Dy. Commissioner of Income-tax , Ferozepur V. Sh. Harpreet Singh Gulati, Ferozepur City.

ITA 317/ASR/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73288 (ITAT-AMRITSAR)
• Duration Of Justice: 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 25-02-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 10-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Keywords: Corroborative evidences

Judgement Text

ITA NO.317(ASR)/2013 IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.317(ASR)/2013 ASSESSMENT YEAR:2009-10 PAN :AELPG5810P DY. COMMISSIONER OF INCOME TAX, VS.SH. HARPEET SING H GULATI, PROP. CIRCLE-III, FEROZEPUR. M/S. AKASH ENTERPRISE S, 92, MODEL TOWN, FEROZEPUR CITY. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. MAHAVIR SINGH, DR RESPONDENT BY:SH.P.N.ARORA, ADVOCATE DATE OF HEARING: 25/02/2014 DATE OF PRONOUNCEMENT:28/02/104 ORDER PER BENCH ; THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER O F THE CIT(A), BHATINDA, DATED 19.02.2013 FOR THE ASSESSMENT YEAR 2009-10. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A), BATHINDA, WAS RIGHT IN NOT APPRECIATING THE FINDING OF THE AO THAT THE ASSESSEE HAS FAILED TO PASS ON THE ENTIRE REBATE OF RS.3,171,40,973.70 TO THE RETAILERS AND HAS KEPT THE BALANCE REBATE OF RS.1,65,86,467/- WITH HIM. 2 2. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR MODI FY THE GROUNDS OF APPEAL SUBSEQUENTLY. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE AO MADE AN ADDITION OF RS.48,16,438/- AND THE RELEVANT PART OF THE FINDING S OF THE AO AT PAGES 2 TO 4 OF THE ORDER ARE REPRODUCED FOR THE SAKE OF CONVENI ENCE AS UNDER: DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 2009-10, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF WHOLESALE OF LIQUOR (L-1 ) & COMMISSIONER BUSINESS OF AUTOMOBILES (GULATI AUTOS). WHEN THE DE TAILS WERE BEING VERIFIED, IT WAS NOTICED THAT THE ASSESSEE HAS SHOW N IN THE TRADING ACCOUNT UNDER THE HEAD DIRECT INCOME AN AMOUNT OF R S.3,71,40,973/-. WHEN FURTHER DETAILS WERE ASKED ABOUT THIS ITEM, I T CAME TO NOTICE THAT ACTUALLY THIS DIRECT INCOME IS REBATE RECEIVED BY THE ASSESSEE AMOUNTING TO RS.3,71,40,973/-. THE COUNSEL FOR THE ASSESSEE WAS ASKED TO FILE THE DETAILS REGARDING THIS REBATE ACC OUNT. IT WAS EXPLAINED ON BEHALF OF THE SSESSEE AS UNDER: DURING THE LAST COURSE OF HEARING I HAVE BEEN ASKE D BY YOUR GOODSELF TO PROVIDE THE EXPLANATION REGARDING REBAT E AS CREDIT IN P&L ACCOUNT AMOUNTING TO RS.3,71,40,973/-. IN TH IS REGARD, IT IS MOST RESPECTFULLY SUBMITTED ACCORDING TO THE NATURE OF TRADE CRITERIA OF REBATE IS FULLY DEPENDENT ON MON THLY LIFTING OF LIQUOR QUOTA. THE REBATE IS PASSED BY DISTILLERIES AFTER KEEPING IN MIND THEIR MONTHLY LIFTING OF LIQUOR BY VARIOUS L-1. ON THE BASIS OF THIS REBATE