SHRI SHRI MUKESH KUMAR GOYAL,RAIPUR vs. THE DY. COMMISSIONER OF INCOME TAX,-2(1), KOLKATA

The relevant facts as culled out from the material on record are as under :-

Before us, at the outset that the Ld. AR submitted that due to the smallness of amount, the assessee does not wish to press ground No. 4. In view of the aforesaid submission, ground No. 4 of the assessee is dismissed as not pressed.

Ground Nos. 1 and 2 being interconnected are considered together. It is with respect to addition of Rs.11,47,600/-.

During the course of assessment proceedings, on perusing the Profit and Loss account, the Assessing Officer noted that in the profit and loss account the assessee had claimed purchase of Rs.42,70,79,514/- whereas, during the assessment proceedings, assessee filed a statement of purchase showing purchase of Rs.43,43,30,082/-. The assessee was therefore asked to explain the discrepancies in the purchase figures and show cause

Before us, Ld. A.R. reiterated the submissions made before Assessing Officer and Ld. CIT(A) and further submitted that the sales made earlier were returned back by the customers and were reflected in the books as “sales return” but however for the purpose of presentation it was included in the purchase on account of requirement of Excise laws. He pointed to the copies of ledger which is placed in pages 65 to 73 of the paper book to demonstrate that in the books of account, assessee had shown the amount as “sales return” but for the purpose of presentation of

The Ld. D.R. on the other hand pointed to the findings of Assessing Officer wherein he has noted that the assessee has not produced the relevant details for verification. He thus, supported the order of lower authorities. Ld. A.R. in the rejoinder submitted that all the required details were submitted before lower authorities.

We have heard the rival submissions and perused the material on record. The issue in the present case is in respect of addition of Rs.11,47,600/-. It is the assessee’s contentions that the amount represents “sales return” which for the purpose of presentation in the Profit and Loss account has been included in the purchase of the assessee. The assessee has produced the copies of the ledger account where the amount has been shown as “sales return”. Assessee has also produced the

Ground No. 3 is with respect to addition of Rs.57,71,042/- on account of freight charges.

During the course of assessment proceedings the Assessing Officer noted that the assessee had claimed freight charges of Rs.57,71,042/-. Assessing Officer noted that the assessee had borne the freight charges paid to different transporters for transporting the goods it has sold thereby providing them free delivery of goods. The assessee also furnished the addresses of parties to whom the goods were supplied without charging transportation charges. After perusing the details furnished by the assessee the Assessing Officer concluded that the assessee has supplied

Before us, Ld. A.R. reiterated the submissions made before Assessing Officer and Ld. CIT(A) and further submitted that the findings of CIT(A) that the assessee did not furnish the required details where he has incurred transportation charges is incorrect. He pointed that the copies of the ledger account filed along with the details placed at 74 to 78 of the paper book. He further submitted that the assesse had also filed the details of transport expenses and that Assessing Officer did not conduct any enquiry either from the transporter or from customers. He further submitted that the Assessing Officer has not brought any material on record to demonstrate that the sales were not made or the expenses were not incurred by the assessee or were borne by the purchaser. He further submitted that it is the business decision of the assessee as to how the conduct the business and Assessing Officer cannot question of business decision and for this proposition he relied on the decision of Hon’ble Apex Court in the case of Commissioner of Income Tax Vs. M/s. Walchand & Co. (Pvt.) Ltd. reported in 1967 AIR 1435 and also placed on record the copy of aforesaid decision. He therefore submitted that no addition is called for in the present case.

The Ld. D.R. on the other hand supported the order of lower authorities.

