ACIT, CHENNAI V. Rajsriya Automotive Industries Pvt. Ltd., CHENNAI

ITA 805/CHNY/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68867 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-12-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 26-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N DEVANATHAN
• Keywords: Retrospective amendment
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI S. S. GODARA, JUDICIAL MEMBER] I.T.A.NOS. 805 & 806/MDS/2013 ASSESSMENT YEARS : 2008-09 & 2009-10 THE ASSTT. COMMISSIONER OF INCOME-TAX COMPANY CIRCLE V(3) CHENNAI VS M/S RAJSRIYA AUTOMOTIVE INDUSTRIES PVT. LTD NO.95, GROUND FLOOR HARRINGTON ROAD, CHETPET CHENNAI 600 031 [PAN - AABCR 4226 K ] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB, ADDL. CIT RESPONDENT BY : SHRI N.DEVANATHAN, ADVOCATE DATE OF HEARING : 03-12-2013 DATE OF PRONOUNCEMENT : 03-12-2013 O R D E R PER S.S.GODARA, JUDICIAL MEMBER THESE APPEALS FILED BY THE REVENUE ARE DIRECTED A GAINST SEPARATE ORDERS OF THE COMMISSIONER OF INCOME-TAX ( APPEALS)-V, CHENNAI, BOTH DATED 31.1.2013, PASSED IN APPEAL NOS .121/2010-11 AND 112/2011-12 FOR ASSESSMENT YEARS 2008-09 AND 20 09-10, RESPECTIVELY, IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). I.T.A.NOS 805 & 806/13. :- 2 -: 2. IN THE COURSE OF HEARING, COMMON GRIEVANCE AGITATE D BY THE REVENUE IN BOTH APPEALS IS THAT THE CIT(A) HAS WRON GLY DELETED ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DIFFERENCE IN TURNOVER UNDER SALES TAX AND INCOME TAX DUE TO PRIC E REDUCTION/DISCOUNT ALLOWED TO CUSTOMERS AND THE ON E ON ACCOUNT OF SALES REJECTION/DAMAGES WHICH HAD NOT BEEN REPORTED TO SALES TAX AUTHORITIES. ACCORDINGLY, IT PRAYS FOR ACCEPTANCE OF APPEALS. 3. IN REPLY, THE ASSESSEE JUSTIFIES THE CIT(A)S ORDE RS AND PRAYS FOR CONFIRMATION THEREOF. SINCE BOTH PARTIES ARE IN UNISON THAT THE GROUNDS RAISED IN THE APPEALS ARE IDENTICAL, WE TAKE UP I.T.A.NO. 805 /MDS/2013 AS THE LEAD CASE. 4. THE ASSESSEE IS A COMPANY ENGAGED IN MANUFACTURE OF TWO WHEELER SPARES AND SUPPLIES THE SAME TO THE ORI GINAL EQUIPMENT MANUFACTURERS. ON 30.9.2008, IT HAD FILED ITS RETU RN DECLARING INCOME OF ` 12,26,59,620/-. 5. IN THE COURSE OF SCRUTINY, THE ASSESSING OFFICER NOTICED THAT IN PREVIOUS YEAR RELEVANT TO THE IMPUGNED ASSESSMEN T YEAR, THE ASSESSEE HAD DISCLOSED A TURNOVER OF ` 133,73,77,663/- TO THE SALES TAX I.T.A.NOS 805 & 806/13. :- 3 -: AUTHORITIES BY WAY OF SALES EFFECTED DURING THE PRE VIOUS YEAR 2007-08 EXCLUDING SALES TAX AND CENTRAL SALES TAX COLLECTED , WHEREAS IN THE PROFIT & LOSS ACCOUNT, IT BEEN ADMITTED TO THE TUNE OF ` 131,96,27,570/- AND IN THE SUB-SCHEDULE, IT HAD EXC LUDED SALES TAX AND CENTRAL SALES TAX. PER ASSESSING OFFICER, THIS LED TO A DIFFERENCE OF ` 1,77,50,093/- IN THE TOTAL TURNOVER. 