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Income Tax Appellate Tribunal, “SMC” BENCH : KOLKATA
Before: Hon’ble Sri N.V.Vasudevan, JM ]
Date of Hearing : 14.03.2016. Date of Pronouncement : 6.4.2016. ORDER This is an appeal by the Assessee against the order dated 07.12.2015 of CIT(A)-10, Kolkata, relating to AY 2011-12. 2. Grounds of appeal raised by the assessee read as follows :- “1. For that on the facts and circumstances of the case the Ld. Commissioner of Income-tax (Appeals) 10 erred in confirming addition made by the Joint Commissioner of Income-tax of a sum of Rs.13,18,638/- (Rs.2,06,08,540/- minus 1,92,89,902/-) as undisclosed income.
2. For that your appellant craves leave to adduce further or other ground/grounds, if any on or before the hearing of appeal.”
The Assessee is a partnership firm. It is engaged in the business of wholesale dealer in spices and other items and a commercial agent. In the course of assessment proceedings the AO noticed that as per VAT return the proforma value of the goods received on consignment during the previous year was Rs.2,06,08,540/-. However, as per the books of accounts of the assessee the value of the goods received on consignment was shows at Rs.1,92,89,902/-. The AO called upon the assessee to explain the discrepancy in the value of goods received on consignment. The assessee explained before the AO that goods received on consignment sale have to be assigned a value. The proforma value of the goods received on consignment as declared for the purpose of VAT return is only realisable value and not the actual value. The assessee ITA No.81/Kol/2016-M/s. Ganeshlall Jay Kumar-A.Y.2011-12 1 pointed out that since it was a consignment sale the assessee does not regard the purchases or sales unless the sale of the consigned goods to a third party are completed. As against the consignment value declared in the VAT returns the actual value received on actual sale to a third party was only a sum of Rs.1,92,89,902/- and this was recorded as purchases as well sale in the books of accounts of the assessee. The assessee pointed out that it received commission on consignment sale and this has been recorded separately in the trading profit and loss account.
The AO however, did not accept the explanation of the Assessee. According to the AO the assessee is given goods on discount and thereafter on sale he is guaranteed commission and other reimbursements by the consignor. The value of goods after inclusion of discount comes to Rs 1,95,96,462 ( Rs 19289902 + Rs 306560). The figure of Rs.3,06,560 has been taken by the AO from the credit side of the Profit and loss account in which the various components of income from consignment business are set out. The was of the view that the assessee’s claim of proforma value being adopted for VAT return was therefore not correct. The also observed that in the line of business, the assessee was at liberty to sell the goods at premium and earn profits over and above the commission decided with the consignor. The discrepancy in sales which has been accidently captured in the VAT return is nothing but the profits that have been earned on sales. There is no concept of notional sales or value under the VAT Act. VAT is levied on actual sales made and not on any estimated figure. The assessee has accepted sales in its return before the sales tax authorities and VAT returns are statutory return and distinguishable from statements to third parties. The AO further observed that assessees has been doing cash sales as reflected in the books of account and therefore the possibility of premium on sales being settled in cash is a stark reality in the line of assessee's business. The AO also held that since commission amount is exempt from VAT it is not included in the calculation of the undisclosed sales. The difference in sales as per the VAT return and as per the books was treated as undisclosed income of the assessee and a sum of Rs.13,18,638/- [ Rs.2,06,08,540/- minus Rs.1,92,89,902/-)] was added to the total income of the assessee. -M/s. Ganeshlall Jay Kumar-A.Y.2011-12 2
Before CIT(A) the assessee submitted that during the previous year the 5. Assessee had sold goods received on consignment and consignment value of goods sold during the year was Rs. 1,92,89,902.47. The Assessee gave a detail statement of consignment sale of each lot party before CIT(A). The Assessee pointed out that sale of own purchase of goods Rs. 3,65,36,955.30 and sale of goods received on consignment of Rs. 1,92,89,902.47 aggregating to Rs. 5,58,26,857.77 has been reflected in four quarterly VAT returns in prescribed Form No.14 in column No. 28 of sale of goods { (other than) M.R.P. as in 26 } taxable at the rate of 4 %. The Assessee pointed out that the aggregate proforma value of goods received on consignment Rs. 2,06,08,540/-. This amount has been reflected in four quarterly VAT Returns in prescribed Form No. 14 in column Number 15B stock of goods transferred from other States. The proforma value of goods received in consignment is needed in course of goods received on consignment from other States for obtaining way bill which is necessary to be carried in-transit by the goods carrier. The actual sale value of goods received in consignment is Rs. 1,92,89,902.47 as stated in para 3(a) and 3(b) and is recorded in regular books of account. Whereas proforma value of goods received on consignment of Rs. 2,06,08,540/- is not transaction value of sale and its recording is not required in regular books of account as the same is needed only for the purpose of way bill and reported in four quarterly returns in column Number 15B of stock of goods transferred from other States. The Assessee pointed out that transaction value of goods sold on consignment and accounted for in regular books of account was Rs. 1,92,89,902.47 and proforma value of goods