M/S SANKARI LORRY URIMAIYARLARGAL SANGHAM,SANKARI vs. ACIT CIRCLE 2, SALEM

This appeal filed by the assessee is directed against the order of the ld. Principal Commissioner of Income Tax, Salem dated 21.03.2018 relevant to the assessment year 2013-14 passed under section 263 of the Income Tax Act,1961 [“Act” in short].

Brief facts of the case are that the assessee is engaged in the business of Petrol & Diesel outlet (Bunk), Oil stores and dealers in automobile spare parts. The assessee filed its return of income for the assessment year 2013-14 on 29.08.2013 admitting total income of ₹.1,22,98,230/-. The return filed by the assessee was processed under section 143(1) of the Act. Subsequently, the case was selected for scrutiny and after due process, the assessment was completed under section 143(3) of the Act dated 05.08.2015. In the assessment order, the Assessing Officer has stated that in response to the notice issued, the AR of the assessee appeared and submitted the details in support of return of income and completed the assessment by accepting the return of income filed by the assessee.

Subsequently, by exercising the power conferred under section 263 of the Act, the ld. PCIT issued a show-cause notice to the assessee dated 06.03.2018 on the ground that the assessment order passed by the Assessing Officer dated 05.08.2015 is erroneous and prejudicial to the interest of Revenue for the reason that the Petrol and Diesel has to be sold at the rate per litre fixed by the Govt. Of India/Oil Companies and therefore, the discount is not allowable and it cannot be stated to earn income as per the provisions under section 36 of the Act. The assessee has not received any special income from member customers i.e., the amount was not spent to earn any income as per the provisions of section 36 of the Act. Therefore, the discount given to the member customers cannot be allowed and the same has to be added back. Accordingly, the ld. PCIT has set aside the assessment order passed by the Assessing Officer on the ground that the Assessing Officer has not made proper enquiry and directed the Assessing Officer to complete assessment afresh in accordance with law.

The assessee carried the matter in appeal before the Tribunal. The ld. Counsel for the assessee has submitted that the Assessing Officer in the assessment order clearly noted that all the details are verified and the assessment is completed. Therefore, the assessment order passed by the Assessing Officer is neither erroneous nor prejudicial to the interest of Revenue. Therefore, the ld. Counsel for the assessee prayed that the revision order passed by the ld. PCIT dated 21.03.2018 may be quashed.

On the other hand, the ld. DR supported the order passed under section 263 of the Act.

We have heard both the sides, perused the materials available on record and gone through the orders of authorities below along with paper book filed by the assessee. During the course of assessment proceedings, the Assessing Officer has issued notice on 12.06.2015, wherein, the assessee was asked vide question No. 4 to explain the discount given to non-members and IC Limited lorries and also vide question No. 5 to explain the discounts given to member customers and also submit the member wise discounts given for the financial year concerned. Accordingly, vide letter dated 09.07.2015, the assessee has submitted its detailed explanations before the Assessing Officer. By filing copy of the explanations offered against question No. 4 and 5, the ld. Counsel for the assessee has submitted that after considering the above explanations of the assessee and making due enquires in respect of discounts to members as well as non-members, the Assessing Officer has completed the assessment. Therefore, the assessment order passed by the Assessing Officer cannot be said that it is neither erroneous nor prejudicial to the interest of the Revenue. That apart, the discount given to the members particularly for the business purposes and therefore, it cannot be said that the discount is not allowable under section 36 of the Act. In this case, due to business exigency, the assessee wanted to reduce its profit by making more turnovers by giving discounts to the members. Therefore, it is a business decision of the assessee for the purpose of its business. In view of the above facts and circumstances, we are of the opinion that the ld. PCIT was not correct in setting aside the assessment order dated 05.08.2015 passed by the Assessing Officer. Thus, the revision order passed under section 263 of the Act directing the Assessing Officer to complete the assessment afresh stands quashed.

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