Prashant Impex Pvt. Ltd., Kolkata V. PCIT-3, Kolkata, Kolkata

ITA 716/KOL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4564 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 11-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K SRIHARI
• Assessee Lawyers: VINOD KUMAR JAIN
• Keywords: Assessment record
• Section: 43B; 143(3); 14A; 115JB; 263; 63; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SHRI S.S. GODARA, JM & SHRI M.BAL AGANESH, AM ] I.T.A NO. 716/KOL/201 7 ASSESSMENT YEAR : 2012-1 3 PRASHANT IMPEX PVT. LTD. -VS- PR. CIT-3, KO LKATA [PAN: AABCP 5328 A] (APPELLANT) (RESPOND ENT) FOR THE APPELLANT : SHRI VINOD KUMAR JA IN, AR FOR THE RESPONDENT : SHRI P.K. SRIHARI, CIT DR DATE OF HEARING : 13.06.2018 DATE OF PRONOUNCEMENT : 01.08.2018 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE O RDER OF THE LEARNED PRINCIPAL COMMISSIONER OF INCOME TAX-3, KOLKATA [IN SHORT THE LD. CIT] IN MEMO NO. PR. CIT, KOL/U/S.263/AC,CIR-8(2)/2016-17/14935-14938 DATED 2 3.02.2017 PASSED U/S 263 OF THE ACT AGAINST THE ORDER PASSED BY THE DCIT, CIRCL E-8(2), KOLKATA [IN SHORT THE LD. AO] UNDER SECTION 143(3) OF THE INCOME TAX ACT, 196 1 [IN SHORT THE ACT] DATED 22.03.2015 FOR THE ASSESSMENT YEAR 2012-13. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD CIT WAS JUSTIFIED IN INVOKING REVISIONARY JURISDICTION U/S 263 OF THE AC T IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2 ITA NO.716/KOL/2017 PRASHANT IMPEX PVT. LTD. A.YR. 2012-13 2 3. THE BRIEF FACTS OF THIS APPEAL ARE THAT THE ASSE SSEE IS A PRIVATE LIMITED COMPANY AND IS AN AGENT OF LIQUOR, BOTTLING PLANT OF LIQUOR AND EN GAGED IN INVESTMENT ACTIVITIES. THE RETURN OF INCOME FOR THE ASST YEAR 2012-13 WAS ELEC TRONICALLY FILED BY THE ASSESSEE ON 30.9.2012 DECLARING TOTAL INCOME OF RS 43,10,479/- . THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 22.3.2015 DETERMINING THE TOTA L INCOME OF THE ASSESSEE AT RS 69,00,00/- UNDER THE NORMAL PROVISIONS OF THE ACT A ND RS 40,04,138/- U/S 115JB OF THE ACT. THE FOLLOWING ADDITIONS WERE MADE IN THE ASSE SSMENT UNDER NORMAL PROVISIONS OF THE ACT :- A) DISALLOWANCE U/S 14A READ WITH RULE 8D - RS 12,34,419/- B) DISALLOWANCE U/S 43B - RS 97,481/- C) ADDITION TOWARDS UNSECURED LOANS - RS 8, 00,000/- D) DISALLOWANCE OF FREIGHT, FORWARDING & LOADING EX PS-RS 4,30,385/- THE DISALLOWANCE U/S 14A OF THE ACT IN THE SUM OF R S 12,34,419/- WAS ALSO ADDED TO THE COMPUTATION OF BOOK PROFITS U/S 115JB OF THE ACT IN THE SAID ASSESSMENT. 