DCIT, New Delhi V. M/s A.V. Valves Pvt. Ltd., New Delhi

ITA 4689/DEL/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1252 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 01-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GURMEET SINGH
• Section: 201

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI A BENCH, NEW DELHI BEFORE SHRI N.K. BILLAIYA , ACCOUNTANT MEMBER, AND MS. SUCHITRA KAMBLE , JUDICIAL MEMBER ITA NO. 4689 /DEL/20 1 6 [A.Y 20 12 - 13 ] THE DY . C . I . T VS. M/S A.V. VALVES PVT LTD CIRCLE - 1 (1) 187, DDA CYCLE MARKET NEW DELHI JHANDEWALAN EXTN KAROL BAGH, NEW DELHI PAN: AA BCA 5110 D (APPLICANT) (RESPONDENT) ASSESSEE BY : SH RI RAKESH GUPTA, ADV SHRI SOMIL AGARWAL, ADV DEPARTMENT BY : SH RI GURMEET SINGH, SR. DR DATE OF HEARING : 03 . 0 9 .201 9 DATE OF PRONOUNCEMENT : 04 . 0 9 .201 9 ORDER PER N.K. BILLAIYA , ACCOUNTANT MEMBER, TH IS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX [APPEALS] - 1, NEW DELHI DATED 22 . 06 .201 6 PERTAINING TO ASSESSMENT YEAR 20 12 - 13 . 2 2. THE SOLITARY GRIEVANCE OF THE REVENUE IS THAT THE CIT(A) ERRED IN DELETING THE ADDITION OF RS. 3 ,67,85,716/ - MADE ON ACCOUNT OF DISALLOWANCE OF CLAIM UNDER REJECTION & DEMURRAGE ACCOUNT. 3. THE UNDERLYING FACTS IN THE ISSUE ARE THAT THE ASSESSEE CLAIMED AN EXPE NSE UNDER THE HEAD REJECTION & DEMURRAGE AMOUNTING TO RS. 3,67,85,716/ - IN SCHEDULE 19 OF FINANCIAL STATEMENT UNDER THE HEAD OTHER EXPENSES . THE ASSESSEE WAS ASKED TO EXPLAIN AND JUSTIFY THE CLAIM OF EXPENDITURE. THE ASSESSEE REPLIED AS UNDER: IN JUSTI FICATION OF OUR CLAIMING REJECTION IN PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING 31 . 03.2012 WAS DUE TO FACT THAT AS THE SALES WAS EFFECTED IN THE YEAR 31 03 2012 AND SITE REJECTION OF THE CONSIGNMENT WAS INFORMED TO US IN MAY & JUNE 2012 IT WAS NOT ACCOUNTABLE TO TAKE BACK THE SALE AND STOCK IN THAT FINANCIAL YEAR 31 03 2012 , AS ALL THE STATUTORY RETURNS WERE ALREADY SUBMITTED AND T AX PAID. HENCE WE HAD TO PARK THE AMOUNT OF SALE IN THE PROFIT AND LOSS ACCOUNT AS REJECTION UNDER WARRANTY WINCH IS BAC KED BY OUR BANK GUARANTEE VALID TILL YEAR 2015 AND 2014 RESPECTIVELY . AS SOON AS WE WOULD RECTIFY THE MATERIAL TO THE SATISFACTION OF CLIENTS, AND GET THE PAYMENT, WE WILL ADJUST THE SAME UNDER WARRANTY CLAUSE AND WOULD TAKE THE PROCEEDS IN OUR PROFIT AND LOSS ACCOUNT UNDER THE HEAD OF OTHER NON OPERATING INCOME 3 TO BACK OUR CLAIM AS STATED ABOVE, WE HAVE IN THE FINANCIAL YEAR 2013 - 14 TAKEN RS. 99,78,301/ - UNDER THE NON OPERATING INCOME AS SHOWN IN THE BALANCE SHEET . HENCE SIR, AS AND WHEN WE WILL REPAIR AN D RECTIFY THE MATERIAL AND GET FUNDS, WE WILL TAKE THE SAME IN ACCOUNT AS ABOVE THIS IS FOR YOUR KIND INFORMATION AND PERUSAL. SINCE THE SUPPLIES ARE EXTENSIVELY SPREAD AT VARIOUS SITES A CR OSS THE REMOTE AREAS IN THE COUNTRY IT TAKES ENOUGH TIME TO RECTIFY THE SAME' 4. THE REPLY OF THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE ASSESSING OFFICER WHO WAS OF THE OPINION THAT THE REJECTION OF CONSIGNMENT HAS NOT BEEN MADE OUT TO BE AN OUTRIGHT REJECTION. RATHER, IT IS COVERED BY A WARRANTY CLAUSE WHEREIN THE GOODS SUPPLIED NEEDED REPAIR AND SERVICE FOR USE BY THE BUYER. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE CLAIM OF DEMURRAGE AS DEBITED IN THE PROFIT AND LOSS ACCOUNT IS WITHOUT JUSTIFICATION AND NOT IN ACCORDANCE WITH THE METHOD OF ACCOUNTING FOLLOW ED BY THE ASSESSEE. ACCORDINGLY, THE ASSESSING OFFICER MADE THE ADDITION OF RS. 3,67,85,716/ - . 5. BEFORE THE CIT(A), THE ASSESSEE CLAIMED THAT THE ASSESSEE SUPPLIED ITS PRODUCTS TO BIG COMPANIES LIKE BHEL, M/S ANRAK ALUMINIUM LTD, M/S SMS INDIA PVT LTD, M/S MCCAPTA, CALCUTTA AND SOME OF THESE 4 CUSTOMERS REJECTED THE MATERIAL AND AGGREGATE OF SUCH REJECTION WAS TO THE TUNE OF RS. 3,67,85,715/ - . IT WAS FURTHER STRONGLY CONTENDED BEFORE THE CIT(A) THAT DETAILED EXPLANATION WAS FILED BY THE ASSESSEE DURING TH E COURSE OF ASSESSMENT ORDER TO THE EFFECT THAT REJECTIONS DONE BY SUCH PRESTIGIOUS AND PROMINENT CUSTOMERS HAVE TO BE TAKEN VERY SERIOUSLY AND THESE STOCKS ARE REJECTED OUT RIGHTLY AND LANGUISH AT THEIR END. IT WAS FURTHER EXPLAINED THAT THE ASSESSEE CAR RIED OUT RECTIFICATIONS LATER ON, AND AFTER RECTIFICATIONS, THESE SALES WERE ACCEPTED BY THESE CUSTOMERS IN THE RESPECTIVE YEARS. IT WAS BROUGHT TO THE NOTICE OF THE CIT(A) THAT AFTER RECTIFICATION, THERE IS NO LOSS TO THE REVENUE . 6. AFTER CONSIDERING THE FACTS AND SUBMISSIONS, LD. CIT(A) OBSERVED AS UNDER : - I HAVE EXAMINED THE DETAILS PLACED ON RECORD WHICH INCLUDE THE LEDGER ACCOUNTS OF THESE PARTIES, WHERE THESE REJECTIONS WERE CREDITED IN THEIR ACCOUNTS, AND SUBSEQUENT LEDGER ACCOUNTS OF THE SUBS EQUENT YEARS WHEN THESE PARTIES WERE DEBITED AGAIN AGAINST THE REJECTED MATERIAL AFTER RECTIFICATIONS MADE IN THE DEFECTIVE MATERIAL. I HAVE ALSO VERIFIED THE SUBSEQUENT YEARS BALANCE SHEETS OF THE APPELLANT ASSESSEE, WHERE THESE AMOUNT RECEIVED AGAINST 5 TH ESE REJECTION HAS BEEN SHOWN AS INCOME. APPELLANT HAS FURNISHED A CHART SHOWING THE INCOME IN THE SUBSEQUENT YEARS AGAINST THE REJECTION CLAIMED IN ASSTT. YEAR 2012 - 13. FOR THE SAKE OF CONVENIENCE THE SAME IS REPRODUCED HEREUNDER : DETAILS OF REJECTION INC ORPORATED IN NON - OPERATIONAL INCOME (WARRENTY WRITTEN BACK) REMARK NAME OF THE PARTY PLACE CONSIGNEE BILL NO BILL AMOUNT REJECTIO N AMOUNT LATE DELIVE RY DEDUC TION AGAIN INCORPOR ATED IN NON - OPERATION AL INCOME DATE AMOUNT RELEVAN T A Y BHELLTD NOIDA TALCHAR SITE SS/360 5051527 5051527 31.03.201 4 508080 31 03.2016 9978301 2014 - 15 BHEL LTD NOIDA TALCHAR SITE SS/361 5434854 5434854 31 03.2014 BHEL LTD NOIDA KAKATAIYA SITE SS/350 5627746 5627746 31.03.2015 5627746 2015 - 16 BHEL LTD NOIDA KHANDWA SITE SS/364 4088120 4088120 31.03.201 5 4088120 2015 - 16 BHEL LTD NOIDA KHANDWA SITE SS/365 4816431 4816431 31 03.2015 4816431 2015 - 16 MCCAPTA KOIKATT A SS/215 1843790 1843790 251402 31.03.201 6 159288 2015 - 16 ANRAK ALUMINIU M LTD VISHKHAPATN AM SS/336 5961474 4974707 31 03 2016 4974707 2016 - 17 SMS INDIA PVT. LTD GURGAON SS/279 4948540 4948540 31 03.2016 4948540 2016 - 17 37772482 36785715 759482 36026233 6 SUMMARY OF NON - OPERATIONAL INCOME OFFERED FOR TAXATION IN FOLLOWING ASSESSMENT YEAR S: I HAVE VERIFIED THE PROFIT AND LOSS ACCOUNTS FOR THESE SUBSEQUENT YEARS AND FIND THAT EXCEPT AN AMOUNT OF RS. 7,59,482/ - THE ENTIRE BALANCE AMOUNT OF RS.3,60,26,233/ - (RS. 3,67,85,715/ - - RS. 7,59,482/ - ) HAS BEEN SHOWN BY THE ASSESSEE AS ITS INCOME IN THE ASSTT. YEARS 2014 - 15, 2015 - 16 AN AY 2016 - 17. THUS, THERE IS NO LOSS TO THE REVENUE AS THERE IS NO CHANGE IN SLAB RATES AS WELL BEING IT A CASE OF A COMPANY. THE APPELLANT HAD RELIED UPON THE JUDGMENT HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS VISHNU IN DUSTRIAL GASES PVT. LTD. ITA 229/1988 DATED 06.05.2008 AND CIT VS DINESH KUMAR GOEL 331 ITR 10 (DEL.) WHEREIN IT IS HELD THAT IT DOES NOT MATTER IN WHICH YEAR THE INCOME IS ACCOUNTED FOR, THE TAX RATE IS SAME . 7 . AFTER CONSIDERING THE FACTS I N THE LIGHT OF THE DECISIONS OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF VISHNU INDUSTRIAL GASES [P] LTD IN 229 ITR 1988 DATED 6.5.2008 AND THE CASE OF DINESH KUMAR GOEL 331 1 AY. 2014 - 15 9978301 2 AY. 2015 - 16 16124685 3 AY 2016 - 17 10682729 36785715 7 ITR 10, THE CIT(A) DELETED THE ADDITION AND CONCLUDED THAT THE ASSESSEE HAS SHOWN THE RECEI PTS RECEIVED FROM THESE PARTIES IN THE SUBSEQUENT YEAR. 8 BEFORE US, THE LD. DR COULD NOT POINT OUT ANY FACTUAL ERROR IN THE FINDINGS OF THE CIT(A). 9 . THE LD. AR, ON THE OTHER HAND, RELIED UPON THE FINDINGS OF THE CIT(A). 1 0 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. THE CHART EXHIBITE D ELSEWHERE CLEARLY DEPICTS THAT THE ASSESSEE HAS RECTIF I ED THE ENTRY IN THE SUBS E QU E NT YEARS AND HAS SHOWN THE INCOME AS MENTI O NED IN THE CHART ELSEWHERE. IN THE LIGHT OF THE DECIS I ON OF THE HON'BLE HIGH COURT OF DELHI [SUPRA] WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE FINDINGS OF THE CIT(A). ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 8 12. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO. 4689 /DEL/201 6 STAND S DISMISSED. THE ORDER IS PRON OUNCED IN THE OPEN COURT ON 04 . 0 9 .201 9 . S D / - S D / - [ SUCHITRA KAMBLE ] [ N.K. BILLAIYA ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 04 T H SEPTEMBER , 201 9 VL/ COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI 9 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER