Appeal details
Counselvise Citation
[2011] 134 COUNSELVISE.COM (IT) 6306 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 10 month(s) 10 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
24-06-2011
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
D
Next Hearing Date
04-05-2011
Assessment Year
2005-2006
Appeal Filed On
13-08-2008
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'D' BEFORE SHRI T K SHARMA,JM & SHRI A N PAHUJA, AM ITA NO.2944/AHD/2008 (ASSESSMENT YEAR:-2005-06) MATRA AHAR PVT. LTD., 304, SWAMINARAYAN INDUSTRIAL ESTATE, VILLAGE: TANTITHAYA, TALUKA: PALSANA, DISTRICT: SURAT V/S INCOME-TAX OFFICER, WARD- 1(3), ROOM NO.113, 1 ST FLOOR, AAYAKAR BHAVAN, MAJURA GATE, SURAT PAN: AABCM 5106 F [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI G C PIPARA, AR REVENUE BY:- SHRI G D BALVA, DR O R D E R A N PAHUJA: THIS APPEAL BY ASSESSEE AGAINST AN ORDER DATED 26- 06- 2008 OF THE LD. CIT(APPEALS)-I, SURAT, FOR THE ASSE SSMENT YEAR 2005- 06, RAISES THE FOLLOWING FIVE GROUNDS:- 1 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE AO IN REJECTING BOOK RESULTS OF THE C OMPANY U/S, 145(3) OF THE ACT IGNORING THE FACT THAT THE AO HAS REJECT ED THE BOOK RESULTS WITHOUT BRINGING ON RECORD SPECIFIC DISCREPANCY IN THE BOOKS OF ACCOUNTS. IN VIEW OF FACTS, SUBMISSIONS AND EVIDENC ES FILED AS WELL AS LEGAL POSITION, THE BONK RESULTS OUGHT TO HAVE B EEN ACCEPTED THE BOOK RESULTS OF THE APPELLANT COMPANY. 2 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.26,30,272/- ON ADHOC BASIS OUT OF TR ADE DISCOUNT OF RS.34,70,272/- CLAIMED BY THE APPELLANT WHILE INVOK ING THE PROVISIONS OF SECTION 144 OF THE ACT, IN VIEW OF TH E FACTS, SUBMISSIONS AND EVIDENCES FILED, THE IMPUGNED ADDIT ION OF RS.26,30,272/- REQUIRES TO BE DELETED, 3 THE LEARNED CIT(A) HAS ERRED IN !AW AND ON FACTS IN CONFIRMING THE ADDITION OF RS,25.76,687/- ON ACCOUNT OF ALLEGED SU PPRESSED SALES MADE BY THE A,O, MERELY ON SURMISES AND CONJECTURES AND WITHOUT PROPER CONSIDERATION AND APPRECIATION OF THE FACTS OF THE APPELLANT COMPANY. IN VIEW OF THE FACTS, SUBMISSIONS AND EVID ENCES FILED, THE IMPUGNED ADDITION OF RS,25,76,687/-REQUIRES TO BE D ELETED, 4 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.37,030/- ON ACCOUNT OF PAYMENT MADE TO HINDUSTAN 2 ITA NO.2944/AHD/2008 2 TRADERS ALLEGEDLY OUT OF UNDISCLOSED INCOME. IN VIE W OF FACTS, SUBMISSIONS AND EVIDENCES FILED, THE IMPUGNED ADDIT ION OF RS,37,030/- REQUIRES TO BE DELETED. 5 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RENT EXPENSES OF RS.18,000/- MADE B Y THE AO WITHOUT PROPER CONSIDERATION AND APPRECIATION OF TH E FACTS OF THE APPELLANT COMPANY. IN VIEW OF THE FACTS, SUBMISSION S AND EVIDENCES FILED, THE IMPUGNED DISALLOWANCE OF RS.18,000/- REQ UIRES TO BE CANCELLED / QUASHED. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, M ODIFY OR DELETE ANY OF THE ABOVE GROUNDS AS WELL AS TO SUBMIT ADDITIONAL G ROUNDS AT THE TIME OF HEARING OF THE APPEAL. 2 ADVERTING FIRST TO GROUND NOS.1 TO3 IN THE APPEAL , FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING NI L INCOME FILED ON 29-10-2005 BY THE ASSESSEE, ENGAGED IN THE BUSINESS OF MANUFACTURING BREAD AND BREAD RELATED ITEMS, AFTER BEING PROCESSED ON 27.2.2006 U/S 143(1) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT], WAS SELECTED FOR SCRUTIN Y WITH THE ISSUE OF A NOTICE U/S 143(2) OF THE ACT ON 04-10-2006. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER[AO IN SHORT] NOTICED THAT THE ASSESSEE-COMPANY CLAIMED TRADE DISCOUNT OF RS.34,70,272/- TO A QUERY BY THE AO, THE ASSESSEE PROVIDED FOLLOWI NG DETAILS IN RESPECT OF TRADE DISCOUNT EXCEEDING RS. 50,000/- I N EACH CASE:- PARTY NAME AMOUNT IN RS . KIRAN BISNOI 718759 NEMICHAND BISNOI 789991 NEMICHAND & CO. 491493 MANGILAL 476807 JHAMBHESWAR AGENCY 61658 VAN NO. 4785 50185 VAN NO. 798 58691 VAN NO. 6586 65342 VAN NO. 1273 59195 VAN NO. 7354 51004 ----------- TOTAL 2863125 3 ITA NO.2944/AHD/2008 3 2.1. THE ASSESSEE EXPLAINED THAT THE COMPANY PROVID ED TRADE DISCOUNT TO ALL THOSE PESONS WHO SOLD BREADS OR BRE AD RELATED ITEMS EITHER THROUGH ASSESSEE'S VAN OR THROUGH THEIR OWN VAN. THE DISCOUNT WAS ALLOWED @ 9% ON SALES THROUGH ASSESSEE'S VAN AND @ 12% TO THE PERSONS WHO SOLD THROUGH THEIR OWN VAN . TO A FURTHER QUERY BY THE AO, SEEKING CONTRACT DEED OF 9% AND 1 2% TRADE DISCOUNT, THE ASSESSEE DID NOT FURNISH ANY DETAILS AND ACCORDINGLY, THE AO OBSERVED THAT IN THE ABSENCE OF ANY BASIS FO R CALCULATION OF TRADE DISCOUNT, IT WAS DIFFICULT TO ASCERTAIN THE CORRECTNESS OF THE CLAIM. TO A FURTHER QUERY BY THE AO VIDE ORDER SHEE T DATED 03-12- 2007, THE ASSESSEE SUBMITTED A CHART ALONG WITH SA LE AMOUNT AND TRADE DISCOUNT AMOUNT. ON PERUSAL OF CHART, THE AO FOUND THAT THE RELATED SALES DID NOT MATCH WITH THE TRADE DISCOUNT CLAIMED BY THE ASSESSEE COMPANY. FOR EXAMPLE, THE SALES THROUGH VA N NO. 4785 WERE MENTIONED AS RS.17,00,186/- AND TRADE DISCOUNT OF RS.2,03,908 WAS CLAIMED WHILE THE RATE OF TRADE DISCOUNT WAS SH OWN @ 12% OF THE SALES. ACCORDINGLY, THE TRADE DISCOUNT WORKED O UT TO RS.2,04,022/- INSTEAD OF RS.2,03,908/- CLAIMED BY T HE ASSESSEE. IN ALMOST ALL THE CASES, THE TRADE DISCOUNT DID NOT M ATCH WITH THE SALES AS PER FOLLOWING DETAILS MENTIONED IN THE ASSESSMEN T ORDER: SR. NO. 1 VAN NO. TRADE DISCOUNT RATE TOTAL SALES AS PER REPLY DATED 29.12.2007 TRADE DISCO UNT AS PER CHART DATED 29.12.2007 1 4785 12% 1700186 203908 2 1348 9% 1269561 113586 3 3784 12% 1147413 136902 4 1435 9% 1684693 151303 5 5017 12% 1588929 190651 6 798 12% 1952650 234190 4 ITA NO.2944/AHD/2008 4 7 6586 12% 2231152 267264 8 2353 9% 1780598 160365 9 