ACIT, Balasore V. Sudhasindhu Panda, Balasore

ITA 405/CTK/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4412 (ITAT-CUTTACK)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 12-05-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 11-11-2010
• Court: TRIBUNAL
• Department Lawyers: P K MISHRA
• Assessee Lawyers: PARAMITA TRIPATHY

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL,CUTTACK BENCH, CUTTACK BEFORE : HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER, AND HONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER. ITA NO. 405/CTK/2010 (ASSESSMENT YEAR 2007 - 08) ASST.COMMISSIONER OF INCOME - TAX, BALE SWAR CIRCLE,BALESWAR. VERSUS SUDHASINDHU PANDA, CHOUDHURYSAHI, MATIGANJ, BALESWAR, ODISHA PAN: AHAPP 7611 H (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI P.K.MISHRA, AR FOR THE RESPONDENT SMT. PARAMITA TRIPATHY, DR ORDER SHRI K.K.GUPTA, ACCOUNTA NT MEMBER : THE REVENUE IS IN APPEAL AGITATING THE ACTION OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) WHO WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS. 8,68,830 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISCOUNT DEBITED IN THE BOOKS OF ACCOU NT OF THE ASSESSEE ON T HE LAST DAY OF THE PREVIOUS YEAR. 2. THE BRIEF FACTS AS HAVE BEEN PERUSED BY US ARE THAT THE ASSESSEE DEALS IN MOTOR PARTS , LUBRICANTS AND DEALER IN PETROL , DIESEL AND OTHER ALLIED BUSINESS AS DEALER OF ASHOK LEYLAND VEHICLES FILED THE RETURN OF INCOME OF RS.16,02,840. THE ASSESSING OFFICER IN HIS ORDER U/S.143(3) FOUND THAT THE ASSESSEE HAD CLAIMED EXPENSES AS DISCOUNT AMOUNTING TO RS.8,68,830 DEBITED ON THE LAST DAY OF THE FINANCIAL YEAR ON ONE SINGLE VOUCHER ONLY TO MINIMIZE THE INCOME AND AVOID PAYMENT OF TAX THEREON. AGGRIEVED, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY WHO VERIFIED THE DETAILS OF THE DISCOUNT ALLOWED AND PASSED ENTRY FOR CLAIMING EXPENSES ON THE LAST DAY BY WAY OF JOURNAL ENTRY AS IT RELATED TO DIFFERENT PARTIES TO WHOM THE DISCOUNT WAS TO BE ALLOWED IN ACCORDANCE WITH THE BUSINESS PROCEDURE ON HIS HAVING O B T AINED FINANCE FOR ITS CUSTOMERS BUYING TRUCKS AND OTHER VEHICLES. THE CUSTOMERS WHILE PU RCHASING THE VEHICLES NEGOTIATE THE PRICE WITH THE A SSESSEE. THEY AVAIL DISCOUNT OFFERED BY THE DEALERS FROM TIME TO TIME AND BILLS ARE RAISED FOR FULL AMOUNT. THE FULL AMOUNT IS PAID BY THE FINANCIER AND THE ASSESSEE IN TURN REFUNDS THE DISCOUNT TO THE CUSTOMERS. IN SOME CASES, EVEN THE DISCOUNT AMOUNT WAS PAID BY THE ASSESSEE AND A DEBIT BALANCE REMAINS IN THE ACCOUNTS AS BILLS ARE RAISED FOR FULL AMOUNT. THE JOURNAL ENTRIES ARE PASSED AT THE YEAREND INSOFAR AS IT IS THE AMOUNT REMAINING OWED TO THE 100% FINANCIERS WHICH THE ASSESSEE AS SUCH IS NOT 2 ITA NO.405/CTK/2010 ABLE TO OBTAIN FULL PAYMENT FROM THE CUSTOMERS. THE LEARNED CIT(A) THEREFORE, OBSERVED THAT THIS BEING A NORMAL PROCEDURE 27 CUSTOMERS WERE PAID BY CHEQUES WHEN ADJUSTMENT ENTRIES WERE PASSED ON THE LAST DATE. A SUM OF RS.29,633 WAS PAID IN CASH AS ALSO CLAIMED A S DISCOUNT THEREFORE CANNOT BE TERMED AS DISCOUNT ALLOWED AS A MATTER OF CREATING FICTITIOUS EXPENSES FOR DEDUCTION OF TAX. HE ALLOWED THE EXPENSES TO BE CLAIMED BY THE ASSESSEE BY DELETING THE DISALLOWANCE. 