6. ON BEING PUT TO NOTICE, THE ASSESSEE HAD PRODUCED ALL ITS DETAILS AND RECONCILIATION ALONGWITH BOOKS, SALES T AX AND VAT RETURNS DEMONSTRATING DISCOUNT AND PRICE REDUCTION OF ` 1,62,65,137/- ON SALES DEBIT BY PARTIES. NOT ONLY THIS, DETAILS OF LEDGER SALES DEBITS OF ` 1,10,54,29,151/- WERE ALSO PRODUCED BEFORE THE ASSE SSING OFFICER. IT IS TO BE SEEN FROM THE ASSESSMENT ORDER DATED 7.12. 2010 THAT THE ASSESSING OFFICER DID NOT AGREE TO THE ASSESSEES PLEAS AFORESAID AND HELD THAT GENERAL VOUCHERS OF CORRESPONDING DEBITS MADE IT APPARENT THAT THE ASSESSEE HAD MADE PROVISIONS FOR PRICE RE DUCTION ON THE LAST DAY OF THE YEAR AND SETTLED IT IN NEXT FINANCIAL YE AR. IN ASSESSING OFFICERS VIEW, DIFFERENT FIGURES HAD BEEN REPORTE D TO SALES TAX AUTHORITIES REGARDING PRICE REDUCTION AND DISCOUNT. HE OBSERVED THAT AS PER THE RECONCILIATION FIGURES, NO PROVISION TO THE AFORESAID EFFECT HAD BEEN CREATED. THEREFORE, THE ASSESSING OFFICER HELD THAT THE I.T.A.NOS 805 & 806/13. :- 4 -: DIFFERENCE BETWEEN THE FIGURES REPORTED TO SALES TA X AUTHORITIES AND INCOME TAX AUTHORITIES AS WELL AS ALLEGED EXPENSES OF ` 1,62,65,137/- DESERVED TO BE DISALLOWED AND ADDED BACK AS UNDISC LOSED INCOME U/S 68 OF THE ACT. SIMILARLY, THE ASSESSING OFFICER ALSO MADE ANOTHER ADDITION OF ` 14,84,956/- NOT REPORTED TO SALES TAX AUTHORITIES FROM SALES RETURNS. 7. IN ASSESSEES APPEAL, THE CIT(A) HAS DELETED BOTH ADDITIONS BY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES CASE PERTAINING TO ASSESSMENT YEARS 2003-04 AND 2006-07. THEREFORE, THE REVENUE IS AGGRIEVED. 8. WE HAVE HEARD THE PARTIES AND GONE THROUGH THE CASE FILE. THE ONLY ISSUE BETWEEN THE REVENUE AND THE ASSESSE E IS AS TO WHETHER THE DIFFERENCE IN SALES TAX AND INCOME TAX RETURNS AFORESAID IS LIABLE TO BE ADDED AS UNDISCLOSED INCOME OF THE AS SESSEE. IN THIS BACKDROP, WE NOTICE THAT THE TRIBUNAL IN ASSESSME NT YEARS 2002-03 AND 2006-07 IN I.T.A.NOS.2051 & 2052/MDS/2010 & C.O .NOS.9 & 10/MDS/2011 VIDE ORDER DATED 31.10.2012, HAS DECIDE D THE VERY ISSUE AGAINST THE REVENUE BY OBSERVING AS UNDER: I.T.A.NOS 805 & 806/13. :- 5 -: 3.6. IT IS NOT POSSIBLE TO INSIST THAT THE TURNOVER REPORTED BY AN ASSESSEE FOR THE PURPOSE OF CENTRAL EXCISE, SALES T AX AND INCOME-TAX MUST BE ALWAYS EQUAL. THERE MAY BE DIFF ERENCES IN THE QUANTUM OF SALES REPORTED UNDER THE RES PECTIVE LAWS MAINLY FOR REASON OF STATUTORY INTERVENTIONS. THE ASSESSEE HAS TO REPORT ITS TURNOVER TO CENTRAL EXCISE AUTHORITIE S AS SOON AS THE GOODS ARE RELEASED OUT OF ITS WAREHOUSE. IT IS QUI TE POSSIBLE THAT THERE MAY BE A POSSIBILITY OF ADJUSTMENT THERE AFTER, ON THE ULTIMATE PRICE OF CONSIGNMENT BASED ON THE NEGOTIAT IONS BETWEEN THE ASSESSEE AND THE BUYER. SUCH NEGOTIATIO NS MAY BE NECESSITATED BECAUSE OF VARIOUS FACTORS INCLUDIN G FALL AND RISE IN THE PRICE OF RAW MATERIALS OR REDUCTION IN THE DUTY RATE OR MISCLASSIFICATION OF GOODS FOR THE PURPOSE OF CENTR AL EXCISE ETC. THE ULTIMATE PAYMENT IS MADE BY THE BUYER ONLY AFTE R NEGOTIATIONS AND THE PRICES FINALLY DETERMINED. BUT THE CENTRAL EXCISE RULES DO NOT PERMIT AN ASSESSEE TO K EEP THE PRICE OF THE GOODS DESPATCHED IN A SUSPENDED ANIMAT ION FOR A LONG PERIOD. IF AT ALL AN ADJUSTMENT IS CALLED FOR , THE SAME SHOULD BE EFFECTED WITHIN THE TIME ALLOWED BY THE C ENTRAL EXCISE RULES. AFTER THE EXPIRY OF THAT PERIOD, IT IS NOT P OSSIBLE FOR AN ASSESSEE TO CHANGE THE FIGURES OF TURNOVER REPORTED BEFORE THE CENTRAL EXCISE AUTHORITIES. LIKEWISE, IN THE CASE OF SALES TAX ALSO, THE TURNOVER IS REPORTED ON THE BASIS OF THE INVOICES ISSUED AT THE TIME OF MAKING SALES. AFTER THE SALE S ARE MADE, THERE MAY BE OCCASIONS WHERE THE BUYERS WILL ASK FO R ADJUSTMENTS IN THE PRICE ON ACCOUNT OF VARIOUS REAS ONS. IT MAY BE BECAUSE OF SALES RETURNS, OR MAY BE BECAUSE OF D AMAGES, OR MAY BE BECAUSE OF FINAL PRICE DETERMINATION AND SO MANY SUCH OTHER COMMERCIAL FACTORS. HERE ALSO, IF AN AS SESSEE WANTS ANY SUCH ADJUSTMENT, WHICH HAS TO BE MADE WIT HIN A SHORT PERIOD, THE SAME IS PERMITTED BY THE STATUTE. ONCE THAT PERIOD IS OVER, THE ASSESSEE CANNOT MAKE ANY CHANGE IN THE TURNOVER REPORTED BEFORE THE SALES TAX AUTHORITIES, EVEN IF THE ASSESSEE IS RECEIVING A LESSER AMOUNT AGAINST THE S ALES MADE BY IT. BUT, WHEN THE TURNOVER IS FURNISHED FOR THE PURPOSE OF INCOME-TAX, THE SAID TURNOVER WOULD BE ON THE BASIS OF BOOKS OF ACCOUNT MAINTAINED BY IT. EVEN IF SUBSEQUENT ADJU STMENTS COULD NOT HAVE BEEN MADE IN THE RETURNS FILED UNDER CENTRAL EXCISE AND SALES TAX ACT, THE ADJUSTMENTS HAVE NECE SSARILY TO BE REFLECTED IN THE BOOKS OF ACCOUNT BECAUSE IT IS ON THAT BASIS THE PAYMENTS ARE SETTLED BETWEEN THE PARTIES. 3.7. BECAUSE OF THE ABOVE REASONS, IT IS ALWAYS POS SIBLE THAT THE ASSESSABLE TURNOVER FOR THE PURPOSE OF DIFFEREN T ENACTMENTS IS DIFFERENT FROM THE TURNOVER REFLECTED IN THE BOO KS OF ACCOUNT MAINTAINED BY AN ASSESSEE. THIS HAS EXACTLY HAPPEN ED IN THIS I.T.A.NOS 805 & 806/13. :- 6 -: CASE ALSO. THE ASSESSEE IS SUPPLYING ITS GOODS MAI NLY TO TVS LIMITED. M/S. TVS LTD. NEGOTIATES WITH THE ASSESSE E TO REDUCE THE ULTIMATE PRICE OF THE CONSIGNMENT CORRESPONDING TO THE FALL IN THE PRICE OF RAW MATERIALS. CONVERSELY M/S. TVS LTD. ALSO AGREES WITH THE ASSESSEE TO ENHANCE THE PRICE ON AC COUNT OF ANY INCREASE IN THE PRICE OF RAW MATERIALS. THESE TYPES OF ADJUSTMENTS ARE FINALIZED AT THE END OF THE RELEVAN T PREVIOUS YEAR. THE ASSESSEE CANNOT RECORD THESE ADJUSTMENTS WITH RETROSPECTIVE EFFECT IN THE TURNOVER REPORTED FOR T HE SALES TAX AUTHORITIES. IT IS FOR THIS REASON THAT THERE IS A DIFFERENCE BETWEEN SALES TAX TURNOVER REPORTED BY THE ASSESSEE AND ITS SALES REFLECTED IN THE BOOKS OF ACCOUNT. BUT THE MOST IMPORTANT ASPECT IS THAT THIS DIFFERENCE HAS BEEN E XPLAINED BY THE ASSESSEE WITH THE HELP OF DOCUMENTARY EVIDENCES . 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE A GREE WITH THE FINDINGS OF THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT THERE IS NO BASIS FOR CONFIRMING THE ADDITION OF ` 21,11,402/-. THIS ADDITION MADE BY THE ASSESSING O FFICER ON ACCOUNT OF PRICE REDUCTION STANDS DELETED, AS HELD BY THE COMMISSIONER OF INCOME-TAX(APPEALS). THIS ISSUE IS DECIDED AGAINST THE REVENUE. SIMILARLY, IN RESPECT OF THE OTHER ADDITION ON ACC OUNT OF SALES REJECTION/DAMAGES, THE FINDINGS OF THE CO-ORDINATE BENCH READ AS UNDER: 5. THE SECOND ISSUE RAISED BY THE REVENUE IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN DE LETING THE ADDITION OF ` 12,87,118/- MADE ON ACCOUNT OF SALES REJECTION. FOR THE DETAILED REASONS GIVEN IN THE ABOVE PARAGRA PHS WHILE DEALING WITH THE ISSUE OF PRICE REDUCTION ADDITION, WHICH ARE APPLICABLE TO THE DAMAGES AS WELL, WE AGREE WITH TH E COMMISSIONER OF INCOME-TAX(APPEALS) THAT THERE IS N O JUSTIFICATION IN MAKING AN ADDITION OF ` 12,87,118/-. WE, THEREFORE, UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME- TAX(APPEALS) IN DELETING THE SAID ADDITION. THIS I SSUE IS ALSO DECIDED AGAINST THE REVENUE. I.T.A.NOS 805 & 806/13. :- 7 -: ON BEING GRANTED OPPORTUNITY TO REBUT THE FINDINGS OF THE TRIBUNAL, ONLY CONTENTION ADVANCED BY THE REVENUE IS THAT ITS APPEAL IS PENDING BEFORE THE JURISDICTIONAL HIGH COURT. IN OUR VIEW, THIS IS HARDLY A JUSTIFIABLE GROUND TO ADOPT A DIFFERENT APPROACH IN THE IMPUGNED ASSESSMENT YEAR. ACCORDINGLY, WE FOLLOW THE EARLIER ORDER OF THE TRIBUNAL AND CONFIRM THE FINDINGS UNDER CHALLENGE ARRIVED AT BY THE CIT(A). SAME ORDER TO FOLLOW IN I.T.A.NO.806/MDS/2013. 9. IN THE RESULT, THE APPEALS OF THE REVENUE STAND DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON TUESDAY, THE 03 RD OF DECEMBER, 2013, AT CHENNAI SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (S. S. GODARA) JUDICIAL MEMBER DATED: 03 RD DECEMBER, 2013 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR