Sai krishna Agencies , Hyderabad V. Asst. Commissioner of Income Tax, Circle-15(1), Hyderabad

ITA 264/Hyd/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4605 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 07-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M SITHARAM
• Assessee Lawyers: A V RAGHURAM
• Keywords: Principle of natural justice; Additional evidence
• Section: 143(3)

Judgement Text

ITA NO 264 OF 201 8 SAI KRISHNA AGENCIES HYDERABAD. PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 264/HYD/2018 (ASSESSMENT YEAR: 2014-15) M/S. SAI KRISHNA AGENCIES MEDAK PAN: AB IFS5472K VS ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 15(1) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI A.V. RAGHURAM FOR REVENUE : SHRI M. SITHARAM, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2014-15 AGAIN ST THE ORDER OF THE CIT (A)-7, HYDERABAD, DATED 04.12. 2017. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE ORDER OF THE ID. COMMISSIONER OF INCOME TAX (APPEALS)-7, HYDERABAD, DISMISSING THE APPEAL OF TH E APPELLANT IS ERRONEOUS, ILLEGAL AND UNSUSTAINABLE I N LAW. 2. THE COMMISSIONER (APPEALS) ERRED IN SUSTAINING T HE ADDITION OF RS.L,34,44,000/-BEING THE DISCOUNT ALLO WED BY THE APPELLANT TO ITS CUSTOMERS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) FAILED TO APPRECIATE THAT THE AO ALLEGEDLY G OT THE INQUIRY CONDUCTED WITH THE CUSTOMERS BEHIND THE BAC K OF THE APPELLANT AND WITHOUT ANY INTIMATION TO THE APPELLANT, AND THEREFORE IS IMPROPER AND LEGALLY UNSUSTAINABLE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE AUTHORITIES BELOW FAILED TO APPRECIATE THAT ALLOWAN CE OF DISCOUNT IN THIS TYPE OF BUSINESS IS NORMAL AND IS DATE OF HEARING: 31. 07. 201 8 DATE OF PRONOUNCEMENT: 10.08.2018 ITA NO 264 OF 201 8 SAI KRISHNA AGENCIES HYDERABAD. PAGE 2 OF 4 ALLOWABLE. THE CIT(A) FAILED TO APPRECIATE THE CRED IT VOUCHERS AND OTHER LEDGERS PRODUCED BEFORE HIM, IN SUPPORT OF ALLOWING DISCOUNT BY THE APPELLANT TO IT S CUSTOMERS. 5. THE AUTHORITIES BELOW FAILED TO APPRECIATE THAT THE NET EFFECT OF ALLOWING DISCOUNT SO FAR AS THE APPELLANT IS CONCERNED REMAINS THE SAME VIZ., WHETHER IT IS REDU CED FROM THE INVOICE AMOUNT, OR BY OFFERING GROSS SALES AND SHOWING THE DISCOUNT SEPARATELY IN THE PROFIT AND L OSS ACCOUNT. THE ALLEGED VIOLATION OF MAINTAIN THE INVO ICE UNDER THE APVAT ACT WOULD NOT DIS-ENTITLE THE ALLOWANCE OF GENUINE EXPENDITURE IN THE HANDS OF TH E APPELLANT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A PARTNERSHIP FIRM, AN AUTHORIZED DEALER OF MAHINDRA & MAHINDRA TRACTORS IN PART OF MEDAK DISTRICT, IS IN THE BUSIN ESS OF SALE OF TRACTORS AND ITS SPARE PARTS AND IS ALSO OFFERING A FTER SALES SERVICES TO THE CUSTOMERS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE A.Y 2014-15 DECLARING A TOTAL INCOME OF RS.26,72,50 3 ON 29.9.2014. 3. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE AO OBSERVED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.1,33,44,000/- TOWARDS OWNERS DISCOUNTS TO TRAD ING ACCOUNT. WHEN ASKED FOR THE DETAILS, THE ASSESSEE SUBMITTED THAT THE DISCOUNT OFFERED AT THE TIME OF DISCUSSION OF THE P RICE OF THE TRACTOR AND THAT THE INVOICE INCLUDES THE DISCOUNT OFFERED, TEMPORARY REGISTRATION, INSURANCE AND EXTRA FITTING S. HOWEVER, ON VERIFICATION OF THE INVOICES, THE AO OBSERVED THAT DISCOUNT IS NOT REFLECTED THEREIN, EVEN THOUGH AS PER THE AP VAT AC T, 2005 AND SALE OF GOODS ACT, 1930, IT IS MANDATORY