RECEIVED ALL THE FUTURE PRICES ARE FIXED IN ORDER TO CAPTURE MORE MARKET. IT MAY NOT BE OUT OF PLACE TO MENTION HERE THAT THE PUNJAB GOVT. HAD MADE THE MA RKET MORE COMPETITITVE BY ALLOTTING THE LICENSE OF L-1 TO VAR IOUS WHOLESALE SUPPLIERS IN THE SAME DISTRICT, SO THE MONOPOLISTIC CRITERIA HAD BEEN CURTAILED DOWN. KEEPING IN MIND THE INCREASE O F COMPETITION IN MARKET EVERY WHOLESALER IS PUTTING I TS BEST EFFORTS TO INCREASE SALE SO THAT THE HIGHER REBATE CAN BE C LAIMED FROM THE DISTILLERIES. IN ORDER TO INCREASE THE SALES T HE REBATE IS PASSED TO THE RETAILER HOLDING L-2 LICENSE SO THAT SALES TARGET5S CAN BE ACHIEVED. IN THIS REGARD, I AM ENCLOSING HER EWITH THE PHOTOCOPY OF THE SALE BILLS FROM WHICH YOUR GOODSEL F WILL FIND THAT THE REBATE IS ALSO PASSED TO THE ULTIMATE RETA ILER.. 3 3. FROM THE ABOVE EXPLANATION GIVEN BY THE ASSESSEE A FACT THAT EMERGES IS THAT WHETHER THE REBATE RECEIVED BY THE ASSESSEE IS ULTIMATELY PASSED IN TOTO TO THE RETAILERS AS PER T HE ASSESSEES OWN VERSION AS STATED ABOVE OR NOT,. THEN THE COUNSEL F OR THE ASSESSEE WAS ASKED THE SAME QUESTION AND IT WAS DISCLOSED ON BEH ALF OF THE ASSESSEE BY THE COUNSELS THAT ACTUALLY DURING THE YEAR REBAT E RECEIVED WAS RS.3,71,40,973/- AND REBATE PASSED ON TO THE RETAIL ERS WAS AMOUNTING TO RS.2,05,54,506/- AND NET REBATE REMAINED WITH TH E ASSESSEE OF RS.1,65,86,467/-. THE COUNSELS OF THE ASSESSEE WERE ASKED WHY THE NET REBATE REMAINED WITH THE ASSESSEE SHOULD NOT BE TRE ATED AS HIS REAL INCOME INSTEAD OF INCOME DECLARED BY HIM AMOUNTING TO RS.1,17,70,029/-. THE EXPLANATION FILED IN THIS RES PECT ON BEHALF OF THE ASSESSEE VIDE LETTER DATED 15.12.2011 IS REPRODUCED AS UNDER: 1. DURING THE LAST COURSE OF HEARING WE HAVE BEEN A SKED BY GOODSELF TO PROVIDE DETAILED EXPLANATION ON NET REB ATE I.E. (REBATE RECEIVED REBATE GIVEN). IN THIS REGARD, T HE DETAILED SUMMARY ALONGWITH THE ANNEXURE IS AS UNDER: PARTICULARS AMOUNT AMOUNT REBATE RECEIVED 37140973.70 A-1 REFER PAGE 1-2 REBATE GIVEN 20554506.20 A- REFER PAGE 3-9 NET REBATE 16586467.00 - THE SAID NET REBATE IS ALREADY PART OF TRADING RESU LTS AND GROSS PROFIT AMOUNTING TO RS.3,62,21,148.51. THE BIFURCATION OF GROSS PROFIT IS AS UNDER: TOTAL GROSS PROFIT 36212148.51 LESS NET REBATE 16586467.50 BALANCE G.P. ON SALES 19625681.01 2. THE CONSOLIDATED PROFIT & LOSS ACCOUNT IS AS UNDER: PARTICULARS AMOUNT PARTICULARS AMOUNT TO CASH LOST IN TRANSIT 300000.00 BY NET REBATE 16586467.50 TO EXP. DEBITED 21263365.50 BY GROSS PROFIT 19625681.01 4 IN P/L TO APPLICATION REJECTION 3527000.00 BY INTEREST 657589.00 TO NET PROFIT 11770029.73 BY ROUND OFF 657.72 3687395.23 36870395.23 IT MAY NOT BE OUT OF PLACE TO MENTION HERE THAT WE WOULD HAVE SUFFERED HUGE LOSSES IF WE HAD NOT RECEIVED THE REB ATE WHICH WAS ONLY POSSIBLE