1273 12% 1842565 220865 10 7354 12% 1793145 215056 11 5536 12% 1719303 205998 12 6922 12% 993546 119201 13 1075 12% 1558914 186745 14 2811 12% 1032287 123794 15 1456 9% 1835397 165040 16 3160 12% 850599 102006 17 1453 9% 729142 59912 18 1409 12% 528066 63362 19 1454 9% 1255189 113191 20 2503 12% 1273825 152788 21 1436 12% 3903 468 22 1452 9% 1235398 111440 TOTAL 3,00,06,461 3301180 2.2 IN THE LIGHT OF AFORESAID FACTS, ESPECIALLY WHEN THE ENTIRE SALES WERE IN CASH WHILE TRADE DISCOUNT WAS ALLOWED IN CA SH AND SALES THROUGH VANS WERE NOT RECORDED IN CASH MEMO AND THE DETAILS OF TRADE DISCOUNT PROVIDED ON 22.7.2007 DID NOT RECON CILE WITH THE DETAILS FURNISHED ON 29.12.2007(ANNEXURE-A & B TO T HE ASSESSMENT ORDER)[NOT PLACED BEFORE US] AS REVEALED FROM FOLLO WING FIGURES EXTRACTED IN THE ASSESSMENT ORDER: 5 ITA NO.2944/AHD/2008 5 VAN NO. TRADE DISCOUNT AS PER CHART DATED 22-07-2007 TRADE D ISCOUNT AS PER CHART DATED 29- 12-2007 4785 50,185 2,03,908 798 58,691 2,34,190 6586 65,342 2,67,264 1273 59,195 2,20,865 7354 51,004 2,15,055 THE AO REJECTED THE BOOK RESULTS, INVOKING THE PR OVISIONS OF SECTION 145(3) OF THE ACT .SINCE OUT OF 21 VEHICLES OPERATED BY THE ASSE SSEE, 7 WERE OWNED BY THE ASSESSEE COMPANY., THE AO ESTIMATED SALARY OF EACH OF THE DRIVER @ RS.2000/- PER MONTH WHILE FOR DRIVERS OF OTHER VEHICLES @ RS . 4000/- PM AND ACCORDINGLY DISALLOWED AN AMOUNT OF RS.26,30,272/- [RS.34,70,27 2-(1,68,000 + 6,72,000)]. 2.3 THE AO FURTHER NOTICED ON PERUSAL OF MONTHLY DETAILS OF EACH VEHICLE WITH ITS TURNOVER FURNISHED ON 29-12-2007 V IS-A-VIS DETAILS PROVIDED IN LETTER DATED 18-07-2007 THAT FIGURES OF SALES DID NOT MATCH AND THE FOLLOWING DIFFERENCES WERE REVEALED : SR. NO. VAN NO. TRADE DISCOUNT RATE TOTAL SALES AS PER REPLY DATED 29-12- 2007 AS PER REPLY DATED 18-07- 2007 DIFFERENCE 1 4785 12% 1700186 1546353 153833 2 1348 9% 1269561 1182025 87536 3 3784 12% 1147413 1042004 105409 4 1435 9% 1684693 1570822 219280 5 5017 12% 1588929 1444495 144434 6 798 12% 1952650 1777025 175625 6 ITA NO.2944/AHD/2008 6 7 6586 12% 2231152 2028751 202401 8 2353 9% 1780598 1661250 119348 9 1273 12% 1842565 1680807 161758 10 7354 12% 1793145 1629036 164109 11 5536 12% 1719303 1549597 169706 12 6922 12% 993546 902407 91139 13 1075 12% 1558914 1414507 144407 14 2811 12% 1032287 938330 93957 15 1456 9% 1835397 1706722 128675 L 16 3160 12% 850599 780714 69885 I 17 1453 9% 729142 681142 48000 18 1409 12% 528066 582022 (-)53956 19 1454 9% 1255189 1163710 91479 20 2503 12% 1273825 1157019 116806 21 1436 12% 3903 3434 469 22 1452 9% 1235398 1146967 88431 TOTAL 25,76,687 SINCE THE ENTIRE TURNOVER HAD BEEN CLAIMED IN CASH AND NO VERIFICATION WAS POSSIBLE THROUGH INDEPENDENT ENQUIRIES, THE AO ADO PTED THE SALES PROVIDED AS ON 29-12-2007 AS ACTUAL SALES MADE THROUGH EACH VEH ICLE, AND THE DIFFERENCE OF SALES WORKED OUT IN ABOVE CHART WAS TREATED AS SUPP RESSED SALES, RESULTING IN ADDITION OF RS.25,76,687/-. 