FIRST DIRECT MARKETING P. LTD, MUMBAI V. IITO 8(1)-4, MUMBAI

ITA 6408/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9501 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 27-11-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 19-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: RAJENDRA C THAKKAR
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F , MUMBAI BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 6408/MUM/2011 ASSESSMENT YEAR : 2007-08 FIRST DIRECT MARKETING P. LTD. B/7, RAJ RATTAN CO-OP HSG. SOC. LTD. NEAR MUNICIPAL GARDEN SERVICE ROAD JOGESHWARI (E) MUMBAI-400 060. PAN NO. AAACF 0911 G VS. INCOME TAX OFFICER WARD 8-(1)-4 206, 2 ND FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJENDRA C. THAKKAR RESPONDENT BY : SHRI A.B. KOLI DATE OF HEARING : 27.11.2012 DATE OF PRONOUNCEMENT : 27.11.2012 O R D E R PER RAJENDRA SINGH, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER D ATED 11.7.2011 OF CIT(A) FOR THE ASSESSMENT YEAR 2007-08. T HE ONLY DISPUTE RAISED BY THE ASSESSEE IS REGARDING ADDITION OF RS. 6,13,028/- MADE BY AO IN THE ASSESSMENT WHICH HAS BEEN CONFIRMED BY CIT(A). 2. FACTS IN BRIEF ARE THAT THE AO DURING THE ASSESSMENT P ROCEEDINGS NOTED THAT THE ASSESSEE HAD ADDED A SUM OF RS.3,06,514/- TO THE PURCHASES ON ACCOUNT OF DISCOUNT /RATE DIFFERENCE. THE AO T HEREFORE ITA NO.6408/M/11 A.Y. 07-08 2 ASKED THE ASSESSEE TO EXPLAIN AS TO WHY ADDITION SHOULD NO T BE MADE ON THIS ACCOUNT. THE ASSESSEE EXPLAINED THAT THE AMOUNT AD DED TO THE PURCHASES WAS SALE DISCOUNT WHICH HAD BEEN WRONGLY ADDED T O THE PURCHASES INSTEAD OF REDUCING FROM THE SALES. ASSESSEE GAVE D ETAILS OF SALES DISCOUNT PURCHASE-WISE. THE ASSESSEE ALSO PRODUCED THE DE TAILS OF LEDGER ACCOUNTS TO SUPPORT THE CLAIM. THE AO HOWEVER DID NOT ACCEPT THE EXPLANATION GIVEN AND THE AMOUNT OF RS.3,06 ,514/- ADDED TO THE PURCHASES WAS REDUCED FROM PURCHASES AND FURTHER ADD ITION OF THE SAME AMOUNT WAS MADE TO THE TOTAL INCOME. THE AO T HUS MADE TOTAL ADDITION OF RS.6,13,028/-. 3. THE ASSESSEE REITERATED THE SAME SUBMISSIONS BEFORE CIT( A) THAT THE AMOUNT OF RS.3,06,514/- WAS ACTUALLY SALES DISC OUNT ALLOWED TO THE PARTIES WHICH HAD BEEN DULY RECORDED IN THE B OOKS OF ACCOUNT. INSTEAD OF REDUCING THE SAME FROM SALES, THE ASSESSEE HAD AD DED IT TO PURCHASES BY MISTAKE BUT THERE WAS NO IMPACT ON THE PROFI T. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAD FURNISHED DETAILS OF P ARTY-WISE PURCHASES, SALES, COPY OF LEDGER ACCOUNT OF BUYERS SHOWING DISCOUNT ON SALE BILLS THROUGH CREDIT NOTES ETC. ALONG WITH COPY OF CORRESPONDING SALE BILLS TO EXPLAIN THAT THE IMPUGNED AMOUNT WAS IN FACT SALES DISCOUNT WHICH WERE NOT CONSIDERED BY AO. CIT(A) HOWEVER DID NOT ACCEPT THE CONTENTION RAISED. IT WAS OBSERVED BY HIM THAT THE ASSESSEE HAD INFLATED PURCHASES