The Pr. Commissioner Of Income Tax -6 v. Menarini Raunaq Pharma Ltd.through

$~35 *IN THE HIGH COURT OF DELHI AT NEW DELHI+ITA 867/2019 THE PR. COMMISSIONER OF INCOME TAX -6 ..... Appellant Through:Mr. Puneet Rai and Mr. RuchirBhatia, Advocates. versus MENARINI RAUNAQ PHARMA LTD.Through: ..... Respondent CORAM:HON'BLE MR. JUSTICE VIPIN SANGHIHON'BLE MR. JUSTICE SANJEEV NARULAO R D E R%27.09.2019 C.M. No. 43452/2019 (delay) 1. By this application, the applicant seeks condonation of delay of 2 days infiling the application. For the reasons stated in the application, the delay iscondoned. 2. The application stands disposed of in the aforesaid terms. ITA 867/2019 3. The Revenue has preferred the present appeal to assail a part of the orderdated 28.02.2019 passed by the ITAT in ITA No. 2944/DEL/2014 for theassessment year 2005-06. The Assessing Officer has made two additionswhich were set aside by the CIT (Appeals).Against the said order, theRevenue preferred the aforesaid appeal before the Tribunal. Thereafter, theRevenue has preferred the present appeal on two issues. Firstly, whether theITAT was justified in law in deleting the addition of Rs. 6,11,59,512/- on account of the unsubstantiated claim of sales return by accepting the claimoftheassesseethat37.3%ofthesalesreturnwererelatingtoexpired/damaged stocks and not included in the closing stock. A perusal ofthe impugned order shows that the issue raised by the Appellant iscompletely factual and no question of law arises for consideration of thisCourt in the present appeal. The finding of fact return by the CIT (Appeal)as well as Tribunal are concurrent and, in fact, perusal of the impugnedorder shows that the Assessing Officer did not even grant sufficientopportunity to the Assessee to explain its position since the date of hearingwas fixed as 06.12.2007 but the assessment was framed even prior thereto,on 29.11.2007. The CIT (Appeal) while dealing with the assessee’s appealcalled for a remand report and premised on the said report, returned factualfinding in relation to the return sales in favour of the assessee. The relevantextract from the impugned order reads as follows: “5. Ground no. 1 It is the case of the assessee that sales executives in order to earnthe incentives have shown fictitious sales which came to thenotice of the company when receivables has piled up and theassessee has not received any payment. Alleged fictitious saleswere noticed for the period of April, 2004 to July 2004. Then theassessee has recovered goods worth Rs. 6,11,59,512/-lying withthe transporters. 6. Undisputedly auditors have not made any comment on theappropriateness of the sales because the return sale was notincluded in the closing inventory. It is also not in dispute thatduring the assessment proceedings the assessee had furnishedparty wise details from which unsold goods were returned backalong with copy of sales return invoices on sample basis. The Ld.CIT(A) brought on record the fact that the assessee has not beenprovided an opportunity to explain the party wise details ofreturned goods for which he has fix the date of hearing asappropriateness of the sales because the return sale was notincluded in the closing inventory. It is also not in dispute thatduring the assessment proceedings the assessee had furnishedparty wise details from which unsold goods were returned backalong with copy of sales return invoices on sample basis. The Ld.CIT(A) brought on record the fact that the assessee has not beenprovided an opportunity to explain the party wise details ofreturned goods for which he has fix the date of hearing as 06.12.2007butproceededtoframetheassessmenton29.11.2007. However, during the appellate proceeding the Ld.CIT(A) called the remand report. 06.12.2007butproceededtoframetheassessmenton29.11.2007. However, during the appellate proceeding the Ld.CIT(A) called the remand report. 7. The Ld. CIT(A) on the basis of remand report and rejoinderfiled by the assessee has rightly reached the conclusion that thesale return for a period of 4 months from April, 2004 to July,2004 has been duly supported with evidence that it occurred dueto malpractices carried out by the sales representatives andmissing items have been recovered from the transporter.Moreover it was not case of the AO that sales and sale returns arenot supported by actual physical stock or there was anunaccounted cash receipt in the hands of the assessee for theunaccounted. 8: Moreover the assessee has submitted party wise details of"sales return" during financial year 2004-05 and details ofvaluation of sellable goods out of returned goods included in theclosing stock as on 31[st]March, 2005 which has been dulyexamined by Ld. CIT(A). Assessee has duly proved before theCIT(A) that out of total quantity of the sale return during the yearunder assessment approximately 40.3% quantity of such stockwas resold and approximately 22.4% of quantity was included inthe closing stock being sellable goods in the subsequent yearsand remaining quantity of approximately 37.3% was claimed asexpired / damaged stock which was not included whilecomputing the value of the closing stock as on 31st March, 2005.9. So when sale returns has been duly proved with physical stockavailable with the assessee, the Ld. CIT(A) has rightly decidedthe issue in favour of the assessee that the same cannot be addedas unexplained income. So we find no illegality or perversity onthe findings of facts returned by Ld. CIT(A), hence, ground no. 1is determined against the revenue.” 4. On the second aspect, counsel for the Appellant points out that theassessee has given an affidavit that the assessee shall not be claiming refundof the sales tax paid on return sales. That being the position, the assesseewould be entitled to claim deduction of the sales tax paid on the sales returns for the fictitious sales. Thus, ITAT was justified in upholding the deletionof Rs. 40,88,589/- on account of sales tax paid by the assessee.5. In view of the aforesaid, in our view, no question of law arises in thepresent appeal and the same is dismissed. VIPIN SANGHI, J SEPTEMBER 27, 2019nk SANJEEV NARULA, J