ITO, Muzaffarnagar V. Shri Ajay Kumar Gupta, Muzaffarnagar

ITA 5116/DEL/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7450 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 18-12-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 03-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Keywords: Gross profit estimation; Business income
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A , NEW DELHI) BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO. 5116/DEL/2012 ASSESSMENT YEAR : 2009-10 ITO, WARD 1(1), VS. SHRI AJAY KUMAR GUPTA, NEW DELHI 167/15, SOUTH CIVIL LINES, MUZAFFARNAGAR GIR / PAN:AATPG8465G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI Y KAKKAR, DR RESPONDENT BY : SHRI ANKIT GUPTA ORDER PER T.S. KAPOOR, AM: THIS IS AN APPEAL FILED BY REVENUE AGAINST THE ORD ER OF LD. CIT(A) DATED 05.07.2012. THE REVENUE HAS TAKEN FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS), MUZAFFARNAGAR HAS ERRED IN LAW IN DELETING THE ADDITION OF RS. 13,80,077/- MAD E BY THE AO ON ACCOUNT OF LOW GROSS PROFIT BY APPLYING THE G.P. RA TE OF2% AS AGAINST 1.19% SHOWN BY THE ASSESSEE ON THE SALE OF MOBILE H AND SETS AFTER REJECTING THE BOOKS OF ACCOUNT UNDER SECTION 145(3) OF THE : I.T. ACT, 1961 FOR WANT OF ANY SUPPORTING BILLS/VOUCHERS /EVI DENCE AND AS THE ASSESSEE DID NOT MAINTAIN THE STOCK REGISTER AS PER THE AUDIT REPORT. 2. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE , THE CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS. 12,39, 724/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF LOW GROSS PROFIT BY APPLYING THE G.P. RATE OF 2% AS AGAINST 0.69% SHOWN BY THE ASSESSEE O N THE SALE OF MOBILE RECHARGE COUPONS AFTER REJECTING THE BOOKS O F ACCOUNT UNDER SECTION 145(3) OF THE I.T. ACT, (961 FOR WANT OF AN Y SUPPORTING ITA NO.5116/DEL/12 2 BILLS/VOUCHERS/EVIDENCE AS THE ASSESSEE DID NOT MAI NTAIN THE REGISTER REGARDING THE MARGIN/PROFIT /DISCOUNT RECEIVED FROM M/S BHARATI AIRTEL LIMITED. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE ORDER OF THE LD. CIT(A) DESERVES TO BE SET- ASIDE AND THAT O F ASSESSING OFFICER BE RESTORED. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF MOBILE RECHARGE, TRADING OF CELL-PHONES AND THE CASE OF ASSESSEE WAS SELECTED FOR SCRUT9INY. DURING ASSESSMENT PROC EEDINGS, THE A.O. OBSERVED THATS THE ASSESSEE HAD DECLARED THE GP RA TE OF 1.19% ON SALE OF MOBILE SETS. THE A.O. FURTHER ON THE BASIS OF TEST CHECK ON VARIOUS PURCHASE AND SALE BILLS OF VARIOUS CELL PHONES ARRIVED AT TH E CONCLUSION THAT THE AVERAGE GP EARNED BY ASSESSEE