THAT ALL D ISCOUNTS AND REBATES SHOULD BE MENTIONED IN THE INVOICE. THE AO THEREFORE, DID NOT ACCEPT THE ASSESSEES CLAIM OF OWNERS DISCOUNT GIVEN FROM THE GROSS RECEIPTS. FURTHER, THE AO ALSO MADE RANDOM EN QUIRIES WITH ITA NO 264 OF 201 8 SAI KRISHNA AGENCIES HYDERABAD. PAGE 3 OF 4 THE BUYERS AS TO WHETHER THE ASSESSEE HAS GIVEN ANY CASH DISCOUNT AND AN INSPECTOR FROM THE OFFICE OF THE AO WAS ALSO DEPUTED TO ENQUIRE FROM FEW OF THE CUSTOMERS WHETHE R THEY RECEIVED ANY DISCOUNT. THE INSPECTOR REPORTED THAT TWO CUSTOMERS HE MET HAD STATED THAT THEY HAVE NOT RECEIVED ANY D ISCOUNT AND CONFIRMED THAT THE PAYMENT WAS MADE AS PER THE INVO ICE. THE AO ALSO MADE TELEPHONIC CALLS TO FEW CUSTOMERS WHO ALS O CONFIRMED THAT NO DISCOUNT WAS GIVEN TO THEM. IN VIEW OF THE SAME, THE AO DISALLOWED THE ENTIRE DISCOUNT OF RS.1,34,44,000 CL AIMED BY THE ASSESSEE AND BROUGHT IT TO TAX AS UNEXPLAINED EXPEN DITURE. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) WHO CONFIRMED THE ORDER OF THE AO AND THE ASSESSEE IS I N SECOND APPEAL BEFORE US. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE AO CONDUCTED ENQUIRIES BEHIND HIS BACK AND HAS NOT GIVEN ANY OPPORTUNITY TO THE ASSESSEE TO REBUT THE FINDIN GS IN THE REPORT. HE SUBMITTED THAT THE ASSESSEE COULD NOT FU RNISH RELEVANT MATERIAL BEFORE THE CIT (A), BUT HAS FILED ADDITION AL EVIDENCE IN THE FORM OF A PAPER BOOK BEFORE THIS TRIBUNAL. AN APPLI CATION FOR ADMISSION OF ADDITIONAL EVIDENCE IS FILED BEFORE US . 5. THE LEARNED DR, ON THE OTHER HAND, OPPOSED THE ADMISSION OF ADDITIONAL EVIDENCE AND ALSO SUBMITTED THAT THE ASSESSEE HAS NOT YET ROUTED THE ALLEGED CASH DISCOU NT THROUGH THE P&L A/C AND THEREFORE, IT IS NOT ALLOWABLE. 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE AO HAD MADE SOME ENQUIR IES FROM THE CUSTOMERS TO FIND OUT IF THEY RECEIVED ANY DISCOUNT S FROM THE ITA NO 264 OF 201 8 SAI KRISHNA AGENCIES HYDERABAD. PAGE 4 OF 4 ASSESSEE, BUT THE ASSESSEE HAS NOT BEEN CONFRONTED WITH THE FINDINGS OF SUCH AN EX-PARTE ENQUIRY REPORT. THIS I S IN CLEAR VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. THE ASS ESSEE HAS NOW FILED THE CONFIRMATION FROM THE PARTIES AND ALSO RE LEVANT MATERIAL IN SUPPORT OF HIS CLAIM THAT HE HAS GIVEN CASH DISC OUNT TO THE CUSTOMERS AND HIS EXPLANATION AS TO WHY IT IS NOT I NCLUDED IN THE INVOICES IS THAT MAHINDRA & MAHINDRA DOES NOT ALLOW SUCH DISCOUNT TO BE GIVEN AND THEREFORE, IT COULD NOT BE INCLUDED IN THE INVOICES, BUT ONLY TO WARD OFF THE COMPETITION, THE ASSESSEE WAS CONSTRAINED TO GIVE THE CASH DISCOUNT. WE FIND THAT THIS EVIDENCE GOES TO THE ROOT OF THE MATTER AND IF IT IS PROVED THAT THE ASSESSEE HAS GIVEN CASH DISCOUNTS, THE SAME IS ALLOWABLE AS EXPENDITURE. THIS MATERIAL IS FILED BEFORE US FOR THE FIRST TIME . THEREFORE, WE DEEM IT FIT AND PROPER TO ADMIT THE SAME AND REMAND THE ISSUE TO THE FILE OF THE AO FOR VERIFICATION AND ADJUDICATIO N IN ACCORDANCE WITH LAW. NEEDLESS TO MENTION THAT THE ASSESSEE SHO ULD BE GIVEN A FAIR OPPORTUNITY OF HEARING. 6. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH AUGUST, 2018. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 10 TH AUGUST, 2018. VINODAN/SPS COPY TO: 1 K.VASANTKUMAR, A.V. RAGHURAM & P.VINOD, ADVOCATES , 610 BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD 2 ASSTT. CIT, CIRCLE 15(1) IT TOWERS, AC GUARDS, MA SAB TANK, HYDERABAD - 4 3 CIT (A)-7 HYDERABAD 4 PR. CIT 7, HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER