The Income Tax Appellate Tribunal (ITAT), Raipur bench, observed that goods supplied to a sister concern under a discount amount had been credited to the books of account of the assessee. Therefore, the bench upheld the CIT(A) order that quashed the reassessment order of the AO.
The assessee, Sunil Sponge Pvt. Ltd, engaged in the business of manufacturing and trading of steel items, had filed its return of income for A.Y. 2007-08, declaring an income of Rs. 55,755.
Subsequently, the AO observed that the assessee company made sales of Rs. 21,14,43,116 to its sister concern and also noted that the assessee provided a discount to its sister concern for the supply of goods.
Consequently, the AO, holding the conviction that the assessee company had suppressed its sales and debtors by Rs. 1.64 Crore, reopened the assessment due to the failure to disclose fully and truly all material facts by the assessee. After verifying the records of the assessee, the AO concluded that the assessee company had suppressed both its sales and debtors by Rs. 1.64 crore. The AO then made an addition of Rs. 1.64 crore to the returned income of the assessee company.
Aggrieved by the order, the assessee filed an appeal before the CIT(A), who allowed the appeal. Subsequently, the revenue filed another appeal against the order of CIT(A).
Sakshi Gopal Agrawal, Counsel appearing for the assessee, submitted that the documents on the basis of which the reassessment proceedings had been initiated were already available in the AO’s record.
Furthermore, the said transaction is fully recorded in the audited books of account of both parties. Thus, there was no failure on the part of the assessee to disclose full and true material facts necessary for the assessment before the AO. The assessee has not suppressed its sales by giving a discount on the quantity of sponge iron and, secondly, discount on quality.
Choudhary N.C. Roy, Counsel for Revenue, argued that the amount of discount allowed by the assessee company towards the quality difference in the supply of goods was not found debited in the books of accounts. Thus, an escapement of income had occurred due to the failure of the assessee company to disclose fully and truly all material facts necessary for assessment.
The tribunal observed that the assessee company supplied goods to its sister concern and had been credited in the latter’s account only on the last day of the accounting year, i.e., on 31.03.2007. Therefore, on the last date of the financial year, both quality and quantity discounts by the assessee company had entered the account of the sister concern.
After reviewing the facts and records, the two-member bench of Rajesh Kumar (Accountant member) and Rajpal Yadav (Vice-President) held that goods supplied to the sister concern under a discount amount had been credited to the books of account of the assessee. Therefore, the bench dismissed the appeal of the revenue.
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