WAS 2.25% AND THEREFO RE ASSESSEE WAS SHOW CAUSED AS TO WHY GP RATE OF 2.25% AGAINST 1.19% SHO WN BY THE ASSESSEE BE NOT TAKEN FOR THE PURPOSE OF ARRIVING AT GROSS PROF IT. IN RESPONSE, THE ASSESSEE FILED REPLY AND SUBMITTED A TABLE SHOWING ITEM-WISE GP IN RESPECT OF VARIOUS MODELS OF CELL PHONES AND SUBMITTED THAT THE A.O. HAD SELECTED ONLY THOSE ITEMS WHERE GP RATE WAS AT HIGHER MARGIN AND HE HAD IGNORED THE ITEMS WHERE THERE WAS LOW GP. IT WAS SUBMITTED TH AT ASSESSEE WAS MAINTAINING STOCK REGISTER FOR EACH AND EVERY ITEM AND THEREFORE, GP DECLARED BY ASSESSEE CANNOT BE ALTERED. THE A.O. H OWEVER, DID NOT ACCEPT THE SUBMISSION OF THE ASSESSEE AND MADE ADDITION OF RS.13,80,077/- BY HOLDING AS UNDER: (I). STOCK REGISTER WAS NOT MAINTAINED AS CLAIMED BY ASSESSEE IN HIS REPLY. COLUMN 28(A) OF THE AUDIT REPORT CLEARLY SHO WS THAT STOCK REGISTER WAS NOT MAINTAINED. (II). THE ASSESSEE HAS NOT DENIED OF RESULT OF TES T CHECKING ITEMS. ITA NO.5116/DEL/12 3 (III). THE ASSESSEE HAS FURTHER ENCLOSED A LIST OF MORE THAN 150 ITEMS IN WHICH PURCHASE SALE VALUE AND G.P. AND G.P. RATE SHOWN. FOR THE BREVITY OF ORDER IT IS NOT MENTIONED HERE BUT THE S AME IS ENCLOSED AS PER ANNEXURE 'A'. IN THE SAID LIST G.P. RATE ON 42 ITEMS IS FOUND IN NEGATIVE. THE G.P. RATE IN A NUMBER OF ITEM IS FOUND (-) 5% TO 13 - 14 %. THE ASSESSEE HAS NOT ENCLOSED THE SALE AND PURCHASE BILL DETAILS IN THE ITEMS SHOWN IN THE LIST. THE ASSESSEE IS A R.D.S. OF M/S HCL INFO. SYSTEM AND SOLD MOBILE HANDSET IN WHOLESALE TO THE RETAILERS IN MUZ AFFARNAGAR AND ADJOINING AREAS. THE ASSESSEE'S CONTENTION THAT A N UMBER OF ITEM SOLD ON LESS THAN THE PURCHASE PRICE IS NOT ACCEPTED. TH E AFORESAID REPLY OF THE ASSESSEE IS NOT SUPPORTED BY ANY DOCUMENTARY EV IDENCE. ON THE BASIS OF AFORESAID FACTS THE BOOKS OF ASSESS EE IS REJECTED UNDER SECTION 145(3) AND THE G.P. IS TAKEN 2% OF HIS TOT AL SALES FROM MOBILE HANDSET BUSINESS WHICH IS FAIR AND REASONABLE. THE TOTAL AMOUNT OF GROSS PROFIT COMES TO RS.3396805/- AS AGAINST G.P. SHOWN RS.2016728/- (ROUND 'FIGURE). (ADDITION OF RS.1380 077/-. 3. THE A.O. FURTHER OBSERVED THAT THE ASSESSEE WAS ALSO ENGAGED INTO SALES AND RECHARGE BUSINESS OF MOBILE PHONE CARDS A ND IT WAS RECEIVING PROFITS FROM BHJARTI AIRTEL LTD. IT WAS OBSERVED B Y A.O. THAT THE RECORD OF MARGIN PASSED ON BY ASSESSEE TO OTHER RETAILERS WAS NOT MAINTAINED, THEREFORE, AN INQUIRY U/S 133(6) WAS MADE FROM BHAR TI AIRTEL LTD. AND IN REPLY BHARTI AIRTEL LTD. HAS SUBMITTED THAT MARGIN TO THE ASSESSEE WAS 4%. THE A.O. OBSERVED THAT ASSESSEE HAD DECLARED GP RAT IO OF ONLY 0.69% THEREFORE, VIDE NOTICE U/S 142(1), THE ASSESSEE WAS ASKED TO EXPLAIN. IN REPLY, THE ASSESSEE FURNISHED DETAILED REPLY AND SUBMITTED THAT ASSESSEE WAS A PARTICIPANT OF HUB DISTRIBUTION OF BHARTI AIRTEL LT D. AND ITS PROFITS AS ALLOWED BY BHARTI AIRTEL LTD. WAS TO BE SHARED BETWEEN SPOK E AND RETAILERS. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE USED TO CHARGE SPOKE AND RETAILERS ON THE BASIS OF FIXED MARGINS AS FIXED BY BHARTI AIRTEL LT D. IT WAS SUBMITTED THAT THE MARGIN DECLARED BY ASSESSEE WAS CORRECT. THE A .O. DID NOT ACCEPT THE ITA NO.5116/DEL/12 4 CONTENTION OF THE ASSESSEE AND MADE ADDITION OF RS. 12,39,724/- BY HOLDING AS UNDER: IN THE ABOVE REPLY, THE ASSESSEE HAS ACCEPTED THAT HE HAS RECEIVED 4.27% MARGIN FROM BHARTI AIRTEL LIMITED. BUT THE AS SESSEE HAS NOT FURNISHED THE DETAILS AND EVIDENCE OF HOW MUCH MARG IN / PROFIT PASS ON TO SPOKE AND RETAILER. IN THE REPLY, THE ASSESSE E HAS STATED THAT HIS MARGIN IS 0.70% OF TOTAL SALES. HIS TOTAL SALES FRO M THIS BUSINESS ARE RS.94522084.50 AND 0.70% OF THIS COMES TO RS.661654 .59 WHEREAS THE ASSESSEE HAS SHOWN THE GROSS PROFIT OF RS.65071 8.32. THEREFORE, IT CAN BE SAID THAT THE GROSS PROFIT WAS NOT CORRECTLY WORKED OUT OR THE GROSS PROFIT HAS BEEN SUPPRESSED. THE ASSESSEE HAS ALSO FAILED TO FURNISH THE EVIDENCE OF HOW MUCH PROFIT / MARGIN HE HAS PASS ON TO THE SPOKE AND RETAILER. THE MARGIN / PROFIT RECEIVED FR OM AIRTEL AS HE ADMITTED IS 4.27%. IN THE ABSENCE OF EVIDENCE OF MA RGIN / PROFIT PASS ON TO THE RETAILERS AND ON THE BASIS OF 4.27% OF AD MITTED MARGIN, THE G.P. RATE FROM HIS MOBILE RECHARGE BUSINESS IS ESTI MATED 2% OF HIS TURNOVER WHICH COMES TO RS.1890442/-. THE ASSESSEE HAS SHOWN GROSS PROFIT RS.650718/- (ROUND FIGURE). THE REMAINING G. P. OF RS.1239724/- IS ADDED TO THE INCOME OF THE ASSESSEE . 4. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE LD. CIT(A) AND MADE VARIOUS SUBMISSIONS. THE LD. CIT(A) FORWARDED THE WRITTEN SUBMISSIONS TO THE A.O. AND OBTAINED REMAND REPORT AND AFTER GOING THROUGH THE SUBMISSIONS, REMAND REPORT AND REJOINDER THEREON DE LETED THE ADDITION MADE BY A.O. BY HOLDING AS UNDER: A) FIRST ADDITION OF RS.13,80,077/-: THE FACTS OF THE CASE, SUBMISSIONS MADE BY THE APPE LLANT, REMAND REPORT OF THE AO AND REJOINDER OF THE APPELLANT HAV E BEEN CAREFULLY CONSIDERED. IT IS OBSERVED THAT THE AO HAD MADE ADD ITION OF RS.13,80,077/- BEING ESTIMATION OF GP @ 2% ON THE T OTAL TURNOVER FROM MOBILE HAND-SETS ON THE GROUND FOLLOWING GROUN DS :- (I) STOCK REGISTER WAS NOT MAINTAINED AS CLAIMED BY THE