We have heard the rival submissions and perused the material on record. The issue in the present case is in respect of disallowance of transportation expenses. It is Revenue’s case that no business man will incur loss in a transaction unless he has been compensated in some way in the process and therefore Revenue has disallowed the expenses. We find that the sales made by the assessee to the parties for whom the assessee has borne transportation expenses have not been held to be non- genuine by the Revenue authorities. Further it is not the case of Revenue that the aforesaid parties to whom the sales have been made are related parties of the assessee. We further find that before lower authorities assessee had furnished the details about the transportation and the customers and no inquiry has been made by the Revenue authorities from the transporter or from the customers to verify the genuineness of transportation. We further find that Hon’ble Delhi High Court in the case of CIT Vs. Dalmia Cement (Bharat) Ltd. (2002) 254 ITR 377 (Del) has held that the reasonableness of expenditure for the purpose of business has to be judged from the point of view of the businessman and not the Revenue. It has further held that Revenue cannot justifiably claim to put itself in the armchair of a businessman or in the position of the Board of Directors and assume the said role to decide as to how much is a reasonable expenditure having regard to the circumstances of the case. Considering the totality of aforesaid facts and relying on the aforesaid decision of Hon’ble Delhi High Court we are of view that Assessing Officer was not justified in disallowing

Ground No. 5 is with respect to addition of Rs.82,56,694/-.

During the course of assessment proceedings the Assessing Officer noted that the assessee had taken loan from Punjab National Bank against the hypothecation of the stock. The assessee had filed stock statement with the bank and according to which the value of stock of goods with assessee was of Rs.2,97,96,359/- as against the value of stock furnished before Revenue authorities of Rs.1,50,47,914/-. The assessee was asked to explain the discrepancies of stock to extent of Rs.1,47,48,445/-. The assessee submitted that there was a clerical mistake wherein the stock of sale was valued at Rs.72,13,056/- instead of Rs.7,21,305/- due to which there was a difference of Rs.64,91,750/-. It was further submitted that in order to maintain credit limit the assessee has inflated value of stock in the stock statement furnished to the bank and that the stock statement furnished to bank was on estimate basis. The submissions of the assessee were not found acceptable to Assessing Officer. The explanation of the assessee having inflated the stock statement submitted to bank for getting excess over draft facility was also not found acceptable to Assessing Officer. The Assessing Officer thereafter relying on the decision of Kolkata Bench of Tribunal in the case of Estee Exports (P) Ltd. Vs. Income Tax

Before us, Ld. A.R. reiterated the submissions made before Assessing Officer and Ld. CIT(A) and further submitted that the assessee’s books of account are audited and closing stock is also verified by the Auditors. He further submitted that book figures are supported by the purchase and sale bills and no discrepancies have been found and no instances of unrecorded purchases have been found by Assessing Officer. He further submitted that the stock statement submitted to bank was on estimate basis and the inflated stock statement furnished to the bank was to obtain higher bank loan and no addition can be made on the basis of inflated stock statement submitted to bank and for which he placed reliance on the decision of Hon’ble Gujarat High Court in the case of Commissioner of Income Tax Vs. Riddhi Steel and Tubes (P.) Ltd. reported in (2014) 220 Taxman 148 (Gujarat) and the decision of Kolkata Tribunal in the case of Income Tax Officer Vs. Ms. Jearul Haque in ITA No. 1766/Kol/2011 for A.Y. 2008-09 order dated 20-11-2015. He also placed on record of the copies of aforesaid decisions. He therefore submitted that the addition be deleted.

The Ld. D.R. on the other hand supported the order of lower authorities.

We have heard the rival submissions and perused the material on record. The issue in the present case is in respect of addition of Rs.82,56,694/-. It is assessee’s case that the stock statement submitted to the bank was inflated to get more credit from the bank. It is also assessee’s submission that the books of account of assessee are audited and no discrepancies have been pointed out by the Auditors and the same method has been continuously followed by the assessee for valuing the stock. The aforesaid contentions of assessee have not been controverted by Revenue. We find that Hon’ble Gujarat High Court in the case of Commissioner of Income Tax Vs. Riddhi Steel and Tubes (P.) Ltd. (supra) has held that only on account of inflated statement furnished to banking authorities for availing of larger credit facilities, no addition can be made u/s. 69C of the Act. We also find that the Co-ordinate Bench of Kolkata Tribunal in the case of Income Tax Officer Vs. Ms. Jearul Haque (supra) after considering the various decisions has held that no addition can be made merely on the basis of inflated higher value of stock submitted to the bank. Before us Revenue has not placed any contrary binding decision in its support nor has placed any material on record to demonstrate that the aforesaid decisions relied upon by assessee have been over ruled or set aside by higher judicial authority. Further, Revenue also could not

In the result, the appeal of assessee is partly allowed.