9911796707
TMI Blog2025 (5) TMI 897X X X X Extracts X X X X X X X X Extracts X X X X ..... by the respondent Revenue for Block Assessment Period 01/04/1990 to 09/01/2001. 3. Tax Appeal No.1211 of 2006 is admitted on the following substantial questions of law by order dated 26/12/2006. "(i) Whether in the facts and circumstances of the case the Income Tax Appellate Tribunal was right in law in holding that debit under the head 'debtors' in Annexure A-15 is not an allowable expenditure? (ii) Whether in the facts and circumstances of the case the Income Tax Appellate Tribunal was right in law in not accepting debit side of the seized Annexure A-15 when the credit side of the very same seized Annexure has been the basis for making additions in the hands of the appellant?" 4. Tax Appeal No.663 of 2016 which was filed later on by the appellant assessee is admitted on the following substantial questions of law: "(i) Whether, in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that debit under the head "debtors" in Annexure A-15 is not an allowable expenditure? (ii) Whether, in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in not accepting debit side of the seize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcise duty and as the appellant assessee has accounted for excise duty collected to separate account in which MODVAT credit on purchases were adjusted whereas in the loose papers in file A-15 the sale was inclusive of excise duty, the Assessing Officer enhanced the sales shown in the books of accounts with the excise duty collection during that period and accordingly total sales was taken at Rs. 8,41,46,058/- so as to work out the unaccounted sales till 31/03/2000 at Rs. 15,27,37,583/- (Rs. 23,68,83,461/- - Rs. 8,41,46,058/-). 7.5. The Assessing Officer thereafter verified the expenses on each head debited to profit and loss account and in the loose paper file A-15 for the period from 01/04/1999 to 31/03/2000 and arrived at findings that the expenses to the extent of Rs.10,76,52,157/- were not accounted for in the books of accounts as compared to loose paper file at A-15. 7.6. The Assessing Officer therefore worked out the difference between the unaccounted sales and unaccounted expenses at Rs. 4,50,85,429/- and thereafter worked out the proportionate profit for the period from 01/04/2000 to the date of search i.e. 09/01/2001 at Rs. 60,54,951/- and determined the earned undisclos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent side, there is a payment for liabilities, expenses, etc in the paper itself on the receipt side it is mentioned as "receipt" while on the payment side, it is mentioned as "payment". Therefore, we agree with the contention of the ld. counsel for the assessee that the amount debited under the head "debtors" at the payment side is payment to the debtors and not the closing balance of debtors. However, every outgoing is not an expenditure. Therefore, it has to be further examined whether the payment was for an expenditure incurred for the purpose of business. It was claimed by the assessee before the lower authorities as well as before us that the debit under the head "debtors" in Annexure A-15 is for discount and commission allowed to the debtors and also for bad debts. So far as the assessee's contention for bad debt is concerned, it has to be rejected outright because in the case of bad debt, no payment is made to the debtor but the outstanding amount against the sale proceeds becomes irrecoverable. Therefore, the question of bad debt being debited in the payment side of receipt and payment account does not arise coming to the assessee's contention that the debit under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 December, 1999 26,009 35,89,242 1,75,817 2,33,50,266 At page 11 of the assessee's paper book which is page 107 of the bunch of loose papers, the details of sale of Rs.2,62, 13,554/- is there. The same reads as under: - Boxes Amount (Rs.) 33125 44,70,513 July, 1999 31783 41,46,428 August, 1999 33641 40,87,963 September, 1999 33887 42,97,248 October, 1999 32272 41,03,845 November, 1999 37009 51,07,557 December, 1999 2,01,817 2,62,13,554 From the comparison of above, it is evident that the loss sales at page 8 is because of less number of boxes having been sold and not because of any discount or commission being reduced from the gross sales. The learned counsel has not brought on record any evidence to support his contention that there is general trade practice in this line of business of allowing cash discount to traders and which is separately paid to them. On the other hand, the assessee's own regular books prove to the contrary. In view of above, we are unable to accept the assessee's contention that debit under the head "debtors" in the receipt and payment account reflects payment of discount and commission by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d out from page-24 of the paper-book containing loose papers A-15 that there is no debtors on payment side but only discounts and commission is mentioned. Reference was also made for the period from 01/01/1999 to 30/06/1999. It was therefore submitted that the contention was raised by the assessee before the Tribunal and the CIT (Appeals) that when there is no payment to debtors and the same are shown on the payment side, the sales are taken as net sales. 