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2023 (11) TMI 1147 - AT - Income TaxAddition on account of purchase return - variation of G.P. and N.P ratio - assessee is selling the products on consignment basis on sale of Sabyasachi products - goods are received by the assessee on consignment basis - as argued as per the double entry accounting principles, if there is an increase in cost of purchase, then there is a corresponding increase in valuation of closing stock and there will not be any impact on income - HELD THAT:- Assessee is in the business of trading as well as trader of Sabyasachi products for which assessee receives commission on the basis of consignment sale. We observe from the record that assessee’s main as well as major income is from commission. It is very much visible from the statement of profit and notes forming part of the financial statements in particular Note - 14 and Note – 16. It clearly shows that the assessee’s main income is commission income which matches with the revenue from operation declared by the assessee. Assessee has to declare purchases and sales received from Sabyasachi products which is on consignment basis. However, as per the requirement of VAT, assessee has to declare both the purchases as well as sales in its Books of Accounts and assessee has to declare the goods kept under its control i.e., opening goods on consignment basis and total purchases for the year less purchase returns during the year under consignment. Since the goods are received by the assessee on consignment basis assessee may have to return consigned goods back to Sabyasachi in case of defective or unsold stocks. In the line of trade particularly with respect to consignment sales assessee is not the owner of the goods and he is responsible to make the sales on behalf of the other party and in return assessee is eligible to get only the percentage of agreed commission. Assessee has squared up the purchases and sales in its financial records and no doubt assessee has declared substantial amount as purchases return back to Sabyasachi. It is the responsibility of Sabyasachi to declare the above activities in its Books of Accounts. Since assessee is only a commission agent assessee has recorded the transactions to square up the sales and purchases in its Books of Accounts and declared only the commission income as its main source of income. Therefore, we are not inclined to accept the findings of the Assessing Officer in this regard. Variation in G.P and N.P ratio - As we observe that assessee has received percentage of commission lesser than the previous year turnover and also the assessee has declared additional employee cost compared to previous year, since these issues were not contested before us, we are not inclined to make further comments on these issues. Accordingly, Ground No. 1 raised by the assessee is allowed.
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