ACIT, New Delhi v. M/s Sai Distributors,, New Delhi

ITA 4594/DEL/2009 | 2006-2007
Pronouncement Date: 21-01-2011 | Result: Dismissed

Appeal Details

RSA Number 459420114 RSA 2009
Assessee PAN ABBFS6605B
Bench Delhi
Appeal Number ITA 4594/DEL/2009
Duration Of Justice 1 year(s) 1 month(s) 17 day(s)
Appellant ACIT, New Delhi
Respondent M/s Sai Distributors,, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 21-01-2011
Date Of Final Hearing 17-01-2011
Next Hearing Date 17-01-2011
Assessment Year 2006-2007
Appeal Filed On 04-12-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) BEFORE SHRI A.D. JAIN JUDICIAL MEMBER AND SHRI K.D. RANJAN ACCOUNTANT MEMBER ITA NO.4594/DEL./2009 (ASSESSMENT YEAR : 2006-07) ACIT CIR.33(1) VS. M/S SAI DISTRIBUTORS NEW DELHI. F-225 1 ST FLOOR NEW RAJINDER NAGAR NEW DELHI. (PAN/GIR NO.- ABBFS6605B) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUDHIR KUMAR ARORA CA REVENUE BY : SHRI K. RAVI RAMACHANDRAN SR.DR ORDER PER A.D. JAIN JM THIS IS DEPARTMENTS APPEAL FOR AY 2006-07 CONTENDING THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF `1 42 0 9 820. THE ASSESSEE FIRM IS A SOLE SELLING AGENT OF LOTTERIES FOR CERTAIN ST OCKISTS OF STATE LOTTERIES HAVING ARRANGEMENTS WITH SUB-AGENTS WHEREUN DER THE SUB- AGENTS OPERATE THE TERMINALS AT RESPECTIVE KIOSKS FOR SEL LING THE LOTTERIES TO CUSTOMERS. THE AO OBSERVED THAT THE BALAN CE SHEET FILED BY THE ASSESSEE ALONG WITH THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION SHOWED A CREDIT ENTRY OF `1 42 12 620/- WITH A NARRATION OF PRIZE WINNING TICKETS (PWT) PAYABLE. 2. ON QUERY AS TO WHY THIS AMOUNT BE NOT TREATED AS TH E INCOME OF THE ASSESSEE THE ASSESSEE SUBMITTED BEFORE THE AO THAT AGA INST THE PWT PAYABLE AMOUNT OF `1 42 12 620 THE ASSESSEE HAD AL READY RECEIVED PWT WORTH `1 36 77 950 FROM THE SELLING AGE NTS DURING THE YEAR AND THIS AMOUNT HAD BEEN REFLECTED IN THE BALAN CE SHEET AS PWT IN HAND; THAT THEREFORE BOTH THE FIGURES I.E. THE CONTRIBUTION TOWARDS ITA NO.4594/DEL./2009 (AY : 2006-07) 2 PRIZE FUND (CPF FOR SHORT) PAYABLE AND THE CPF RE CEIVABLE/RECEIVED HAD BEEN DULY REFLECTED IN THE BALANCE SHEET OF THE ASSESSEE; THAT THE ACCOUNT UP TO 1.1.06 HAD ALREADY BEEN SETTLED DURING THE YEAR; THAT HOWEVER THE BALANCE CPF ACCOUNT OF `1 42 12 620 WA S SETTLED IN THE NEXT YEAR; THAT THE DETAIL OF PURCHASE OF TICKETS FRO M M/S VALUABLE RESERVES (I) PVT. LTD. FOR THE PERIOD FROM 2.1.06 TO 31.3.06 AS PER WHICH CPF AMOUNTED TO `1 42 12 620 AND CONTRIBUTIO N TOWARDS PARTICIPATION IN DRAW (CPD FOR SHORT) WAS OF `5 80 785.83 WERE BEING FILED; THAT COPIES OF FOUR PURCHASE BILLS FROM M/S VALU ABLE RESERVES (I) PVT. LTD. CONFIRMING THE SAID FACTS WERE ALSO BEING FILED; THAT BESIDES COPY OF BALANCE CONFIRMATION OF CPF AMOUNT OF `1 42 12 620 OF M/S VALUABLE RESERVES (I) PVT. LTD. AND COPY OF ACCOUNT O F M/S VALUABLE RESERVES (I) PVT. LTD. FOR THE PERIOD FROM 1.4.06 TO 31.3.07 CONFIRMING THE RECEIPT OF PRIZE WINNING TICKETS AMOUNTING TO `1 42 09 820 ON 1.4.06 WAS ALSO BEING ENCLOSED. 