Computtion of discount on hypothical basis and applied monthly is not permissible because discount is not constant

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- “B” CALCUTTA

Before Shri Pramod Kumar, Accountant Member

and

Shri George Mathan, Judicial Member

ITA No.1439/Kol/2011

Assessment Year: 2001-02

Sri Arun Kumar Paul

PAN: AFWPP 0325C

(APPELLANT)

-Versus-.

ITO, Ward 51(3), Kolkata

(RESPONDENT)

For the Appellant: Shri Anikesh Banerjee, Advocate, ld.AR

For the Respondent: Shri D.J. Mehta, ld.CIT/DR

Date of Hearing: 22-06-2012

Date of Pronouncement: 22-06-2012

ORDER

Shri George Mathan, Judicial Member

This is an appeal filed by the assessee against order of the learned Commissioner of Incometax

(Appeals), XXXII, Kolkata in appeal no.257/CIT(A)-XXXII/08-09/51(3),Kol dated 30-03-2011

for the assessment year 2001-02.

2. In this assessee’s appeal, the assessee has raised following grounds of appeal :-

“1. For that the addition of purchase difference of Rs.55, 32 1/- is bad in law. Please add the gross profit @ 1.77% with total income of the assessee & restrict the addition up to Rs.980/-.

2. For that the addition of purchase difference of Rs.15, 792/- is bad in law. Please add the gross profit @ 1.77% with total income of the assessee & restrict the addition up to Rs.280/-.

3. For that the Ld. Income tax Officer without understanding adjustment with the Parties added the discount received of Rs.2, 74,769/- difference in purchase.

4. For that the Ld. Assessing Authority in arbitrary manner added the difference of discount paid Rs.2,21,971/- minus hypothetical calculation of discount payment of Rs.1,22,652/- i.e. Rs. 99,319/-.

5. For that the Ld. assessing Authority without understanding the mode of payment added back the amount of Rs.50,000/-

6. For that the Ld. Assessing Authority neglecting all pros & cons, intentionally avoided the implementation of Act added the business loan of Rs.3 ,3 3,000/-

7. For that in any event the assessment order is illegal, arbitrary and not tenable in law.

8. For that your petitioner prays to place any additional ground or grounds at the time of hearing of appeal petition.

3. Shri Anikesh Banerjee, Advocate, ld.AR represented on behalf of the assessee and Shri D.J. Mehta, learned CIT/DR represented on behalf of the revenue.

4. At the time of hearing the ld.AR for the assessee submitted that the appeal filed by the assessee is barred by limitation by 41 days. It was submitted that the assessee has filed an affidavit for condonation of delay to which revenue has not raised any serious objection. In the circumstances, the delay in filing the appeal is condoned and appeal is disposed on merits.

5. It was further submitted by the learned AR that the assessee is not pressing ground nos. 3 & 6

of this assessee’s appeal. These are dismissed as not pressed.

6. In regard to ground nos. 1 & 2, it was submitted that the Assessing Officer has made the addition in respect of the difference in the purchases. It was submitted that same was also confirmed by the learned Commissioner of Income-tax (Appeals). It was the submission that the gross profit may be added and not the difference of the purchases as made by the Assessing Officer.

7. The learned CIT/DR that he did not raise any serious objection to the submission that the gross

profit may be added.

8. We have heard the rival submissions and perused the material available on record. The Assessing Officer is directed to add the gross profit at 1.77% as disclosed by the assessee in respect of purchase difference of Rs.55,321/- and Rs.15,792/-.

9. In regard to ground no.4, it was submitted by the learned AR for the assessee that the issue was against the action of the learned Commissioner of Income-tax(Appeals) in confirming the difference of the discount paid, which had been hypothetical calculated by the Assessing Officer. It was the submission that the assessee had granted discount on the sale. The Assessing Officer had calculated the rate of discount on monthly basis and had taken at average rate. It was the submission that the Assessing Officer then hypothetically estimated the discount, which was liable to be allowed and differential between hypothetical calculation and discount disclosed by the assessee was treated as income of the assessee. The factum of the discount has not been disputed. It was the submission that the assessee could not have granted the discount at fixed rate. It was the submission that the factum of the discount having been accepted, it was the submission that the addition was liable to be deleted.

10. In reply, the learned CIT/DR has vehemently supported the orders of the Assessing Officer and the learned Commissioner of Income-tax (Appeals).

11. We have considered the rival submissions. A perusal of the assessment order clearly shows that the Assessing Officer questioned the assessee why there is a difference in the rate of discount. Assessee replied to the questions raised by the Assessing Officer. However, the Assessing Officer has proceeded to compute the discount by hypothetical calculation to arrive at discount rate for the whole year and then asessee applied on monthly sale basis. This obviously is not permissible in so far as the discount granted by the assessee is not a constant every month. The average rate of discount would be a highly impractical method. In the circumstances, the addition in respect of discount as made by the Assessing Officer and confirmed by the learned Commissioner of Income-tax(Appeals) stands deleted.

12. In regard to ground no.5 no serious arguments have been placed by the learned AR for the

assessee and consequently, the same are dismissed.

13. In the result, the appeal of the assessee stands partly allowed.

THIS ORDER IS PRONOUNCED IN OPEN COURT AS DICTATED ON

                                              Sd/-                                  Sd/-

                                  Pramod Kumar,                  George Mathan,

                               Accountant Member              Judicial Member

Dt 22-06-2012

*PP/SPS

Copy of the order forwarded to:

1.      The Appellant : Sri Arun Kumar Paul 11 Baranasi Ghosh Road, Talpukur, 24 Pgs(N).

2 The Respondent- ITO, W 51(3), Uttarapan Complex, Manicktala Civic Centre, DS-II & III, Kol-54.

3. The CIT,

4. The CIT(A)

5. DR, Kolkata Bench

6. Guard file.

True Copy,

By order,

Asstt Registrar