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2016 (2) TMI 297 - ITAT HYDERABAD

2016 (2) TMI 297 - ITAT HYDERABAD - TMI - Disallowance of claim of discount to customers on sale of two wheelers - Held that:- The genuineness is not established by the evidence that assessee sought to rely upon. We are of the opinion that on the basis of the sample evidences furnished by assessee, in the absence of any policy of discount or acknowledgement by the customers in the invoices, the Modus Operandi adopted by assessee seems peculiar.

Therefore, in the interest of justice, .....

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enquiries and satisfying, whether assessee's claim of discount is genuine or not, the claim can be allowed. Decided in favour of assessee 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 ma .....

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8,540/- 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-company to furnish the details of discount given along with ledger extract of sales & sales invoices. The AR of assessee-company appeared on 13-11-2006 before the AO and failed to produ .....

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lied that the discount portion was shown separately. On further verification, AO found that the same were not signed by the customers who had said to have received the discount. AO has given a final opportunity to assessee-company to prove the discount allowed to customers as genuine. For this purpose, assessee-company has to produce sales register, discount account along with sales invoices and discount given vouchers which possesses customers' signature. Assessee-company could not substant .....

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had filed 41 bills and confirmations in respect of sale invoices of the customers, who have received discounts on sale of two wheelers and requested that the same may be taken as additional evidence under Rule 46A of the I.T. Rules. The same was forwarded by the then CIT(A) to the AO vide letter dt. 04-12-2007. On receipt of the same, AO has submitted that assessee has furnished confirmations in respect of discount paid in 41 cases involving discount amount of ₹ 32,070/-as against discoun .....

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d 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 .....

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rer and often printed on the package), the retail price (set by the retailer and often attached to the product with a sticker), or the list price (which is quoted to a potential buyer, usually in written form). There are many purposes for discounting, including: a. To increase short-term sales; b. To move out-of-date stock ; c. To reward valuable customers; d. To otherwise reward behaviors that benefits the discount issuer. The Ld.CIT(A) further held that 'some discounts and allowances are i .....

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r, Hyderabad, dated 12-09-2005 for the F.Y.2003-04. In the order, in Form AR-II as per books, the following figures were shown: Particulars Gross Turnover Net Turnover 1st Sales of vehicles 39,56,72,207 39,56,72,207 1st Sale of CSD 1,59,60,267 1,59,60,207 2nd Sale of vehicles 1,32,218 1,32,218 TOTAL: 41,17,64,693 41,17,64,693 The Profit and loss Account filed before the Commercial Tax Officer for the F.Y.2003-04 reveals the total turnover from sale of Motor Cycles at ₹ 41,64,33,382.03 and .....

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he 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 mot .....

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ives/ local mechanics bargain and receive discounts and pay the amount and take delivery of the vehicle on behalf of the actual user. In this process, the actual customers are not aware of the details of discounts but purely procure the vehicles only after verification and certification of the mechanic/person he believes. Under these circumstances, it may not be possible to prove each and every details of discounts offered to the customers/local mechanics etc. 6.3 The A.O.'s report dated 3-1 .....

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ove discussion, I am of the opinion that the AO has not brought anything concrete to prove that no discount was provided in cash by the appellant to its customers on sale of two wheelers. Accordingly, the ground taken by the appellant is thus allowed". Aggrieved by the orders of CIT(A), Revenue has come before us. 6. Ld. DR contended that the Ld. CIT(A) has erred in giving relief when there is evidence that assessee has not properly given the discount nor substantiated the claim of discount .....

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ounts and reduced the turnover accordingly. He reconciled the amounts. On a query whether assessee can submit proper evidences and the rate of discount on each vehicle, Ld. Counsel submitted that there was fire accident subsequently and information was not available. 8. We have considered the issue and perused the rival contentions. Even though Ld. CIT(A) allowed the discount by analyzing the general Modus Operandi of granting discounts and necessity of discounts in a business, we are not convin .....

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. 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 s .....

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d furnish only 41 confirmations out of 11,515 motorcycles sold during the year. As rightly contended by the Revenue, this is very small number. On enquiry by the AO, more than 50% have denied the receipt of amount and one has reported receipt of gold ring as prize. No evidence was placed on record before us whether there is any particular rate of discount granted to a customer or there is any policy by the company to grant discounts on each of the vehicles sold. The fact that customers are not a .....

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though subsequently filed confirmation letters which was not put to verification by the CIT(A), that claim itself could not have been allowed in full by the Ld. CIT(A). 9. One factor which might have led the CIT(A) to allow discount was reduction in turnover acknowledged by the Commercial Tax Department. We are not sure how and in what circumstances, Commercial Tax Department reduced the discount from the gross turnover. For the purpose of income tax, what is material is the genuineness of the e .....

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