4. LATER THIS ASSESSMENT WAS SOUGHT TO BE REVISED B Y THE LD CIT U/S 263 OF THE ACT BY TREATING THE ORDER PASSED BY THE LD AO AS ERRONEOUS IN AS MUCH AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE ON THE FOLLOWING GROUNDS:- IT WAS FOUND THAT THE ASSESSEE DERIVED INCOME FROM OPERATION OF RS. 4,24,86,369/- FROM WHICH EXCISE DUTY OF RS. 67,44,948/-, SALES TAX OF RS. 94,99,332/-; TCS OF RS. 1,14,270/- AND SERVICE TAX OF RS. 15,15,274/- WERE DEDUCTED TO ARRIVE AT NET INCOME FROM OPERATION OF RS. 2,46,12,545/-. THE NET INCOME WAS CREDITED TO THE CONCERNED PROFIT & LOSS ACCOUNT. AS PER NOTES FORMING PART OF FINANCIAL STATEMENT (N OTE NO. 2.6)- SALES ARE NET OFF RETURNS AND TRADE DISCOUNT. SALES INCLUDE EXCISE DU TY BUT EXCLUDE SALES TAX AND VAT. A. SINCE EXCISE DUTY WAS INCLUDED IN SALES THE AMOUNT OF EXCISE DUTY WAS DEDUCTED FROM SALES. SALES TAX WAS NOT INCLUDED IN SALES BUT THE SAME WAS ALSO DEDUCTED FROM SALES WHICH RESULTED IN UNDER ASSESSMENT OF SALES T O THE EXTENT OF SALES TAX OF RS. 94,99,332/-. HENCE, SALES TAX OF RS. 94,99,332/- DE BITED TO SALES WAS REQUIRED TO BE DISALLOWED AND ADDED BACK. OMISSION TO DO SO RESULT ED IN UNDER ASSESSMENT OF INCOME OF RS. 94,99,332/-. 3 ITA NO.716/KOL/2017 PRASHANT IMPEX PVT. LTD. A.YR. 2012-13 3 B. TCS IS A PREPAID TAX AND THE ASSESSEE IS ELIGIBLE F OR CLAIMING CREDIT OF THE SAME WHILE COMPUTING TAX PAYABLE. ACCORDINGLY, THE ASSES SEE CLAIMED TDS/TCS CREDIT OF RS. 1,16,597/- AND THE SAME WAS ALLOWED IN THE ASSE SSMENT. FURTHER, THE ASSESSEE CLAIMED DEDUCTION OF TCS OF RS. 1,14,270/- FROM SAL ES. TCS IS NOT DEDUCTIBLE FROM SALES BUT DEDUCTION OF THE SAME FROM SALES RESULTED IN REDUCTION OF INCOME. DEDUCTION OF TCS OF RS. 1,14,270/- CLAIMED BY THE A SSESSEE WAS REQUIRED TO BE DISALLOWED AND ADDED BACK. OMISSION TO DO SO RESULT ED IN UNDER ASSESSMENT OF INCOME OF RS. 1,14,270/-. 5. THE ASSESSEE STATED THAT THERE WERE CLERICAL ERR ORS IN THE NOTES TO ACCOUNTS IN POINT NO. 2.6. RELATED TO REVENUE RECOGNITION WHEREIN I T WAS MENTIONED AS UNDER:- SALES ARE RECOGNIZED , NET OF RETURNS AND TRADE DI SCOUNTS, ON TRANSFER OF SIGNIFICANT RISKS AND REWARDS OF OWNERSHIP TO THE B UYER, WHICH GENERALLY COINCIDES WITH THE DELIVERY OF GOODS TO CUSTOMERS. SALES INCLUDE EXCISE DUTY BUT EXCLUDE SALES TAX AND VALUE ADDED TAX. THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE RESPO NDED TO THE SHOW CAUSE NOTICE ISSUED BY THE LD CIT AS UNDER:- TO DT: 23.02.2017 THE PR. COMMISSIONER