BY THE TEAM OF THE AGENTS. THE DUTY OF THE AGENT WAS TO INCREASE SALES AND OFFER LESS DISCOUNTS TO THE RETA ILERS. IN RETURN THE AGENTS WERE PAID REWARD IN THE FORM OF COMMISSION. FROM THE ABOVE EXPLANATION FILED BY THE ASSESSEE O NE FACT THAT EMERGES IS THAT THE TOTAL REBATE REMAINED WITH THE ASSESSEE AMOUNTING TO RS.1,65,86,467/- IN CONTEST TO ASSESSEES OWN VE RSION IN PARAGRAPH (2) ABOVE, WHEREIN IT HAS BEEN MENTIONED THAT ALL T HE REBATE IS PASSED ON TO THE RETAILERS. NOW THE FACT EMERGES IS THAT W HETHER RS.1,65,86,467/- IS THE EXTRA INCOME OF THE ASSESSE E EXCLUDING NET PROFIT DECLARED AT RS.1,17,70,029/-. BUT TAKING A C ONSIDERATE VIEW OF THE MATTER AND ALL THE EXPLANATIONS GIVEN BY THE AS SESSEE IN THIS RESPECT TOTAL OF BALANCE REBATE I.E. RS.1,65,86,467 /- IS TAKEN AS THE INCOME OF THE ASSESSEE WHICH INCLUDES NET PROFIT OF RS.1,17,70,029/-. SO, ADDITION OF RS.48,16,438/- (RS.1,65,86,467 RS .1,17,70,029) IS MADE TO THE INCOME OF THE ASSESSEE. PENALTY PROCEED INGS U/S 271(1)(C) OF THE ACT ARE INITIATED SEPARATELY FOR FURNISHING INACCURATE PARTICULARS OF INCOME. WITH THESE REMARKS, INCOME OF THE NET AS SESSABLE INCOME OF THE ASSESSEE IS COMPUTED AS UNDER: INCOME RETURNED RS.1,20,51,170/- ADDITION ON ACCOUNT OF REBATE AS DISCUSSED ABOVE RS . 48,16,438/- NET ASSESSABLE INCOME RS.1,68,68,148/- 3. THE LD. CIT(A) ACCEPTED THE EXPLANATION OF THE ASSESSEE AND DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 4. THE LD. DR RELIED UPON THE ORDER OF THE ASSESSIN G OFFICER. 5 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE, MR. P.N. ARORA, ADVOCATE RELIED UPON THE ORDER OF THE LD. CIT(A) AN D REITERATED THE SUBMISSIONS MADE BEFORE HIM. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE CONCUR WITH THE FINDINGS OF THE LD. CIT(A) THAT THE A.O. HAS FAILED TO RECORD ANY FINDING IN THE ASSESSMENT ORDER THAT TH E CASE OF THE ASSESSEE IS AKIN TO THE PROVISIONS OF SECTION 145(3) OF THE ACT . THE ARGUMENTS MADE BY THE LD. COUNSEL FOR THE ASSESSEE BEFORE THE LD. CIT (A) ARE THAT THE ASSESSEE FURNISHED AUDITED ACCOUNTS/TAX AUDIT REPORT ALONGW ITH BOOKS OF ACCOUNT AND BILLS/VOUCHERS FOR PURCHASE/SALES OF LIQUOR AND REL ATING TO EXPENSES WERE PRODUCED FOR VERIFICATIONS. THE DETAILS AND BASIS OF VALUATION OF CLOSING STOCK WERE PLACED ON RECORD DURING THE COURSE OF AS SESSMENT PROCEEDINGS. THE STATE EXCISE AND TAXATION DEPARTMENT KEEPS STRI CT CONTROL AND SUPERVISION OVER THE LIQUOR TRADE CARRIED OUT BY THE ASSESSEE. THE PURCHASES OF LIQUOR CAN BE MADE BY THE ASSESSEE AGAINST THE PERMITS ISSUED BY THE STATE EXCISE DEPARTMENT AND SIMILARLY THE SALES OF THE LIQUOR BY THE ASSESSEE TO THE RETAILERS HAVING 1-2 LICENSES CAN ONLY BE MADE AG AINST THE PERMITS ISSUED BY THE STATE EXCISE DEPARTMENT. THE AO FAILED TO REBUT THE CONTENTION OF THE ASSESSEE THAT THE NET REBATE OF RS.16586467/- IS A PART OF THE TRADING RESULTS AND ALSO THE GROSS PROFIT. THE AO HAS TRIED TO MAKE OUT A CASE THAT THE ABOVE 6 STATED AMOUNT OF RS.16586467/- IS THE INCOME OF THE ASSESSEE AS PER HIS OWN VERSION BY TWISTING THE CONTENTIONS OF THE ASSESSEE IN WRITTEN REPLY FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS BY RECO RDING THE FINDING THAT A FACT THAT EMERGES IS THAT WHETHER THE REBATE RECE IVED BY THE ASSESSEE IS ULTIMATELY PASSED IN TOTO TO THE RETAILERS AS PER T HE ASSESSEES WON VERSION AS STATED ABOVE OR NOT BECAUSE THE WORD IN TOTO HAS B EEN INTRODUCED BY THE AO BUT THE COUNSEL OF THE ASSESSEE DID NOT USE THIS WO RD IN THE WRITTEN REPLY. THE DETAILS OF REBATE RECEIVED FROM THE SELLERS FROM WH OM THE LIQUOR WAS PURCHASED AND PAID TO THE PURCHASERS L-2 LICENSE HO LDERS TO WHOM THE LIQUOR WAS SOLD, ALONGWITH THE SUPPORTING EVIDENCE WAS FILED BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND NO DEFECT WAS POINTED OUT BY THE AO EITHER DURING THE COURSE OF THE ASSESSMEN T PROCEEDING OR IN THE ASSESSMENT ORDER. NO OPPORTUNITY WAS ALLOWED BY THE AO TO THE ASSESSEE BEFORE MAKING THE ADDITION OF RS.48,16,438/-. 6.1. AS MENTIONED HEREINABOVE, WE CONCUR WITH THE F INDINGS OF THE LD. CIT(A) THAT THE CASE OF THE ASSESSEE IS COVERED BY THE JUDGMENT OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. K.S. BHATIA REPORTED IN 269 ITR 577 AND THE JUDGMENT OF THE HONBLE CHHATTI SGARH HIGH COURT IN THE CASE OF ACIT, RAIPUR VS. ROOP CHAND THARANI RE PORTED IN 249 CTR 326 IN WHICH IT HAS BEEN HELD THAT THE PROFITS CANNOT B E ESTIMATED WITHOUT 7 REJECTING THE BOOKS OF ACCOUNT BY POINTING OUT THE SPECIFIC DEFECTS AND RECORDING THE FINDING REGARDING THE SAME. THE CONTE NTIONS OF THE AR OF THE ASSESSEE ARE FACTUALLY CORRECT AND THE AO HAS FAILE D TO POINT OUT ANY DISCREPANCY IN THE BOOKS OF ACCOUNT TO JUSTIFY HIS ACTION OF ESTIMATING THE INCOME OF THE ASSESSEE AT RS.16586467/- AS AGAINST THE INCOME OF RS.11770029/- DECLARED IN THE PROFIT AND LOSS ACCOU NT. 6.2. THUS, IN VIEW OF THE FACTS AND CIRCUMSTANCES O F THE CASE DISCUSSED ABOVE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHO HAS RIGHTLY DELETED THE ADDITION OF RS.48,16,438/-. WE ACCORDIN GLY, UPHOLD THE ORDER OF THE LD. CIT(A) AND DISMISS THE APPEAL OF THE REVENU E. 7. IN THE RESULT THE APPEAL OF THE REVENUE IN ITA N O.317(ASR)/2013 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28TH FEBRUARY, 2014. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 28TH FEBRUARY, 2014 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:SH. HARPREET SINGH GULATI, FEROZEPUR 2. THE DCIT, CIRCLE-III, FEROZEPUR. 3. THE CIT(A), BATHINDA. 4. THE CIT, BATHINDA. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER