The DCIT, Circle-1,, Surat v. Jagga Prints Pvt.Ltd.,, Surat

ITA 3701/AHD/2008 | 2005-2006
Pronouncement Date: 24-12-2010 | Result: Dismissed

Appeal Details

RSA Number 370120514 RSA 2008
Assessee PAN AABCJ4090P
Bench Ahmedabad
Appeal Number ITA 3701/AHD/2008
Duration Of Justice 2 year(s) 1 month(s) 10 day(s)
Appellant The DCIT, Circle-1,, Surat
Respondent Jagga Prints Pvt.Ltd.,, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 24-12-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 24-12-2010
Date Of Final Hearing 09-12-2010
Next Hearing Date 09-12-2010
Assessment Year 2005-2006
Appeal Filed On 14-11-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : AHMEDABAD (BEFORE HONBLE SHRI G.D. AGRAWAL V.P. (AZ) AND HO N'BLE SHRI T.K. SHARMA J.M.) I.T.A. NO. 3701/AHD./2008 ASSESSMENT YEAR : 2005-2006 DEPUTY COMMISSIONER OF INCOME TAX -VS.- M/S. J AGGA PRINTS PVT. LTD. SURAT CIRCLE-1 SURAT (PAN : AABCJ 4090 P) (APPELLANT) (RESP ONDENT) & I.T.A. NO. 3852/AHD/2008 ASSESSMENT YEAR : 2005-2006 M/S. JAGGA PRINTS PVT. LTD. SURAT -VS.- DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-1 SURAT (APPELLANT) (RESPONDENT) ASSESSEE BY : N O N E DEPARTMENT BY : SHRI SHELLEY JINDAL CI T (D.R.) O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER : THIS CROSS APPEAL ARE AGAINST THE ORDER DATED 10.0 9.2008 OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-I SURAT FOR THE ASSESSMENT YE AR 2005-06. 2. IN THIS CASE NOTICE OF HEARING FIXING BOTH THE APPEALS FOR HEARING ON 09.12.2010 WAS ISSUED TO THE ASSESSEE BY REGISTERED POST WITH A/D AND THE A/D CARD IS PLACED ON RECORD. DESPITE THE SERVICE OF NOTICE ON THE DATE FIXED FOR HEARIN G NEITHER ANYBODY APPEARED FROM THE SIDE OF THE ASSESSEE NOR AN APPLICATION FOR ADJOURNMENT RECEIVE D. WE THEREFORE DECIDED TO DISPOSE OF THE APPEALS AFTER HEARING THE LD. DEPARTMENTAL REPRESEN TATIVE AND THE MATERIAL AVAILABLE ON RECORD. 3. BRIEFLY STATED THE FACTS OF REVENUES APPEAL ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF DEALING IN ART SILK CLOTH. FOR T HE ASSESSMENT YEAR UNDER APPEAL IT FILED THE RETURN OF INCOME ON 29.10.2005 SHOWING TOTAL INCOME OF RS.8 02 260/-. THE ASSESSING OFFICER FRAMED THE ASSESSMENT UNDER SECTION 143(3) ON 07.12 .2007 AT A TOTAL INCOME OF RS.34 66 912/-. IN THIS ASSESSMENT ORDER THE ASSESSING OFFICER MADE T HE ADDITION ON ACCOUNT OF DISCOUNT/ RATE DIFFERENCE AMOUNTING TO RS.21 01 720/- AND ALSO DIS ALLOWED RS.5 62 932/- OUT OF ADMINISTRATIVE GENERAL AND SELLING EXPENSES. 2 ITA NO. 3701-AHD-2008 & ITA-3852-AHD-2008 3.1. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF I NCOME TAX(APPEALS) WITH REGARD TO OBJECTING THE ADDITION OF RS.21 01 720/- THE ASSES SEE HAS SUBMITTED AS UNDER :- (I) IT HAS GIVEN TRADE DISCOUNT TO SOME OF TH E SURAT PARTIES ON BULK SALES TOTALING TO RS.3 97 157/- ONLY. (II) IT HAS NOT GIVEN ANY CORN MISSION TO ANY PARTY AND NO SUCH COMMISSION HAS BEEN CLAIMED IN THE PROFIT A LOSS ACCOUNT AND THEREFORE THE ENTIRE ARGUMENT OF THE A.O. AND BASIS OF ADDITION IS WRONG. (III) THE A.O. HAS HIMSELF QUOTED ON PAGE- 5 OF THE ASSESSMENT ORDER THAT EVEN THE ICAI HAS DEFINED THE TURNOVER AS FOLLOWS: 'THE TERM 'TURNOVER' ..MAY BE INTERPRETED TO MEAN THE AGGREGATE AMOUNT FOR WHICH SALES ARE AFFECTED... TRADE DISCOUNT CAN BE D EDUCTED FROM SALES BUT NOT THE COMMISSION ALLOWED TO THIRD PARTIES'. IN VIEW OF THIS THE A.O HIMSELF HAS CONTRADICTED HIMSELF BY SAYING THAT AS PER THE INSTITUTE OF CHARTERED ACCOUNTANTS TRADE DISCOUNT C AN BE DEDUCTED FROM SATES BUT NOT THE COMMISSION. THE ASSESSEE HITS FOLLOWED THIS POLICY OF THE INSTITUTE OF CHARTERED ACCOUNTANTS AND HAS DEDUCTED THE TRADE DI SCOUNT FROM THE SALES THEREBY TAKING NET SALES IN THE PROFIT & LOSS ACCOU NT. HENCE THE A.O. CANNOT HAVE ANY OBJECTION. (IV) THE APPELLANT HAS GIVEN DISCOUNT OF ONLY RS .3 97 157/- WHICH IS CLEAR FROM THE SALES BILLS PRODUCED BEFORE THE A.Q AND THEREFORE THER E IS NO QUESTION OF ADDING RS.21 01 720/- BY ESTIMATING THE DISCOUNT RATE AT 2 .5% THAT THE ASSESSEE MIGHT HAVE GIVEN ON THE TOTAL SALES EVEN THE TOTAL SALE FIGURE HAS BEEN WRONGLY ADAPTED BY THE A.Q. ACCORDING TO THE A.O. THE TOTAL SALES ARE RS.8 40 68 805/- WHEREAS THIS INTRUDES OTHER INCOME AND INCREASED IN STOCK OF FINISHED GOODS TH E TOTAL SALES ARE ONLY RS.8 01 05 530/-. (V) THE A.O HAS RELIED ON THE VARIOUS JUDGMENT S TO COMMISSION AND NOT TO TRADE DISCOUNT AND HENCE NONE OF THESE CASES ARE APPLICAB LE. (VI) THE A.O. HAS WRONGLY STATED THAT IT HAS NOT PRODUCED THE SALES VOUCHERS. AS PET SUBMISSION MADE HIM VIDE LETTER DATED 05.1O.2007 ALL THE BOOKS ACCOUNT AND VOUCHERS WERE PRODUCED FOR HIS PERUSAL. THE SALES VOUCHERS C LEARLY SHOWED THE GROSS SALES TRADE DISCOUNT AND THE NET SALES.THE A.O. HAS NOT REJECT ED THE BOOKS OF ACCOUNT AND STILL ESTIMATED THE INCOME. IT IS NOT THE SETTLED POSITIO N OF LAW. 4. AFTER CONSIDERING THE AFORESAID SUBMISSIONS IN THE IMPUGNED ORDER THE CIT(A) DELETED THE ENTIRE ADDITION F RS.21 01 720/- FOR THE DETAIL ED REASONS GIVEN IN PARA 2.3 OF PAGE 7 WHICH READS AS UNDER :- 3 ITA NO. 3701-AHD-2008 & ITA-3852-AHD-2008 2.3 I HAVE CONSIDERED THE SUBMISSION MADE BY TH E APPELLANT AND THE OBSERVATION OF THE A.O. FROM THE ABOVE IT IS CLE AR THAT THE A.O. HAS DEALT WITH THE ISSUE UNDER CONSIDERATION NOT AS TRADE DISCOU NT BUT THE A.O. HAS DISCUSSED AS IF IT IS COMMISSION AS SEEN FROM PAGE-3 4 & 5 OF THE ASSESSMENT ORDER. COMMISSION PAID IS AN EXPEND ITURE WHICH THE ASSESSEE IS REQUIRED TO PROVE BUT TRADE DISCOUNT IS ALLOWED TO BE DEDUCTED FROM THE SALES AS PER THE QUOTATION GIVEN BY THE A.O. ON PAGE-5 OF TH E ASSESSMENT ORDER. ICAI HAS DEFINED THE TURNOVER ACCORDING TO WHICH T RADE DISCOUNT CAN BE DEDUCTED FROM THE SALES. THIS QUOTATION HAS BEEN GIVEN BY THE A.O. HIMSELF WHICH HAS BEEN REPRODUCED ABOVE IN PARA-2.1.3. THIS SHOWS T HAT THE ENTIRE THEORY AND DISCUSSION OF THE A.O. IS WRONG THAT SHOWING SALES NET OF TRADE DISCOUNT IS AGAINST POLICY AND THE ASSESSEE HAS NOT FOLLOWED THE ACCOUN TING POLICY. I AGREE WITH THE APPELLANT THAT THE POLICY OF DEDUCTING TRADE DISCOU NT FROM THE SALES IS CORRECT AS PER THE QUOTATION OF ICAI GIVEN BY THE A.O. HIMSELF . IN ANY CASE WHAT IS IMPORTANT IS NOT THE ENTRY BUT WHETHER A PARTICULAR ITEM IS ALLOWABLE OR NOT. TRADE DISCOUNTS ARE COMMON IN THE BUSINESS WH ERE THE TRADE DISCOUNTS ARE GIVEN ON BULK SALES. THE SUBMISSION MADE BEFORE T HE A.O. SHOWS THAT SALES VOUCHERS WERE PRODUCED AND THE SALES VOUCHERS CLEARLY SHOW GROSS SALES FIGURES TRADE DISCOUNT FIGURES AND NET SALES FIGUR ES. FURTHER I AGREE WITH THE APPELLANT THAT NO DEFECTS HAVE BEEN POINTED OUT IN THE ASSESSMENT ORDER AND HENCE THE A.O. HAS NOT REJECTED THE BOOKS OF ACCOUN T AND THEREFORE AS PER THE SETTLED POSITION OF LAW INCOME CANNOT BE ESTIMATED. THE A.O. HAS WITHOUT GIVING ANY BASIS HAS ESTIMATED THE INCOME WITHOUT REJECTIN G BOOKS OF ACCOUNT AND ADOPTED DISCOUNT RATE OF 2.5/U AND ASSUMED TH AT IT WOULD HAVE BEEN GIVEN ON THE TOTAL SALES. THERE IS NO EVIDENCE ON RECORD R EGARDING GIVING DISCOUNT @2.5% AND THERE IS NO EVIDENCE THAT IT WAS GIVEN TO SOME PARTIES AND NOT RECORDED BY THE ASSESSEE. THIS ESTIMATION OF INCOME IS THEREFORE ABSOLUTELY WRONG AS THE ASSESSEE HAD PRODUCED COPIES OF VOUCHERS BEFORE THE A.O. AND HAD STATED THAT TOTAL DISCOUNT CLAIM WAS ONLY R S.3 97 157/-. IN VIEW OF THE ABOVE I AGREE WITH THE APPELLANT THAT I NCOME CANNOT BE ESTIMATED WITHOUT ANY REASON AND THEREFORE THE ENTIRE ADDIT ION OF RS.21 01 720/- IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. AGGRIEVED WITH THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING BEFORE US ON BEHALF OF R EVENUE SHRI SHELLEY JINDAL LD. CIT(D.R.) APPEARED AND RELYING ON THE REASONING GIVEN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER CONTENDED THAT THE ASSESSING OFFICER MADE THE ADDIT ION OF RS.21 01 720/- ON ACCOUNT OF DISCOUNT GIVEN TO THE CUSTOMERS @ 2.5% ON THE SALES MADE ON THE FOLLOWING GROUNDS :- (A) THE ASSESSEE THOUGH CLAIMED THAT THE DISCOUNT IS ALLOWED TO THE CUSTOMERS WHO PURCHASE THE GOODS IN BULK AND MAKES THE FAST P AYMENT OF THE SALE 4 ITA NO. 3701-AHD-2008 & ITA-3852-AHD-2008 CONSIDERATION ONLY AND NOT ON ALL THE SALES MADE BU T THE ASSESSEE HAS NOT ADDUCED ANY EVIDENCE TO SUBSTANTIATE ITS SUCH CLAIM. (B) THE ASSESSEE HAS NOT SHOWN GROSS SALES IN THE T RADING ACCOUNT BUT HAS SHOWN NET SALES AFTER DEDUCTING THEM FROM AMOUNT OF DISCO UNT WHICH IS NOT IN ACCORDANCE WITH THE AS-I NOTIFIED UNDER THE INCOME TAX ACT AND THEREBY IT IS CLEAR A VIOLATION OF AS-I. (C) RELIANCE IS PLACED ON THE DECISION OF HON'BLE A PEX COURT IN THE CASE OF GOODLAYS NETROLAC PAINTS LIMITED 137 ITR 50 WHEREI N THE HON'BLE APEX COURT HAS HELD THAT SECRET COMMISSION NOT PROVED AS ACTUA LLY PAID IS NOT DEDUCTIBLE. (D) RELIANCE IS PLACED ON THE DECISION OF THE SUPRE ME COURT IN THE CASE OF L.H. SUGAR FACTORY AND OL MILLS PVT. LTD. 125 ITR 293 WH EREIN IT IS HELD BY HON'BLE COURT THAT WHERE THE ASSESSEE CLAIMS THE DEDUCTION ONUS IS ON HIM TO BRING ALL MATERIAL FACTS ON RECORDS TO SUBSTANTIATE ITS CLAIM . 6. IN THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DELETED THE ENTIRE ADDITION ON THE FOLLOWING GROUNDS :- (1) THE A.O. HAS DEALT WITH THE ISSUE UNDER CONSIDE RATION NOT AS TRADE DISCOUNT BUT HAS DISCUSSED AS IF IT IS COMMISSION. 2. THE COMMISSION PAID IS AN EXPENDITURE WHICH THE ASSESSEE IS REQUIRED TO PROVE BUT THE TRADING DISCOUNT IS ALLOWED TO HE DEDUCTED FROM THE SALES AS PER QUOTATION CITED BY THE AO IN THE ASSESSMENT ORDER. 3. THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA HAS DEFINED THE 'TURNOVER' ACCORDING TO WHICH TRADE DISCOUNT CAN HE FROM THE SALES. 4. TRADE DISCOUNT IS COMMON IN THE BUSINESS WHERE THE DISCOUNT ARE GIVEN ON BULK SALES. 5. THE SUBMISSION MADE BY THE ASSESSEE BEFORE THE ASSESSING OFFICER SHOWS THAT SALES VOUCHES WERE PRODUCED AND SUCH VOUCHERS CLEARLY SHO WS 'GROSS SALES FIGURE'; 'TRADE DISCOUNT FIGURE AND 'NET SALES FIGURES'. 6. THE AO HAS NOT POINTED OUT ANY SPECIFI C DEFECTS AND HAS NOT REJECTED THE BOOKS OF ACCOUNTS AND HAS DISALLOWED THE DISCOUNT .5% WI THOUT ANY BASE. 7. THERE IS NO EVIDENCE ON RECORD REGARDING GIVING DISCOUNT @2.5% AND THERE IS NO EVIDENCE THAT IT WAS GIVEN TO SOME PARTIES AND NOT RECORDED BY THE ASSESSEE. 8. THE ASSESSEE HAS PRODUCED COPIES OF VOUCH ERS BEFORE THE AO AND HAS SUBMITTED THAT CLAIM OF DISCOUNT ONLY OF RS. 3 97 157/-. 5 ITA NO. 3701-AHD-2008 & ITA-3852-AHD-2008 9. THE ESTIMATION OF DISCOUNT @2 5% IS WITHOUT ASSIGNING ANY REASONINGS AND THEREBY THERE WAS NO QUESTION OF ADDITION OF RS .21 01 720/- AS DISALLOWED BY AO. 7. AGGRIEVED WITH THE DELETION OF ADDITION OF RS.21 01 720/- THE REVENUE IS IN APPEAL ON THE FOLLOWING GROUNDS :- (1) THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A.) HAS ERRED IN NOT APPRECIATING THAT THE ASSE SSEE HAS NOT FURNISHED ANY VOUCHER FOR VERIFICATION BEFORE THE A .O. AS IS CLEAR FROM THE FIRST ORDER SHEET ENTRY DATED 06.12. 2007. (2) THE FACTS OF THE CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A.) HAS ERRED IN NOT APPRECIATING THAT THE A.O. POINTED OUT CERTAIN SPECIFIC DEFECTS FOR REJECTION OF BOOKS OF ACCOUNTS ABOUT DEVIATION FROM THE ACCOUNTING NORMS PRESCRIBED BY I NSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. 8. AT THE TIME OF HEARING BEFORE THE LD. D.R. POIN TED OUT THAT THE FINDINGS OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ARE NOT ACCEPT ABLE BEFORE THE LD. CIT(A.) HAS NOT APPRECIATED THAT THE ASSESSEE HAS NOT FURNISHED ANY VOUCHER FOR VERIFICATION BEFORE THE ASSESSING OFFICER AS IS CLEAR FROM THE FIRST ORDER SHEET ENTR Y DATED 6.12.2007. THE LD. D.R. ALSO POINTED OUT THAT THE CIT(A.) ALSO HAS NOT APPRECIATED THAT THE A.O. HAS POINTED OUT CERTAIN SPECIFIC DEFECTS FOR REJECTION OF BOOKS OF ACCOUNTS ABOUT DEVIATION FROM THE ACCOUNTING NORMS PRESCRIBED BY INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. THE LD. D.R. CON TENDED THAT THE ADDITION OF RS.21 01 720/- MADE BY THE ASSESSING OFFICER BE RESTORED. 9. AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATIV E WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. AS ALREADY STATED NONE IS PRESENT FROM THE SIDE OF THE ASSESSEE. IT IS PERTINENT TO NOTE THAT ONLY REAL INCOME IS TAXABLE. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) THE ASSESSEE HAS CONTENDED THAT IT HA S GIVEN TRADE DISCOUNT TO SOME OF THE SURAT PARTIES ON BULK SALES TOTALING TO RS.3 97 157/- ONL Y AND THEREFORE THERE IS NO QUESTION OF ADDING RS.21 01 720/- BY ESTIMATING THE DISCOUNT RATE AT 2 .5%. IT APPEARS THAT THE ENTIRE ADDITION OF RS.21 01 720/- WAS MADE BY THE ASSESSING OFFICER ON DOUBTS AND SUSPICION AND IN OUR OPINION THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS GIVEN COGENT REASON FOR DELETING THE SAID ADDITION. WE THEREFORE DECLINE TO INTERFERE. RESU LTANTLY THE APPEAL OF THE REVENUE IS DISMISSED. 6 ITA NO. 3701-AHD-2008 & ITA-3852-AHD-2008 10. THE ONLY GROUND RAISED BY THE ASSESSEE IN ITS A PPEAL IS AS UNDER :- ON THE FACTS AND IN CIRCUMSTANCES OF THE ASE AS WE LL AS LAW ON THE SUBJECT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERR ED IN PARTLY CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN MAKING DISAL LOWANCE OF RS.2 33 597/- OUT OF TOTAL RS.5 62 932/- BEING 10% OF CUTTING EXPENSES PACKING EXPENSES DALALI EXPENSES INCLUDING UNVOUCHED EXPENSES OF RS.69 338/ -. 11. THE LD. D.R. APPEARING ON BEHALF OF THE REVENUE CONTENDED THAT IN THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) RIG HTLY CONFIRMED THE ACTION OF ASSESSING OFFICER IN MAKING THE DISALLOWANCE OF RS.2 33 597/- OUT OF TOTAL OF RS.5 62 932/- BEING 10& OF CUTTING EXPENSES PACKING EXPENSES DALALI EXPENSES INCLUDING UNVOUCHED EXPENSES OF RS.69 338/- THEREFORE THE VIEW TAKEN BY THE CT(A) BE UPHELD. 12. AS ALREADY STATED NONE WAS PRESENT ON BEHALF O F THE ASSESSEE AT THE TIME OF HEARING. AFTER CAREFULLY GOING THROUGH THE REASONING GIVEN BY BOTH THE DEPARTMENTAL AUTHORITIES BELOW WE ARE CONVINCED THAT SOME BILLS/VOUCHERS WERE NOT PRESENT ED NEITHER BEFORE THE ASSESSING OFFICER NOR BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS). WE THEREFORE DECLINE TO INTERFERE WITH THE ORDER OF LEARNED COMMISSIONER OF INCOME TA X (APPEALS). RESULTANTLY THE APPEAL OF THE ASSESSEE IS DISMISSED. 13. IN THE RESULT BOTH THE APPEALS ARE DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 24.12.20 10 SD/- SD/- (G.D. AGRAWAL) (T.K. SHARMA ) VICE-PRESIDENT (AZ) JUDICIAL MEMBER DATED : 24/ 12 / 2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A.) CONCERNED (4) CIT CONCERNED (5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGI STRAR ITAT AHMEDABAD LAHA/SR.P.S.