received on consignment of Rs. 2,06,08,5401- is needed only for the purpose of way bill and the same are cross verifiable with reference to regular books of account, bank statement, stock register, purchase and sale bills, way bills and challans which are being produced herewith. The Assessee submitted that the Meaning of the term :- " Goods sent on consignment"- is when goods are consigned by Consignor to Consignee it is accompanied by a document called Proforma Invoice. It is a forwarding letter containing particulars relating to the name of the item, numbered (quantity, weight and measurement) and price. As the consignment is not a sale and the consignee is not -M/s. Ganeshlall Jay Kumar-A.Y.2011-12 3 a buyer, therefore, the forwarding letter sent along with the consignment and way bill is meant only for his (consignee) information. This forwarding letter is a substitute for invoice but it is drawn up in the form of an invoice and termed as PROFORMA INVOICE. Contrary to PROFORMA INVOICE a SALES INVOICE is a document sent by a seller to buyer which charges the buyer with the value of goods. The Assessee pointed out that the ownership in goods remains with the Consignor. Consignee does not become the owner even though the goods are in his (consignee) possession. The Assessee gave a summnary of quarterly VAT Returns for the period 01.04.2010 to 31.03.2011 filed online with the Directorate of Commercial Taxes, Govt. of West Bengal and Summary of VA T Return for the period 01.04.2010 to 31.03.2011, which was as follows:-
Period Out of Bengal Proforma Local Total CST Vat Output Input Amount Purchase Value of purchase sale Taxable VAT VAT deposited Consignment Amount Amount Goods recd. April l0 to Jun 10 9337152 5450300 Nil 13123931.93 Nil 13123931.93 524957 Nil 166300 189940 168718 July 10 to Sept 10 5991794 1935420 44400 12410526.34 Nil 12410526.34 496421 1776 165865 149855 178925 Oct 10 to Dec 10 6286567 6833615 44400 14099668.06 Nil 14099668.06 563987 1776 198965 201020 162230 Jan 11 to Mar 11 10545182 6389205 53255.6516192731.44 Nil 16192731.44 647709 2130 190895 254115 180000 20000 570 TOTAL 32160695 20608540 142055.65 55826857.77 Nil 55826857.77 2233074 5682 2227398 The above summary of VAT Return is cross verifiable with reference to sales of Rs. 5,58,26,857.77 (including goods sold in consignment Rs.19289902.47) as reflected in Profit and Loss Account and sales account reflected in regular books of account. The total sales of Rs. 5,58,26,857.77 is fully VAT taxable and output V A T of Rs. 22,33,074/- has been charged on such sale. The Assessee thus prayed that the addition made by the AO should be deleted. ITA No.81/Kol/2016-M/s. Ganeshlall Jay Kumar-A.Y.2011-12 4
CIT(A) however confirmed the order of AO. The CIT(A) observed that it was mandatory that it was mandatory that there should be matching between the sales disclosed before VAT authority and the sales disclosed before the Income tax department. He also held that sale of any type being normal sale or consignment sale cannot have a different treatment for the purpose of VAT. Aggrieved by the order of CIT(A) assessee has preferred the present appeal before the Tribunal.
I have heard the rival submissions. The leaned counsel for the assessee reiterated the submissions made before the revenue authorities. The learned DR relied on the order of CIT(A). 8. I have considered the rival submissions. It is clear from Schedule-V to the balance sheet which gives break- up of the closing stock that a sum of Rs.1,92,89,902/- is found recorded in the stock in trade received on consignment sale. The same quantity of stock which was sold has been duly considered in arriving at the closing stock. The quantitative details given Form No.3CD auditors report in sub- schedule-VII gives the quantitative details of goods traded by the assessee. The same is given as annexure to this order. A perusal of the same shows that whatever the quantity of goods received on consignment in the form of purchases during the previous year + opening stock after reducing the sales have been shown as closing stock. Thus there is no dispute with regard to the quantity of the goods received on consignment sale as reflected in the books of accounts. The dispute is only with regard to the value assigned for the purpose of VAT returns. From the submissions made by the assessee it is clear that in a consignment sale the assessee does not become the owner of the property. In a consignment sale goods sent on consignment are accompanied by pro-forma invoice. This pro-forma invoice contains only a notional value of the goods send on consignment. The actual value of these goods are recorded in the books of the consignee only when the goods are sold by the consignee to a third party. I, therefore find force in the contention raised on behalf of the assessee. In this regard I also find that in the trading profit and loss account the assessee has shown the goods received on consignment as purchases at Rs.1,92,89,902/- and on sale of such goods the same value has been shown as sales. Apart from this the assessee has also ITA No.81/Kol/2016-M/s. Ganeshlall Jay Kumar-A.Y.2011-12 5 shown income from consignment business in the profit and loss account. Thus the stand taken by the assessee that the realisable value is only reflected in the books of account and the commission for carrying out the consignment is correctly accounted in the books of accounts of the assessee is found to be correct. In the given facts and circumstances I am of the view that the addition made by AO and sustained by CIT(A) is without any basis. I may also add that the AO has made the addition purely on assumptions. AO has placed a negative onus on the assessee and made the impugned disallowance. For the reasons given above I allow the appeal of the assessee.
In the result the appeal of the assessee is allowed.