7 ITA NO.2944/AHD/2008 7 3. ON APPEAL, THE LEARNED CIT(A) UPHELD THE ACTION OF THE AO, REJECTING THE BOOK RESULTS AND CONSEQUENT DISALLOWA NCE OF TRADE DISCOUNT IN THE FOLLOWING TERMS:- 2.6 DURING THE APPELLATE PROCEEDINGS THE APPELLANT STATED THAT THE AO HAS MADE CALCULATION WITHOUT PROPER APPRECIATION OF FACTS. THE APPELLANT STATED THAT IT HAS GIVEN ALL THE DETAILS AND HAS MA INTAINED COMPLETE SET OF BOOKS OF ACCOUNTS. IT WAS ALSO STATED THAT THESE BO OKS OF ACCOUNTS ARE AUDITED AND ENTIRE SALES AND PURCHASE ARE DULY VOUC HED. THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW ANY DEFECT I N THE SALES AND PURCHASE VOUCHERS. THE APPELLANT FURTHER STATED THA T SINCE ALL THE SALE PURCHASE ARE FULLY VOUCHED THE BOOKS OF ACCOUNTS SH OULD NOT BE REJECTED IN VIEW OF THE DECISION OF HON'BLE ITAT IN THE CASE OF KHAMBATTA FAMILY TRUST [62 TTJ 685] (AHD). THE APPELLANT HAS GIVEN FURTHER MORE DECISIONS OF VARIOUS ITAT WHICH ARE NOT REPEATED AS THEY SAY THE SAME THING. WITH RESPECT TO THE ADDITION THE APPELLANT STATED THAT T HE ASSESSEE WAS NOT GIVEN ENOUGH OPPORTUNITY. THE APPELLANT STATED THAT THE ALLEGED DISCREPANCIES BETWEEN THE FIGURES AND TRADE DISCOUN T IN THE TWO LETTERS HAS OCCURRED DUE TO MISUNDERSTANDING OF FACTS AS THE DE TAILS FURNISHED VIDE BOTH THE LETTERS IS DIFFERENT AND NOT THE SAME. THE APPELLANT STATED THAT DURING THE FIRST THREE MONTHS I.E. APRIL, MAY AND J UNE 2004 GROSS SALES WERE SHOWN AND THE TRADE DISCOUNT WAS SEPARATELY AC COUNTED FOR WHEREAS IN THE MONTH OF JULY 2004 TO MARCH 2005 THE SALES W ERE SHOWN NET OF TRADE DISCOUNT AND THE TRADE DISCOUNT WAS NOT SEPARATELY ACCOUNTED FOR . ACCORDING TO THE APPELLANT THIS HAS RESULTED IN THE DISCREPANCY MENTIONED BY THE AO. THE APPELLANT HAS STATED THAT THEY HAVE BIFURCATED SALES UNDER TWO HEADS WHICH ARE SALES AT FACTORY NET OF SALES R ETURN AND AT SURAT OFFICE. SUM OF THESE TWO IS FURTHER ADDED WITH SUNDRY SALES AND IS NETTED OFF WITH TRADE DISCOUNT. THE RESULTANT FIGURE IS SALES REFLE CTED IN THE AUDITED BALANCE SHEET AND THE SALES RECORDED IN SALES ACCOU NT IN THE BOOKS OF ACCOUNTS. REGARDING FACTORY SALES IT HAS BEEN STATE D THAT MAJOR PART OF THESE SALES ARE MADE THROUGH DEALERS AT VARIOUS LOC ATIONS WHICH ARE ENTITLED TO TRADE DISCOUNT AS PER THE TERMS NEGOTIA TED WITH THEM. THE SALES MADE THROUGH COMPANY TRUCKS ARE TREATED AS COUNTER SALES AND NO DISCOUNT IS GIVEN ON THE SALES. SOME SALES ARE ALSO MADE IN CASH FROM THE FACTORY GATE WHICH IS RECORDED AS CASH SALES. THE A PPELLANT COMPANY RAISES BILLS IN THE NAME OF DEALERS AND DEALERS IN TURN SELLS THE GOODS TO THE SHOP KEEPERS AND COLLECT PAYMENT FROM SHOP KEEPERS MOSTLY IN CASH AND IN TURN MAKES