3. ON EXAMINING THE COPY OF ACCOUNT OF THE STOCKISTS I.E. M/S VALUABLE RESERVES (I) PVT. LTD. IN THE BOOKS OF THE ASSE SSEE THE AO OBSERVED THAT THE CREDIT ENTRY OF `1 42 12 620 HAD B EEN SQUARED OFF BY M/S VALUABLE RESERVES (I) PVT. LTD. BY PASSING A DEBIT NOTE WHEREAS NO TRANSACTION OF MONEY HAD TAKEN PLACE. FROM THIS THE AO WAS OF THE OPINION THAT IN VIEW OF THE NATURE OF THE BUSINESS OF THE ASSESSEE THE TICKETS WOULD BE RELEASED AS AND WHEN THE PURCHASERS MAK E THE PAYMENT AT THE KIOSKS AND THAT THEREFORE THE WHOLE O F THE TICKETS WERE NOT RELEASED TO THE ASSESSEE AND THEY WOULD BE RELEASED O NLY WHEN THE PURCHASER MAKES THE PAYMENT. ON THIS REASONING T HE AO TREATED THE LIABILITY OF `1 42 12 620 AS ARTIFICIAL CREATION TO MISLEAD THE TAXABLE PROFIT OF THE ASSESSEE. AS SUCH THIS AMOUNT WAS ADDED BAC K TO THE TOTAL INCOME OF THE ASSESSEE. 4. BY VIRTUE OF THE IMPUGNED ORDER THE CIT(A) DELE TED THIS ADDITION. 5. AGGRIEVED THE DEPARTMENT IS IN APPEAL. ITA NO.4594/DEL./2009 (AY : 2006-07) 3 6. THE LD.DR HAS ARGUED THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITION CORRECTLY MADE BY THE AO; THAT WHILE DOING SO THE CIT(A) FAILED TO TAKE INTO CONSIDERATION THE CATEGORICAL FI NDING OF THE AO THAT THE LIABILITY OF THE AMOUNT WAS ONLY AN ARTIFICIAL C REATION TO CONCEAL THE TAXABLE PROFIT AND THAT THE SAME WAS SQUARED UP WITHOU T ANY TRANSACTION OF MONEY; AND THEREFORE THE ORDER OF T HE CIT(A) IS LIABLE TO BE CANCELLED WHEREAS THAT PASSED BY THE AO IS ENTITLED TO BE REVIVED WHICH BE DONE BY ALLOWING THE DEPARTMENTS APPEAL. 7. THE LD.COUNSEL FOR THE ASSESSEE ON THE OTHER HAND H AS STRONGLY RELIED ON THE IMPUGNED ORDER. IT HAS BEEN CONTENDED AS BEFORE THE CIT(A) THAT THE BUSINESS OF THE ASSESSEE IS ONLY THAT OF A SOLE SELLING AGENT; THAT THE ACTUAL SALE OF LOTTERY AND DISTRIBUTI ON OF PRIZE IS BEING DONE BY THE SUB-AGENTS; THAT THE SUB-AGENTS ARE RESPONSIB LE FOR DISTRIBUTION OF PROFITS; THAT THE SUB-AGENTS CREDIT THE ASSESSEE WITH THE AMOUNT OF PWT PAYABLE; THAT THE ASSESSEE PASSES SIMILAR EN TRY IN RESPECT OF PWT PAYABLE TO THEIR STOCKIST; THAT ULTIMAT ELY THE STOCKIST IN ITS TURN PASSES A SIMILAR ENTRY TO SQUARE UP ACCOUNTS WITH THE GOVERNMENT IN THE STATE LOTTERIES DEPARTMENT; THAT T HIS IS ACTUALLY WHAT HAS HAPPENED HEREIN ALSO; THAT THE TRANSACTIONS CO ME ABOUT ON A DAY-TO-DAY BASIS AND IT IS ON THE NEXT DAY THAT THE CR EDIT ENTRY REGARDING PWT PAYABLE IS SQUARED UP WHEN A DEBIT ENTR Y IS PASSED; THAT PWT AMOUNTING TO `1 36 77 950 HAD ALREADY BEEN RECEIVED BY THE ASSESSEE AGAINST THE PWT PAYABLE OF `1 42 12 620 AS ON 31 .3.06; THAT THIS WAS SHOWN AS PWT IN HAND AS ON 31.3.06; THAT THE B ALANCE AMOUNT OF `5 34 670 WAS DULY SQUARED UP ON THE NEXT D AY I.E. ON 1.4.06; THAT AS SUCH THERE WAS NO REQUIREMENT FOR ANY CASH PAYMENT; THAT THE CIT(A) HAS DULY TAKEN INTO CONSIDERATION ALL THESE FACTS WHILE RIGHTLY DELETING THE ADDITION WRONGLY MADE; AND THA T THEREFORE THERE BEING NO MERIT THEREIN THE APPEAL FILED BY THE DEP ARTMENT BE DISMISSED. ITA NO.4594/DEL./2009 (AY : 2006-07) 4 8. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MAT ERIAL ON RECORD. UNDISPUTEDLY AS RIGHTLY OBSERVED BY THE CIT( A) THE PWT PAYABLE IN THIS CASE IS ACCOUNTED FOR IN THE ACCOUNTS O F THE ASSESSEE ON A DAY-TO-DAY BASIS. RATHER THAN THE ASSESSEE IT IS TH E SUB-AGENT WHO IS RESPONSIBLE FOR SELLING THE LOTTERY AND TO MAKE THE PAYMENT FOR PRIZE WINNING TICKETS AND ALSO TO ACCOUNT FOR IN THE P&L A/C. IT IS THE STATE LOTTERIES DEPARTMENT OF THE GOVERNMENT WHICH ULTIMATELY ACCOUNTS FOR THE AMOUNT OF PWT PAYABLE. THE SUB-AGEN T MAKES THE ENTRY WITH RESPECT TO PWT VIS-A-VIS THE ASSESSEE WHO IS TH E SOLE SELLING AGENT IN SUCH A MANNER. PERTINENTLY THE ASSESSEE IS AT NO STAGE RESPONSIBLE FOR PAYMENT OF PWT. SO FAR AS REGARDS THE AMOUNT IN QUESTION THE ENTRY FOR PWT PAYABLE AS ON 31.3.06 WAS MATCHED TO THE EXTENT OF `1 36 77 950 BY THE AMOUNT OF PWT IN HAND . THIS REFLECTED THE PWT RECEIVED FROM THE SUB-AGENTS. UNDISPUTEDLY T HE DIFFERENT OF `5 34 670 WAS SQUARED UP ON THE NEXT DAY I.E. ON 1. 4.06. THE AO WAS OBVIOUSLY OBLIVIOUS OF THIS PROCESS WHICH LED TO THE ER RONEOUS ADDITION HAVING BEEN MADE. THE CIT(A) ON THE OTHER HAND H AS CORRECTLY TAKEN THESE FACTS INTO CONSIDERATION AND HAS THEREBY ARRIVED AT AND IN OUR CONSIDERED OPINION A CORRECT FINDING THAT THE ADDITI ON HAD BEEN WRONGLY MADE. 9. IN VIEW OF THE ABOVE THE ORDER OF THE CIT(A) CA NNOT BE FOUND FAULT WITH AND IT IS CONFIRMED. THE GRIEVANCE OF TH E DEPARTMENT IS ACCORDINGLY REJECTED. 10. IN THE RESULT THE APPEAL FILED BY THE DEPARTMEN T IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 21.01.2011. (K.D. RANJAN) (K.D. RANJAN) (K.D. RANJAN) (K.D. RANJAN) (A.D. JAIN) (A.D. JAIN) (A.D. JAIN) (A.D. JAIN) ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER DATED: DATED: DATED: DATED: 21 2011. 21 2011. 21 2011. 21 2011. *SKB* *SKB* *SKB* *SKB* COPY FO COPY FO COPY FO COPY FORWARDED TO: RWARDED TO: RWARDED TO: RWARDED TO:- -- - ITA NO.4594/DEL./2009 (AY : 2006-07) 5 1. 1.1. 1. THE ASSESSEE THE ASSESSEE THE ASSESSEE THE ASSESSEE 2. 2.2. 2. THE REVENUE THE REVENUE THE REVENUE THE REVENUE 3. 3.3. 3. THE CIT THE CIT THE CIT THE CIT 4. 4.4. 4. THE CIT (A) THE CIT (A) THE CIT (A) THE CIT (A)- -- -XXVI DELHI. XXVI DELHI. XXVI DELHI. XXVI DELHI. 5. 5.5. 5. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DE LHI. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DEL HI. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DEL HI. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DEL HI. ASSTT. REGISTRAR ASSTT. REGISTRAR ASSTT. REGISTRAR ASSTT. REGISTRAR INCOME INCOME INCOME INCOME- -- -TAX APPELLATE TR TAX APPELLATE TR TAX APPELLATE TR TAX APPELLATE TRIBUNAL IBUNAL IBUNAL IBUNAL NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI.