASSESSEE AND HAS ALSO BEEN ACCEPTED BY THE ITA NO.2554/AHD /2013 DCIT VS. SMT.NEETABEN RAJENDRA SETH ASST.YEAR 2010-11 - 6 - REVENUE IN THE SCRUTINY PROCEEDINGS. HE HAS FURTHE R NOTED THAT DURING THE YEAR UNDER CONSIDERATION ASSESSEE HAD RECEIVED TRADE DEPOSITS OF RS.35.5 LACS AND HAS REPAID RS.26 LACS OUT OF IT A ND IN EFFECT THE NET TRADE RECEIVED BY THE ASSESSEE DURING THE YEAR WAS ONLY T O THE TUNE OF RS.9.5 LACS. UNDER THESE CIRCUMSTANCES, LD.CIT(A) HAD DEL ETED THE ADDITION. BEFORE US, REVENUE HAS NOT PLACED ANY MATERIAL TO C ONTROVERT THE FINDINGS OF LD.CIT(A). IN VIEW OF THE AFORESAID FACTS, WE S EE NO REASON TO INTERFERE WITH THE ORDER OF LD.CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 6. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED . THIS ORDER PRONOUNCED IN OPEN COURT ON 09/08/2016 SD/- SD/- () () (RAJPAL YADAV) ( ANIL CHATURVEDI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 09/ 08 /2016 3..,.../ T.C. NAIR, SR. PS !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. $& / THE APPELLANT 2. '($& / THE RESPONDENT. 3. 456 7 / CONCERNED CIT 4. 7 ( ) / THE CIT(A)-VI, AHMEDABAD 5. 89:'56 , 56/ , 4 / DR, ITAT, AHMEDABAD 6. :<=+ / GUARD FILE. / BY ORDER, (8' //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD