Flipkart India (P) Ltd. Vs ACIT (ITAT Bangalore)
Where the assessee sold goods at loss in order to create market for itself, AO disregarded the loss without any basis and converted the same into income then action of AO was not justified. What can be taxed is only income that accrues or arises as laid down in section 5 of the Act. Nothing beyond section 5 of the Act can be brought to tax. There was nothing to show accrual of income so as to disregard the loss declared by the assessee in the return of income filed. There is no provision in the Act by which the AO can ignore the sale price declared by an assessee and proceed to enhance the sale price without material before him to show that the assessee has in fact realized higher sale price.
FULL TEXT OF THE ITAT JUDGMENT
ITA No.202/Bang/2018 is an appeal by the Assessee and ITA No.693/Bang/2018 is an appeal by the Revenue. Both the appeals are directed against the order dated 22.12.2017 of CIT(A)-3, Bengaluru, relating to AY 2015- 16.
2. The Assessee is a company. During the relevant previous year it was engaged in the business of wholesale trader/distributor of books, mobiles, computers and related accessories. It filed a return of income for AY 2015-16 declaring loss of Rs.796,34,36,863/-.
3. The AO noticed that the Assessee was a wholesale dealer and acquired goods from various persons and was immediately selling the goods to retail sellers like M/S.WS Retail Services Pvt.Ltd. and others, who subsequently would sell those goods as sellers on internet platform under the name ‘Com’. The AO further noticed that the Assessee has been purchasing goods at say Rs.100/- and selling them to the retailers at Rs.80/-. The purchases during the relevant previous year was Rs.10335,73,05,882/- and sales was Rs.9351,75,05,319/-. After excluding closing stock of unsold goods, the purchase and sales figure were as follows:
