TMI Blog2016 (2) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... e for statistical purposes. - ITA No. 1677/HYD/2013 - - - Dated:- 29-1-2016 - P. Madhavi Devi, JM And B. Ramakotalah, AM For the Appellant : Shri M Sitaram, DR For the Respondent : Shri A Chandra Mohan Rao, AR ORDER Per B Ramakotaiah, AM This is Revenue's appeal against the order of the Commissioner of Income Tax (Appeals)-V, Hyderabad, dated 26-08-2013. The main issue in this appeal is with regard to disallowance of claim of discount to its customers on sale of two wheelers of amount of ₹ 46,69,869/- made by the Assessing Officer (AO) vide assessment order u/s. 143(3) of the Income Tax Act [Act], but allowed by Ld. CIT(A). 2. The brief facts of the case are that assessee is engaged in the business of dealer of automobiles. For the AY. 2004-05, the assessee-company filed its return of income on 28-10-2014 admitting taxable income of ₹ 22,38,540/- and the same was processed u/s. 143(1). During the course of assessment proceedings, AO found that an amount of ₹ 46,69,869/- towards discount given on sale of motorcycles has been debited by assessee-company in P L Account. Vide letters dt. 05-07-2006 08-11-2006, AO asked the assessee-co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Rao was not aware of getting discount when the vehicle was purchased one of his relatives, but he admitted that his signature on the confirmation letter was obtained by the person from company stating that their records were misplaced. Like-wise, Shri V.V.R. Subramaniam also confirmed that he has no idea of discount, but somebody has obtained the confirmation letter. Further, AO also reported that he has contacted some people on phone, who confirmed partly whereas some of them have reported that they have not received discount. Out of the twenty people contacted, extracted by the Ld. CIT(A) in page 5 of the order, ten people admitted to have received discount. Whereas other ten people have stated that they have not received the discount. In fact, one person received a gold ring as prize but not cash discount. Thereafter, assessee against obtained confirmation letters from those ten persons and submitted before the CIT(A). On the basis of the same, Ld. CIT(A) considered the whole issue and gave relief in his order. 4. As far as discount is concerned, Ld.CIT(A) held that 'discount is reduction to a basic price of goods or services. They can occur anywhere in the distribution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1,32,218 ₹ 41,17,64,693 6.1 From the above order, it is clear that the Commercial Tax Officer, a local authority, assessed the income from sale of motor cycles at ₹ 41,17,64,693/-, by considering the discount amount debited to P L A/c of ₹ 46,69,869/-. This fact cannot be brushed aside while taking the above decision. As per Books, also the appellant has shown net turnover of ₹ 41,17,64,693 on sale of 1st sale of vehicles, 1st sale to CSD and 2nd sale of vehicles, which is the same as adopted by the Commercial Tax Officer. 6.2 It is a common knowledge that in this line of business of sale of motor cycles, it is not unusual to give discounts to attract the customers to withstand the competition from other vehicle dealers and to successfully run the business. If the discount is not offered to the customers, he would go to other dealers, sub-dealers and other brands due to which the appellant is bound to lose its business. It is also a common practice that customers depend on local mechanics and other free lancers etc. to purchase the vehicles, who receive the discounts. These re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count by analyzing the general Modus Operandi of granting discounts and necessity of discounts in a business, we are not convinced with the orders of the Ld. CIT(A). First of all, the claim of assessee about discounts itself is very peculiar. Generally, on two-wheelers discounts are given for some period, either during festivals or during phasing out of certain model of vehicles. If there are special promotional sales, the discounts are allowed at a particular percentage and these are given in the invoice itself. Assessee has not shown any particular pattern of discounts. On every vehicle sold, assessee claimed discount. What is interesting to note is that this discount is not given to the customer in the invoice. It is also surprising to note that assessee claims discounts even on hire purchase sales/installment sales and also on the payments received by way of cheques to the full extent. This discount is claimed at a round sum amount, irrespective of the cost of vehicle and on all vehicles sold throughout the year. Another interesting feature which arose the suspicion of the AO is the fact that there is no signature of the customer on any of the discount vouchers prepared by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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