THE DCIT-1(1), Bhopal V. M/S. C.I. FINLEASE LIMITED, Bhopal

ITA 415/IND/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6249 (ITAT-INDORE)
• Duration Of Justice: 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 05-04-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 04-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI B.C.MEENA, ACCOUNTANT MEMBER I.T.A.NO. 415/IND/2015 A.Y. : 2010-11 DY. CIT, C.I.FINLEASE LIMITED, 1(1), VS 182, ZONE I, M.P. NAGAR, BHOPAL BHOPAL APPELLANT RESPONDENT PAN NO. AABCC6164B APPELLANTS BY : SHRI R.A.VERMA, DR RESPONDENT BY : NONE. O R D E R PER D.T.GARASIA, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A)-I, BHOPAL, DATED 17.03.2015 FOR THE ASSE SSMENT YEAR 2010-11. DATE OF HEARING : 05 . 0 4 .2016 DATE OF PRONOUNCEMENT : 05 . 0 4 .2016 DY. CIT, 1(1), BHOPAL VS. M/S. C.I. FINLEASE LIMITE D,BHOPAL I.T.A.NO. 415/IND/15 A.Y. 2010-11 2 2 2. THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN 1. DELETING THE ADDITION OF RS. 19,34,225/- MADE ON ACCOUNT OF ADVANCE AGAINST FREE SERVICES NOT SHOWN AS INCOME BY THE ASSESSEE. 2. DELETING THE ADDITION OF RS. 26,21,500/- MADE ON ACCOUNT OF CLAIMS AGAINST SETTLEMENT NOT SHOWN AS INCOME BY THE ASSESSEE. 3. DELETING THE ADDITION OF RS. 72,006/- MADE ON ACCOUNT OF UNEXPLAINED SUNDRY CREDITORS FOR EXPENSES. 3. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE I S A LIMITED COMPANY ENGAGED IN THE BUSINESS OF SALE AND SERVICES OF HYUNDAI VEHICLES AND ALSO IN HIRE PURCHASE AND L OAN. THE ASSESSEE FURNISHED ITS E-RETURN OF INCOME FOR ASSES SMENT YEAR 2010-11 ON 16.02.2010 DECLARING TOTAL INCOME OF RS. 93,55,370/-. THE CASE WAS SELECTED FOR SCRUTINY BY ISSUING NOTICE U/S 143(2) OF THE ACT. THE ASSESSMENT U/S 14 3(3) OF THE ACT WAS COMPLETED ON 15.10.2013 DETERMINING TOTAL IN COME OF DY. CIT, 1(1), BHOPAL VS. M/S. C.I. FINLEASE LIMITE D,BHOPAL I.T.A.NO. 415/IND/15 A.Y. 2010-11 3 3 RS.1,46,90,945/-. THE AO NOTICED THAT THE ASSESSEE HAS SHOWN FOLLOWING AMOUNTS AS LIABILITY. PARTICULARS AMOUNT ( RS. ) ADVANCE AGAINST I SERVICE 2,56,125/ - ADVANCE AGAINST I I SERVICE 6,34,275/ - ADVANCE AGAINST II I SERVICE 10,43,825/ - CLAIMS AGAINST SETTLEMENT 26,21,500/ - ADVANCE FROM CUSTOMER 7,07,844/ - TOTAL 52,63,569/ - 4. THE ASSESSEE HAD COLLECTED THE ABOVE SUMS AGAINST I ST, IIND AND IIIRD SERVICE. THE ASSESSEE HAD ALSO COLLE CTED A SUM OF RS. 45,91,800/- FOR CLAIMS AGAINST SETTLEMENT. THE ASSESSEE DID NOT FILE DETAILS OF SUM OF RS. 7,07,844/- COLL ECTED FROM THE CUSTOMERS. THE AO HELD THAT THE ABOVE SUMS COLLECTE D BY THE ASSESSEE FROM THE CUSTOMERS WERE OF REVENUE IN NATU RE, WHEREAS THESE SUMS WERE SHOWN IN THE AUDITED ACCOUNTS AS LIABILITY. THEREFORE, THE AO MADE THE ADDITION OF R S. 52,63,563/- AS UNDISCLOSED BUSINESS INCOME. DY. CIT, 1(1), BHOPAL VS. M/S. C.I. FINLEASE LIMITE D,BHOPAL I.T.A.NO. 415/IND/15 A.Y. 2010-11 4 4 5. IN APPELLATE PROCEEDINGS, THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT IN THE