Case Law Details
DCIT Vs Sunil Sponge Pvt. Ltd. (ITAT Raipur)
ITAT Raipur held that addition on account of discount allowed to sister concern unsustainable as assessee duly placed on record documentary evidence to substantiate the factum of having sold low-quality sponge iron to its sister concern. Accordingly, rejection of discount merely on the basis of doubts and suspicion unjustified.
Facts- The assessee company, which is engaged in the business of manufacturing and trading of steel items. After the culmination of the original assessment proceedings, AO observed that the assessee company had, during the year under consideration, made sales of Rs.21,14,43,116/- to its sister concern, viz. M/s Sunil Re-roller and Steels Pvt. Ltd., Raipur.
AO observed that assessee company had credited the account of the M/s. Sunil Re-roller and Steels Pvt. Ltd. by an amount of Rs.1,64,20,225/- with a narration “being the 225 MT @1000/- PMT debited by steel due to quality def”. The assessee company had credited the account of the purchaser, i.e., M/s Sunil Re-roller and Steels Pvt. Ltd. towards quality defect on the basis of a journal entry, but there was no corresponding debit of the said amount in its Profit & Loss account. AO noticed that the assessee company had reduced the amount of Rs.1.64 crore from the account of the aforementioned purchaser/debtor. Holding a conviction that the assessee company had suppressed its sales and debtors by Rs.1.64 Crore, AO reopened its concluded assessment u/s.147 of the Act.
Conclusion- Apropos the observation of the A.O as to why the said discount did not find a place in the “books of account” from time to time when the assessee company supplied goods to its sister concern and had been credited in the latter’s account only on the last day of the accounting year, i.e., on 31.03.2007, we concur with the view taken by the CIT(Appeals) that the same was for the reason that as “quantity discount” was only to be allowed if the sister concern lifted more than 10000 PMT sponge iron, and determination of the total amount of sponge iron that was purchased by the sister concern during the year could be arrived at only after end of the financial year. Considering the aforesaid facts, we find no infirmity in the crediting of the amount of discount, e., both quality and quantity discount by the assessee company in the account of the sister concern on the last date of the financial year, i.e., on 31.03.2007.
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