Adelta Optec, Yamunanagar V. ITO, Yamunanagar

ITA 752/CHANDI/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9891 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 10-03-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 27-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: A K SUD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.752/CHD/2015 (ASSESSMENT YEAR : 2006-07) ADELTA OPTEC, VS. THE INCOME TAX OFFICER, E-29, INDUSTRIAL AREA, WARD-4, YAMUNA NAGAR. YAMUNA NAGAR. PAN: AADFA2403R (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.K. SUD RESPONDENT BY : SHRI MANJIT SINGH, DR DATE OF HEARING : 05.05.2016 DATE OF PRONOUNCEMENT : 16.06.2016 O R D E R PER RANO JAIN, A.M . : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), PANCHKULA DATED 26.6.2015, RELATING TO ASSESSMENT YEAR 2006-07, PASSED UNDER SECTION 250(6 ) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD CLAIMED TDS OF RS.29,640/- ON THE BASIS OF CERTIFICATE ISSUED BY THE PRINCIPAL, MLN MEDICAL COLLEGE, ALLAHABAD. AS PER THIS CERTIFICATE, THE P AYMENT OF 2 RS.12,88,956/- WAS MADE BY THE PRINCIPAL DURING THE YEAR. HOWEVER, IT WAS NOTICED THAT THOUGH THE ASSE SSEE HAD CLAIMED TDS, THE INCOME CORRESPONDING TO IT WAS NOT DECLARED BY IT. ON AN ENQUIRY MADE FROM THE PRINCI PAL, MLN MEDICAL COLLEGE, ALLAHABAD VIDE LETTER DATED 12.11.2008, THE PARTY ENCLOSED THE COPY OF PROFORMA INVOICES AGAINST WHICH THE ASSESSEE HAD SUPPLIED SCIENTIFIC INSTRUMENTS TO THE INSTITUTE. ON A QUER Y RAISED BY THE ASSESSING OFFICER, THE ASSESSEE STATED THAT THESE WERE PROFORMA INVOICES ISSUED TO THE INSTITUTE IN T HE MONTH OF FEBRUARY, 2016, AS THE SAME WERE DEMANDED BY THEM IN ORDER TO RETAIN THEIR SANCTIONED FUNDS FROM LAPSING BY 31.3.2006. IT WAS ALSO STATED THAT FOR THE SUPPLY OF EQUIPMENTS VALUED AT RS.12,88,956, A PERFORMANCE BANK GUARANTEE HAD TO BE OBTAINED AT TH E RATE OF 10% OF THE VALUE OF INVOICES FOR WHICH REQU EST LETTER WAS GIVEN TO SBI, YAMUNA NAGAR TO ISSUE SAID GUARANTEE OF RS.1,28,895/- FOR A PERIOD OF 26 MONTH S FROM 25.4.2006 TO 23.6.2006 ON 25.4.2006. THE CLAIM OF THE ASSESSEE WAS THAT THE GOODS WERE DISPATCHED TO THE PRINCIPAL, MLN MEDICAL COLLEGE, ALLAHABAD AS ON 25.4.2006 THROUGH GOLDEN TRANSPORT SERVICES, YAMUNA NAGAR. THE PHOTOCOPIES OF THE RECEIPTS OF THE TRAN SPORT WERE SHOWN TO THE ASSESSING OFFICER AND IT WAS CLAI MED THAT THE SAME WERE CHECKED AT TRANSIT CHECK POINT A T GHAZIABAD, U.P. IT WAS ALSO CLAIMED THAT THE ROA D PERMIT ISSUED BY PRINCIPAL, MLN MEDICAL COLLEGE, ALLAHABAD WAS ALSO CHECKED AT GHAZIABAD, U.P. IT W AS 3 STATED THAT ONLY AFTER DELIVERY OF GOODS, THE PAYME NT IN RESPECT OF THESE WAS RECEIVED IN MAY, 2006. IN THI S WAY, IT WAS STATED THAT SINCE GOODS WERE SUPPLIED AS ON 25.4.2006, SAME WERE NOT TREATED AS SALE OF THE CUR RENT YEAR. THE ASSESSING OFFICER, CONSIDERING THE SALE RELATING TO THIS YEAR, MADE THE ADDITION. 3. BEFORE THE CIT (APPEALS), SIMILAR CONTENTIONS WERE REITERATED, HOWEVER, THE CIT (APPEALS) NOT AGR EEING WITH THE SAME, HELD THAT SINCE CONTRACT OF SALE HAS BEEN ENTERED AND THE BUYER HAS PERFORMED ITS PART, THE S ALE HAS TO BE TAKEN IN THE CURRENT YEAR. 4. THE ASSESSEE WENT IN APPEAL BEFORE THE I.T.A.T. , CHANDIGARH BENCH IN ITA NO.1265/CHD/2009, DATED 9.9.2010, AFTER CONSIDERING THE RIVAL SUBMISSIONS T HE I.T.A.T. SENT THE MATTER BACK TO THE ASSESSING OFFI CER TO RE-ADJUDICATE THE ISSUE OF COMPLETION OF CONTRACT A FTER CONSIDERING THE AVAILABLE EVIDENCE. 5. IN THE SECOND ROUND, THE ASSESSING OFFICER AGAI N MADE THE SAME ADDITION, WHICH HAS BEEN CONFIRMED BY THE CIT (APPEALS) AND CONSEQUENTLY, THE ASSESSEE HAS CO ME UP IN APPEAL BEFORE US, RAISING THE FOLLOWING GROUNDS OF APPEAL : 1. THAT THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) ARE CONTRARY TO LAW AND THE FACTS OF THE APPELLANT'S CASE. 4 2. THAT THE LD C1T (APPEALS) HAS ERRED IN CONFIRMING THE ADDITION OF RS.12,88,956/- DESPITE THE FACT THAT TH E ASSESSING OFFICER IN ITS ORDER OF REASSESSMENT DATED 21.12.2011 HAS CON FIRMED THE FACT THAT THE GOODS W ERE SUPPLIED ON 25.04.2006 AND PAYMENT RECEIVED ON 05.05.2006 I.E. IN THE NEXT YEAR ON THE PLEA THAT I N MERCANTILE SYSTEM OF ACCOUNTING ONCE THE ACCRUAL HA S TAKEN PLACE THE DELIVERY OF GOODS AND ACTUAL DATE O F RECEIPT OF PAYMENT IS NOT RELEVANT WHEREAS AS PER T HE SALES OF GOODS ACT THE SALES GETS EFFECTED ONLY WHEN THE GOODS ARE DELIVERED TO THE PURCHASER AND PAYMENT RECEIVED BY THE SELLER. 3. ANY OTHER GROUND THAT MAY BE TAKEN UP BEFORE THE APPEAL IS FINALLY HEARD AND DISPOSED OF. 6. THE LEARNED COUNSEL FOR THE ASSESSEE AGAIN REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND DREW OUR ATTENTION TO VARIOUS DOCUM ENTS FILED IN THE PAPER BOOK. THE SUM AND SUBSTANCE OF HIS ARGUMENTS WAS THAT WHAT WAS RAISED IN THE MONTH OF FEBRUARY WAS ONLY A PROFORMA INVOICE AND NOT THE IN VOICE AND THERE IS ENOUGH MATERIAL IN THE FORM OF GR AND CHECK POINT REPORT ETC. TO SHOW THAT THE GOODS WERE ACTUA LLY DELIVERED IN THE MONTH OF APRIL. IN THIS WAY, IT W AS SUBMITTED THAT THE SALES SHOULD BE TAKEN TO HAVE RE LATED TO THE NEXT YEAR. THE CLAIM OF TDS IN THIS YEAR WA S STATED TO BE JUST AN INADVERTENT ERROR. 7. THE LEARNED D.R. RELIED ON THE ORDER OF THE LOW ER AUTHORITIES AND SPECIFIC RELIANCE WAS PLACED ON A CONFIRMED COPY OF ACCOUNT FILED BY THE PRINCIPAL, M LN MEDICAL COLLEGE, ALLAHABAD, PLACED AT PAPER BOOK PA GE 23, 5 WHEREBY IT HAS BEEN CERTIFIED BY THE PRINCIPAL THAT THE GOODS WERE SUPPLIED AS ON 26.3.2006. 8. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. FIRST, WE WILL TRY TO ASSERT THE REAL FACTS OF THE CASE. THE UNDISPUTED FACTS ARE THAT IN RESPONSE TO THE PURCHA SE ORDERS DATED 10.2.2016, CERTAIN INSTRUMENTS WERE TO BE SUPPLIED BY THE ASSESSEE TO THE PRINCIPAL, MLN MEDI CAL COLLEGE, ALLAHABAD. AT PAPER BOOK PAGES 24 TO 27 A RE CERTAIN COPIES OF INVOICES, ALL DATED IN THE MONTH OF FEBRUARY, 2006. THE CLAIM OF THE ASSESSEE, ALTHOUG H, IS THAT THESE ARE NOT THE FINAL INVOICES, BUT ONLY PRO FORMA INVOICES, WHICH WERE ISSUED AT THE INSTANCE OF THE PRINCIPAL, SINCE HE WANTED NOT TO LAPSE THE BUDGET BY THE MONTH OF MARCH. REQUEST TO THE STATE BANK OF INDIA FOR ISSUE OF PERFORMANCE BANK GUARANTEE IN FAVOUR OF PRINCIPAL, MLN MEDICAL COLLEGE, ALLAHABAD FOR A PER IOD OF 28 MONTHS IS PLACED AT PAPER BOOK PAGE 28. THIS LE TTER IS DATED 25.4.2006. IN THIS LETTER, THE PERIOD STATED IS FROM 25.4.2006 TO 23.6.2008. THE DOCUMENTS RELATED TO G RANT OF BANK GUARANTEE ARE PLACED AT PAPER BOOK PAGE 29 ONWARDS. IN ALL THESE DOCUMENTS THE DATES REFERRED ARE 26.4.2006. PAPER BOOK PAGES 34 TO 38 ARE COPIES OF TRANSPORT RECEIPT AND ALSO SOME RECEIPT/CHALLAN FR OM THE CHECK POINT, GHAZIABAD, THESE ALL DOCUMENTS ARE DAT ED 25.4.2006. THE DESTINATION MENTIONED IN THAT OF 6 PRINCIPAL, MLN MEDICAL COLLEGE, ALLAHABAD, THE GOOD S MENTIONED ARE MICROSCOPES FROM ADELTA OPTEC, THE ASSESSEE. ON PERUSAL OF ALL THESE DOCUMENTS, WE DO NOT HESITATE TO INFER THAT THE GOODS WERE ACTUALLY DELI VERED AS ON 26.4.2006. HOWEVER, THERE IS A COPY OF ACCOUNT SUPPLIED BY THE PRINCIPAL, MLN MEDICAL COLLEGE, ALL AHABAD TO THE ASSESSING OFFICER, WHEREBY IT HAS BEEN STATE D THAT THE SUPPLY OF INSTRUMENTS WAS MADE AS ON 26.3.2006, IN PURSUANCE OF WHICH PAYMENTS WERE MADE THROUGH DEMAN D DRAFTS, A COPY OF EACH OF THESE WAS ALSO ENCLOSED W ITH THE PAPER BOOK. ALL THE BANK DRAFTS ARE MADE IN THE MO NTH OF APRIL. IT IS ALSO QUITE CLEAR THAT ON THIS BASIS A LONE, SINCE THE AMOUNT WAS CREDITED IN THE NAME OF THE ASSESSEE IN THE MONTH OF MARCH, THE TDS WAS DEDUCTED IN THIS YE AR. 9. ON CLOSE PERUSAL OF THESE DOCUMENTS, WE OBSERVE THAT THERE ARE AMPLE EVIDENCES TO PROVE THAT THE SU PPLY OF GOODS WAS MADE IN THE MONTH OF APRIL. ONLY CONTRAD ICTORY EVIDENCES IS IN THE FORM OF CONFIRMATION FILED BY T HE PRINCIPAL. HOWEVER, IN VIEW OF SUCH NUMBER OF DOCUMENTARY EVIDENCES, SCREAMING TO THE FACT OF SUP PLY BEING MADE IN THE MONTH OF APRIL. WE DO NOT HESITA TE TO IGNORE THIS CONFIRMATION. IN ANY CASE, IT IS A SEL F-SERVING DOCUMENT AND IS BASED ON THE ACCOUNT BOOKS MADE BY THE PRINCIPAL, MLN MEDICAL COLLEGE, ALLAHABAD ONLY. IN SUCH CIRCUMSTANCES, WE CAN ALSO PRESUME THAT ENTRIES IN THE BOOKS OF MLN MEDICAL COLLEGE WERE AT BEST MADE ON T HE BASIS OF PROFORMA INVOICES RAISED BY THE ASSESSEE. 7 10. IN VIEW OF THE ABOVE, WE HEREBY HOLD THAT THE GOODS IN QUESTION WERE ACTUALLY DELIVERED IN THE MO NTH OF APRIL. 11. NOW APPLYING THE LAW, IN SUCH FINDING OF FACT, THE QUESTION BEFORE US IS WHETHER THE SALE COULD BE CONSIDERED TO BE RELATED TO THE ASSESSMENT YEAR 200 6-07 OR 2007-08. ADMITTEDLY, NOW THE INVOICES WERE RAIS ED IN THE ASSESSMENT YEAR 2006-07, HOWEVER, GOODS WERE DELIVERED IN ASSESSMENT YEAR 2007-08. WE HAVE TO G ET TO THE POINT OF TIME AT WHICH THE SALE IS TO BE CONSID ERED AS INCOME OF THE ASSESSEE FOR INCOME-TAX PURPOSES. ON THE BASIS OF PRINCIPLES OF ACCOUNTANCY, THE REVENUE IS TO BE RECOGNIZED BY THE SELLER, WHEN HE HAD TRANSFERRED T HE PROPERTY IN GOODS TO THE BUYER FOR A CONSIDERATION. NORMALLY, WHEN THE SELLER TRANSFERS THE PROPERTY IN GOODS, IT ALSO TRANSFERS SIGNIFICANT RISKS AND REWARDS ON THE OWNERSHIP TO THE BUYER. HOWEVER, THERE MAY BE SITU ATION WHERE THE TRANSFER OF PROPERTY IN GOODS MAY NOT COI NCIDE WITH THE TRANSFER OF SIGNIFICANT RISKS AND REWARDS OF OWNERSHIP. EVEN, IN SUCH SITUATION ALSO, THE REVEN UE IS TO BE RECOGNIZED AT THE TIME OF TRANSFERRING SIGNIFICA NT RISKS AND REWARDS OF OWNERSHIP TO THE BUYER ONLY. THUS, IN ANY CASE, THE MAIN AND THE MOST IMPORTANT CRITERIA FOR REVENUE TO BE RECOGNIZED IS THE POINT OF TIME SIGNIFICANT R ISKS AND REWARDS ARE TRANSFERRED TO THE BUYER. IT IS TO BE KEPT IN MIND THAT THE TIME OF TRANSFER OF ALL SIGNIFICANT R ISKS AND REWARDS OF OWNERSHIP MAY BE DIFFERENT FROM THE TIME OF 8 TRANSFER OF LEGAL OWNERSHIP AND THAT REVENUE IN SUC H CASE SHOULD BE RECOGNIZED AT THE TIME OF TRANSFER OF SIG NIFICANT RISKS AND REWARDS OF OWNERSHIP TO THE BUYER. VARIO US FACTORS ARE TO BE CONSIDERED FOR ASCERTAINING THE T IME OF TRANSFERRING OF SUCH SIGNIFICANT RISKS AND REWARDS OF OWNERSHIP. FOR EXAMPLE, FACTORS LIKE, WHO BEARS TH E RISK OF DAMAGE DURING TRANSIT, WHETHER THE GOODS PRODUCE D ARE SUBSTANTIALLY COMPLETE, WHETHER THE BUYER CAN SELL THE GOODS TO ANOTHER PARTY OR PLEDGE THE SAME AFTER HAN DLING THE GOODS TO THE CARRIER ETC, WILL HAVE TO BE TAKEN INTO ACCOUNT IN DETERMINING THE TIME OF TRANSFER OF SIGN IFICANT RISKS AND REWARDS OF OWNERSHIP. THESE AND OTHER SU CH CONDITIONS HAVE ALSO BEEN PRESCRIBED IN AS-9 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. 12. NOW, APPLYING THE SAME CONDITION TO THE PRESE NT CASE, BY NO STRETCH OF IMAGINATION, IT CAN BE SAID THAT SIGNIFICANT RISKS AND REWARDS OF OWNERSHIP WERE TRANSFERRED TO THE PRINCIPAL, MLN MEDICAL COLLEGE, ALLAHABAD BY THE ASSESSEE IN THE ASSESSMENT YEAR 2 006- 07. THERE IS NO EVIDENCE EVEN TO SHOW THAT THE GOO DS WERE EARMARKED FOR BUYER BY THE ASSESSEE IN THIS YEAR. ONLY IN THE NEXT YEAR, THE GOODS WERE SENT FOR TRANSPORTATI ON TO THE BUYER. EVEN IF THE SO CALLED PROFORMA INVOICES I SSUED IN CURRENT YEAR, ARE TO BE TREATED AS FINAL INVOICES , CAN IT BE SAID THAT SIGNIFICANT RISKS AND REWARDS OF OWNERSHIP WAS TRANSFERRED TO BUYER IN THE CURRENT YEAR? THE ANSWER IS A CLEA R NO. IN VIEW OF THIS, WE HOLD THAT THE SALE CANNOT BE TREAT ED IN 9 THE HANDS OF THE ASSESSEE IN THE ASSESSMENT YEAR 20 06-07. THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADD ITION. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF JUNE, 2016. SD/- SD/- (H.L.KARWA) (RANO JAIN) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 16 TH JUNE, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE D R. ASSISTANT REGISTRAR, ITAT, CHANDIGARH