OF INCOME TAX-3/KOLKATA AAYAKAR BHAWAN P-7, CHOWRINGHEE SQUARE KOLKATA-700069. DEAR SIR, REF: PR. CIT-3/KOL/AC, CIT-8(2)/U/S.263/16-17/4091,DATE D 13.02.2017 SUB: IN THE MATTER OF PRASANT IMPEX PVT. LTD, A.Y.2012- 13 SHOW CAUSE NOTICE U/S 263(1) OF THE I.T.AC T, 1961 . WE AS AUTHORIZED REPRESENTATIVE ABOVE NAME OF THE C OMPANY ARE SUBMITTING THE FOLLOWING SUBMISSION IN RESPONSE TO YOUR ABOVE CAUS E NOTICE. 1. THAT THE APPREHENCE OF UNDER ASSESSMENT INCOME BY R S. 94,99,332/- AND RS. 1,14,270/- IS MISPLACED. AS THE SALES TAX AMOUNT OF RS. 94,99,332 & TCS OF RS. 1,14,270/- WERE INCLUDED IN THE GROSS AMOUNT OF SAL E OF PRODUCE STATED IN NOTE 18: REVENUE FROM OPERATIONS, CLAUSE (A) AMOUNTING OF RS . 2,62,59,695/-. 2. THAT THE AO INITIATED THE RECTIFICATION PROCEEDING UNDER SECTION 154 OF THE ACT AFTER PASSING THE ORDER U/S 143(3) OF THE ACT, ON 02.07.2 015 ON THE SAME SUBJECT, SALES TAX & TCS WRONGLY ALLOWED. 4 ITA NO.716/KOL/2017 PRASHANT IMPEX PVT. LTD. A.YR. 2012-13 4 3. THAT IN RESPONSE THEREOF THE COMPANY SUBMITTED LETT ER DATED 14.07.2015. THE COMPANY EXPLAINED THAT GROSS SALES INCLUDE EXCISE D UTY, SALES TAX, AND TCS COLLECTED FROM VENDOR. THAT IN SAME LETTER THE COMP ANY ADMITTED THAT REMARK GIVEN IN NOTE NO. 2.6 REVENUE RECOGNITION STATING SALE S INCLUDES EXCISE DUTY BUT EXCLUDES SALES TAX AND VAT, WAS A CLERICAL TYPING ERROR MADE BY THE AUDITOR OF THE COMPANY IN ITS AUDITED ANNUAL ACCOUNTS OF THE COMPA NY FOR THE YEAR ENDED ON 31 ST MARCH, 2012. FOR THE PURPOSE, THE AUDITOR OF THE CO MPANY ISSUED THE CLARIFICATION LETTER DATED 14.07.2015, SAID CLARIFICATION LETTER WAS FILED ALONG WITH LETTER OF THE COMPANY. 4. THAT DURING THE COURSE OF PROCEEDING THE COMPANY AL SO FILED A STATEMENT OF SALES PARTY WISE HAVING DETAILS OF QUANTITY, RATE, GROSS TOTAL, GOODS VALUE, SALE TAX, EXCISE DUTY & TCS. ON SUBMISSION THE MATTER WAS DISCUSSED AND DECIDED. THERE WAS NO INSTANCE OF ANY UNDER REPORTING/ASSESSMENT OF INCOM E THE COMPANY. THE CONFUSION CREATED BY TYPOGRAPHICAL ERROR IN THE NOTES WAS CLE ARED. 5. THAT ABOVE FACTS COULD BE VERIFIED FROM THE ASSESSM ENTS RECORDS OF THE COMPANY. 6. THAT ON FACTS THERE IS NO UNDER STATEMENTS OF INCOM E AS POINTED OUT IN OUR CAUSE NOTICE THEREFORE WE REQUEST YOU KINDLY DROP THE PRO CEEDINGS. THANKING YOU, YOURS FAITHFULLY V.K. JAIN (AR) 6. THE LD CIT HOWEVER IGNORED THE ENTIRE CONTENTIO NS OF THE ASSESSEE TOGETHER WITH THE DETAILS AND EXPLANATIONS OFFERED IN RESPONSE TO SHO W CAUSE NOTICE AND PROCEEDED TO SET ASIDE THE ORDER OF THE LD AO TREATING THE SAME AS E RRONEOUS IN AS MUCH AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND PASSED AN ORDER U/S 263 OF THE ACT. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS. FROM THE F ACTS AVAILABLE ON RECORD, WE FIND THAT THE LD AO HAD ISSUED A NOTICE U/S 154 OF THE ACT DA TED 2.7.2015 TO RECTIFY THE MISTAKE APPARENT FROM RECORD IN THE ASSESSMENT COMPLETED U/ S 143(3) OF THE ACT ON 27.3.2015 FOR THE ASST YEAR 2012-13 ON THE FOLLOWING GROUND:- SALES TAX AND TCS WRONGLY ALLOWED 5 ITA NO.716/KOL/2017 PRASHANT IMPEX PVT. LTD. A.YR. 2012-13 5 THE ASSESSEE GAVE A REPLY DATED 14.7.2015 STATING T HAT IN THE BALANCE SHEET NOTE NO. 18, GROSS SALES INCLUDES EXCISE DUTY, SALES TAX AND TCS COLLECTED FROM VENDOR WHICH HAS BEEN DEDUCTED TO DERIVE NET SALES BUT IN BALANC E SHEET, NOTE NO. 2.6, REVENUE RECOGNITION , IT WAS STATED THAT SALES INCLUDES EX CISE DUTY BUT EXCLUDES SALES TAX AND VAT WHICH WAS CLERICAL TYPING ERROR FOR WHICH A CER TIFICATE WAS ENCLOSED FROM A CHARTERED ACCOUNTANT. TCS DEDUCTED IN NOTE NO. 18 IS THE TCS COLLECTED BY THE ASSESSEE ON THE SALES FROM VENDOR WHICH WAS LATER D EPOSITED TO THE ACCOUNT OF THE CENTRAL GOVERNMENT. THE ASSESSEE SELLS ALCOHOLIC L IQUOR ON WHICH THEY HAD TO COLLECT TCS FROM THE VENDOR OF THE SALES AMOUNT. IT WAS DU LY CLARIFIED BY THE ASSESSEE THAT THE TAX CREDIT CLAIMED BY IT WHILE COMPUTING THE TAX LI ABILITY IN THE FORM OF TCS / TDS WAS NOT THE TAX COLLECTED AT SOURCE FROM THE SALE OF LI QUOR MADE BY THE ASSESSEE. THE ASSESSEE DULY PLACED THE CLARIFICATION IN THE FORM OF LETTER DATED 14.7.2015 FROM A CHARTERED ACCOUNTANT ALONG WITH THE REPLY TO SECTIO N 154 NOTICE BEFORE THE LD AO STATING THAT THERE WAS A CLERICAL TYPING ERROR IN THE NOTES ON ACCOUNTS POINT NO. 2.6. REVENUE RECOGNITION. IT WAS SPECIFICALLY CLARIFIED THAT T HE CORRECT NOTES ON ACCOUNTS THEREON WOULD BE AS UNDER:- SALES ARE RECOGNIZED , NET OF RETURNS AND TRADE DI SCOUNTS, ON TRANSFER OF SIGNIFICANT RISKS AND REWARDS OF OWNERSHIP TO THE B UYER, WHICH GENERALLY COINCIDES WITH THE DELIVERY OF GOODS TO CUSTOMERS. SALES INCLUDE EXCISE DUTY, SALES TAX, TCS AND VALUE ADDED TAX. (UNDERLINING PROVIDED BY US) THIS CLARIFICATION LETTER OF CHARTERED ACCOUNTANT I S ENCLOSED IN PAGE 88 OF THE PAPER BOOK. 7.1. WE FIND THAT THE ASSESSEE IN THE AUDITED FINAN CIAL STATEMENTS IN NOTE NO. 18 HAD DISCLOSED THE REVENUE FROM OPERATIONS AS UNDER:- SALE OF MANUFACTURED