ASSESSEE IN HIS REPLY. COLUMN 28(A) OF THE AUDIT RE PORT CLEARLY SHOWED THAT STOCK REGISTER WAS NOT MAINTAINED. ITA NO.5116/DEL/12 5 (II) THE ASSESSEE HAS NOT DENIED RESULTS OF TEST C HECKING OF ITEMS. FURTHER, THE GP OF 42 ITEMS WAS FOUND IN NEG ATIVE BY THE AO DURING THE COURSE OF TEST CHECK. FURTHERMORE, THE A PPELLANT HAD NOT ENCLOSED THE SALE/PURCHASE DETAILS IN THE ITEMS SHO WN IN THE LIST. ON THE OTHER HAND, IT HAS BEEN VEHEMENTLY CONTENDED BY THE APPELLANT THAT HE HAD MAINTAINED BOOKS OF ACCOUNT IN THE REGULAR C OURSE OF BUSINESS WITH SUPPORTING PURCHASE AND SALE VOUCHER ALONG WIT H STOCK REGISTER AND NO DISCREPANCIES WERE POINTED OUT BY THE AO. AS PER THE APPELLANT THE AO SELECTED HIGHER GROSS PROFIT RATE IN SALE BILL WHEREAS SALE BILL OF LOW GROSS PROFIT RATE HAS NOT BEEN CON SIDERED. AS SUCH, IT HAS BEEN ARGUED THAT GP CANNOT BE WORKED OUT ON SEL ECTED ITEM FOR THE WHOLE YEAR. IT HAS BEEN CONTENDED THAT A LIST O F BILLS OF PURCHASE & SALES WERE FURNISHED BEFORE THE AO WHERE-THERE WAS LOSS IN SOME ITEMS AND PROFIT VARIED FROM ITEM TO ITEM RANGING F ROM .98% TO 2% APPROXIMATELY. IT HAS BEEN EXPLAINED THAT THE LOSS IN PROFIT WAS DUE TO THE FACT THAT WHENEVER A NEW MOBILE SET WAS LAUNCHE D IN THE MARKET WITH MORE FEATURES, THERE WAS LESS DEMAND FOR OLD S ETS. THUS IN ORDER TO EFFECT THE SALE OF OLD MOBILE SETS, THE SAME WER E SOME TIMES AS LESS THAN THE PURCHASE PRICE. THE APPELLANT HAS RELIED O N VARIOUS CASE LAWS OF THE HON'BLE COURTS IN SUPPORT OF HIS CONTEN TION. IT IS A WELL KNOWN FACT THAT WHENEVER A NEW MOBILE SET IS LAUNCH ED IN THE MARKET IN A NEW SET-UP WITH CHANGED FEATURES, THE CUSTOMER WHICH IN MAJORITY ARE TEENAGERS RUN AFTER IT AND AFTER FEW MONTHS WHE N ANOTHER MODEL IS LAUNCHED IN THE MARKET WITH DIFFERENT FEATURES, THE MOBILE SET EARLIER PURCHASED BY THEM SEEMS LESS ATTRACTIVE TO THEM AND THEY AGAIN GO AFTER THE LATEST MODEL. SIMILARLY, IN THE CASE OF C AR IT IS A GENERAL TREND THAT WHENEVER A NEW MODEL IS LAUNCHED, EVEN THE CUS TOMERS WHO ARE MORE MATURED THAN THE TEENAGERS GO FOR THE NEW MODE L. EVEN IN THAT CASE THE CAR MANUFACTURING COMPANIES IN ORDER TO AT TRACT CUSTOMERS, REDUCE THE PRICES OF CAR WITH OLD VERSION WITH A HE FTY SUM. THUS SUCH ATTITUDE OF THE CUSTOMER IS UNIVERSAL AND HAS TO BE VIEWED IN THAT PERSPECTIVE. THEREFORE, THE APPELLANT'S SUBMISSIONS TO THE EFFECT THAT THE OLD MOBILE SETS WERE SOLD AT LOWER A PRICE THAN PURCHASE PRICE CAN EASILY BE UNDERSTOOD AND HAVE FORCE. REGARDING MAINTENANCE OF STOCK REGISTER THE APPELLA NT HAS FURNISHED CERTIFICATE FROM THE AUDITOR