TMI Blog2020 (2) TMI 1271X X X X Extracts X X X X X X X X Extracts X X X X ..... the set aside proceedings before the A.O. As such, the matter is restored to the file of the A.O for the limited purpose of giving effect to our aforesaid observations. Needless to say, the A.O shall in the course of the set aside proceedings afford a reasonable opportunity of being heard to the assessee. Accordingly, the order passed by the CIT(A) is set aside in terms of our aforesaid observations. The Ground of appeal No. 1 to 3 are allowed for statistical purposes. - ITA No. 1685/Mum/2018 - - - Dated:- 25-2-2020 - Shri Shamim Yahya, Accountant Member And Shri Ravish Sood, Judicial Member For the Appellant : Shri Vijay Mehta And Shri Anuj Kisnadwala, A.Rs For the Respondent : Shri Ravinder Sindhu, D.R ORDER PER RAVISH SOOD, JM The present appeal filed by the assessee is directed against the order passed by the CIT(A)-28, Mumbai, dated 24.08.2017,which in turn arises from the order passed by the A.O under Sec. 143(3) of the Income Tax Act, 1961 (for short Act ), dated 22.03.2013 for A.Y. 2010-11. The assessee has assailed the impugned order on the following grounds of appeal before us: 1.1 The learned Commissioner of Income-Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee that the gift vouchers would be transferred to the outstanding liability account and not accounted for as revenue in its books of accounts . Further, it was submitted by the assessee that issuance of a gift voucher fastened an obligation on the assessee to sell at a future date. As regards the period of validity of the gift vouchers , it was stated by the assessee that though the same remained valid for a period of 3 years, but then as a matter business prudence the vouchers were redeemed even after the lapse of the aforesaid period. In the backdrop of the aforesaid facts, the A.O called upon the assessee to explain as to why the liability of the gift vouchers that have not been claimed for more than 3 years may not be disallowed and the corresponding amount be added to its income for the year under consideration. Rebutting the aforesaid observation of the A.O, it was submitted by the assessee that though the validity period of the gift vouchers was 3 years i.e the same could be encashed by the customers within 3 years, however, as a matter of business prudence the strict adoption of the aforesaid period of validity could not be adopted as a hard and fast rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts, the A.O called upon the assessee to furnish the amount of the gift vouchers that had been encashed out of those which were issued during the aforesaid financial year. However, the assessee failed to furnish the requisite information, for the reason, that there was no inbuilt system of accounting as per which it could correlate the encashment of the gift vouchers with the issuance of the same. 4. On the basis of his aforesaid observations, the A.O was of the view that the assesses liability to honor the gift vouchers ceased after the expiry of a period of 3 years from the date of issuance of the same. As such, the A.O held a conviction that after the expiry of a period of 3 years from the date of issuance of the gift vouchers if the same were not redeemed the amounts embedded in the said vouchers would legally become the amount of the assessee as the purchaser of the vouchers after the aforesaid period would be divested of their right to raise any claim on the basis of the same. Although, the A.O was of the view that though the assessee may revalidate or honor the gift vouchers even beyond the period of 3 years, however, as per law he was not obligated to do so. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the order of the CIT(A) was received on 04.10.2017 by Ms. Ranjana Jadhav, one of the housekeeping staff of the assessee firm. It is stated by the assessee that as at the relevant point of time extensive repair and renovation was going on at its premises, therefore, temporary make shift arrangement was made to receive the correspondence at its premises. As such, as stated by the assessee, in the course of the aforesaid ongoing repair work some staff from the housekeeping department would receive the correspondence on behalf of the assessee firm. It is stated by the assessee that as the housekeeping staff members were semi-literate and not well versed with handling the correspondence received, therefore, there would be a delay involved on their part in forwarding the documents received by them to the concerned department/persons, and in certain cases the documents would even get misplaced. In the backdrop of the aforesaid facts, it is the claim of the assessee that its chartered accountant, Mr. Shenvi who was looking after the affairs of assessee firm, not having heard anything about the outcome of the appeal from the assessee firm, therefore, as on 09.02.2018 on his visit to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y them in context of the issue pertaining to the delay involved in filing of the present appeal by the assessee before us. Admittedly, the appeal filed by the assessee involves a delay of 102 days. As observed by us hereinabove, the assessee had filed an application seeking condonation of the aforesaid delay along with an affidavit deposing the facts leading to the same. On a perusal of the affidavit filed by the assessee, we find, that it is the claim of the assessee that as at the relevant point of time extensive repair and renovation was going on at its premises, therefore, it had made temporary make shift arrangement for receiving the correspondence. As such, it is the claim of the assessee that during the aforesaid period the correspondence was received at its premises by some staff from the housekeeping department on its behalf. It is stated by him, that as the members of the housekeeping staff were semi-literate and not well versed with handling the correspondence so received, therefore, the same would lead to delay in forwarding of the documents received by them to the concerned department/persons, and also in certain instances the documents would even get misplaced. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f issuance of the gift vouchers but only at the time when the property in the goods would thereafter pass on to the buyer. On a perusal of the facts, we are of the considered view that the aforesaid gift voucher system that was implemented by the assessee was strategically backed by his business prudence in order to facilitate its customers to shop gifts for their friends and relatives. As observed by us hereinabove, since the amount encompassed in the gift vouchers was not in the nature of a revenue receipt to the assessee at the time on sale of the same, the amount would thus be transferred to an outstanding liability account, as the same would represent an obligation of the assessee to sell on a future date, i.e against the redemption of the same. In sum and substance, the amount received by the assessee at the time of issuance of gift vouchers can safely be characterised as an advance received from its customers. The controversy involved in the present appeal hinges around the disallowance made by the A.O/CIT(A) in respect of the amount outstanding in the gift vouchers liability in the hands of the assessee during the year under consideration. Although, the A.O adop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d year had disallowed 2/3rd of the outstanding liability of the gift vouchers as on 31.03.2008 amounting to ₹ 3,22,15,623/-, and had made a consequential addition/disallowance of ₹ 2,14,77,082/- in the hands of the assessee. On appeal, the Tribunal had restricted the disallowance to the extent of the value of the gift vouchers which were found to be more than 3 years old. The observations of the Tribunal while concluding as hereinabove are reproduced as under: 5. We have considered rival contentions, carefully gone through the orders of the authorities below and found from the record that during the year the assessee has issued gift vouchers of ₹ 3.32 crores, out of which gift vouchers of ₹ 2.47 crores were encashed during the year itself leaving a balance of ₹ 85.07 lakhs. The genuineness of issue of gift vouchers and its encashment in subsequent year has not been denied by the department. Even in earlier years, no addition was made in receipt of similar gift vouchers issued by the assessee which was claimed to have been encashed in the subsequent years. During the year under consideration the CIT(A) has confirmed the addition in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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