M/s Vikas Mahajan, Jammu V. The Income Tax Officer, Jammu

ITA 513/ASR/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0019 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 14-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: GAURAV ARORA
• Keywords: Reopening of assessment; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 40A(3); 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A. NO. 513/(ASR)/2016 ASSES SMENT YEAR: 2009-10 VIKAS MAHAJAN, PROP. M/S. POOJA COLLECTIONS, HOUSE NO. 136, KAILASH NAGAR, TALLAB TILLO, JAMMU [PAN: ACGPM 4522K] VS. INCOME TAX OFFICER, WARD 2(3) JAMMU (APPELLANT) (RESPONDENT) APPELLANT BY : SH. GAURAV ARORA (ADV.) RESPONDENT BY: SH. CHARAN DASS (D.R.) DATE OF HEARING: 23.08.2018 DATE OF PRONOUNCEMENT: 14.09.201 8 ORDER PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS), JAMMU [(CITA ) SHORT FOR] DATED 24.06.2016, DISMISSING THE ASSESSEES APPEAL CONTES TING HIS ASSESSMENT UNDER SECTION 143(3) R/W S.147 OF THE INCOME TAX ACT, 196 1 (THE ACT HEREINAFTER) DATED 10.12.2014 FOR ASSESSMENT YEAR (A.Y.) 2009-10. 2. THE APPEAL BEING IN RESPECT OF REASSESSMENT, IN ITIATED BY THE ISSUE OF NOTICE U/S. 148 ON 12.11.2013, I.E., SUBSEQUENT TO THE ASS ESSMENT U/S. 143(3) OF THE ACT DATED 30.12.2011, CHALLENGES THE SAME BOTH ON THE L EGAL ASPECT (OF THE VALIDITY OF THE REOPENING OF ASSESSMENT) AS WELL AS ON THE MERI TS OF THE SOLE DISALLOWANCE EFFECTED IN REASSESSMENT, I.E., U/S. 40A(3). ITA NO. 513/ASR/2016 (AY 2009-10) VIKAS MAHAJAN, JAMMU V. ITO 2 3. THE ASSESEE IS A FRANCHISE OF M/S. ESS AAY FASHI ONS PVT. LTD., SELLING GOODS (BRANDED READYMADE GARMENTS OF A POPULAR BRAND). TH E ASSESSEES CASH-BOOK WAS, IT WAS CLAIMED BEFORE US, CALLED FOR AND EXAMINED A T THE TIME OF ORIGINAL ASSESSMENT. AS SUCH, THE REOPENING OF ASSESSMENT ON THE SOLE GROUND THAT PAYMENTS IN CASH WERE MADE AGAINST PURCHASES, LIABLE FOR DIS ALLOWANCE U/S 40A(3), COULD NOT BE IN-AS-MUCH AS IT IS ONLY A CHANGE OF OPINION, HE LD AS INVALIDING A REASSESSMENT BY THE HONBLE APEX COURT IN CIT VS. KELVINATOR INDIA PVT. LTD . [2010] 320 ITR 561 (SC). THIS DID NOT, HOWEVER, FIND FAVOUR WITH T HE REVENUE, WHICH HAS UPHELD THE REOPENING OF ASSESSMENT. ON MERITS, AGAIN, IT WAS CONTENDED THAT IT HAS NOT BEEN APPRECIATED THAT THE CASH PAYMENTS UNDER REFERENCE ARE BY THE ASSESSEE I N HIS CAPACITY OF AN AGENT TO HIS PRINCIPAL. HOW COULD THE SAME BE REGARDED AS TOWARD PURCHASES, EXPENDITURE ON WHICH IS DEDUCTIBLE U/S. 37(1), TO WHICH, THEREFORE , SEC. 40A(3) COULD BE SAID TO APPLY? THE SAME, IN SUPPORT OF WHICH THE ASSESSEE R ELIED ON HIS TRADING ACCOUNT EXHIBITING NIL GROSS PROFIT, HAS NOT BEEN ACCEPTED BY THE REVENUE AS THE ASSESSEE HAD ALSO PLEADED HIS CASE AS BEING EXCEPTED UNDER R ULE 6DD(K) OF THE INCOME TAX RULES, 1962. THIS, IN FACT, WAS UNDER THE WRONG NOT ION OF THE ASSESSEES COUNSEL (AT THE FIRST APPELLATE STAGE) THAT THE SAID RULE IS AP PLICABLE, WHICH, ON THE CONTRARY, IS APPLICABLE TO PAYMENTS BY THE PRINCIPAL TO HIS AGEN T AND, THEREFORE, OUGHT TO BE DISREGARDED, RATHER THAN BEING MADE THE BASIS FOR U PHOLDING THE IMPUGNED DISALLOWANCE. THIS SUMS UP THE ASSESSEES CASE BEFO RE US. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. WE FIND NO MERIT IN THE ASSESSEES LEGAL CHALLENGE . THE REASON IS SIMPLE. A CHANGE OF OPINION COULD ONLY BE WHERE A VIEW HAS BE EN TAKEN OR CAN BE SAID TO HAVE BEEN FORMED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THERE IS, TOWARD THIS, NOTHING TO SHOW THAT THE CASH-BOOK WAS, AS CLAIMED, CALLED FOR OR EXAMINED. ITA NO. 513/ASR/2016 (AY 2009-10) VIKAS MAHAJAN, JAMMU V. ITO 3 FURTHER, EVEN SO, AND IN-AS-MUCH AS THE FACT OF THE CASH PAYMENT/S, IN EXCESS OF THE AMOUNT PRESCRIBED U/S. 40A(3), WHICH HAS NOT BEEN D ENIED, COULD BE ASCERTAINED OR KNOWN FROM OTHER DOCUMENTS AS WELL, VIZ. THE LEDGER ACCOUNT OF THE SUPPLIER, ETC., IT HAS NOT BEEN SHOWN THAT ANY SUCH MATERIAL WAS EXAMI NED, OR THE ASSESSEE, CORRESPONDINGLY, QUESTIONED ON THIS ASPECT, TO CONT END OF A VIEW HAVING BEEN FORMED IN ITS RESPECT. WHY, THE ASSESSEE IN SUCH A CASE, AS HE DOES IN THE REASSESSMENT PROCEEDINGS, WOULD HAVE SIMILARLY EXPL AINED HIS CASE, OF WHICH THERE IS NOTHING ON RECORD TO SUGGEST, MUCH LESS SHOW. TH E QUESTION OF A CHANGE OF OPINION, IT NEEDS TO APPRECIATED, IS PRINCIPALLY FA CTUAL, TO BE DETERMINED CONSIDERING THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE. THE LAW IN THE MATTER IS WELL SETTLED, FOR WHICH REFERENCE MAY BE MADE TO THE DEC ISIONS, INTER ALIA, IN A.L.A. FIRM VS. CIT [1991] 189 ITR 285 (SC) AND KALYANJI MAVJI & CO. VS. CIT [1976] 102 ITR 287 (SC). REFERENCE, FURTHER, IN THIS CONTEXT M AY ALSO BE MADE TO THE DECISION IN CONSOLIDATED PHOTO & FINVEST LTD. VS. ACIT [2006] 281 ITR 394 (DELHI), WHEREIN ITS STANDS HELD THAT SECTION 147 IS PERMISS IBLE ON THE BASIS OF THE REASON TO BELIEVE BEING DERIVED FROM THE SAME MATERIAL WHICH WAS A SUBJECT MATTER OF THE ASSESSMENT PROCEEDINGS. AGAIN, THE REOPENING BEING WITHIN FOUR YEARS (FROM THE END OF THE RELEVANT ASSESSMENT YEAR), THERE IS NO Q UESTION OF THE REOPENING BEING SUBJECT TO THE ASESSEE HAVING FAILED TO DISCLOSE FU LLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT YEAR. THE REO PENING, ACCORDINGLY, IS LEGALLY VALID. COMING TO THE MERITS OF THE IMPUGNED DISALLOWANCE, THE ASSESSE BEFORE US RELIED, AS HE DID AT THE FIRST APPELLATE STAGE , ON HIS TRADING ACCOUNT EXHIBITING NIL GROSS PROFIT, STATED TO BE PREPARED AS PER CONSIGNM ENT ACCOUNTS. THE VERY FACT OF NIL TRADING MARGIN, IT IS CLAIMED, WOULD LEAD TO THE IN FERENCE OF THE SALES MADE BEING FOR AND ON BEHALF OF THE PRINCIPAL, WHO ALLOWS THE ASSESSEE A PRESCRIBED RATE OF COMMISSION, WHICH CONSTITUTES THE GROSS REVENUE OF THE ASSESSEES FRANCHISE ITA NO. 513/ASR/2016 (AY 2009-10) VIKAS MAHAJAN, JAMMU V. ITO 4 BUSINESS. WE DO NOT THINK THAT THE TRADING ACCOUNT EXHIBITING NIL MARGIN COULD BE SAID TO BE DETERMINATIVE OF THE MATTER. RATHER, THE VERY FACT THAT IT REFLECTS BOTH PURCHASES AND SALES, IMPLIES THE SAME TO BE THE ASSESSEES PURCHASES AND SALES, AND NOT THAT OF HIS PRINCIPAL, WHICH THOUGH COULD B E MADE AT THE SAME RATE/S, RESULTING IN NO PROFIT OR LOSS. THE LD. COUNSEL WAS DURING HEARING QUERIED ABOUT WHETHER THE PROPERTY IN THE GOODS PASSED TO THE ASS ESSEE UPON PURCHASE, TO NO SATISFACTORY ANSWER. THE SAME IN FACT COULD ONLY BE ASCERTAINED WITH REFERENCE TO THE FRANCHISE AGREEMENT, WHICH IS NOT ON RECORD. IF THE RISK AND REWARD ASSOCIATED WITH THE OWNERSHIP (OF GOODS) PASSES TO THE ASSESSE E UPON THEIR ACQUISITION, THE ASSESSEE EFFECTIVELY PURCHASES THE GOODS, EXPENDITU RE QUA WHICH STANDS, THEREFORE, CLAIMED. THE