WHEREIN IT HAS BEEN CE RTIFIED THAT STOCK REGISTER IN RESPECT OF COSMETIC AND E-RECHARGE WERE NOT AVAILABLE HOWEVER, STOCK REGISTER IN RESPECT OF MOBILE PHONES WAS MAINTAINED. ITA NO.5116/DEL/12 6 THE AUDITOR IN THE AFORESAID CERTIFICATE HAS ADMITT ED HIS MISTAKE IN NOT SPECIFYING THE ITEMS IN RESPECT OF WHOM STOCK REGIS TER WAS NOT MAINTAINED. THE APPELLANT HAS ALSO FURNISHED COPIES OF STOCK REGISTER IN RESPECT OF MOBILE SETS. THUS IT IS HELD THAT THE AO WAS LEGALLY AND FACTUALLY INCORRECT TO ESTIMATE GP ON THE GROUND TH AT THE APPELLANT HAD NOT MAINTAINED STOCK REGISTER IN RESPECT OF MOB ILE SETS. THE AO IN HIS REMAND REPORT DATED 21-05-2012 HAS NO T COMMENTED UPON THE SUBMISSIONS/DETAILS/EVIDENCE FURNISHED BY THE APPELLANT. THIS IMPLIES THAT THE AO HAS NOT DRAWN ADVERSE INFERENCE IN RESPECT OF SUBMISSIONS/DETAILS/EVIDENCE FURNISHED BY THE APPEL LANT WHICH WERE FORWARDED TO THE AO FOR REMAND REPORT. THUS IN ABSE NCE OF ANY REBUTTAL ON DETAILS/EVIDENCES FURNISHED BY THE APPE LLANT, IT IS HELD THAT THE' APPELLANT HAS SATISFACTION EXPLAINED-THE DEFIC IENCIES POINTED OUT BY THE A.O. IN THE ASSESSMENT ORDER IN RESPECT OF T HE IMPUGNED ISSUE. THE AO HAS REJECTED BOOKS OF ACCOUNT WITHOUT POINTI NG OUT ANY DEFECTS IN THE BOOKS OF ACCOUNT AND MERELY FOR THE REASON THAT THERE WAS NEGATIVE GP WHICH HAS ALREADY BEEN EXPLAINED IN THE PRECEDING PARAS. FURTHER, THE AO CANNOT OVERRIDE THE BUSINESS PRUDENCE OF THE ASSESSEE. FURTHER, THE REJECTION OF BOOKS OF ACCOUNT AND ESTI MATION OF GP MADE BY THE AO IS HELD UNTENABLE FOR THE FOLLOWING REASO NS:- (I) THE FACT THAT THE A.O. HAS FOUND SOME FAULTS WITH THE ACCOUNTS WILL NOT NECESSARILY BRING THE CASE WITHIN THE SCOPE OF 145(3). THE HON'BLE SUPREME COURT IN THE CASE OF CI T V. PADAMCHAND RAMGOPAL (1970) 76 ITR 719, OBSERVED THAT INSIGNIFI CANT MISTAKES CANNOT AFFORD A GROUND FOR RESORTING TO THIS SECTIO N. SO LONG AS IT IS NOT IMPOSSIBLE TO DEDUCE THE TRUE INCOME FROM THE A CCOUNTS MAINTAINED BY THE ASSESSEE, ITS COMPUTATION CANNOT BE MADE IN ANY OTHER WAY. RELIANCE IS PLACED ON THE DECISION OF HO N'BLE HON'BLE ANDRA PRADESH HIGH COURT IN THE CASE OF CIT V. MARG ADARSI CHIT FUNDS PVT. LTD. (1985) 155 ITR442. (II) BEFORE REJECTION OF THE ACCOUNTS, THE A.O. M UST RECORD A CLEAR FINDING THAT THE SYSTEM OF ACCOUNTING FOLLOWE D BY THE ASSESSEE IS SUCH THAT THE CORRECT PROFITS CANNOT BE DEDUCED THE REFROM. THE MERE FACT THAT THERE WAS NEGATIVE OP IN SALE OF MOBILE S ETS, THE BOOKS CANNOT BE REJECTED. RELIANCE IS PLACED ON THE DECIS ION OF THE HON'BLE ITA NO.5116/DEL/12 7 MADHYA