3. THE LEARNED DR SUBMITTED THAT THE AMOUNT OF D ISCOUNT DID NOT PERTAIN TO THE BUSINESS OF THE ASSESSEE INSOFAR AS IT WAS ONLY A BOOK ADJUSTMENT WHEN THE PURCHASE AND SALES ARE NOT ROUTED THROUGH THE ASSESSEES BOOKS OF ACCOUNT. HE IS NOT A DEALER OF MOTOR VEHICLES SO FINANCED ON THE BASIS OF 100% BILLS RAISED ON THE CUSTOMERS. THEREFORE, THIS DISCOUNT CANNOT BE CONSIDERED FOR ALLOWABILITY INSOFAR AS WAS CLAIMED IN THE PROFIT & LOSS ACCOUNT BY PASSING THE JOURNAL ENTRIES ON THE LAST DAY OF THE FINANCIAL YEAR. SHE SUPPORTED THE ORDER OF THE ASSESSING OFFI CER FOR HER PART OF SUBMISSIONS. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON OUR CAREFUL CONSIDERATION OF THE FACTS, WE ARE INCLINED TO UPHOLD THE ORDER OF THE LEARNED CIT(A) INSOFAR AS THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SALE AND SERVICES OF ASHOK LAYLAND VEHICLES. THE ASSESSEE SELLS TRUCKS TO VARIOUS CUSTOMERS O N FINANCE FROM OTHER FINANCIER S . HE MAKES PAYMENT OF THE MARGIN MONEY AND THE BALANCE PAYMENTS ARE MADE BY THE FINANCIER. WHILE PURCHASING THE VEH ICLE, THE CUSTOMER NEGOTIATED THE PRICE WITH THE ASSESSEE AND AVAIL THE DISCOUNT OFFERED BY THE DEALERS FROM TIME TO TIME. HOWEVER, BILLS ARE RAISED FOR THE FULL AMOUNT AND ACCORDINGLY FULL AMOUNT IS PAID BY THE FINANCIERS. THE ASSESSEE IN TURN REFUNDS TH E DISCOUNT AVAILED TO THE CUSTOMERS AND IN SOME CASES EVEN IF THE DISCOUNT AMOUNT PAID BY THE ASSESSEE A DEBIT BALANCE REMAINS IN THE ACCOUNTS AS BILLS HAVE BEEN RAISED FOR THE FULL AMOUNT AS SUCH DEBIT AMOUNTS ARE GENERALLY VERIFIED BY THE ASSESSEE AT THE YEAREND AND CLAIMED AS DISCOUNT ALLOWED TO THE CUSTOMERS. THE ENTRY WAS PASSED ON THE LAST DATE ON ACCOUNT OF TRANSACTIONS HAVING BEEN INCURRED DURING THE YEAR WAS RIGHTLY CONSIDERED BY THE LEARNED CIT(A) WAS CLAIMED BY WAY OF A JOURNAL ENTRY INSOFAR AS T HE PAYMENTS BY CHEQUES WERE NOT MADE ON THE LAST DATE. A NUMBER OF ACCOUNTING ENTRIES WERE PASSED AT THE YEAR END TO BRING OUT THE TRUE AND FAIR INCOME OF THE ASSESSEE AND IT WAS NOT UNUSUAL ON THE PART OF 3 ITA NO.405/CTK/2010 THE ASSESSEE TO DEBIT SUCH AMOUNTS WHEN THE CUSTOM ERS HAVE REFUSED TO FURTHER PAY THE AMOUNT A S IS OW ED TO THE FINANCIER BEING 100%. IT IS THE USUAL PRACTICE BY THE ASSESSEE, WHO ALSO RENDERED INCOME ON ACCOUNT OF LAST DISCOUNT AVAILED BY THE CUSTOMERS WHEN THE AMOUNT PAID BY THEM IS MORE THAN THE AMOUNT FINANCED ON ACCOUNT OF VARIOUS OTHER CHARGES. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THERE WAS NO BASIS FOR DISALLOWING THE SAID CLAIM AND WAS RIGHTLY ADJUDICATED UPON BY THE LEARNED CIT(A) WHICH IS UPHELD. 5. IN THE RESULT, THE APPEAL FI LED BY THE REVENUE IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON DT. 12.05.2011 SD/ - SD/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 12.05.2011 H.K.PADHEE, SENIOR PRIVATE SEC RETARY . COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT : ASST.COMMISSIONER OF INCOME - TAX, BALESWAR CIRCLE,BALESWAR. 2. THE RESPONDENT : SUDHASINDHU PANDA, CHOUDHURYSAHI, MATIGANJ, BALESWAR, ODISHA. 3. THE CIT, 4. THE CIT(A), 5. TH E DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.