AS WELL AS SALES IN ORDER TO OBTAIN BETTER LOAN ITA NO.6408/M/11 A.Y. 07-08 3 FACILITY FROM THE BANK. THE ENTRY PASSED BY THE ASSESSEE WAS TO MISLEAD THE FINANCIAL INSTITUTIONS TO SECURE LOAN AND T HEREFORE, THE STATEMENT OF ACCOUNT SUBMITTED BY THE ASSESSEE COULD NOT BE RELIED UPON. CIT(A) THEREFORE CONFIRMED THE ADDITION MADE B Y THE AO AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 4. BEFORE US, THE LD. AR REITERATED THE SUBMISSIONS MAD E BEFORE LOWER AUTHORITIES WHEREAS THE LD. DEPARTMENTAL REPRESE NTATIVE PLACED RELIANCE ON THE ORDER OF CIT(A). 5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING ADDITION MADE BY A O AMOUNTING TO RS.6,13,028/- ON ACCOUNT OF DISCOUNTS. THE CASE OF THE ASSE SSEE IS THAT IT HAD ALLOWED TOTAL SALES DISCOUNT OF RS.3,06,514/ - TO DIFFERENT PARTIES IN RESPECT OF ALL THREE BRANCHES WHICH INSTEAD OF BEING REDUCED FROM SALES HAD BEEN INADVERTENTLY ADDED TO THE PURCHASE S WHICH HAD NOT AFFECTED THE PROFIT DECLARED BY THE ASSESSEE. THE ASSESS EE HAD ALSO GIVEN FULL DETAILS OF PARTY-WISE PURCHASES, SALES, COPY OF LEDGER ACCOUNT OF BUYERS SHOWING DISCOUNT ON SALE BILLS ALONG WITH CORRESP ONDING SALE BILLS TO DEMONSTRATE THAT THE IMPUGNED AMOUNT WAS DIS COUNT ALLOWED ON SALE BILLS. THESE DETAILS HAVE NOT BEEN ACCEPTED WITHO UT POINTING OUT ANY DEFECT BY THE AO. CIT(A) HAS ALSO REJECTED THE SAME AFTER OBSERVING THAT THE ASSESSEE HAD INFLATED THE PURCHASES AND SALES TO GET LOAN FACILITIES AND THEREFORE ACCOUNTS COULD NOT BE R ELIED UPON. THE ITA NO.6408/M/11 A.Y. 07-08 4 VIEW TAKEN BY CIT(A) CAN NOT BE UPHELD AS BY DEBITING THE AMOUNT TO THE PURCHASES INSTEAD OF REDUCING THE SAME FROM SALES, HA S NO EFFECT ON THE PROFIT AND, THEREFORE, IT IS NOT UNDERSTOOD AS TO HOW THE ASSESSEE COULD IMPRESS THE BANK FOR BETTER LOAN BY ADOPTIN G THIS PRACTICE AS THE RELEVANT FACTOR BONDS WOULD BE, TO CONSIDE R PROFIT AND NOT SALES WHILE SANCTIONING LOAN. IN OUR VIEW THE APPR OACH ADOPTED BY THE AUTHORITIES BELOW TO DEAL WITH THE PROBLEM CAN NO T BE APPRECIATED. WHEN THE ASSESSEE PRODUCES EVIDENCE TO SHOW THAT THE AMOUNT WAS ACTUALLY DISCOUNT ALLOWED ON SALES AND BY MISTAKE ADDED T O THE PURCHASES, NO ADDITION CAN BE MADE AS PROFIT REMAINED T HE SAME. NOT ONLY AO ADDED THE SUM OF RS.3,06,514/- BUT HAD MADE DOUBLE ADDITION BY TREATING THE AMOUNT AS PURCHASE DISCOUNT WHICH HAS ALSO BEEN DISALLOWED. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ADDITION MADE BY AO AND CONFIRMED BY CIT(A) IS REQUIR ED TO BE DELETED. WE, THEREFORE, SET ASIDE THE ORDER OF CIT(A) AND DELETE THE ADDITION MADE. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.11.2012 SD/- SD/- (VIJAY PAL RAO ) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 27.11.2012. JV. ITA NO.6408/M/11 A.Y. 07-08 5 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.