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Income Tax Appellate Tribunal, KOLKATA BENCH (SMC
Before: Hon’ble Shri J. Sudhakar Reddy, AM]
order : August 24, 2018 ORDER This is an appeal filed by the assessee for the A.Y. 2010-11 is directed against the order of the Ld. CIT(A) – XXXII, Kolkata on 05.11.2014 passed u/s 250 of the Income Tax Act, 1961 (‘Act’). The assessee is a firm and is a distributor of recharge vouchers, SIM Card of Bharti Airtel Limited. It filed its return of income on 28.09.2010 disclosing income of Rs. 1,38,763/- . The Assessing Officer completed assessment under section 250 of the Act on 31.01.2013 determining the total income of Rs. 11,66,730/-.
The facts are brought out by the Ld. CIT(A) at page 2 of his order. For the sake of brevity I do not extract the same. Suffice to say that the assessee, while accounting for purchases from Bharti Airtel
2 A.Y. 2010-11 M/s. Ghosh Trading Limited, has admittedly shows the commission of 4% due, as the cost of purchase. The Assessing Officer, by relying on the details of the transactions obtained from M/s. Bharti Airtel Limited under section 133(6) of the Act, computed the income of the assessee. As admittedly, neither the sales nor the purchases were properly accounted for by the assessee, he rejected the trading account submitted by the assessee and added the amount of Rs. 55,414/- as gross profit. Further, the Ld. Assessing Officer based on the details obtained from Bharti Airtel Ltd., came to conclusion that the assessee had received 19,342 units as extra load in addition to claim/LAPU of Rs. 4,76,598/-. He estimated the sale at Rs. 4,82,550/- and as the assessee had disclosed a sale of Rs. 1,08,705/- made an addition of Rs. 3,73,845/- as undisclosed commission. The submission of the assessee that it received easy load recharge voucher as reimbursement of expenditure incurred on behalf of the Bharti Airtel Ltd., was rejected as no evidence was produced in support of the claim. The assessee carried the matter in appeal.
After considering the submissions of the assessee as well as the evidence produced before him, the Ld. CIT(A) has called for a remand report from the Assessing Officer. After receiving the remand report, he confirmed both the additions. These findings at pages from 17 to 21 of order. Aggrieved the assessee before us.
The assessee has raised revised grounds of appeal as well as additional ground of appeal. The learned counsel for the assessee repeated the contentions raised before the lower authorities. These contentions are summarised as follows:
3 A.Y. 2010-11 M/s. Ghosh Trading a. Till date the statement of accounts and books of account were not rejected. Only the purchase and sale figure disclosed therein were altered. b. While doing so, the closing stock figure was not revised. c. Sales were considered on accrual basis and whereas purchases were taken on cash basis by the A.O., which is not correct. It was submitted that the purchase figure is inflated because, the commission paid by M/s. Bharti Airtel Ltd. in kind is included in the purchases. d. To Avoid complication item-wise profitability has been ascertained and submitted both before the Ld. A.O. as well as the Ld. CIT(A) which has not been properly examined. e. Commission of the earlier years has been included in the current year.
The Ld. DR, on the other hand, controvert the submissions of the learned counsel for the assessee and argued that: a. Admittedly the purchase figure has been inflated, as it included commission receivable by the assessee in kind. b. No evidence whatsoever was furnished by the assessee in support of its claim that part of the commission is reimbursement of expenditure or that, the commission does not pertained to the assessee.
The learned DR submitted that the assessee has been given adequate opportunity during the course of assessment proceedings as well as during the remand proceedings and that it failed to demonstrate as to what would be the correct profit of the assessee. He relied on the order of the Ld. CIT(A) and submitted that the same be upheld.
Rival contentions heard. A perusal of the papers on record as well as the assessment orders, demonstrate that figure of purchase recorded in the books of account, as well as audited statements do not reflect the correct expenditure incurred by the assessee for purchases. The income receivable by the assessee from Bharti Airtel Ltd., which is paid in kind, is included in the cost purchases. Contra
4 A.Y. 2010-11 M/s. Ghosh Trading entries eliminating the commission from the cost of purchases have not been passed. Thus in my view the Assessing Officer as well as the Ld. CIT(A) were right not accepting the purchase figure disclosed by the assessee as correct. When certain addition on account of inflation of purchases has been made, there is no legal requirement of rejection of books of account. The assessee’s grievances is that, the Assessing Officer as not valued the closing stock on the same principle. Though we agree with the findings of the Ld. A.O. has confirmed by the Ld. CIT(A), we are of the considered opinion that the valuation of closing stock has to be re-done by the Assessing Officer, by excluding the commission part from the total purchases. Coming to the other submission of the learned counsel for the assessee, it has not been demonstrated before me, that there are factual inaccuracies in the conclusions done by the Assessing Officer. Coming to the issue of the A.O. accounting for purchases a cash basis and for sales on accrual basis, we find that in this case, the commission in question accrues to the assessee at the point of purchase and is also received by the assessee in kind, at the point of purchases itself. It is another matter that this commission is realised by way of cash on sale of recharge vouchers. The claim of the assessee is not supported by the evidence. Hence, we reject the same.
In view of the above discussion this issue of quantification of suppressed profit is set aside to the file of the A.O. for fresh computation in accordance with the directions stated in the above paragraphs.
5 A.Y. 2010-11 M/s. Ghosh Trading 9. Coming to the issue of commission, the assessee has not demonstrated with the evidence its claim that the amount in question is not commission but reimbursement of expenditure incurred on behalf of the Bharti Airtel Ltd. Hence this ground of the assessee is dismissed. The assessee has also not demonstrated that the commission pertains to the earlier accounting period. Hence this argument is also dismissed.
In the result, the appeal of the assessee is dismissed. Order Pronounced in the Open Court on 24th August, 2018.