D.b. Income Tax Appeal v. Assistant Commissioner Of Income Tax, Circle Jhunjhunu,Rajasthan

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 35 / 2015 Sampat Sachin Sarees Pvt. Ltd., having its registered office at JainMarg, Sardarshahar, District Churu, Rajasthan, through itsDirector, Sh. Sachin Bachawat s/o Sh. Sampat Mal Bachawat Agedabout 36 Years and Resident of C-3, Narupath, Narain SinghCircle, Jaipur (Rajasthan). ----Appellant Versus Assistant Commissioner of Income Tax, Circle Jhunjhunu,Rajasthan. ----Respondent _____________________________________________________ For Appellant(s) : Mr. Prakul Khurana For Respondent(s) : Mr. Daksh Pareek for Mr. Sameer Jain _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYASJudgment 04/10/2017 1. By way of this appeal, the appellant has challenged thejudgment and order of the tribunal whereby tribunal has allowedthe appeal of the department and dismissed the cross objection ofthe assessee. 2.This court while admitting the matter framed the following substantial question of law:- “(a) Whether the Ld. ITAT in exercise of its poweru/s 254 of the Act can travel beyond the scope ofthe ground of appeal before it to interfere with the uncontested findings/issues between theparties? (b) Whether under the facts and circumstances ofthe case the order of the Ld. ITAT reversing therelief allowed by the Ld. CIT(A) by doubting theveracity of the additional evidences, in theabsence of any objection/ground of appeal beingraised by the revenue is not without jurisdiction?” 3.Earlier this court has directed counsel for the appellant toplace on record the remand report. The relevant abstract of theremand report reads as under:- “The additional evidences and the contentionsraised by appellant vide letter dated 21/05/2011have been examined vis-a-vis the above fourfindings. At the outset, it needs to be appreciatedthat in the assessment order dated 06/12/2010,there is no mention of any non-compliance onthe part of the assessee, or non submission ofany details/evidences. On the other hand, mostof the evidences submitted during appellateproceedings were in some from or the other, alsopresented during the assessment proceedings.Most importantly, the confirmations of dealersregarding the percentage of discount allowed andthe value of such discount in the copy ofaccounts in the books of account of the dealers,were duly furnished. In absence of any contraryfindings in the assessment order, it can beassemed that there was no non-compliance onthe part of the assessee and noanomaly/discrepancy was noticed in theevidences filed by the assessee or obtainedduring the assessment proceedings. After considering the submissions made, at leastone thing which appears to be apparent is, thatthe appellant company does follow a definitesystem of allowing cash discount in the creditBills and the VPP(DOD) Bills which appears to begenuine. The discretion for allowing or notallowing cash discount is sought to be retaineduntil the actual receipt of amount and therebythe incentive for the dealer to make timely andfull payment is made available. Perusal of theP&L a/c does reveal that no bad debt or shortpayment expenses have been claimed. Duringremand proceedings, the assessee also claimedthat this system of cash Discount is not new buthas been followed in all the group concerns since 4.Counsel for the appellant has taken us to the order of AO where it has been observed as under:- So keeping in view the aforesaid discussion andconsidering, copy of accounts collected u/s133(6) and from assessee it is conducted thatassessee has allowed no discount on sales. Sonot 10% but 100% discount claimed isdisallowed and added to the total income of theassessee amounting to Rs. 67,98,640/-. -P&L expenses: 4.Counsel for the appellant has taken us to the order of AO where it has been observed as under:- So keeping in view the aforesaid discussion andconsidering, copy of accounts collected u/s133(6) and from assessee it is conducted thatassessee has allowed no discount on sales. Sonot 10% but 100% discount claimed isdisallowed and added to the total income of theassessee amounting to Rs. 67,98,640/-. -P&L expenses: During the original assessment dated 28-7-2008following expenses were noticed:- In absence of proper vouchers 10% of these saidclaimed expenses were denied during originalassessment and were added to total income.Addition on this account worked out atRs.3,11,330/-. During the denovo, assessment proceedings theposition is same, as no further vouchers wereproduced. So assessee failed to substantiate hisclaim of expenses. In such circumstances 15% ofthese expenses is further disallowed and addedto the total income amounting to Rs.(Rs.3113304X15%)=Rs.4,66,995/-. 5.He contended that while considering the matter CIT(A) has specifically observed as under:- The Ld. AR also stated that the AO has also madecertain inquiries u/s. 133(6) of the Act, with theclients of the appellant, in this regards and nodiscrepancy was observed on this account. Healso referred the contents of the remand reportdated 28.6.2011 of the AO, wherein no adversefinding was given in this regard. In the light ofthe above rival stands and the details/documentssubmitted during the present proceeding, I havereached to the following conclusion- I. From the assessment order, it can be seen that the AO has not pointed out any valid and seriousdiscrepancy I.r.o., the claim of the appellant’stowards the discount allowed and claim asbusiness expenses. Rather, it is evident that hehas disallowed the claim of the appellant insummary in cryptic manner, without providingany evidence/relevant material in this ragard. ii. It is also felt that the reasons/justifications,given in the assessment order, are found totallyunrelated and irrelevant to the issue underconsideration. The above conclusion/imprecationis based on the following factual position.: -Regarding the issue of non-mentioning of thediscount allowed in the bills is concerned, the AOhas failed to appreciate the fact that theimpugned transactions were of nature of cashdiscount as such, which were to be given at thetime of receipts of payment from the buyers,therefore, the same can not be anticipated andentered in advance, while preparing the sale billat initial stage of such transactions. -Similarly, it is also felt that the another reasonsof the AO i.e. non-mentioning of description ofgoods in the sales bills has nothing to due withthe issue of discount allowed by the appellant assuch. -The AO also raised another unrelated issue, i.e.the appellant has not received any discount on itspurchases; therefore, their claim of discountallowed of early payments is also not admissibleas such. In my view they are, altogether, twodifferent and unconnected matters and can notbe co-related to arrive at any conclusion. -The AO also referred the meager NP rate of theappellant, in compared to the rate of discountallowed, to justify the rejection of claim of thediscount expenses. The above reasoning andlogic of the AO is difficult ot understand orappreciate, unless some relevant tangiblematerials are also brought to link the aboveaspects. The AO has not done the needful in thisregard. -The AO also raised another unrelated issue, i.e.the appellant has not received any discount on itspurchases; therefore, their claim of discountallowed of early payments is also not admissibleas such. In my view they are, altogether, twodifferent and unconnected matters and can notbe co-related to arrive at any conclusion. -The AO also referred the meager NP rate of theappellant, in compared to the rate of discountallowed, to justify the rejection of claim of thediscount expenses. The above reasoning andlogic of the AO is difficult ot understand orappreciate, unless some relevant tangiblematerials are also brought to link the aboveaspects. The AO has not done the needful in thisregard. Iii. From the assessment order, it is also evidentthat the AO has not brought any positive andcogent incriminating material/evidence tosubstantiate his case or to prove that the claim ofthe appellant, I.e.o., discount expenses, wasbogus or inadmissible as such. On the contrary,the result of verification made u/s 133(6) of theAct made by him, rather suggested that thediscount allowed was dually shown/confirmed bythe recipient of the same. iv. The confirmations of the client’s submittedtowards discounts aspect, submitted u/r 46Aduring the present proceeding, further supportsthe claim of the appellant. v. The most important aspect is that even in theremand report date 28.6.2011; the present AOhas also confirmed the genuines and correotnessof the appellant’s claim of discount as allowableexpenses, as he has found all the details anddocuments, submitted during the assessmentproceeding and also u/r 46A of the Act, in order.” 6.He contended that only one ground was taken by thedepartment which reads as under:- “(i) The CIT(A) has passed a perverse order, inthe facts & circumstances of the assessee, byholding that the expenses of Rs.67.98 Lakhsclaimed for discount given was in order evenwhile the assessee himself had surrendered 10%thereof, in its revised return filed on 12.03.2009. (ii) The appellant craves leave to add, alter,amend, withdraw or insert any ground orgrounds of appeal before or at the time ofhearing of appeal.” 7.The Tribunal while considering the matter has reversed thefinding of CIT(A) holding as under:- “We have heard the rival contentions andperused the materials available on record. Thereis no merit in the contention of the ld. AR thatthis almost third round of the assessment and aperiod of 4 ½ years has clapsed between theassessment and the end of the accountingperiod. The ld. CIT(A) has neither referred to thedate of filing of the additional evidence nor thecontents thereof. The remand report wassubmitted by the AO vide his letter dated28.6.2011. In the absence of the details as toapplication for admission of additional evidence,even three months time is given for applicationand receipt of the remand report and it can beassumed that the assessee filed the applicationfor additional evidence somewhere in March 2011i.e. after five years from the end of the financialyear. Thus in our considered view, there is nomention as to what evidence was filed and thefiling of additional evidence suffers latches of time gap of five years and there is no mention ofreason for accepting the delay of filing ofadditional evidence. The conduct of the assesseethus assumes suspicion as to why it took fiveyears for additional evidence which is part ofregular books of account. In the remand reportalso, the AO has behaved in blue hot and bluecold manner. On one hand, the admission ofevidence is questioned on the basis of indolentbehaviour of the assessee. In remand also, theAO has given shaky observations that it appearsthat the assessee follows the system of givingdiscount to the customers. In our consideredview, the findings of the remand report containlot of contradictions. We find merit in thearguments of the ld. DR that it was the burdenon the assessee to establish and file the cogentmaterials instead the ld. CIT(A) has untenablefastened on the AO. Similarly, the relief has beengiven by the ld. CIT(A) by wrongly observing thatthe AO has briefly and unreasonably rejected theclaim of discount of the assessee. In ourconsidered view, both the findings of the ld.CIT(A) suffer from untenability and findings fromvagueness looking at the entirety of the facts andcircumstances of the case. Thus we see notenable justification in the ld. CIT(A)s ordergranting relief based on fantastic additionalevidence by sweeping observations and irrelevantconsideration.” 8.Counsel for the respondent has supported the order passed by the tribunal. 9.We have heard counsel for the parties. 10.Taking into account that the tribunal in para 3.9 as referredabove has given a contrary finding to the report which is placedon record has not considered five grounds which has weighedwith the CIT(A). 11.Without entering into merits of the case, we are of theopinion that the order of the tribunal is required to be quashedand set aside. The matter is remitted back to the tribunal. 12.It is made clear that we have not expressed any opinion on the merits of question of law which we have admitted and it willbe open for the parties to agitate the same before the tribunal. 13.The appeal stands allowed to the aforesaid extent. (VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J. Bmg 65.