AUDITED BALANCE SHEET UNDER THE HEAD CURRENT LIABILITIES, THE ASSESSEE HAD SHOWN TOTAL AMOUNT OF RS.1,51,30,144/- AS ADVANCE FROM CUSTOMERS. DURING THE COURSE OF ASSESS MENT PROCEEDINGS, THE LD. AO NEVER REQUIRED THE ASSESSEE TO EXPLAIN THE NATURE TO EXPLAIN THE NATURE OF ADVANCES AND NE VER RAISED ANY QUERY. THE AO CONSIDERED THE ADVANCES OF RS. 52 ,63,569/- AS REVENUE NATURE INSTEAD OF CURRENT LIABILITY. THE AO ADDED THIS SUM TO THE INCOME OF THE ASSESSEE AS UNDISCLOS ED BUSINESS INCOME. THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED BEFORE THE AO THAT AFTER SALE OF VEHICLES , THE ASSESSEE HAS TO PROVIDE FREE SERVICES WITHIN A PERIO D OF 24 MONTHS FROM THE DATE OF SALE OF THE VEHICLE, WHICH I S COMPULSORY AS PER THE INSTRUCTIONS OF HYUNDAI MOTOR S INDIA LIMITED. TO COMPENSATE THE DEALER FOR THESE FREE SE RVICES, HYUNDAI MOTOR INDIA LIMITED HAS INBUILT THE COST OF THESE FREE SERVICES IN THE DEALERS MARGIN. SINCE THESE FREE SE RVICES ARE NOT NECESSARILY PROVIDED IN THE YEAR OF SALE OF THE VEHICLE, BUT ARE PROVIDED OVER A PERIOD OF TIME, THE ASSESSEE SE PARATES THE DY. CIT, 1(1), BHOPAL VS. M/S. C.I. FINLEASE LIMITE D,BHOPAL I.T.A.NO. 415/IND/15 A.Y. 2010-11 5 5 AMOUNT OF THESE THREE SERVICES AND CREDITS THE SAME TO THE ADVANCE AGAINST FREE SERVICE ACCOUNTS. THEREAFTER , AS AND WHEN THESE SERVICES ARE RENDERED, THE SAID ACCOUNT I S DEBITED AND CREDITED AS INCOME TO THE SERVICE & LABOUR CHAR GES ACCOUNT. THE VEHICLE OWNER CAN GET HIS VEHICLE FREE SERVICED FROM ANY OTHER HYUNDAI DEALER. IN THAT CASE ALSO, T HE ASSESSEE HAS TO PAY THE AMOUNT RETAINED AGAINST FREE SERVICE TO THE OTHER HYUNDAI DEALER. THEREFORE, TILL THE SERVICES ARE RENDERED, THE AMOUNT OF FREE SERVICE IS MAINTAINED SEPARATELY AS ADVANCE. THIS IS DONE ACCORDING TO NORMAL BUSINESS PRACTICE AND MERCANTILE SYSTEM, INCOME AND EXPENDITURE ARE R ECORDED AT THE TIME OF THEIR OCCURRENCE, NEITHER BEFORE NOR AFTER. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTE D THAT CONSIDERING THE ENTIRE AMOUNT OF BALANCE IN THE FRE E SERVICE ACCOUNTS AS INCOME EVEN BEFORE THE SERVICES ARE REN DERED, IS NOT JUSTIFIED. REGARDING ADVANCE OF CUSTOMERS OF RS . 7,07,544/-, THE AO NEVER REQUIRED THE ASSESSEE TO S UBMIT DETAILS OF AFORESAID AMOUNT AND ALSO DID NOT PUT AN Y QUERY REGARDING THE SAME FOR EXPLANATION. THESE AMOUNTS WE RE LIABILITY OF THE ASSESSEE AND WERE NOT IN THE NATUR E OF ANY DY. CIT, 1(1), BHOPAL VS. M/S. C.I. FINLEASE LIMITE D,BHOPAL I.T.A.NO. 415/IND/15 A.Y. 2010-11 6 6 INCOME. THE LD. AUTHORIZED REPRESENTATIVE FOR THE A SSESSEE SUBMITTED BEFORE THE AO THAT THE AMOUNT OF RS. 52,6 3,569/- WAS NOT THE INCOME OF THE ASSESSEE FOR THE RELEVANT YEAR AND PRAYED THAT THE ADDITION MAY BE DELETED. 6. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CI T(A) DELETED THE AMOUNT OF RS. 19,34,225/- ON ACCOUNT OF ADVANCE AGAINST FREE SERVICES. 7. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON TH E ORDER OF THE AO. NO ON APPEARED ON BEHALF OF THE ASSESSEE. 8. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE . WE FIND THAT THERE IS NO DENIAL OF THE FACT THAT TH E AMOUNT RECEIVED FROM HYUNDAI MOTOR INDIA LIMITED IS A REVE NUE RECEIPT. THE ASSESSEE HAD ALSO ACCOUNTED FOR THE SA ME AS INCOME, WHEN THE SERVICES ARE ACTUALLY RENDERED. HEN CE, THERE IS NO ESCAPEMENT OF INCOME ON ACCOUNT OF SERVICE CH ARGES RECEIVED FROM HYUNDAI MOTOR INDIA LIMITED BY THE AS SESSEE. WE UPHOLD THE ACTION OF LD. CIT(A) IN DELETING THE ADDITION MADE ON ACCOUNT OF ADVANCE AGAINST FREE SERVICES OF RS. . 19,34,225/-. OUR INTERFERENCE IS NOT REQUIRED. GROU ND NO. 1 IS REJECTED. DY. CIT, 1(1), BHOPAL VS. M/S. C.I. FINLEASE LIMITE D,BHOPAL I.T.A.NO. 415/IND/15 A.Y. 2010-11 7 7 9. GROUND NO. 2 IS AGAINST DELETION OF ADDITION OF RS. 26,21,500/- MADE ON ACCOUNT OF CLAIMS AGAINST SETTL EMENT NOT SHOWN AS INCOME BY THE ASSESSEE. 10. THE FACTS ARE THAT THERE WAS A SCHEME OF HYUNDAI MOTOR INDIA LIMITED TO PROVIDE CERTAIN DISCOUNTS KN OWN AS LOYALTY/CORPORATE/RURAL AND PROFESSION TO VARIOUS C USTOMERS ON THE SALE PRICE OF CARS. THE ASSESSEE PREPARED TH E CLAIM OF THESE DISCOUNTS AND WHEN THESE CLAIMS WERE APPROVED BY M/S. HYUNDAI MOTOR INDIA LIMITED, THE ASSESSEE RECEIVED THE PAYMENT/CREDIT NOTES FOR MAKING PAYMENT TO THE CUST OMERS. THEREAFTER, THE ASSESSEE MADE PAYMENT BY CHEQUE TO ALL THE CUSTOMERS. THE AO ASKED TO PRODUCE THE LEDGER ACCOU NT AND FOUND THAT THE ASSESSEE HAD PAID SUCH CLAIMS TO CUS TOMERS BY CHEQUE. ASSESSEE WAS ALSO ASKED TO FURNISH THE POSIT ION OF SUCH CLAIMS FOR TWO YEARS AND THE DETAILS WERE FURNI SHED BY THE ASSESSEE, WHICH READS AS UNDER :- F.Y. OPENING BALANCE CREDIT(RECEIVED DURING THE YEAR) DEBIT (PAID TO CUSTOMERS) CLOSING BALANCE 2009-10 0 45,91,800/- 19,70,300/- 26,21,500/- 2010-11 26,21,500/- 53,23,500/- 36,29,500/- 43,15,5 00/- DY. CIT, 1(1), BHOPAL VS. M/S. C.I. FINLEASE LIMITE D,BHOPAL I.T.A.NO. 415/IND/15 A.Y. 2010-11 8 8 11. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CI T(A) DELETED THE ADDITION OF RS. 26,21,500/-. 12. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON TH E ORDER OF THE AO. 13. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE. WE FIND FROM THE CHART MENTIONED ABOVE THAT THE ASS ESSEE WAS REGULARLY PAYING THE AMOUNT RECEIVED AS CLAIMS TO T HE RESPECTIVE CUSTOMERS. THESE ADVANCES WERE RECEIVED ON BEHALF OF THE CUSTOMERS AND SUCH AMOUNT RECEIVED WAS NOT T HE INCOME OF THE ASSESSEE. THESE AMOUNTS RECEIVED ON A CCOUNT OF CLAIMS WERE TRANSFERRED TO THE RESPECTIVE CUSTOMERS AND NO AMOUNT WAS ULTIMATELY RETAINED BY THE ASSESSEE, WHIC H COULD BE SAID TO BE PROFIT OR GAINS DERIVED BY THE ASSESS EE. HENCE, WE UPHOLD THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS. 26,21,500/- ON ACCOUNT OF ADVANCE AGAINST CLAIM S SETTLEMENT RECEIVED. OUR INTERFERENCE IS NOT CALLED FOR. GROUND NO. 2 OF THE REVENUE FAILS. 14. GROUND NO.3 RELATES TO DELETION OF THE ADDITION BY THE LD. CIT(A) AMOUNTING TO RS. 72,006/- MADE ON ACCOU NT OF UNEXPLAINED SUNDRY CREDITORS FOR EXPENSES. BY THE LD. CIT(A) DY. CIT, 1(1), BHOPAL VS. M/S. C.I. FINLEASE LIMITE D,BHOPAL I.T.A.NO. 415/IND/15 A.Y. 2010-11 9 9 15. THE LD. AUTHORIZED REPRESENTATIVE SUPPORTED THE ORD ER OF CIT(A). 16. THE AO NOTICE THAT A SUM OF RS. 72,006/- HAD BEEN SHOWN UNDER THE HEAD SUNDRY CREDITORS FOR EXPENSES . THE AO STATED THAT AS THE ASSESSEE DID NOT FURNISH ANY DET AILS IN THIS REGARD, THE AO ADDED THIS AMOUNT TO THE TOTAL INCOM E OF THE ASSESSEE. 17. IN APPELLATE PROCEEDINGS, IT WAS SUBMITTED THAT IN T HE AUDITED BALANCE SHEET UNDER THE HEAD CURRENT LIABIL ITIES, THE ASSESSEE HAD SHOWN TOTAL AMOUNT OF RS. 6,16,436/- AS SUNDRY CREDITORS FOR EXPENSES. DETAILS OF THE SAM E WERE FILED BEFORE THE AO, WHICH CONTAINED AN AMOUNT OF RS. 72 ,006/- AS INTER-DEALER CREDITORS FOR FREE SERVICE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NEVER RAISED ANY QUE RY WITH REGARD TO THE SAID AMOUNT OF RS. 72,006/-. THE DET AILS OF THE SAID AMOUNT WERE ENCLOSED. IT WAS STATED THAT ALL TH E PARTIES TO WHOM THE AMOUNT OF RS. 72,006/- WAS PAYABLE WERE THE DEALERS OF HYUNDAI MOTOR INDIA LIMITED. THE VEHICL ES SOLD BY THE ASSESSEE HAD BEEN FREE SERVICED BY THESE OTHER DEALERS. HENCE, THE AMOUNTS OUTSTANDING AS PAYABLE TO THEM WE RE FOR DY. CIT, 1(1), BHOPAL VS. M/S. C.I. FINLEASE LIMITE D,BHOPAL I.T.A.NO. 415/IND/15 A.Y. 2010-11 10 10 FREE SERVICES RENDERED BY THEM TO THE VEHICLES SOLD BY THE ASSESSEE. THE AMOUNT OF RS.72,006/- WAS CURRENT LIAB ILITY AND NOT THE INCOME OF THE ASSESSEE. THE ASSESSEE PRAYED THAT THE ADDITION OF RS. 72,006/- MAY BE DELETED. 18. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CI T(A) DELETED THE ADDITION. 19. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON TH E ORDER OF THE AO. 20. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE. WE FIND THAT THE AMOUNT OF RS. 72,006/- WAS SHOWN U NDER THE MAJOR HEAD SUNDRY CREDITORS FOR EXPENSES AS INTER-DEALER CREDITORS FOR FREE SERVICES, WHICH WAS PAYABLE TO OT HER DEALERS OF HYUNDAI. WE FIND THAT AS PER EXPLANATION OF THE ASSESSEE IN REGARD TO ADVANCE RECEIVED AGAINST FREE SERVICE IF A CUSTOMER APPROACHES ANOTHER DEALER FOR FREE SERVICE OF THE V EHICLE THAT DEALER OF HYUNDAI PROVIDES FREE SERVICES AND ISSUES A DEBIT NOTE TO THE ASSESSEE. HENCE, THE ASSESSEE MAKES THE PAYMENT OF THE ADVANCES RECEIVED TO THAT DEALER FOR RENDERI NG FREE SERVICES TO THE CUSTOMERS AND THE ASSESSEE MADE PAY MENT IN THE SUBSEQUENT YEAR ALSO TO THESE DEALERS. WE UPHOL D THE DY. CIT, 1(1), BHOPAL VS. M/S. C.I. FINLEASE LIMITE D,BHOPAL I.T.A.NO. 415/IND/15 A.Y. 2010-11 11 11 ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION O F RS.72,006/-. OUR INTERFERENCE IS NOT REQUIRED. GROUND NO. 3 OF THE REVENUE IS REJECTED. 21. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 5 TH APRIL, 2016. SD/- (B.C.MEENA) ACCOUNTANT MEMBER SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 5 TH APRIL, 2016. CPU* 11.4