THE PAYMENT TO THE ASSESSEE AGAINST T HE BILLS IN CASH. THE APPELLANT ALLOWS THEM DISCOUNT AT NEGOTIATED RATE A T THE END OF THE MONTH AND ISSUES CREDIT NOTE FOR THE SAME. THE ENTRY IS P ASSED IN THE BOOKS ONLY AT THE TIME OF PERIODICAL SETTLEMENT OF ACCOUNTS OF THE DEALER. ALL THE PAYMENTS FROM COUNTER SALES AND CASH SALES ARE ALSO RECEIVED IN CASH. THE PAYMENTS IN CHEQUE ARE RECEIVED IN VERY MINIMAL MANNER . THE ASSESSEE HAS STATED THAT IT ALLOWS DISCOUNT FROM 12 % TO 10% ON DRY ITEMS, 18 TO 15% ON BREAD ITEMS AND 1% TO OTHER DEALERS. S ALES FROM SURAT OFFICE ARE THROUGH AUTO VANS AND THE BILLS ARE RAISED IN T HE NAME OF AUTO VANS. THE PAYMENTS ARE COLLECTED FROM THEM AGAINST THE BI LLS. THE SALESMEN 8 ITA NO.2944/AHD/2008 8 APPOINTED FROM THE COMPANY OPERATE THIS AUTO VAN. ACCORDING TO THE APPELLANT THE AO HAS FAILED TO APPRECIATE THE FACT THAT THE VEHICLE OWNERS ARE NOT THE PERSON THROUGH WHOM THE GOODS ARE SOLD BUT THE GOODS ARE ACTUALLY SOLD TO THEM BY PREPARING INVOICES IN THEI R NAMES. 2.7 I HAVE CONSIDERED THE SUBMISSION MADE BY THE AP PELLANT AND OBSERVATION OF THE AO. THE APPELLANT HAS FAILED TO COUNTER THE ARGUMENTS GIVEN BY THE AO. THE APPELLANT HAS ADMITTED THAT THE ENTIRE SALES ARE IN CASH AND EVEN THOSE WHICH ARE THROUGH BILLS. THE APPELLANT HAS INITIALLY TOLD THE AO THAT THE TRADE DISCOUNT ARE AT THE RATE OF 9% TO 12% AND GAVE THE DETAILS BUT LATE R ON THE APPELLANT SAYS THE TRADE DISCOUNT VARIES FROM ITEM TO ITEM. A CCORDING TO THE APPELLANT IT IS 12% TO 10% ON DRY ITEMS, 18% TO 15% ON BREAD ITEMS AND 1% TO OTHER DEALERS. THE APPELLANT SAYS THAT THE APPELLANT ALLOWED DISCO UNT AT NEGOTIATED RATE AT THE END OF THE MONTH AND ISSUED CREDIT NOTE FOR THE SAME. SIMULTANEOUSLY THE APPELLANT SAYS THAT THE ENTRY IS PASSED IN THE BOOKS OF ACCOUNTS ONLY AT THE TIME OF PERIODICAL SE TTLEMENT OF ACCOUNTS OF THE DEALERS. THIS CLEARLY SHOWS THAT TH E BOOKS OF ACCOUNTS ARE NOT REGULARLY MAINTAINED. THE CREDIT N OTE ISSUED AT THE END OF EACH MONTH IS NOT ACCOUNTED FOR EVERY MONTH BUT AT THE TIME OF PERIODICAL SETTLEMENT OF THE ACCOUNTS WITH THE D EALER. IN VIEW OF THE ABOVE, THE AO HAS RIGHTLY WORKED OUT THE DIFFERENCE IN THE TWO TABLES MENTIONED ABOVE WHICH THE APPELLANT HAS FAILED TO COUNTER WITH FACTS AND FIGURES. THE BOOKS OF ACCOUNTS ARE THEREF ORE RIGHTLY REJECTED AND THE ESTIMATING OF DISALLOWANCE IS ALSO VERY REASONA BLE. THEREFORE THE DISALLOWANCE MADE BY THE AO IS CONFIRMED. THIS GROU ND OF APPEAL IS DISMISSED. 3.1 AS REGARDS ADDITION TOWARDS SUPPRESSION IN SA LES, THE LD. CIT(A) CONFIRMED THE ADDITION, HOLDING AS UNDER:- 3.2 DURING THE APPELLATE PROCEEDINGS THE APPELLANT HAS STATED THAT THE SUPPRESSED SALES IS BASED ON SURMIS ES AND CONJECTURES AND MISUNDERSTANDING OF FACTS. THE APPE LLANT STATED THAT THE DETAILS OF SALES AS PER LETTER DATE D 29-12-07 AND 18-07-07 ARE NOT COMPARABLE. IN THE FIRST THREE MON THS THE SALES WERE GROSS AND OF REMAINING IT WAS NET SALES. 