JINDAL TELECOM,NEW DELHI vs. ITO, WARD-38(3), NEW DELHI

Facts in brief qua the issue involved are that, the assessee is a partnership firm engaged in the business of trading of mobile phones. During the course of assessment proceedings certified copy of account from M/s Sony India Private Ltd., was obtained by the AO under section 133(6) and from the perusal of the same, it was found that there was a difference of Rs. 53,13,612/- in the purchase value of claimed by the assessee and as submitted by Sony India Private Ltd.,. In response to the show cause notice, the assessee had submitted as under:-

After reconciliation, the AO found that there was a difference of Rs. 12,375.68/- which was not found to be reconcilable as per assessee and same was added. However, in so far as the account for discount of Rs. 13,35,979.25/-, AO noted that the account of discount tallied with the statement received from Sony India Pvt. Ltd., is Rs. 2,95,329.80/- and accordingly the difference of Rs. 10,42,465/- was added.

Before the CIT(A), the assessee filed copy of reconciliation statements and pointed out that there was a discount of Rs. 13,35,979/- which was a account of trade discount of Rs. 10,71,788.34/- and cash discount of Rs. 2,64,190.91/-. The entry of trade discount reflected in credit side as per the statement received from Sony India Private Ltd., and also the cash discount. The figure of entries as noted by the CIT(A) is noted in the impugned order at pages no. 4 and 5. The assessee has also given the reconciliation account of Sony India Private Ltd., and pointed out that the total credit side was Rs. 1,80,73,740.064/- out of which there were certain reversal entry also. The learned CIT(A) noted that though the figures are tallied with the account given by the assessee and the account given by the Sony India Private Ltd.,, however he held that there is an un-reconcile credit entry of Rs. 9,81,436/- dated 13.5.2014 which has been confirmed by him.

After hearing both the parties and on perusal of the material referred to before us, I find that the entire addition has been made on the ground that certain amount on the credit side remained un-reconciled as per the accounts submitted by the Sony India Private Ltd., and as shown by the assessee in its ledger account. There is no difference in the opening and closing balances but with the summations of debit and credit entries. It has been explained by the learned counsel before us that the Sony India Private Ltd., use to credit account on bill to bill basis and pointed out that Ld. CIT(A) has overlooked the circled figures in the said statement He has taken entries of Rs. 18,563,82/- on the debit side with the entry of same amount on credit side to be contra. By doing so, he overlooked and was mistaken by accepting the entry of Rs. 2,22,139/- on the credit side as true whereas the actual payment against this was for Rs. 2,03,576/- only, which is evident from the entry dated 16.05.2014 in the bank statement. Actually Sony India Pvt. Ltd. was crediting the account on bill to bill basis and for shortfall in payment made for Rs. 2,03,576/- against the total of bills amounting Rs. 2,22,139/- it credited the bills in full and debited the account by difference of Rs. 18,563/-. The Company, Sony India Pvt. Ltd was already having a cheque of Rs. 10 lakhs by which it credited the account in two parts, i.e., difference of Rs 18,563/- and the rest of bills amounting Rs. 9,81,436/-. On return of cheque, the single entry of Rs. 10,00,000/- was debited to the account of the assessee firm by said company. The Ld. CIT (A) overlooked all these facts and figures and made his own presumption of the entries without ascertaining the fact and reality from the said Sony India Private Limited. He presumed the said credit entry of Rs. 9,81,436/- in the books of the said company as a payment made by assessee out of books and made additions u/s 69C of the Act. He further made an addition of Rs. 18,564/- being difference of debit entry of Rs. 10.00.000/- and credit entry of Rs. 9,81,436/-. Ld. C1T(A) confirmed the total addition of Rs. 10,00,000/- and worked the relief to the assessee at Rs. 40,650/- out of additions made by the ld. AO for Rs. 10,53,025/- on account of the above non understanding of accounting entries, which is again a mistake/non application of mind. Ld. Counsel has also given the details in respect of bill to bill accounting which is as under:-

Thus, he explained that the payment of Rs. 2,22,139/- was short by Rs. 18,564/- because the actual payment was Rs. 2,03,576/- and therefore, there was a corresponding debit entry of Rs. 18,564/-. Since the payment of Rs. 9,81,436/- was exceeding Rs. 18,564/- hence a corresponding credit entry was made to account for the payment of cheque of Rs. 10,00,000/- given by the assessee to Sony India Private Ltd.

After considering the aforesaid explanation of the Ld. Counsel, we find his contention to be correct, as the accounts have been completely misconstrued by the authorities below. The manner in which a third party maintains its account cannot be the basis for either rejecting the accounts or draw any adverse inference in the account of the assessee especially when no defect has been pointed out either in the purchase or sale shown by the assessee from the said party. The entire details of purchases were produced before the AO alongwith books of accounts on which no discrepancy has been found. Thus, such addition on account of difference which otherwise stands reconciled cannot be made. Accordingly, the same is directed to be deleted.

In the result, appeal of the assessee is allowed.