GOODS RUM 97,51,298/- WHISKY 59,16,872/- GIN 1,05,91,525/- 6 ITA NO.716/KOL/2017 PRASHANT IMPEX PVT. LTD. A.YR. 2012-13 6 ----------------- TOTAL SALE OF PRODUCTS 2,62,59,695/- ----------------- SALE OF SERVICES BOTTLING CHARGES 1,62,26,674/- ----------------- TOTAL SALE OF SERVICES 1,62,26,674/- ----------------- (A) TOTAL SALE OF PRODUCTS 2,62,59,695/- (B) TOTAL SALE OF SERVICES 1,62,26,674/- (C ) LESS: EXCISE DUTY 67,44,948/- SALES TAX 94,99,332/- TAX COLLECTED AT SOURCE 1,14,270/- SERVICE TAX 15,15,274/- ------------------- 1,78,73,824/- --------------------- NET REVENUE FROM OPERATIONS (A) + (B) (C ) 2,46,12,545/- --------------------- 7.2. WE FIND THAT THE TAX COLLECTED AT SOURCE OF RS 1,14,270/- REPRESENTS TCS COLLECTED FROM BUYERS AS PER SECTION 206C OF THE ACT. IN TH E CASE OF SALE OF ALCOHOLIC BEVERAGES FOR HUMAN CONSUMPTION, THE ACT AUTHORIZE THE SELLER TO COLLECT FROM THE BUYER , THE APPLICABLE TCS WHICH IS INCLUDED IN THE INVOICE RAI SED ON THE BUYER AND THE SAID TCS WAS DULY REMITTED BY THE ASSESSEE TO THE ACCOUNT OF THE CENTRAL GOVERNMENT. THE ASSESSEE ALSO HAD PLACED THE ENTIRE DATE WISE AND P ARTY WISE SALES STATEMENT FOR THE PERIOD 1.4.2011 TO 31.3.2012 CLEARLY MENTIONING THE QUANTITY, RATE PER CASE, VALUE OF GOODS, VALUE OF SALES TAX, VALUE OF EXCISE DUTY AND VALUE OF TCS AS TABULATED ABOVE. THE ASSESSEE HAD ALSO PLACED THE SAMPLE INVOICES TO JUS TIFY ITS CLAIM IN THE SALES STATEMENT. THESE DETAILS WITH EVIDENCES WERE FILED BEFORE THE LD AO WHICH ARE PART OF THE 7 ITA NO.716/KOL/2017 PRASHANT IMPEX PVT. LTD. A.YR. 2012-13 7 ASSESSMENT RECORDS. THE LD CIT FACTUALLY MISUNDER STOOD THE TCS DEDUCTED TO THE CREDIT OF THE ASSESSEE HEREIN WITH THE TCS COLLECTED BY TH E ASSESSEE ON BEHALF OF THE BUYER OF LIQUOR AND ERRONEOUSLY APPLIED THE PROVISIONS OF SE CTION 40(A)(II) OF THE ACT AND STATED THAT THE TCS IS NOT ALLOWED AS A DEDUCTION. THE AB OVE FACTS WITH TABULAR STATEMENTS CLEARLY DEPICT THE TREATMENT OF TCS BY THE ASSESSEE . WE HOLD THAT THE LD CIT GOT CLEARLY CONFUSED WITH THE TCS DEDUCTED BY ASSESSEE WITH TCS DEDUCTED ON BEHALF OF THE ASSESSEE. THERE IS NO DISPUTE THAT THE TCS COLLECTE D BY THE ASSESSEE FROM THE BUYER OF LIQUOR FROM THE ASSESSEE, HAD BEEN DULY REMITTED TO THE ACCOUNT OF THE CENTRAL GOVERNMENT BY THE ASSESSEE. HENCE WE HAVE NO HESITA TION IN HOLDING THAT THERE IS ABSOLUTELY NO ERROR COMMITTED EITHER BY THE ASSESSE E WITH REGARD TO TCS, SALES TAX AND EXCISE DUTY OR BY THE LD AO. HENCE THE