Case Law Details
ITO Vs Smt. Keshar Devi (ITAT Delhi)
Introduction: In a recent case between the Income Tax Officer (ITO) and Smt. Keshar Devi, the issue at hand was whether additions should be made for unverified sales in the trading account. The Income Tax Appellate Tribunal (ITAT) Delhi delivered a crucial ruling, highlighting the treatment of commission earned from consignment sales in the Profit and Loss (P&L) account.
Detailed Analysis: The appeal by the Revenue concerned the addition of Rs. 25,57,22,855/- in the trading account of Smt. Keshar Devi, representing unverified sales. However, the ITAT Delhi upheld the decision of the ld. CIT(A) to delete the addition, emphasizing the treatment of commission earned from consignment sales.
Case Background: Smt. Keshar Devi, operating under the name M/s Grah Lakshmi Trading Co., declared a certain amount of sales in her trading account. However, the Assessing Officer (AO) observed discrepancies and made additions, alleging unverified sales. The crux of the matter was whether the commission earned from consignment sales should be treated as income and reflected in the P&L account.
Legal Arguments: Smt. Keshar Devi argued that consignment sales should not be included in the turnover as per accounting standards. Instead, commission earned from consignment sales should be reflected in the P&L account. The ld. CIT(A) supported this argument, noting the history of the taxpayer’s business operations and the acceptance of trading and consignment sales in previous assessments.
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