3.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE A PPELLANT AND OBSERVATION OF THE AO. THE REPLY OF THE APPELLA NT CANNOT BE ACCEPTED. THE ENTIRE SALES ARE IN CASH. THEY ARE NOT VERIFIABLE BECAUSE PARTY NAMES ARE NOT THERE. FURTH ER AS STATED 9 ITA NO.2944/AHD/2008 9 IN THE ABOVE GROUND THE APPELLANT IS NOT ACCOUNTING THE CREDIT NOTES ON REGULAR BASIS. THESE ARE ISSUED EVERY MONT H FOR TRADE DISCOUNT ACCOUNTED AT A MUCH LATER DATE. IT IS DIFF ICULT TO BELIEVE THAT THE ASSESSEE WOULD GIVE GROSS SALES PA RT OF THE YEAR AND NET SALES FOR OTHER PART OF THE YEAR. EVEN IF THIS CONTENTION IS ACCEPTED IT IS NOT BASED ON ANY DOCUM ENTARY EVIDENCE. THEREFORE THE AO HAS RIGHTLY ADDED THE DI FFERENCE IN SALES AS SUPPRESSED SALES. THIS GROUND OF APPEAL IS DISMISSED. 4. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED AR ON B EHALF OF THE ASSESSEE, AT THE OUTSET, CONTENDED THAT THE ASSESSE E HAD CHANGED ITS METHOD OF ACCOUNTING IN THE YEAR UNDER CONSIDER ATION. IN THE FIRST THREE MONTHS OF THE ACCOUNTING YEAR, GROSS SALES ,I NCLUDING DISCOUNT WERE SHOWN WHILE IN THE FOLLOWING NINE MONTHS ,NET SALES AFTER DEDUCTION OF TRADE DISCOUNT WERE SHOWN IN THE TRADI NG ACCOUNT. THOUGH THE LD. AR MADE THIS STATEMENT, TO A QUERY B Y THE BENCH , THE LD. AR WAS NOT ABLE TO SUPPORT HIS STATEMENT FR OM THE TAX AUDIT REPORT IN FORM 3CD NOR THE FACT OF CHANGE IN THE METHOD OF ACCOUNTING WAS REPORTED IN THE TAX AUDIT REPORT. TH E LD. AR FURTHER SUBMITTED THAT THE AO DID NOT GIVE ANY OPPORTUNITY TO THE ASSESSEE AFTER THEIR REPLY DATED 18/07/2007, 17/12/2007 AND 29/12/2007 T O EXPLAIN THE ALLEGED DISCREPANCIES. IN THE FIRST THREE MONTHS I.E. FROM APRIL TO JUNE,2004, THE TRADE DISCOUNT WAS ACCOUNTED FOR THROUGH CREDIT NOTES WHI LE FROM JULY ONWARDS, IT WAS DIRECTLY ADJUSTED IN THE BILLS ITSELF. SINCE ENTIRE PURCHASES AND SALES WERE VOUCHED AND NO DEFECT WAS POINTED OUT IN THE REGULA R BOOKS OF ACCOUNT ,REJECTION OF BOOKS AND CONSEQUENT ADDITION WAS NOT JUSTIFIED. INTER ALIA, THE ASSESSEE, IN THEIR WRITTEN SUBMISSIONS RELIED UPON DECISIONS IN ACIT VS MAHESH PATODIA (2001) 79 ITD 40 (PUNE);SHANKER RICE COMPANY VS ITO (2000) 72 ITD 139 (ASR) (SB);ASST. CIT VS. KHAMBHATTA FAMILY TRUST (1998) 6 2 TTJ (AHD.) 685;S. GURJAL SINGH TULI VS. ACIT (2000) 73 ITD 365 (NAGPUR); AND VINOD KUMAR PRAMOD KUMAR VS. ITO (2000) 66 TTJ 722 (JODHPUR). AS REGAR DS SUPPRESSION IN SALES, THE LD. AR POINTED OUT THAT DIFFERENCE HAS BEEN WOR KED OUT ON INCORRECT APPRECIATION OF FACTS BY THE AO AND THE LD. CIT(A). THE DETAILS OF SALES AS PER THEIR REPLY DATED 29/12/2007 AND 18/07/2007 WERE NO T COMPARABLE IN VIEW OF THE 10 ITA NO.2944/AHD/2008 10 FACT THAT AS PER THEIR