Mamata Poddar, Balasore V. ITO, Balasore

ITA 351/CTK/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65082 (ITAT-CUTTACK)
• Duration Of Justice: 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 20-07-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 30-05-2012
• Court: TRIBUNAL
• Department Lawyers: PARAMITA TRIPATHY CIT DR AND
• Assessee Lawyers: D K SETH
• Keywords: Business income; Wrong claim

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , HONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER / I.T.A.NO. 351/CTK/2012 ( / ASSESSMENT YEAR 2007 - 08) MAMATA PODDAR, BALSORE (ODISHA) PAN: AIOPP 2959 F - - - VERSUS - INCOME - TAX OFFICER, WARD 2, BALASORE. ( /APPELLA NT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI D.K.SETH, AR / FOR THE RESPONDENT: / S MT. . PARAMITA TRIPATHY, CIT - DR AND SHRI S.C.MOHANTY, DR / DATE OF HEARING: 20.07.2012 / DATE OF PRONOUNCEMENT: 14.08.2012 / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER . THIS APPEAL BY THE ASSESSEE RAISES TWO GROUND S ONE WITH RESPECT TO THE ISSUE OF DISALLOWANCE OF CLAIM OF DISCOUNT AMOUNTING TO 1,60,796 A ND ANOTHER BEING ADDITION OF 68,551 WHICH HAS BEEN ORIGINALLY CONSIDERED FOR ADDITION AS DISALLOWANCE FOR CLAIMING DEDUCTION U/S.80C BEING PAYMENT OF LIFE INSURANCE PREMIUM. 2. THE BRIEF FACTS AS HAVE BEEN BROUGHT ON RECORD ARE THAT THE ASSESSEE DERIVES I NCOME FROM BUSINESS IN MEDICINES ON WHOLESALE AND RETAIL BASIS. RETURN FOR THE IMPUGNED ASSESSMENT YEAR WAS FILED SHOWING INCOME OF 1,65,570. THE ASSESSING OFFICER AFTER ISSUING NOTICE U/S.143(2) PROCEEDED TO SCRUTINIZE THE RETURN ON OBSERVING THAT THE AS SESSEE HAD SHOWN SUNDRY CREDITORS OF 37,13,095 WHICH EXCEEDED 30% OF THE GROSS SALES DISCLOSED BY THE ASSESSEE AT 1.08 CRORES. THE ASSESSEE HAD CLAIMED DISCOUNT OF I.T.A.NO. 351/CTK/2012 2 4,00,711 WHEN HE SOUGHT TO VERIFY THE DETAILS OF THE DISCOUNT FINDING THAT IN THE SALES R EGISTER DISCOUNT HAD BEEN ALLOWED ON THE INVOICES AMOUNTING TO 2,39,914 ONLY. IT WAS EXPLAINED BY THE ASSESSEE THAT THE SUM OF 1.,60,797 WAS THE DISCOUNT ALLOWED AT THE TIME OF ISSUING MONEY RECEIPTS WAS HELD BY THE ASSESSING OFFICER AS WRONG CLAIM OF DI SCOUNT INSOFAR AS IT WAS THE REIMBURSEMENT TO THE FIELD STAFF TOWARDS TRAVELLING AND CONVEYANCE CHARGES WHICH REMAINED UNPAID PERTAINED TO THE EARLIER YEAR. ON THE ISSUE OF CLAIMING DEDUCTION U/S.80C THE ASSESSING OFFICER VERIFIED THE CAPITAL ACCOUNT WHERE THERE WAS AN ADDITION OF 70,596 BEING ADJUSTMENT FOR NSC AND LIC SOUGHT TO DISALLOW THE CLAIM OF PAYMENT OF LIFE INSURANCE PREMIUM FOR THE IMPUGNED ASSESSMENT YEAR AMOUNTING TO 68,551. 3. AGGRIEVED THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHOR ITY WHO CONSIDERED THE CASE OF THE ASSESSEE APPELLANT BY BRINGING ON RECORD THE REASONS FOR THE DECISION TO CONFIRM THE SAME. ON THE ISSUE OF DISCOUNT DISALLOWED IT WAS SUBMITTED THAT AS PER THE SALES REGISTER, THE DISCOUNT ALLOWED WAS 2,39,914 AND THE D ISCOUNT ALLOWED ON ACCOUNT OF CREDIT SALES ON THE SETTLEMENT OF THE DEBTORS THE ISSUE OF MONEY RECEIPTS ACCOUNTED FOR SHORT RECEIPTS AMOUNTING TO 1,6 0 ,797 WAS CLAIMED AS DISCOUNT. THE LEARNED CIT(A) CONSIDERED TH E SAME AS CONFLICTING STATEMENT OF THE ASSE SSEE BEFORE THE ASSESSING OFFICER AND NOW BEFORE HIM CONFIRMED THE DISALLOWANCE OF 1,69,797. WITH RESPECT TO THE CLAIM OF DEDUCTION U/S.80C AMOUNTING TO 68,551 HE OBSERVED THAT THE CREDIT IN THE CAPITAL ACCOUNT WAS ON ACCOUNT OF ADJUSTMENT BY THE ASSESSE E OF THE EARLIER YEARS PAYMENTS WHICH HAVE TO BE RECORDED IN VIEW OF THE STATUTORY DEDUCTION CLAIMED WITHOUT CREDITING THE ASSET. HOWEVER, ON THE SUBMISSION OF THE ASSESSEE APPELLANT, THE LEARNED I.T.A.NO. 351/CTK/2012 3 CIT(A) DIRECTED THE ASSESSING OFFICER TO EXAMINE THE CLAIM WITH REFERENCE TO THE ORIGINAL DOCUMENTS AND TAKE CONSEQUENTIAL MEASURE. 4. THE LEARNED COUNSEL FOR THE ASSESSEE INITIATING HIS ARGUMENTS SUBMITTED THAT THE VERY BASIS OF THE ASSESSING OFFICER HOLDING THE ASSESSEE WORTHY OF SCRUTINY U/S .143(3)HAS BEEN ON M ISINTERPRETATION OF FACTS INSOFAR AS HE IS HOLDING THE SUNDRY CREDITORS FOR PURCHASES OF GOODS TO BE 30% OF THE SALES WHICH BY NO STRETCH OF IMAGINATION CAN BE CORRELATED INSOFAR AS EVEN DURING THE COURSE OF ASSESSMENT HE HAS NOT BEEN ABLE TO ESTABLISH THE RELATION TO LINK ANY ADDITION OR DISALLOWANCE. HE SUBMITTED THAT THE DISCOUNT AS NOTED IN THE SALES REGISTER WAS DIRECTLY AVAILABLE TO THE PURCHASER OF MEDICINES AS IS PREVALENT IN THE CHEMIST RETAIL AND WHOLESALE BUSINESS INSOFAR AS THERE IS A ST IFF COMP ETITION WHEN MEDICINES ARE PURCHASED IN BULK AND THE MARGIN ON THE MAXIMUM RETAIL PRICE IS NARROWED ON THE BASIS OF CUSTOMERS PREFERENCE. WITHOUT DISTURBING THE GROSS MARGIN RETURNED BY THE ASSESSEE, THE ASSESSING OFFICER SOUGHT TO DISALLOW PART OF THE DI SCOUNT ALLOWED WHEN THE SALES HAVE BEEN ACCEPTED. HE SUBMITTED THAT THE DISCOUNT ALLOWED WAS OBSERVED BY HIM ON THE BASIS OF LEDGER COPIES WHICH ARE BEING FURNISHED HEREWITH CLEARLY INDICATE THAT THE SETTLEMENT OF DEBIT BALANCE ON THE LAST DAY OF THE CLOSE OF THE FINANCIAL YEAR WAS PASSED BY JOURNAL ENTRIES INDICATING THE BILLS ON THE BASIS OF MONEY RECEIPTS ISSUED FROM DEBTORS WHO HAD PURCHASED THE MEDICINES. THIS DISCOUNT IS AKIN TO A BAD DEBT WRITTEN OFF IN THE IMPUGNED ASSESSMENT YEAR CANNOT BE HELD AGA INST THE ASSESSEE AS TWO DIFFERENT STATEMENTS EXPLAINING THE CLAIM BEFORE THE ASSESSING OFFICER AND THEN BEFORE THE LEARNED CIT(A). HE SUBMITTED THAT THE LEARNED CIT(A) DID NOT APPRECIATE THE FINDING OF THE ASSESSING OFFICER WAS ON MISINTERPRETATION OF HOL DING THE DISCOUNT OF MONEY RECEIPTS AS I.T.A.NO. 351/CTK/2012 4 REIMBURSEMENT TO THE TRAVELLING SALESMEN WHO HAD INCURRED EXPENDITURE IN THE EARLIER YEAR. IN ANY CASE HE SUBMITTED THAT THE EXPENDITURE WAS INCIDENTAL FOR THE BUSINESS OF THE ASSESSEE CANNOT BE DENIED WHICH HAS BEEN LEGITIMATELY CLAIMED INSOFAR AS NO ADVERSE FINDING HAS BEEN GIVEN BY THE AUTHORITIES BELOW. WITH RESPECT TO THE ISSUE OF CLAIM OF DEDUCTION U/S.80C AMOUNTING TO 68,551 HE SUBMITTED THAT A DEDUCTION U/S.80C ON MATURITY IS DIRECTLY TAKEN AS ADDITION TO THE CAPITAL CANNOT BE HELD AGAINST THE ASSESSEE INSOFAR AS THE ASSESSING OFFICER HIMSELF HAS ALLOWED THE CLAIM OF DEDUCTION IN THE IMPUGNED ASSESSMENT YEAR AS PER THE COMPUTATION OF TAXABLE INCOME FILED BY THE ASSESSEE WAS ADJUDICATED UPON BY HIM. IN ANY CASE, HE ERRED IN HOLDING A VIEW THAT THE RECEIPTS OF MATURITY OF 70,596 AS ADDITION TO THE CAPITAL ACCOUNT BEING MORE THAN THE INSURANCE PREMIUM PAID FOR THE IMPUGNED ASSESSMENT YEAR OUGHT TO BE DISALLOWED WAS A CLAIM FROM GROSS TOTAL INCOME AND NOT REDUCTION FROM THE CAPITAL. HE PRAYED THAT BOTH THESE DISALLOWANCES AND ADDITIONS MAY KINDLY BE DIRECTED TO BE DELETED INSOFAR AS THE LEARNED CIT(A) HAS NOT GIVEN A FINDING FOR THE ASSESSING OFFICER TO VERIFY. 5. THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITI ES BELOW FOR HIS PART OF SUBMISSIONS. HE POINTED OUT THAT THE CHANGE OF SUBMISSIONS OF THE ASSESSEE BEFORE THE ASSESSING OFFICER AND THE LEARNED CIT(A) WITH RESPECT TO THE DISCOUNT CLAIMED AS EXPENDITURE MAY KINDLY BE DIRECTED TO VERIFIED BY THE ASSESSING OFFICER INSOFAR AS REIMBURSEMENT OF EXPENSES ON ACCOUNT OF TRAVELLING CANNOT BE CLAIMED AS DISCOUNT WHEN THE LEGITIMATE TRAVELLING DID NOT TOOK PLACE IN THE IMPUGNED ASSESSMENT YEAR. WITH RESPECT TO SUSTENANCE OF ADDITION OF 6 8 ,551 HE SUPPORTED THE ORDER OF THE LEARNED CIT(A) BY PRAYING THE SAME ALSO TO BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR VERIFYING AND ALLOWING THE CONSEQUENTIAL CLAIM. I.T.A.NO. 351/CTK/2012 5 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW AND THE M ATERIAL AVAILABLE ON RECORD. ON CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE INCLINED TO FIND THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE APPROPRIATE INSOFAR AS THE SUBMISSIONS BEFORE THE ASSES SING OFFICER WITH RESPECT TO CLAIM OF DISCOUNT WAS IN ACCORDANCE WITH THE BUSINESS PRACTICE OF GIVING DISCOUNTS TO BULK PURCHASERS OF MEDICINES THE ASSESSEE BEING CHEMIST AT BATESWAR ROAD, BALASORE, ODISHA. THE DETAILS FOR CLAIMING DISCOUNT WERE FURNISHED TO THE ASSESSING OFFICER WHICH LEDGER COPIES HAVE BEEN FURNISHED BY THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US INDICATING THE TOTAL AMOUNT AT 4,00,711 INCLUDES THE DEBTORS WHOSE INCOME HAVE BEEN TAKEN IN THE SALES DID NOT PAY THE AMOUNT TILL 31 ST MARC H,2007 WERE CONSIDERED FOR AVAILING THE DISCOUNT ON THE TOTAL SALES AS PER THEIR ACCOUNTS WHEN REMAINING DEBIT BALANCE WAS ADJUSTED BY ISSUING MONEY RECEIPTS OR CREDIT NOTES. WE FIND THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE APPROPRIATE TO THE EXTENT THAT IT WAS NEVER THE CASE OF THE ASSESSEE TO ADJUST ANY EXPENDITURE WHICH WAS NOT LEGITIMATELY ALLOWABLE UNDER THE I.T.ACT BUT WAS A BUSINESS PRACTICE BROUGHT ON RECORD IN ACCORDANCE WITH THE CLAIM AS IT ACTUALLY OCCURRED. THE LEARNED CIT(A) DID N OT APPRECIATE THE FACT THAT THE INCOME AGAINST THE SALES FROM WHICH DISCOUNT WAS AVAILABLE TO THE BUYERS OF THE MEDICINES COULD DISTURB THE GROSS MARGIN WHICH WAS ACCEPTABLE TO THE ASSESSING OFFICER. THEREFORE, IN OUR CONSIDERED VIEW, THE TOTAL CLAIM OF 4,00,711 WAS DISCOUNT AVAILED BY THE CUSTOMERS OF THE ASSESSEE WHO PREFERRED TO AVAIL THE DISCOUNT RATHER THAN TO PAY WHOLE OF THE BILLS AS PER THE MRP. WE DO NOT FIND ANY CONTROVERSY ON THIS ISSUE AND DIRECT THE AO TO DELETE THE DISALLOWANCE OF 1,60 ,797 . WITH RESPECT TO THE NEXT ISSUE, THE LEARNED CIT(A) AFTER HAVING I.T.A.NO. 351/CTK/2012 6 VERIFIED THE CLAIM AS GENUINE WAS ONLY A MISINTERPRETATION OF THE FACTS BY ASSESSING OFFICER INSOFAR AS THE LIC PREMIUM WAS PAID FOR THE IMPUGNED ASSESSMENT YEAR WAS NOT TO BE BALANCED WITH ADDITION IN THE CAPITAL ACCOUNT INSOFAR AS THE ADDITION IN THE CAPITAL ACCOUNT WAS ON ACCOUNT OF EARLIER YEARS MATURITY OF LIC AND NSC WAS NOT FOR THE DISALLOWANCE OBSERVED BY THE ASSESSING OFFICER. IT WAS NOT THE CASE OF THE ASSESSING OFFICER TO DISALLOW T HE ADDITION TO THE CAPITAL BY DISALLOWING THE DEDUCTION/S.80C WHEN THE LIC PREMIUM PAID FOR THE IMPUGNED ASSESSMENT YEAR HAS TO BE ALLOWED UNDER THE PROVISIONS OF THE I.T.ACT AS RIGHTFULLY CLAIMED BY THE ASSESSEE. THE LEARNED CIT(A) THEREFORE WAS NOT JUSTI FIED IN DIRECTING THE ASSESSING OFFICER TO VERIFY THE CLAIM AND THEN ALLOW INSOFAR AS THE ASSESSING OFFICER HAD HIMSELF HAD VERIFIED THAT 68,551 WAS THE AMOUNT OF LIC PREMIUM PAID CLAIMED IN THE RETURN FILED BY THE ASSESSEE. IN THIS VIEW OF THE MATER, WE SET ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ABOVE ADDITIONS. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. S D / - S D/ - ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL M EMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 14.08.2012 ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY. I.T.A.NO. 351/CTK/2012 7 - COPY OF THE ORD ER FORWARDED TO: 1 . / THE APPELLANT : MAMATA PODDAR, BALSORE (ODISHA) PAN: AIOPP 2959 F 2 / THE RESPONDENT: INCOME - TAX OFFICER, WARD 2, BALASORE. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / D R, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET B Y THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 9.8.2012 . 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 10.8.20123 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S. /P.S . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 14.08.2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER ..