M/S BABA KANWAR RAM FRUIT CO.,ALWAR V. ITO, WARD-1(2), ALWAR, ALWAR

ITA 375/JPR/2025

AI Insights

The case involves M/s Baba Kanwar Ram Fruit Co., a firm engaged as a commission agent, which challenged the order of the Learned CIT(A) at the National Faceless Appeal Centre, Delhi. The dispute arose from the assessment year 2020-21, where the Assessing Officer made an addition of INR 49,16,194 as disallowed discount expenses claimed by the assessee. The CIT(A) upheld this addition, leading to the appeal before the Income Tax Appellate Tribunal. The Tribunal found that the Assessing Officer had not been provided with complete records initially, which hindered the verification of the claimed discounts. Consequently, the Tribunal remanded the case for a thorough examination of the submitted documents and a fresh assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 396520 (ITAT-JAIPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2020-2021
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GORAV AVASTHI
• Assessee Lawyers: P.C. PARWAL; MAKING; WAY OF
• Keywords: Opportunity of being heard
• Section: 142(1)

Judgement Text

"vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B-BENCH” JAIPUR Jh jkBkSM+ deys'k t;UrHkkbZ] ys[kk lnL; ,o Jh ujsUnz dqekj] U;kf;d lnL; ds le{k BEFORE: SHRI RATHOD KAMLESH JAYANTBHAI, AM & SHRI NARINDER KUMAR, JM vk;dj vihy la-@ITA No. 375/JPR/2025 fu/kZkj.k o\"kZ@Assessment Year : 2020-21 M/s Baba Kanwar Ram Fruit Co. New Subzi Mandi, Alwar. cuke Vs. The ITO, Ward-1(2), Alwar. LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: AALFB0861F vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Sh. P.C. Parwal, C.A. jktLo dh vksj ls@Revenue by: Sh. Gorav Avasthi, JCIT lquokbZ dh rkjh[k@Date of Hearing : 26/05/2025 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement: 26/05/2025 vkns'k@ORDER PER: Narinder Kumar, Judicial Member Appellant-assessee is a firm. It has challenged order dated 20.02.2025, passed by Learned CIT(A), National Faceless Appeal Centre, Delhi (in short “NFAC”) u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) The matter pertains to the assessment year 2020-21. 2 ITA No. 375/JPR/2025 M/s Baba Kanwar Ram Fruit Co., Alwar. The assessee was before NFAC, feeling aggrieved by the assessment order dated 05.09.2022, passed by the Assessing Officer. Vide impugned order, Learned CIT(A) dismissed the appeal filed by the assessee and consequently upheld the addition made. 2. As regards the addition, vide impugned order dated 05.09.2022, the Assessing Officer assessed total income of the assessee by making addition as depicted in the table below:- Sl. No. Description Amount (in INR) 1. Income as per return of income filed 19,46,350/- 2. Income as computed u/s 143(1)(a) 19,46,350/- 3. Add: disallowance of the discount paid 49,16,194/- 4. Total income/loss determined as per the above proposal 68,62,544/- 3. From the above said table, it is available that the Assessing Officer disallowed a sum of Rs. 49,16,194/- claimed by the assessee by way of discount expenses. 4. Since, the impugned assessment order has been upheld the assessee is feeling dissatisfied, present appeal has been argued. 5. Arguments heard. File perused. 6. In the course of arguments, Ld. AR for the appellant has candidly admitted that during assessment proceedings, as regards some of the 3 ITA No. 375/JPR/2025 M/s Baba Kanwar Ram Fruit Co., Alwar. parties, namely, Suhel Singh and Company, Milap Indor, Sachin Bhimraj Deshmukh and Nandi Onion, Jalandhar, the assessee had furnished only concise ledger account, which did not contain, and as such, did not depict any entry relating to commission, what to say of any such discount. Further submission of Ld. AR for the appellant is that in the paper book submitted before this Appellate Tribunal, the assessee has submitted copies of ledger accounts of Suhel Singh and Company, Milap Indor, Sachin Bhimraj Deshmukh and Nandi Onion, Jalandhar, and that to enable the AO to verify transactions recorded therein, and pass appropriate fresh orders on verified facts, matter may be remitted to the Assessing Officer. 7. As regards the above submission put forth by Ld. AR for the appellant, Ld. DR for the department submits that had complete record, instead of concise ledger accounts been made available by the assessee to the Assessing Officer, relevant transactions could be verified, but since the same were not produced, the Assessing Officer could had no opportunity to verify the same, and as such, the matter may be remitted to the Assessing Officer for verification of said facts and decide the matter afresh. 8. As is available from the assessment order, the assessee is engaged as commission agent, as regards onions. For the assessment year 2020- 4 ITA No. 375/JPR/2025 M/s Baba Kanwar Ram Fruit Co., Alwar. 21, the assessee declared its total income of Rs. 19,46,350/- as per return of income. Admittedly, the case was selected for scrutiny under CASS, notice u/s 143(2) of the Act was issued on 29.06.2021, followed by other notices u/s 142(1) of the Act. Complete scrutiny was to be made due to following two reasons:-  High value cash withdrawals reported in SFT or u/s 194N (business return)  Low income compared to large commission receipt. As per case of the department, on perusal of profit and loss account of the assessee for the assessment year 2020-21, it transpired that the assessee had debited a sum of Rs. 49,16,940/- towards discount expenses and claimed the same amount as expenditure. Vide notice dated 08.07.2022 issued u/s 142(1) of the Act, the assessee was asked by the department to justify the above said claim of discount expenses, by providing evidence, especially when the assessee was not depicting total purchase and sales in its books of accounts. However, the assessee did not submit any reply to the said notice. It was only on 08.08.2022, that the assessee submitted its reply to another letter issued to the assessee on 21.07.2022. Therein, the assessee claimed that 5 ITA No. 375/JPR/2025 M/s Baba Kanwar Ram Fruit Co., Alwar. the said firm has been charging commission generally @ 6% of the turnover on receipt of payments as per market guidelines, and that the assessee was required to pay discount @ 2% to such persons. In support of said claim, the assessee relied on confirmation letter issued by Alwar Fruit and Vegetable Association. In this way, the assessee claimed that the aforesaid amount of Rs. 49,16,194/- was the discount given as regards the commission amount paid to the assessee. The Assessing Officer considered the above said reply of the assessee and rejected the same. As observed by the Assessing Officer, the confirmation letter issued by association of Alwar Fruit and Vegetable market was only a declaration having no evidentiary value attached to it, the reason being that the said association was not taking part in the business of the assessee. Another ground for rejection of the claim was that the assessee did not furnish any copy of agreement from the persons from whom it had received commission, and to whom it claimed to have given discount. Furthermore, no confirmation letter from the said party was filed by the assessee. The Assessing Officer was of the view that the assessee failed to establish as to what was need for grant of discount to the parties making 6 ITA No. 375/JPR/2025 M/s Baba Kanwar Ram Fruit Co., Alwar. payment of commission, which made the said expenses to be abnormal having regard to the total commission of Rs. 1,47,29,746/-. 9. In para 3.4 of the assessment order, the Assessing Officer observed that the assessee had submitted confirmation of ledger only from some of concerned parties, but a perusal of the said confirmation revealed that major ledgers were found not containing any entry in respect of grant of discount, for example, the case of ledger confirmation submitted by Shri Sachin Bhimraj Deshmukh. Furthermore, the books of account of the assessee did not prove payment or adjustment of any amount by way of discount to its customers. By way of another example, reference was made to the extracts from the ledgers of Nandi Opinion Jalandhar and Suhel Singh & Co. submitted by the assessee on 08.08.2022, which were also found not having any entry in respect of grant of any such discount. 10. The Assessing Officer also observed in the assessment order that unless the assessee furnished documentary evidence, in support of its case as regards discount, the claim of the assessee could not be 7 ITA No. 375/JPR/2025 M/s Baba Kanwar Ram Fruit Co., Alwar. investigated, especially when the assessee was required to prove genuineness of such like expenses during each financial year. The Assessing Officer ultimately held that the assessee had failed to prove grant of any such discount. Accordingly, the assessment order leading to addition of Rs. 49,16,149/- was passed. 11. When the matter came up before NFAC, Learned CIT(A) was also of the opinion that the assessee had failed to discharge its onus regarding genuineness of payments, and accordingly, upheld disallowance of said expenditure as claimed by the assessee. 12. As noticed above, in the course of arguments, Ld. AR for the appellant has candidly admitted that during assessment proceedings, as regards some of the parties- Suheld Singh and Company, Milap Indor, Sachin Bhimraj Deshmukh and Nandi Onion, Jalandhar, the assessee had furnished only concise ledger accounts, which neither contained nor depicted any entry of commission, what to say of discount. As such, the transactions recorded in the copies of ledger accounts of Suhel Singh and Company, Milap Indor, Sachin Bhimraj Deshmukh and Nandi Onion, Jalandhar, subsequently submitted with the paper book, need to be verified 8 ITA No. 375/JPR/2025 M/s Baba Kanwar Ram Fruit Co., Alwar. for the purposes of payments of commission to the assessee, and grant of discount by said parties by the assessee. In the given situation, when Ld. AR for the appellant and Ld. DR for the department are in agreement that the transactions said to have been depicted in the ledger accounts of the parties, named above, need to be verified by the Assessing Officer, matter needs to be remanded to the Assessing Officer for verification of the relevant entry, as regards payment of commission made to the assessee, and the discount expenses incurred by the assessee. Result 14. In the given facts and circumstances, this appeal is disposed of for statistical purpose, and while setting aside the impugned order passed by Learned CIT(A), NFAC, the matter is remanded to the Assessing Officer with direction that he verifies, and takes into consideration the relevant entries said to have been shown in the ledger accounts of the above said persons, as regards granting/availing of discounts, after summoning the relevant parties for the purpose of verification of the said fact, if so desired, provide a reasonable opportunity of being heard to the assessee and then decide the matter afresh as regards grant of discount/ discount expenditure by the assessee on the amount of commission received. 9 ITA No. 375/JPR/2025 M/s Baba Kanwar Ram Fruit Co., Alwar. The matter is restored to the files of Assessing Officer with direction to decide said issue afresh and pass assessment order afresh, after affording reasonable opportunity of being heard to the applicant, in accordance with law. File be consigned to the record room after the needful is done by the office. Order pronounced in the open court on 26/05/2025. Sd/- Sd/- ¼jkBkSM+ deys'k t;UrHkkbZ ½ ¼ujsUnz dqekj½ (RATHOD KAMLESH JAYANTBHAI) (NARINDER KUMAR) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 26/05/2025 *Santosh vkns'k dh izfrfyfivxzsf’kr@Copy of the order forwarded to: 1. The Appellant- M/s Baba Kanwar Ram Fruit Co., Alwar. 2. izR;FkhZ@ The Respondent- ITO, Ward-1(2), Alwar. 3. vk;dj vk;qDr@ The ld CIT 4. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 5. xkMZ QkbZy@ Guard File ITA No. 375/JPR/2025) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asstt. Registrar "