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Facts
The assessee, engaged in distributing VIVO mobiles, filed its return admitting a loss. The Assessing Officer (AO) disallowed price variation charges of Rs. 2,39,75,368/-, treating it as bogus expenditure due to lack of supporting agreements. The CIT(A) allowed the relief.
Held
The Tribunal observed that the CIT(A) had granted relief without proper verification, such as calling for a remand report or discussing the parties' rights and obligations. The Tribunal deemed it proper to remand the matter back to the CIT(A) for fresh adjudication.
Key Issues
Whether the CIT(A) erred in deleting the disallowance of price variation charges without proper verification and due process, and if Rule 46A should have been invoked for additional evidence.
Sections Cited
143(1), 143(2), 142(1), 46A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad ‘B ‘ Bench, Hyderabad
Before: Shri Laliet Kumar & Shri Madhusudan Sawdia
आदेश/ORDER Per Laliet Kumar, J.M
This appeal filed by the Revenue is directed against the order dated 30/09/2024 of the learned CIT (A)-NFAC Delhi, relating to A.Y.20178-18.
The Revenue has raised the following grounds:
Facts of the case in brief, are that the assessee- company, engaged in the business of distribution of VIVO mobiles has filed its original Return of Income for the Asst. Year 2017-18 on 31.10.2017 admitting total loss of (-) Rs. 4,42,49,892/-. The return of income was processed U/s 143(1). The case was selected for Complete Scrutiny through CASS, for which statutory notices U/s 143(2) and u/s 142(1) was issued were issued to the assessee through ITBA. Later, notices to which the assessee has furnished the information called for through ITBA on various dates. During the course of assessment proceedings, the Assessing Officer observed that the assessee had incurred huge expenses towards advertisement expenses and price variance charges. In this regard, the assessee was asked to furnish the reasons for huge expenses and also to furnish the evidence in support of its claim.
Page 2 of 7 In response thereto, the assessee filed submissions dated 24.12.2019 explaining the reasons for huge advertisement expenses followed with evidence. However, with regard to huge Price Variance Charges of Rs.2,39,75,368/- claimed, the assessee submitted ledger copies of credit notes issued by the assessee. As per the submissions filed, the assessee is only a distributor of the mobile phones.
The Assessing Officer observed that the distributor or dealer doesn’t have any say in the price of the product and it would be the prudent decision of the management or the owner company manufacturing the products say mobile phones in the instant case, who decides the price and time of the price variance based on their own prudent analysis. The distributor normally acts like an agent who assists the manufacture in the distribution of the products and providing any other services based on the contractual obligation with the manufacture of the products with a markup or commission. In the instant case, the Assessing Officer note that the assessee have not shifted/passed the burden of price variance of Rs.2,39,75,368/- to the person/company from whom the mobiles were purchased. Also, the assessee have not furnished agreements entered into with company regarding terms of “absorption of the price variance” i.e., whether it should be in the hands of the distributor or the manufacturer. Be that as it may, considering that the assessee have transferred the price variance to the owner, the details of the same were not produced
Page 3 of 7 for verification. Thus, the opined that with non-submission of the supporting agreements entered into with the owner /manufacturing company, for Rs.2,39,75,368/- is treated as bogus expenditure and is being disallowed and added back to the returned income.
Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the learned CIT (A), who allowed relief to the assessee.
Being aggrieved, the Revenue is in appeal before the Tribunal.
At the time of hearing, none filed vakalat nama, though one, Shri Kumar Pal Tated, C.A. has made a request to the Bench to grant time for adjourning the case without filing any power of attorney or letter on behalf of the assessee. Accordingly, the request of Shri Kumar Pal Tated has been rejected and the appeal is taken up for hearing.
8. The learned DR drew our attention to para 7 of the order of the learned CIT (A) which is to the following subject:
The learned DR further drew our attention to para 5 to 7 of the order of the Assessing Officer which are to the following effect:
It was the submission of the learned DR that, the learned CIT (A) has granted relief to the assessee, without verifying the documents which were in the shape of an agreement between the suppliers of the Mobile Firm and the Distributor (i.e. the assessee). Further, the assessee has not demon stated that, the business and promotion, price variation expenses were/are required to be towards the cost of the manufacturer and not towards the cost of the Distributor. It was submitted that, the learned CIT (A) has not called for a remand report from the Assessing Officer and without calling a remand report, the learned CIT (A) has granted relief to the assessee. Therefore, the order is required to be set aside.
We have heard the learned DR and perused the orders of the AO and the learned CIT (A). Admittedly, the learned CIT (A) has granted relief to the assessee without calling any remand report from the Assessing Officer and without discussing any right and obligation of parties. The said document was not filed by the assessee either during the assessment stage or at the stage of the appellate proceedings which is clear from para 6 of the order of the learned CIT (A). Further, the learned CIT (A) has not given a chance to the Assessing Officer to verify the contents of the documents or has himself not examined the issue, by calling the remand report or examining the manufacturer of the mobile
Page 6 of 7 phones i.e. VIVO Mobile. In the light of the above, we deem it proper to remand the matter to the file of the learned CIT (A) with a direction to de novo adjudicate the appeal after calling a remand report from the Assessing Officer on the documents, if any, submitted by the assessee to prove its case that, the price variation of the mobile sets were to the cost of the assessee and not to the manufacturer. We order accordingly.
In the result, appeal filed by the Revenue is allowed for statistical purposes.