ORDER OF TH E LD AO CANNOT BE TREATED AS ERRONEOUS WARRANTING REVISIONARY JURISDICTION U/S 2 63 OF THE ACT. WE ALSO FIND THAT THE LD CIT HAD WRONGLY STATED THAT THE NON-ENQUIRY WITH RE FERENCE TO SECTION 40(A)(II) AND SECTION 145A OF THE ACT HAD MADE THE ORDER OF THE L D AO ERRONEOUS IN AS MUCH AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. WE A LSO FIND FROM THE TAX AUDIT REPORT IN ANNEXURE A TO FORM 3CD ENCLOSED IN PAGE 62 OF SUPPL EMENTARY PAPER BOOK WHEREIN THE METHOD OF VALUATION OF INVENTORIES IS MENTIONED AND THE ITEMS INCLUDED IN THE VALUATION OF INVENTORIES. IT WAS SPECIFICALLY STAT ED THAT THE EXCISE DUTY IN RESPECT OF GOODS MANUFACTURED IS ACCOUNTED UPON REMOVAL OF GOO DS FROM THE FACTORY. THIS GOES TO PROVE THAT THERE IS NEITHER A DEBIT TOWARDS EXCISE DUTY IN THE PROFIT AND LOSS ACCOUNT ( IN RESPECT OF GOODS LYING IN CLOSING STOCK) FOR CONSEQ UENTIAL INCLUSION OF THE SAME IN THE VALUATION OF CLOSING STOCK AS PER SECTION 145A OF T HE ACT. HENCE WE HOLD THAT THERE IS NO VIOLATION OF SECTION 145A OF THE ACT. ALL THESE DETAILS WERE DULY AVAILABLE BEFORE THE LD AO HIMSELF WHICH HAS BEEN DULY APPRECIATED BY TH E LD AO WHILE FRAMING THE ASSESSMENT BY NOT MAKING ANY ADDITION TOWARDS THE S AME. WITH REGARD TO ONE MORE ASPECT OF APPLICABILITY OF PROVISIONS OF SECTION 43 B OF THE ACT, WE FIND THAT THE LD AO HAD ELABORATELY LOOKED INTO THE DISALLOWANCE U/S SE CTION 43B OF THE ACT IN THE ASSESSMENT AND HAD EVEN MADE DISALLOWANCE OF RS 97, 481/- U/S 43B OF THE ACT IN THE 8 ITA NO.716/KOL/2017 PRASHANT IMPEX PVT. LTD. A.YR. 2012-13 8 ASSESSMENT. HENCE THERE IS ABSOLUTELY NO ERROR IN THE ACTION OF THE LD AO AS ALLEGED BY THE LD CIT. 7.3. IN VIEW OF THE AFORESAID OBSERVATIONS, WE HOLD THAT THE ORDER OF THE LD AO IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERESTS OF THE R EVENUE WARRANTING REVISIONARY JURISDICTION U/S 263 OF THE ACT. HENCE WE HAVE NO H ESITATION TO QUASH THE REVISION ORDER PASSED BY THE LD CIT U/S 263 OF THE ACT. ACCORDINGL Y, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE COURT ON 01.08.2018 SD/- SD/- [S.S. GODARA] [ M .BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 01.08.2018 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. PRASHANT IMPEX PVT. LTD., C/O, RSVPC & COMPANY, 41A, A.J.C. BOSE ROAD, SUITE NO.613. 2. PR. CIT-3, KOLKATA, P-7, CHOWRINGHEE SQUARE, AAY AKAR BHAWAN, KOLKATA-700069. 3..C.I.T.(A)- 4. C.I.T .- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S