PRADESH HIGH COURT IN THE CASE OF TRIVEDI BR OS (JA) V CIT (1986) ITR 705. (III) THE A.O. SHOULD RECORD A CLEAR FINDING THAT THE CORRECT PROFIT CANNOT BE DEDUCED FROM THE METHOD OF ACCOUNT ING ADOPTED BY THE ASSESSEE BEFORE REJECTING THE BOOK RESULTS. RAT HER THE AO HAD ACCEPTED SUCH METHOD OF ACCOUNTING IN THE PRECEDING YEARS. RELIANCE IS PLACED ON THE DECISION OF THE HON'BLE ITAT JAIPU R IN THE CASE OF DCIT V MEWAR TEXTILES MILLS LTD (1999) 64 ITJ 502. IN LIGHT OF THE ABOVE FACTS AND FOLLOWING RATIO DEC IDENDE OF THE HON'BLE COURTS (SUPRA), IT IS HELD THAT THE AO WAS NOT JUSTIFIED IN INVOKING PROVISIONS OF SECTIONL45(3) OF THE ACT, ES TIMATING GP @ 2% AND THEREBY MAKE ADDITION OF RS.L3,80,077/-. THE SA ME IS DIRECTED TO BE DELETED. GROUNDS NOS.L TO 4 ARE ALLOWED.' B) 2 ND ADDITION OF RS.12,39,724/-: THE FACTS OF THE CASE, SUBMISSIONS MADE BY THE APPE LLANT, REMAND REPORT OF THY AO AND REJOINDER OF THE APPELLANT HAV E BEEN CAREFULLY CONSIDERED, IT IS OBSERVED THAT THE AO HAD MADE ADD ITION OF RS.12,39, 724/- ON THE GROUND THAT THE ASSESSEE HAD ACCEPTED THAT HE HAD RECEIVED MARGIN/PROFIT FROM M/S BHARTI AIRTEL LTD. @ 4.25%. FURTHER, THE ASSESSEE HAD NOT FURNISHED THE DETAILS AND EVID ENCE OF HOW MUCH MARGIN/PROFIT WAS PASSED ON TO SPOKE{DEALER) AND RE TAILER' (SUB- DEALER). FURTHERMORE, THE GP WAS NOT CORRECTLY WORK ED OUT BY THE ASSESSEE. ON THE OTHER HAND, IT HAS BEEN CONTENDED BY THE APPELLANT THAT THE MARGIN/PROFIT ON SALE OF MOBILE HAND-SETS WAS CORRECTLY SHOWN @ 0.69%. AS PER THE APPELLANT THE PROFIT MARG IN FROM FLEXI IS ONLY 0.70% VERIFIABLE FROM E-MAIL LETTER OF MIS BHA RTI AIRTEL LTD. IT HAS EXPLAINED THAT THE APPELLANT IS A HUB (DISTRIBU TOR) AND PASS TALK TIME TO SPOKE (MINI DISTRIBUTOR) AND IT PASSES ON T HE TALK TIME TO RETAILER (DEAL WITH ACTUAL CONSUMER ON RETAIL COUNT ER). PROFIT MARGIN WAS PAID BY M/S BHARTI AIRTEL LTD. WAS PAID TO THE APPELLANT INCLUDING MARGIN OF SPOKE AND RETAILER AT 4.27% IN THE APPELL ANT'S ACCOUNT. WHEN THE TALK TIME IS PASSED ON TO THE SPOKE AND RE TAILER, THE COMPANY, M/S BHARTI AIRTEL LTD. PASSES THE 4% MARGI N PROFIT TO SPOKE AND RETAILER FROM THE APPELLANT'S ACCOUNT. IT HAS B EEN EXPLAINED THAT THE APPELLANT HAS NO CONTROL OVER PASSING PROFIT MA RGIN OF SPOKE AND ITA NO.5116/DEL/12 8 RETAILER AT THE TIME OF BILLING OF PURCHASE. THUS I T HAS BEEN CONTENDED THAT THE PROFIT MARGIN (COMMISSION ON FLEXI) REMAIN S ONLY AT 0.27% AS UNDER:- HUB .27% SPOKE 1% RETAILER 3% IN THE REMAND REPORT THE AO HAD REPORTED THAT THE A PPELLANT HAD RECEIVED. COMMISSION FROM MIS BHARTI AIRTEL AND PAS SED ON COMMISSION TO SPOKE AND RETAILER. THUS THE APPELLAN T VIDE ORDER SHEET ENTRY DATED 07-06-2012 WAS REQUIRED TO FURNISH THE DETAILS OF TDS MADE BY THE AFORESAID COMPANY AND ALSO TO SHOW CAUS E AS TO WHY TDS HAD NOT BEEN MADE BY HIM ON THE COMMISSION PASS ED ON TO SPOKE AND RETAILER. THE APPELLANT WAS FURTHER REQUIRED TO FURNISH THE COMPLETE DETAILS OF COMMISSION RECEIVED ALONG WITH COMMISSION PASSED ON TO SPOKE AND RETAILER. IN RESPONSE IT WAS CONTENDED THAT THE RELATIONSHIP BETWEEN THE PARTIES IS SOLELY ON PRINC IPAL TO PRINCIPAL BASIS. THE APPELLANT HAS ALSO FURNISHED COPY OF AGR EEMENT WITH M/S BHARTI AIRTEL LTD. IN SUPPORT OF ITS CONTENTION. TH E APPELLANT FURTHER PRODUCED SALES/ PURCHASE BILLS AND EXPLAINED THE NA TURE OF TRANSACTIONS. THE APPELLANT HAS FURTHER FURNISHED S POKE-WISE SALES OF FLEXI-RECHARGE (LAPU). IT HAS BEEN OBSERVED THAT TH E ELEMENT OF COMMISSION AMOUNT, WHICH IS INCLUSIVE IN SALE AMOUN T IS DIRECTLY PASSED ON BY M/S BHARTI AIRTEL LTD. TO SPOKE AND RE TAILER AND THE APPELLANT HAS NO CONTROL OVER SUCH DECISIONS. THERE FORE, THE APPLICABILITY OF T.D.S. PROVISION MAY RISE AGAINST M/S BHARTI AIRTEL LTD. IN LIGHT OF THE ABOVE THE FACTS NO ADVERSE INF ERENCE IS DRAWN IN RESPECT OF APPLICABILITY OF TDS PROVISIONS ON THE A PPELLANT. THE AO IN HIS REMAND REPORT DATED 21-05-2007 HAS NO T COMMENTED UPON THE SUBMISSIONS/DETAILS/EVIDENCE FURNISHED BY THE APPELLANT. THIS IMPLIES THAT THE AO HAS NOT DRAWN ADVERSE INFERENCE IN RESPECT OF SUBMISSIONS/DETAILS/EVIDENCE FURNISHED BY THE APPEL LANT WHICH WERE FORWARDED TO THE AO FOR REMAND REPORT. EVEN OTHERWI SE THE APPELLANT HAS 'FURNISHED ENOUGH DETAILS AND EVIDENCE TO SUBST ANTIATE GP DECLARED @ .69% FROM RECHARGE BUSINESS. THUS IN LIG HT 'OF THE ABOVE FACTS IT IS HELD THAT THE AD WAS NOT JUSTIFIED IN E STIMATING GP @ 2% AND THEREBY MAKING ADDITION OFRS.12,39,724/-. THE S AME IS DIRECTED TO BE DELETED, GROUNDS NOS.5 TO 8 ARE ALLOWED. ITA NO.5116/DEL/12 9 5. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 6. AT THE OUTSET, LD. DR INVITED OUR ATTENTION TO R EMAND REPORT PLACED AT P.B. PAGE 36 & 37 AND SUBMITTED THAT REMAND REPORT HAS NOT GIVEN ANY POSITIVE FINDINGS IN FAVOUR OF ASSESSEE AND LD.CIT( A) AT HIS OWN INFERRED THAT IN THE ABSENCE OF REBUTTAL BY THE A.O., IT IS PRES UMED THAT A.O. WAS SATISFIED WITH THE EXPLANATION. IT WAS SUBMITTED THAT IN THE REJOINDER ALSO ASSESSEE HAD NOT SUBSTANTIATED HIS CLAIMS AND ASSESSEE DID NOT F ILE ANY WORKING TO CLAIM THE DECLARED GROSS PROFITS. IT WAS SUBMITTED THAT AT PAGE 37 OF P.B., A.O. IN REMAND REPORT HAS MENTIONED THAT SOME DETAILS WERE FILED ON 15.12.11 AND NO SPECIFIC DETAILS OF MODELS, THEIR COST PRICES AN D SALE PRICES WERE FILED SO HOW THE CASE OF ASSESSEE HAD IMPROVED. THEREFORE, IT WAS PRAYED THAT CASE NEEDS TO BE READJUDICATED BY THE LD.CIT(A). 7. THE LD.AR, ON THE OTHER HAND, SUBMITTED THAT IN RESPECT OF SALE OF MOBILE SETS, THE ASSESSEE WAS MAINTAINING STOCK REG ISTERS AND A CERTIFICATE TO THIS EFFECT WAS OBTAINED FROM STATUTORY AUDITORS AN D IN THIS RESPECT OUR ATTENTION WAS INVITED TO P.B. PAGE 227. IT WAS SUB MITTED THAT AUDITORS BY MISTAKE HAD NOTED IN THE AUDIT REPORT THAT ASSESSEE WAS NOT MAINTAINING STOCK REGISTERS WHICH IN FACT WAS INCORRECT AS COMPLETE C OPY OF STOCK REGISTER WAS ALSO SUBMITTED AND A.O. IN THE REMAND PROCEEDINGS H AD ACCEPTED IT TO BE MISTAKE ON THE PART OF AUDITORS. WITH RESPECT TO GP FROM BHARTI AIRTEL LTD., THE LD.AR SUBMITTED THAT GP PASSED ON BY BHARTI LTD ., WAS BEING SHARED BY ASSESSEE, RETAILER & SPOKE AND IN THIS RESPECT THE FINDINGS OF A.O. DURING REMAND PROCEEDINGS PLACED AT PAGE 37 WERE REFERRED. ITA NO.5116/DEL/12 10 8. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL ON RECORD. WE FIND FROM THE WRITTEN SUBMISSIONS OF AS SESSEE TO LD.CIT(A) PLACED AT PAPER BOOK PAGE 85 THAT COMBINED GP OF AS SESSEE FOR ASSTT. YEAR 2006-07 TO 2008-09 RANGED FROM 0.89% TO 1.09% AND T HE DECLARED COMBINED GP RATIO IN THE PRESENT YEAR IS 1.17%. THEREFORE, GP DECLARED BY ASSESSEE IN THE PRESENT YEAR IS IN LINE WITH EARLIER YEARS. MOR EOVER, WE FIND THAT A.O. IN THE REMAND REPORT HAS NOT RAISED ANY OBJECTIONS AGA INST WRITTEN SUBMISSIONS FILED BY THE ASSESSEE AND THE LD. CIT(A) HAS PASSED A WELL REASONED AND SPEAKING ORDER. AS REGARDS THE CONTENTION OF LD.DR THAT DETAIL OF PROFIT PASSED ON TO RETAILERS & SPOKE WERE NOT PROVIDED, W E FIND THAT THE BILLING RATES WERE FIXED BY BHARTI AIRTEL LTD., FOR RETAIL ERS & SPOKES AND BILLS WERE RAISED AT PRE-DETERMINED PRICES AS FIXED BY BHARTI AIRTEL LTD. AND ASSESSEE WAS ENTITLED TO ONLY ITS SHARE ONLY OUT OF TOTAL GR OSS PROFIT OF 4.27%. 9. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMI TY IN THE ORDER OF LD.CIT(A). 10. THEREFORE, APPEAL FILED BY THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST DEC., 2014. SD./- SD./- (I.C. SUDHIR ) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 31 ST DEC., 2014 SP ITA NO.5116/DEL/12 11 COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR. PS/PS 6 KEPT FOR PRONOUNCEMENT SR. PS/PS 7 FILE SENT TO BENCH CLERK SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER