Ita/266/2018 Of Pr. Commissioner Of Income Tax, Jalandhar-1, Jalandhar v. Anthony F.r. Madasser

ITA No.266 of 2018 (O&M) IN THE HIGH COURT OF PUNJAB AND HARYANAAT CHANDIGARH Date of decision : 22.07.2019 1,ITA No.266 of 2018 (O&M) Pr. Commissioner of Income Tax, Jalandhar-I, Jalandhar ...... Appellant VerTSU Anthony F.R. Madasser, Prop. M/s NavjeevanEnterprises, G-12, Guru Gobind Singh ColonyJalandhar ...... Respondent 2.ITA No.273 of 2018 (O&M) Pr. Commissioner of Income Tax, Jalandhar-I, Jalandhar ...... Appellant VerTSU Anthony F.R. Madasser, Prop. M/s NavjeevanEnterprises, G-12, Guru Gobind Singh ColonyJalandhar ...... Respondent 3.ITA No.275 of 2018 (O&M) Pr. Commissioner of Income Tax, Jalandhar-I, Jalandhar VerTSU ...... Appellant Anthony F.R. Madasser, Prop. M/s NavjeevanEnterprises, G-12, Guru Gobind Singh ColonyJalandhar ...... Respondent 4.ITA No.300 of 2018 (O&M) Pr. Commissioner of Income Tax, Jalandhar-I, Jalandhar VerTSU ...... Appellant Anthony F.R. Madasser, Prop. M/s NavjeevanEnterprises, G-12, Guru Gobind Singh ColonyJalandhar ...... Respondent 5.ITA No.301 of 2018 (O&M) Pr. Commissioner of Income Tax, Jalandhar-I, Jalandhar ...... Appellant VerTSU Anthony F.R. Madasser, Prop. M/s NavjeevanEnterprises, G-12, Guru Gobind Singh ColonyJalandhar ...... Respondent 6.ITA No.302 of 2018 (O&M) Pr. Commissioner of Income Tax, Jalandhar-I, Jalandhar ...... Appellant VerTSU Anthony F.R. Madasser, Prop. M/s NavjeevanEnterprises, G-12, Guru Gobind Singh ColonyJalandhar ...... Respondent 7. ITA No.303 of 2018 (O&M) Pr. Commissioner of Income Tax, Jalandhar-I, Jalandhar ...... Appellant VerTSU Anthony F.R. Madasser, Prop. M/s NavjeevanEnterprises, G-12, Guru Gobind Singh ColonyJalandhar ...... Respondent 8.ITA No.304 of 2018 (O&M) Pr. Commissioner of Income Tax, Jalandhar-I, Jalandhar ...... Appellant VerTSU Anthony F.R. Madasser, Prop. M/s NavjeevanEnterprises, G-12, Guru Gobind Singh ColonyJalandhar ...... Respondent 9,ITA No.308 of 2018 (O&M) Pr. Commissioner of Income Tax, Jalandhar-I, Jalandhar ...... Appellant VerTSU Anthony F.R. Madasser, Prop. M/s NavjeevanEnterprises, G-12, Guru Gobind Singh ColonyJalandhar ...... Respondent 10.ITA No.310 of 2018 (O&M) Pr. Commissioner of Income Tax, Jalandhar-I, Jalandhar ...... Appellant VerTSU Anthony F.R. Madasser, Prop. M/s NavjeevanEnterprises, G-12, Guru Gobind Singh ColonyJalandhar ...... Respondent CORAM: HON'BLE MR.JUSTICE AJAY TEWARTHON'BLE MR.JUSTICEHARNARESH SINGH GILL 111 Present :Mr. Vivek Sethi, Advocatefor the appellant. 111 ITA No.266 of 2018 (O&M) AJAY TEWARI, J. (Oral) inThis order shall dispose of the above mentioned ten appeals.Since common questions of law and facts are involved therein, they arebeing decided by this common order. For the sake of convenience thefacts are being taken from.ITA No.266 of 2018 2 ITA No.266 of 2018 has been filed under Section 260A ofthe Income Tax Act, 1961 (for short 'the Act’) against the order of theIncome Tax Appellate Tribunal, Amritsar Bench, Amritsar passed in MANo.34/(ASR)/2017 (arising out of ITA No.115(ASR)/2015) dated06.11.2017 tor the Assessment Year 2011-2012. The dispute relates tothe assessment years 2008-2009, 2009-2010, 2010-2011, 2011-2012,20127-2013 3,These 10 appeals have been filed against the orders of theIncome Tax Appellate Tribunal, Amritsar deciding 20 appeals (10 filedby the Assessee and 10 filed by the Revenue). 4The issue involved is whether allowance was to be given tothe Assessee for books and other study material out of which some wereobtained on discount and some were sold at a discount/distributed free ofCOST. 2 ITA No.266 of 2018 has been filed under Section 260A ofthe Income Tax Act, 1961 (for short 'the Act’) against the order of theIncome Tax Appellate Tribunal, Amritsar Bench, Amritsar passed in MANo.34/(ASR)/2017 (arising out of ITA No.115(ASR)/2015) dated06.11.2017 tor the Assessment Year 2011-2012. The dispute relates tothe assessment years 2008-2009, 2009-2010, 2010-2011, 2011-2012,20127-2013 3,These 10 appeals have been filed against the orders of theIncome Tax Appellate Tribunal, Amritsar deciding 20 appeals (10 filedby the Assessee and 10 filed by the Revenue). 4The issue involved is whether allowance was to be given tothe Assessee for books and other study material out of which some wereobtained on discount and some were sold at a discount/distributed free ofCOST. 5 The brief tacts are that the Assessee is a proprietor ofM/s Navjeevan Enterprises. He is an ordained priest and his church runsseveral educational institutions in the area. Through the firm he wasacquiring books and other study material for onward transmission tostudents in the various schools aforesaid. The return was selected forscrutiny and it was discovered that the purchase bills were prepared by the seller at MRP rates but discount ranging from 10% to 50% was ITA No.266 of 2018 (O&M) allowed and it was alleged that the Assessee was selling the books on theMRP rates| 6 During the proceedings before the Assessing Officer theAssessee placed some material to substantiate his assertion that he wasselling books at a discount. However, the Assessing Officer held againsthim holding as follows :- A6.2The assessee is an individual running a_ busineswhere books and other stationery items are sold on retailbasis. He is not running a charitable organization. Theassessee though is a member of charitable/religiousorganization, as an individual he is running a business. Hisnormal course of business is to run business and to earnprofit. The claim of the assessee that he is doing charity bysupplyingfree and discounted sets ofbooks 1s unreliable andunsubstantiated. Even otherwise this is nothing butdiversion offunds/income. It is a kind of donation in thename of religion. The assessee in his personal capacity 1sfree to do charity and give/part away his income to areligious/charitable organization. The assessee is free todeal with his income post tax, in manner he deemsfit, but notat the cost of tax. In this case, since the assessee is closelyconnected with a religious organization, has routed thecharity to the organizations before paying the appropriatetaxes on the net income Charity/donation has been includedin the cost of expenditure of his business and in turn theassessee has reduced his profits to that extent. This is asubterfuge to deflate the true taxable income. The incomehas been diverted before paying the tax. This is not a case ofbusiness expediency to do charity by giving extraordinarydiscount or free sales. The assessee has inflated hisexpenditure in the name of charity. The charity has not beendonefor the purpose ofpromoting the business. This is not a ITA No.266 of 2018 (O&M) normal course of activity in a case of any retail book sellers.The claim of the assessee is unreliable, abnormal, andunreasonable and not a normal usual trade practice of thebusiness of a retail book seller. The charity has neitherbeen done for the furtherance of business nor wholly andexclusively for the purpose of business. In the course ofdoing business certain activities are allowed but theseshould be for the furtherance of business and the expensesshould be incurred wholly and exclusivelyfor the purpose ofthe business or profession. In this case the assessee hasfailed to establish that this act of charity was on account ofbusiness expediency and for the furtherance of business.The assessee has failed to show that the charity was not onhis personal account and has miserably failed to show theconnection between donation/charity and the business of theretail sale ofbooks to schools.” TiAnd ultimately held that the Assessee had not disclosedprofits to the tune of Rs.3,47,83,926/- and consequently assessed theincome at Rs.5,06,79,282/-. It may be mentioned here that the similar isthe position for all the years covered by these appeals. In appeal theCommissioner, Income Tax accepted the assertion § regardidiscounted/free sale of books and granted the following relief :- “6.8 In view of the above stated facts and in thecircumstances of the case, the trading addition made by theAssessing Officer on account of undisclosed profits 1srestricted to Rs.1,78,35,234/- and balance addition ofRs.1,69,48,692/-, Rs.3,47,83,926/- (-) Rs.1,78,35,234/-] 1sdirected to be deleted. In nutshell, the assessee will get arelief of Rs.1,69,45,692/- [Rs.3,47,83,926/- (-)Rs.1,78,35,234/-] out of total trading addition of Rs.3,47,83the result, the ground No.2, 3 and 4 of appeal taken by theassessee are partly allowed. ITA No.266 of 2018 (O&M) 6.9As the addition has been worked out on the cost ofsales, no separate addition on account of discount allowedby the assessee and on account offree distribution of booksis required to be made again otherwise it will tantamount todouble addition. Moreover, the plea of the assessee that hehas made sales at discount and has also given books toteachersfree of cost has been accepted in the absence of anycontrary finding. In view of these facts and in thecircumstances of the case, separate addition § Rs.1,51,59,103/- made by the Assessing Officer on accountof free distribution of books and on account of discountallowed by the assessee to poor students on_ threcommendations ofvarious school is directed to be deleted.In the result, ground No.5 of appeal taken by the assessee 1sallowed.’ 8.Both the Revenue and the Assessee further filed appealsbefore the Tribunal. The Tribunal found that the CIT Appeal hadallowed relief on account of free distribution of books after gettingremand report from Assessing Officer and consequently dismissed theappeals filed by the Revenue and, gave some more relief to the Assessee.The subsequent miscellaneous applications for modification also havingbeen dismissed the present appeals have been filed. QOThe primary contention of the learned counsel for theappellant before us was that there was no material on the record toSupport the conclusions arrived at by the Commissioner as well as theTribunal. However, a perusal of the judgments reveals that material wasthere before the Assessing Officer.In this connection reference may bemade to the following paragraphs of the Order passed by the Assessing| Officer (Annexure A-1) :- 7 |We have already explained in detail the procedure ofdiscounted sale to your goodself and also provided thedetails of sale at concessional sale vide para 4 of our letterdated LO? /20/4. These concessional sqle is made to theneedy students by various’ schools and _ on_recommendation of the School authorities we make the sale.We had also requested that these may be verified from therespective schools principals. We had also submitted thedetailed procedure vide para 4 of our reply dated03/03/2014. Even quarterly VAT 15 returns and yearlyreturn VAT 20 was submitted vide para 11 ofour reply dated10/2/2014. No defect was pointed out in these VAT returnsby your good self till date. We make the entries at net saleand this practice is beingfollowed regularly by the assesseeand accepted by the department in earlier years. This tradepractice is being adopted by all the traders in this trade. 5 Regarding supplying of cost price of discounted items,we submit that books and stationery Items are supplied inevery year at discount and concessional rates to variousneedy students of different schools as per the directions ofprincipals of various schools. Further, it is stated all thedocumentary evidence in theform ofrecommendatory lettersfrom the principals of various schools for supplying offreebooks to teachers have already been placed on yourfile. 5 Regarding supplying of cost price of discounted items,we submit that books and stationery Items are supplied inevery year at discount and concessional rates to variousneedy students of different schools as per the directions ofprincipals of various schools. Further, it is stated all thedocumentary evidence in theform ofrecommendatory lettersfrom the principals of various schools for supplying offreebooks to teachers have already been placed on yourfile. 6.In the last hearing on 3/3/2014 before your goodself, itwas explained that the vouchers where the payment has beenmade through account payee cheque has not been signedsince the payment has been made through a/c payee chequeand other vouchers such as conveyance, telephone,travelling etc. which has been referred are duly supported bythe bills which were qttaqched with the vouchers and whicwere also photo copied by your goodself. We are alsoenclosing details ofsalary paid during the year.” Likewise, reference may be made to the following paragraphof the order passed by the Commissioner (Annexure A-2) :- “1v). Then again since the assessee 1s working on missionary spirit, he is required to sell the books/stationeryfree of cost to the needy students on the recommendations ofPrincipal of each school andfor which the list was given tothe Assessing Officer and along with that necessaryconfirmation from the Principal were filed during the courseof assessment proceedings and which have not been doubtedby Assessing Officer and the cost of such books isRs.48,87,251/-.” 10.In the circumstances, the contention that there was nomaterial is wrong. The Assessing Officer disbelieved the material whilethe Commissioner and Tribunal believed the same. The view taken by theCommissioner and the Tribunal can not be said to be perverse or based onno evidence. No other question of law arises, ll.Appeals stand dismissed, 12.Since the main cases have been decided, the pending C.M.Applications, if any, also stand disposed of, (AJAY TEWARITJUDGE July 22, 2019pooja sharma-l (HARNARESH SINGH GILL)JUDGE Whether speaking/reasoned Whether Reportable | Yes/NoYes/No