11. It was therefore submitted that the Assessing Officer and the CIT (Appeals) could not have relied upon the same documents to come to the conclusion that the amount shown on the payment side did not pertain to the discounts and commissions to the debtors for back dates. It was pointed out that the CIT (Appeals) also in the order has arbitrarily disallowed 30% of the amount of expenditure claimed as payments under the head "debtors" by observing that there are certain names which apparently do not relate to sales though it may be on some other accounts and it was therefore submitted that the CIT (Appeals) ought to have allowed 100% claim of the amount shown under the head "debtors" which the Tribunal has ignored and did not eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was therefore submitted that in view of the findings of fact arrived at by the Tribunal on the basis of the loose papers A-15, it cannot be said that substantial question of law arises to be answered in favour of the assessee. 15. It was further submitted that the Tribunal for the reasons recorded for arriving at findings of fact has restored the order passed by the Assessing Officer for the reasons that the payment to debtors is not an expenditure and the assessee failed to establish that such payment was in nature of discount and what is recorded in loose paper A-15 is nothing but receipt and payment account which means whatever is received and paid payment and therefore the payment made to the debtors cannot be considered as an expenditure by treating the same as discounts to the debtors and there is nothing on record to show that what is shown is the gross sales. It was therefore submitted that both the questions framed by this Court are required to be answered in favour of the Revenue and against the assessee. 16. Having heard the learned advocates for the respective parties and taking into consideration the reasons assigned by the Tribunal for restoring the order passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and payments in the loose papers A-15 should be considered as an allowable expenses as the amount shown on the payment side under the head "debtors" pertains to the amount not realized or not received from the debtors to the tune of Rs.2.49 crores. The Assessing Officer, however, did not consider such claim made by the appellant assessee. 21. The CIT (Appeals), however, while considering the claim of the assessee for payment shown under the head "debtors", observed as under: "From the total sales worked out, the above sales of Rs 8,62,41,738/- is reduced, the total unaccounted sales upto 31/3/2000 will be Rs. 15,06,41,723/- From this sales, A.O. has allowed deduction for unaccounted expenses of Rs. 10,76,52,157/-, which leaves an income of Rs. 4,29,89,566/- as against worked out by the A.O. at Rs. 4,50,85,429/- While doing so, I have rejected the claim of the appellant company that sales for the period of 3 months from 1/1/2000 to 31/3/2000 is not required to be estimated. It is an admitted fact that for majority of the block period, systematic working were found indicating unaccounted receipts and since such receipts and payment accounts were prepared normally at the end of J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se papers pertaining to this issue and find that the appellant claim is partly correct for the reasons that the debtors has been shown on the payment side which inter alia includes repayment of loan, interest paid on loan, excise duty, raw material, various expenses and finally the closing balance of cash on hand and bank balance is worked out. On the receipt side, there appears opening balance of cash and bank, sales, receipt of loan. Therefore, the balance shown under the head debtors cannot represent the outstanding amount because the outstanding balance pertaining to sundry creditors, outstanding for expenses, cumulative balance of investment in fixed assets, etc. are not appearing in the said receipt and payment a/c. Therefore, considering the nature of the notings, amount noted under the head debtors on the payment side essentially means payment to debtors, which may be in the nature of either discount, commission, non-recovery of amount or advances for purchases etc. However, the details of debtors do not categorically show that entire amount paid relates to sales made. For example, there are certain names, which apparently do not related to sales, though it may be on some o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer or not. 25. The Tribunal has come to the conclusion that debt/payment under the head "debtors" shown on payment side in loose papers A-15 is not an allowable expenditure because it is neither a back date claim nor can be considered as a discount and commission as per the reasons assigned by the Tribunal on the basis of the facts available on record as the loose papers also contain the payment under the head 'discount and commission' for several periods and therefore the contention of the assessee was not considered by the Tribunal that payment shown under the head "debtors" pertains to the discount and commission. 26. The Tribunal has also arrived at findings of fact that the contention of the assessee that there is general practice in the line of the trade to allow 30% to 40% discount to the traders on the goods sold was also not accepted in view of the fact that the separate payment under the head 'discount and commission' was mentioned on the payment side. The Tribunal also found upon the perusal of the loose papers Annexure-A-15 that debt under the head "debtors" is only for some period and not for all periods. From 01/01/1999 to 30/06/1999 and from 01/0 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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