COMMISSION COULD ONLY BE A MANNER OF R EMUNERATING THE ASSESSEE, IMPLYING A FIXED/S RATE OF PROFIT, TITLED COMMISSI ON. THE MATTER, STRICTLY SPEAKING, THEREFORE, OUGHT TO TRAVEL BACK TO THE FILE OF THE ASSESSING OFFICER (AO) TO EXAMINE AND DETERMINE THIS ASPECT OF THE MATTER. BE THAT AS IT MAY, WE DO NOT CONSIDER IT APPROPRIA TE TO RESTORE THE MATTER BACK TO THE FILE OF THE AO IN THE INSTANT CASE. THE REAS ON IS, AGAIN, SIMPLE. THE ASSESSMENT WAS REOPENED AS, APPARENTLY, THE ASSESSE ES CLAIM FOR PURCHASE EXPENDITURE WAS, TO THE EXTENT OF RS.1,56,249/- (OU T OF THE TOTAL PURCHASE OF RS.61.77 LACS), LIABLE FOR DISALLOWANCE U/S.40A(3). THE CASE OF HE BEING A CONSIGNEE AGENT, SELLING AT PRE-DETERMINED PRICES B Y THE PRINCIPAL, EARNING COMMISSION, FOR WHICH HE REFERS TO HIS ACCOUNTS, IF DOUBTED, OUGHT TO HAVE BEEN EXAMINED AND REBUTTED BY THE REVENUE WITH REFERENCE TO MATERIALS AND COGENT REASONS, FORMULATING AND ADDRESSING THE ISSUE/S ARI SING, WHICH IT DOES NOT DESPITE THE SAME WITNESSING AN EXAMINATION AT TWO STAGES, R EFLECTING A PERFUNCTIONARY ATTITUDE. WE COULD STILL HAVE, IMPOSING COST ON THE REVENUE, RESTORE THE MATTER BACK IN-AS-MUCH AS AN ISSUE SHOULD GET DECIDED ON M ERITS, BUT ARE DISINCLINED TO CONSIDERING THE NOMINALITY OF THE AMOUNT INVOLVED. ITA NO. 513/ASR/2016 (AY 2009-10) VIKAS MAHAJAN, JAMMU V. ITO 5 GOING BY THE MATERIAL ON RECORD, THOUGH NOT STRICT LY AS PER THE CONSIGNMENT ACCOUNTS, AND WHICH (ACCOUNTS) ARE, IN ANY CASE, NO T DETERMINATIVE (REFER: SUTLEJ COTTON MILLS LTD. VS. CIT [1979] 116 ITR 01 (SC)), THE ASSESSEES ACCOUNTS A RE INDICATIVE OF THE GOODS BEING SOLD AS AN AGENT. THO UGH LABELLED TRADING ACCOUNT, THE SAME IS ONLY IN THE NATURE OF A MEMORANDA ACCOU NT, SHOWING THE VOLUME OF THE TRANSACTIONS AS WELL AS THE VALUE OF THE STOCK LYIN G WITH THE ASSESSEE AS AT THE BEGINNING AND THE CLOSE OF THE YEAR. THAT THE ASSES SEE IS NETWORKED WITH HIS PRINCIPAL THROUGH SAP, SO THAT THE INFORMATION ON S ALES GETS TRANSMITTED/SHARED ON A REAL TIME BASIS, AS EXPLAINED BY THE LEARNED COUN SEL DURING HEARING, FURTHER ENDORSES THIS INFERENCE. THE PAYMENTS BY A PRINCIPA L TO HIS AGENT, IT NEEDS TO BE APPRECIATED, ARE ON A DIFFERENT FOOTING INASMUCH AS THE EXPENDITURE, EVEN IF THROUGH THE AGENT, IS INCURRED BY THE LATTER FOR AND ON BEH ALF OF THE FORMER. THE INCLUSION OF SAME AMONGST THE EXCEPTING CLAUSES OF R. 6DD, SUBJE CT TO THE CONDITIONS SPECIFIED THEREIN, DOES NOT THEREFORE IMPINGE ADVERSELY ON TH E PAYMENT/S UNDER REFERENCE. WE, ACCORDINGLY, FINDING NOTHING ON RECORD TO CONTR ADICT THE ASSESSEES CASE, ACCEPT THE SAME, WHICH, FOR THE REASONS/S AFORE-STA TED, MAY NOT TO CONSTRUED AS HAVING A PRECEDENT VALUE, SO THAT THE ASSESSEE SUCC EEDS ON THE MERITS OF THE DISALLOWANCE U/S. 40A(3). WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER 14, 2018 SD/- SD- (N. K. CHOUDHRY) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 14.09.2018 /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: VIKAS MAHAJAN PROP. POOJA CO LLECTIONS ITA NO. 513/ASR/2016 (AY 2009-10) VIKAS MAHAJAN, JAMMU V. ITO 6 HOUSE NO. 136, KAILASH NAGAR TALLAB TILLO , JAMMU (2) THE RESPONDENT: INCOME TAX OFFICER, WARD 2( 3) JAMMU (3) THE CIT(APPEALS)- JAMMU (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T. TRUE COPY BY ORDER