Span Office Solution India Pvt. Ltd., Eachanari V. ITO, Coimbatore

ITA 963/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5800 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 20-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARV SREENIVASAN JCIT
• Assessee Lawyers: S SRIDHAR

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI ... , , # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ I.T.A. NO. 963/MDS/2017 / ASSESSMENT YEAR : 2012-13 M/S. SPAN OFFICE SOLUTIONS PVT. LTD., RATHINAM TECHNICAL CAMPUS, POLLACHI MAIN ROAD, EACHANARI 641 021. [PAN: AALCS 6711N] VS. INCOME TAX OFFICER, COMPANY WARD 3, COIMBATORE. ( / APPELLANT) ( / RESPONDENT) % & / APPELLANT BY : SHRI. S. SRIDHAR, ADVOCATE )*% & / RESPONDENT BY : SHRI. ARV SREENIVASAN, JCIT & /DATE OF HEARING : 15.11.2017 & /DATE OF PRONOUNCEMENT : 20.11.2017 /O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: ASSESSEE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1, COIMBATORE IN ITA NO. 98/20 15-16 DATED 27.01.2017 FOR ASSESSMENT YEAR 2012-13. :-2-: ITA NO. 963/MDS/2017 2. M/S. SPAN OFFICE SOLUTIONS INDIA PVT. LTD., THE ASSESSEE, IS IN THE BUSINESS OF WHOLESALE AND RETAIL TRADING IN COMPUTE RS AND FURNITURE ITEMS AND ALSO IN INTERIOR DECORATION AND OTHER CONSTRUCTION WORKS. IN THE ASSESSMENT MADE FOR THE ASSESSMENT YEAR 2012-13, THE AO FOUND THAT THE ASSESSEE HAD PENDING STOCK OF COMPUTER OF RS. 22,22,989/- AND HA D SOLD THEM FOR RS. 56,68,559/- TO A RELATED SECTION 25 COMPANY. THE A O REQUIRED THE ASSESSEE TO EXPLAIN HOW CAN IT CAN SELL SUCH ITEMS FOR RS. 5 6,68,559/- TO THE RELATED SECTION 25 COMPANY AND AFTER CONSIDERING THE ASSESS EES REPLY OUT OF PROFIT OF RS. 34,45,570/-, THE AO CONSIDERED 10% CAN BE CONSI DERED AS MAXIMUM GP THAT A PERSON CAN MAKE ON COMPUTER AND ACCESSORIES AND THE BALANCE OF RS. 31,01,013/- IS TREATED AS UNACCOUNTED PURCHASES AND ACCORDINGLY MADE AN ADDITION OF RS. 31,01,013/- UNDER THE HEAD UNACCOUN TED PURCHASES OF COMPUTERS. 3. THE NEXT ISSUE IS THAT THE AO NOTICED THAT THE A SSESSEE HAS PURCHASED CONSTRUCTION MATERIAL FOR RS. 59,97,262/- AND FOUND THAT THERE WERE SALE OF MATERIALS FOR RS. 34,61,224/- WHICH RESULTED IN A G P LOSS OF RS. 25,36,038/-. SO, THE AO REQUIRED THE ASSESSEE TO EXPLAIN WHAT HA S HAPPENED TO THE CONSTRUCTION MATERIALS. AFTER CONSIDERING ASSESSEE S REPLY, THE AO HELD THAT THE ASSESSEE COULD NOT EXPLAIN FOR RS. 28,24,405/- AND HENCE TREATED THIS AS UNACCOUNTED SALE OF MATERIALS AND ACCORDINGLY, ADDE D RS. 28,24,405/- UNDER THE HEAD UNACCOUNTED SALE OF MATERIALS. FURTHER, T HE AO HAS NOTICED THAT THE :-3-: ITA NO. 963/MDS/2017 ASSESSEE HAS CASH CREDIT IN THE CASH BOOK FROM M/S. CBAY SYSTEM PVT. LTD., TO THE TUNE OF RS. 17,06,561/- FOR WHICH THE ASSESSEE COULD NOT FURNISH ANY SATISFACTORY EXPLANATIONS AND THE ASSESSEE HAD NEGA TIVE CASH BALANCE OF RS. 7 LAKHS FROM DECEMBER ON WARDS IN ITS CASH BOOK. SIN CE, THE ADDITION OF RS. 28,24,405/- WAS MADE ON ACCOUNT OF UNACCOUNTED SALE OF MATERIALS, SHE HAS NOT MADE ANY SPECIFIC ADDITION ON THE ABOVE TWO ISS UES. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). 4. BEFORE THE CIT(A) IN RESPECT OF PROFIT OF SALE OF COMPUTERS, THE ASSESSEE SUBMITTED, INTER ALIA, THAT THE APPELLANT HAD ALREADY MADE A PROFIT OF RS. 34,45,570/- AND OFFERED IT AS INCOME AND THE AS SESSING OFFICER FAILED TO APPRECIATE THAT THE ASSESSEE HAD INCLUDED THE PROFI T OF RS. 31,01,013/- WHILE FILING THE RETURN. THE ASSESSING OFFICERS ACTION AMOUNTS TO DOUBLE ADDITION WHICH IS IMPERMISSIBLE IN LAW. THE CIT(A) HAS ACCE PTED SUCH EXPLANATIONS AND DELETED THIS ADDITION. WITH REGARD TO THE ADDI TION ON UNACCOUNTED SALE OF MATERIAL AT RS. 22,28,405/-, THE ASSESSEE SUBMITTED , INTER ALIA, THAT IT PURCHASED MATERIALS FOR RS. 59,97,262/- AND SOLD FO R RS. 34,61,224/- WHICH RESULTED IN A GP LOSS OF RS. 25,36,038/-. IT MADE THE SALE ONLY TO A COMPANY REGISTERED U/S. 25 OF THE COMPANIES ACT, DOING THE CHARITABLE ACTIVITIES IN THE FIELD OF EDUCATION. THE SALE OF ITEMS TO SUCH INST ITUTIONS AT A LESSER PRICE WHICH WAS NOT APPRECIATED BY THE AO. IT ALSO SUBM ITTED THAT THE SALE TO SISTER CONCERN AT A LESSER RATE IS WITHOUT ANY INTE NTION TO REDUCE THE PROFIT OF :-4-: ITA NO. 963/MDS/2017 THE COMPANY BUT ONLY FOR THE PURPOSE OF ENABLING T HE RECIPIENT INSTITUTION TO GET THE BENEFIT OF MATERIAL AT A CHEAPER RATE. THI S FACT WAS NOT APPRECIATED BY THE LEARNED ASSESSING OFFICER. IN VIEW OF THE A BOVE, IT IS SUBMITTED THAT THE ACTION OF THE ASSESSING OFFICER IN HOLDING THAT THE APPELLANT HAD MADE UNACCOUNTED SALE TO SISTER CONCERN (I.E., OUTSIDE B OOKS) IS NOT APPROPRIATE ON THE FACTS AND CIRCUMSTANCES OF THE CASE. THE CIT(A ) ACCEPTED THE SUBMISSION OF THE ASSESSEE STATING, INTER ALIA, THAT THE ASSES SING OFFICER HAS MADE THE ADDITION ON THE PRESUMPTION THAT THERE IS NO NEED FOR THE COMPANY TO RESORT TO A DISTRESS SALE OF MATERIAL, AS THEY CAN VERY WE LL USE IT SUBSEQUENTLY ALSO BY THE GROUP. THE ASSESSING OFFICER CANNOT STEP IN TO THE SHOES OF THE ASSESSEE IN DECIDING HOW TO USE THE MATERIALS. THE ASSESSING OFFICER WAS NOT ABLE TO PROVE HER CONCLUSIONS WITH EVIDENCE. THERE FORE, THE CIT(A) DELETED THIS ADDITION. HOWEVER, THE CIT(A) OBSERVED THAT T HE CASH RECEIPTS OF RS. 17,06,561/- APPEARED IN CASH BOOK AND THE NEGATIVE BALANCE OF RS. 7 LAKHS HAS NOT BEEN EXPLAINED SATISFACTORILY BY THE ASSESS EE AND THE ASSESSING OFFICER HAS NOT ADDED THEM FOR THE REASON THAT RS. 28,24,405/- HAS ALREADY BEEN ADDED ON BEHALF OF THE UNACCOUNTED SALE OF MAT ERIALS. SINCE, THE ADDITION OF RS. 28,24,405/- IS NOW DELETED, THE CAS H RECEIPTS AND NEGATIVE CASH BALANCE WILL HAVE TO BE CONSIDERED SEPARATELY. SINCE, THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF RS. 17,06,561/- AND THE R EASON FOR NEGATIVE CASH BALANCE OF RS. 7 LAKHS EVEN DURING THE COURSE OF AP PELLATE PROCEEDINGS, THE CIT(A) HELD THAT THE UNEXPLAINED CASH RECEIPTS AND NEGATIVE CASH BALANCE OF :-5-: ITA NO. 963/MDS/2017 RS. 24,06,561/- (RS. 17,06,561/- + RS. 7,00,000/-) IS ADDED TO THE INCOME OF THE ASSESSEE. 5. AGGRIEVED THE ASSESSEE FILED AN APPEAL BEFORE TH IS TRIBUNAL WITH THE FOLLOWING GROUNDS: 2. THE LEARNED ASSESSING OFFICER ERRED IN MAKING ADDITION OF RS. 24,06,561/- TOWARDS UNEXPLAINED CASH RECEIPTS AND N EGATIVE CASH BALANCE WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE PROPERLY. 3. THE LEARNED ASSESSING OFFICER HAS FAILED TO TAK E NOTE OF THE EXPLANATION GIVEN BY THE ASSESSEE AT THE TIME OF OR IGINAL ASSESSMENT HEARING WITH REGARDS TO THE SOURCE FOR RECEIPTS AND REASONS FOR SHOWING THE NEGATIVE CASH BALANCE IN THE BOOKS. 4. THE LEARNED ASSESSING OFFICER FAILED TO GIVE AD DITIONAL HEARING ON THIS SUBJECT AND FURTHER CLARIFICATIONS WERE NOT SOUGHT ON THIS MATTER AND IT WAS SOLELY DECIDED ON THE BACKGROUND OF THE SURMISES AR RIVED AT THE TIME OF ORIGINAL ASSESSMENT. 5. THE LEARNED ASSESSING OFFICER ERRED IN NOT CONS IDERING THE CLARIFICATION GIVEN AT THE TIME OF ORIGINAL ASSESSMENT WITH REGAR DS TO THE SOURCE OF CASH RECEIPTS AND CASH NEGATIVE BALANCE IN THE CASH BOOK OF THE ASSESSEE. 6. WITH REGARD TO THE CASH RECEIPTS AT RS. 17,06,56 1/- APPEARED IN CASH BOOK AND THE NEGATIVE BALANCE OF RS. 7 LAKHS, THE A R SUBMITTED THAT THE CIT(A) HAS NOT GIVEN AN OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE IMPUGNED ISSUES. PER CONTRA, THE DR SUPPORTED THE ORDER OF THE CIT(A) STATING THAT SINCE THE AO TELESCOPED THESE ISSUES IN TO THE UNAC COUNTED SALES, THE CIT(A) HAVING DELETING THE ADDITION OF UNACCOUNTED SALES H AS RIGHTLY SUSTAINED THEM. :-6-: ITA NO. 963/MDS/2017 7. WE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE ORDERS OF THE AO AND THE CIT(A). THE REVENUE IS NOT ON APPEAL ON AN Y OF THE ISSUES. HOWEVER, THE ASSESSEE PLEADS THAT THE CIT(A) HAS NO T GIVEN ANY OPPORTUNITY TO IT IN RESPECT OF THE ADDITIONS ON ACCOUNT OF CAS H CREDIT AND CASH SHORTAGE. IN VIEW OF THAT THE ADDITIONS MADE UNDER THE HEADS CASH CREDITS AND CASH SHORTAGES ARE REMITTED BACK TO THE AO FOR A FRESH E XAMINATION. THE AO AFTER AFFORDING DUE OPPORTUNITY TO THE ASSESSEE SHALL PAS S A SPEAKING ORDER. 8. IN THE RESULT, THE ASSESSEES APPEAL IS TREATED AS ALLOWED. ORDER PRONOUNCED ON MONDAY, THE 20 TH DAY OF NOVEMBER, 2017 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) ! ' /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) ' /ACCOUNTANT MEMBER /CHENNAI, 0 /DATED: 20 TH NOVEMBER, 2017 JPV & )12 32 /COPY TO: 1. %/ APPELLANT 2. )*% /RESPONDENT 3. 4 ( )/CIT(A) 4. 4 /CIT 5. 2 ) /DR 6. 7 /GF