REPLY DATED 18/07/2007, THE FIGURE OF SALES FOR THE FIRST THREE MONTHS WERE GROSS SALES WHILE FOR THE REMAINING 9 M ONTHS, THE FIGURE OF SALES WERE NET SALES I.E. NET OF DISCOUNT. THE DETAILS AS PER REPLY DATED 29/12/2007 PERTAINED TO GROSS SALES FOR THE ENTIRE YEAR, THE A SSESSEE MENTIONED IN THEIR WRITTEN SUBMISSIONS. TO A QUERY BY THE BENCH, THE LD. AR DID NOT ADDUCE ANY COGENT REASONS AS TO WHY FIGURES OF TRADE DISCO UNT IN RESPECT OF VAN NOS. 1435 & 1489 WERE NOT MATCHING WITH DIFFERENCE IN S ALES WORKED OUT BY THE AO IN PARA 9 OF THE ASSESSMENT ORDER. INSTEAD, THE LD. AR PLEADED THAT THE MATTER REQUIRES RECONSIDERATION BY THE LD. CIT(A) ,ESPECIA LLY WHEN HE DID RECORD HIS SPECIFIC FINDINGS ON THEIR PLEA REGARDING CHANGE I N METHOD OF ACCOUNTING OF TRADE DISCOUNT SINCE JULY ,2004.THE LEARNED DR, ON THE OT HER HAND, SUPPORTED THE IMPUGNED ORDER OF THE LEARNED CIT(A) AND CONTE NDED THAT CHANGE IN METHOD OF ACCOUNTING WAS NEVER COMMUNICAT ED TO THE AO NOR HAS BEEN SO MENTIONED IN THE TAX AUDIT REPORT. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE. AS IS APPARENT FROM THE AFORESAID FACTS IN THE IMPUGNED ORDER, THE ENTIRE DISPUTE AROSE SINCE THE ASSESSEE FAILED TO RECONCILE THE FIGURES OF TRADE DISCOUNT AND THE CORRESPONDING SALES NOR DID RECONCILE THE DETAILS GIVEN IN THEIR REPLY DATED 1 8.7.2007 & 29.12.2007. EVEN THOUGH IT WAS PLEADED BEFORE THE LD. CIT(A) THAT TH E ASSESSEE CHANGED ITS METHOD OF ACCOUNTING IN THE YEAR UNDER CONSIDERATION I.E IN THE FIRST THREE MONTHS GROSS SALES ,INCLUDING DI SCOUNT WERE SHOWN WHILE IN THE FOLLOWING NINE MONTHS ,NET SALES AFTER DEDUCTION OF TRADE DISCOUNT WERE REFLECTED, THE LD. CIT(A) DID NOT APP EAR TO HAVE GONE IN TO THIS ASPECT NOR ATTEMPTED TO VERIFY OR RECON CILE THE RELEVANT DETAILS. THE LD. AR APPEARING BEFORE US VEHEMENTLY ARGUED THAT THE AO DID NOT ALLOW THEM SUFFICIENT OPPORTUNITY TO EX PLAIN THE ALLEGED DISCREPANCIES NOTICED BY HIM AND THEY ARE PREPARED TO RECONCILE THE SAID DISCREPANCIES IN TRADE DISCOUNT VIS--VIS CORR ESPONDING SALES. IN THESE CIRCUMSTANCES, ESPECIALLY WHEN THE LD. CIT (A) DID NOT RECORD HIS SPECIFIC FINDINGS ON THE PLEA OF THE ASS ESSEE REGARDING CHANGE IN METHOD OF ACCOUNTING OF TRADE DISCOUNT AN D THE 11 ITA NO.2944/AHD/2008 11 CORRESPONDING SALES, WE ARE OF THE OPINION THAT THE MATTER REQUIRES RECONSIDERATION BY HIM, AS CONTENDED BY THE LD. AR. A MERE GLANCE AT THE IMPUGNED ORDER REVEALS THAT THE ORDER PASSED BY THE LD. CIT(A) IS CRYPTIC AND GROSSLY VIOLATIVE OF ONE OF THE FACETS OF THE RULES OF NATURAL JUSTICE, NAMELY, THAT EVERY JUDICIAL/QUASI-JUDICIAL BODY/AUT HORITY MUST PASS REASONED ORDER, WHICH SHOULD REFLECT APPLICATION OF MIND BY THE CONCERNED AUTHORITY TO THE ISSUES/POINTS RAISED BEFORE IT. THE APPLICATION OF MIND TO THE MATERIAL FACTS AND THE ARGUMENTS SHOULD MANIFEST ITSELF IN THE ORDER. SECTION 250(6) OF THE INCOME TAX ACT ,1961 MANDATES THAT THE ORDER OF THE CIT(A) WHILE DISPOSING OF THE APPEAL SHALL BE IN WRITING AND SHALL STATE THE POIN TS FOR DETERMINATION, THE DECISION THEREON AND THE REASON FOR THE DECISION. THE REQUI REMENT OF RECORDING OF REASONS AND COMMUNICATION THEREOF HAS BEEN READ AS AN INTEG RAL PART OF THE CONCEPT OF FAIR PROCEDURE. THE REQUIREMENT OF RECORDING OF REA SONS BY THE QUASI-JUDICIAL AUTHORITIES IS AN IMPORTANT SAFEGUARD TO ENSURE OBS ERVANCE OF THE RULE OF LAW. IT INTRODUCES CLARITY, CHECKS THE INTRODUCTION OF EXTR ANEOUS OR IRRELEVANT CONSIDERATIONS AND MINIMIZES ARBITRARINESS IN THE D ECISION-MAKING PROCESS. WE MAY REITERATE THAT A DECISION DOES NOT MERELY MEA N THE CONCLUSION. IT EMBRACES WITHIN ITS FOLD THE REASONS FORMING BASIS FOR THE C ONCLUSION.[MUKHTIAR SINGH VS. STATE OF PUNJAB,(1995)1SCC 760(SC)]. AS IS APPARENT , THE IMPUGNED ORDER SUFFERS FROM LACK OF REASONING AND IS NOT A SPEAKI NG ORDER. IN VIEW OF THE FOREGOING, ESPECIALLY WHEN THE LD. CIT(A) HAVE NOT PASSED A SPEAKING ORDER ON THE ISSUES RAISED IN THIS APPEAL, WE CONSIDER IT F AIR AND APPROPRIATE TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO HIS FILE FOR DECIDING THE ISSUES RAISED IN GROUND NOS. 1 TO 3 IN THE APPEAL AFRESH I N ACCORDANCE WITH LAW, IN THE LIGHT OF OUR AFORESAID OBSERVATIONS AND OF COURSE, AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES. NEEDLESS TO SAY TH AT WHILE REDECIDING THE APPEAL, THE LEARNED CIT(A) SHALL PASS A SPEAKING ORDER, KEE PING IN MIND, INTER ALIA, THE MANDATE OF PROVISIONS OF SEC. 250(6) OF THE ACT, BR INGING OUT CLEARLY, INTER ALIA, THE DEFECTS IN THE BOOKS, WHICH LEAD TO INVOCATION OF PROVISIONS OF SEC. 145(3) OF THE ACT . WITH THESE OBSERVATIONS, GROUND NOS. 1 TO 3 I N THE APPEAL ARE DISPOSED OF. 12 ITA NO.2944/AHD/2008 12 6. GROUND NOS.4 AND 5 IN THE APPEAL WERE NOT PRESS ED BEFORE US AT THE TIME OF HEARING BY THE LEARNED AR ON BEHALF OF THE ASSESSEE. THEREFORE, THESE TWO GROUNDS ARE DISMISSED. 7. NO ADDITIONAL GROUND HAVING BEEN RAISED BEFORE U S IN TERMS OF RESIDUARY GROUND IN THE APPEAL, ACCORDINGLY, THIS G ROUND IS ALSO DISMISSED. 8. NO OTHER PLEA OR ARGUMENT WAS MADE BEFORE US. 9. IN THE RESULT, APPEAL IS PARTLY ALLOWED, BUT FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT TODAY ON 24 -06-2011 SD/- SD/- (T K SHARMA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 24-06-2011 COPY OF THE ORDER FORWARDED TO: 1. MATRA AHAR PVT. LTD., 304, SWAMINARAYAN INDUS. E STATE, VILLAGE: TANTITHAYA, TALUKA: PALSANA, DISTRICT: SUR AT 2. INCOME-TAX OFFICER, WARD-1(3), ROOM NO.113, 1 ST FLOOR, AAYAKAR BHAVAN, MAJURA GATE, SURAT 3. CIT CONCERNED 4. CIT(A)-I, SURAT 5. DR, ITAT, AHMEDABAD BENCH-D, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD
