TMI Blog2023 (7) TMI 1035X X X X Extracts X X X X X X X X Extracts X X X X ..... nalysis of the trade discount vis a vis special discount and comparative financial results and the applicable comparables for deciding the reasonableness of Trade discount and other claims of expenditure while arriving at the conclusion whether the addition made by AO were justified, in respect of both the assessment year by passing a speaking order. Assessee appeals are allowed for statistical purpose. - I.T. A. Nos. 178 & 400/Asr/2018 - - - Dated:- 2-3-2023 - BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER For the Appellant : Sh. S. K. Vatta, CA For the Respondent : Sh. Ravinder Mittal, Sr. DR ORDER Per Dr. M. L. Meena, AM: Both the appeals have been filed by the assessee aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00/Asr/2018: 1. The CIT(A) has grossly erred in upholding the action of the Assessing Officer regarding the disallowance of Rs. 1975627/- given as special discount to M/S Ess Ess Kay Marketing Company Pvt. Ltd on the following issues: a. That the Directors of both the companies are same, which is factually incorrect. b. That the finding of the A.O. that this amount has been paid to reduce the profits of the assessee company which is totally wrong, as the assessee company has already suffered a loss in its business exceeding Rs. 1 Crore. As such the question of reducing the profits of the assessee company by way of giving discounts does not arise. c. The C.I.T. (A) has ignored the fact that the total amount of discount gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e misleading and with the purpose to reduce the tax liability in its hands. The financial statements of the related company have also been examined by the AO and it was held that only a nominal income has been declared by that company for tax purposes. Being not satisfied with the reply of the Assessee, AO made addition on account of unexplained claim of special discount on sales to sister concern to M/S Ess Ess Kay Marketing Company Pvt. Ltd through credit notes, besides rebate and discount to other parties, travelling expenses etc. 6. In Appeal, the Ld CIT(A) has confirmed the addition by observing as under: 4.8 The appellant company has reiterated the submissions filed in the course of assessment proceedings and has justified the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of appellate proceedings so as to justify the services rendered by the related company M/s Ess Ess Kay Marketing Co P Ltd. I have also noted the fact that M/s Ess Ess Kay Marketing Co P Ltd has earned all the revenue from the appellant company including the other income of Rs. 23.80 lakhs. The very existence of the related party is found to be solely dependent on the appellant and is nothing but a ruse. Thus, the whole arrangement is found to be collusive with the sole intent of reducing the tax liability. In the absence of any evidence available on record with regard to the services being rendered by that company, I hold that AO was justified in disallowing the claim of the appellant. Accordingly, I confirm the addition of Rs. 1,02, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to high Discount parties in comparison with Ess Ess Kay Marketing Co. (P) Limited, an associate entity, both segments represented by accredited dealers net work, and other dealers, not being accredited dealers net work parties, duly marked segment 'A', 'B', 'C' respectively showing as under: (i) Comparative trade discount allowed in % terms - in respect of each of the three segments ' A', ' B' and ' C . (ii) Numbers of parties along with names and cities. (iii) MRP values; (iv) Taxable value of sales; (v) Trade Discount allowed; 10. The Ld. Counsel argued that the appellant explained average trade discount for the year ended 31.03.2013 in respect of all the three segments A, B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts results of the company as per Page 13 vide Volume II dated 30th June, 2022, which has been ignored by not appreciating. In view of the matter, we consider that it is a fit case to be remanded back to the Ld. CIT(A) to adjudicate the issue afresh with due consideration of submissions of the appellant in respect of viewing comparative analysis of the trade discount vis a vis special discount and comparative financial results (APB, Page 13) and the applicable comparables for deciding the reasonableness of Trade discount and other claims of expenditure while arriving at the conclusion whether the addition made by AO were justified, in respect of both the assessment year by passing a speaking order. 12. Thus, the issues pertaining to cla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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