Rajasthan Iron Traders, New Delhi vs Department Of Income Tax

BEFORE SHRI H. S. SIDHU, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. No. 956/Del/2013 Assessment year : 2009-10 ITO, Ward 27(1), Vs. M/s. Rajasthan Iron Traders, New Delhi Y-175, Loha Manid, Naraina, New Delhi-110 028 GIR / PAN:AAAFR8914n (Appellant) (Respondent)

Appellant by : Shri Vikram Sahay Sr. DR Respondent by : Shri Ranjan Chopra, CA

ORDER

PER T.S. KAPOOR, AM:

1. This is revenue's appeal against the order of Ld. CIT(A) dated 05.12.2012. The only ground taken by revenue is the action of Ld. CIT(A) by which he had deleted addition ofRs.37.80 lacs made by A.O. on account of rebate and discounts.

2. At the outset, Ld. D.R. submitted that Ld. CIT(A) has deleted the addition made by A.O. by referring to some meeting held on 12.04.2008 at A-26, Udyog Nagar, New Delhi. However assessment order does not contain anything regarding this and neither assessee had filed any paper book to support his case.

3. Ld. A.R. on the other hand submitted that all details were filed with the A.O. but he did not mention the same in the assessment order and in this respect, he filed a copy of letter dated 14.04.2008 written by 2 ITA No.956/Del/2013

assessee to M/s. Globe Engineers which was obtained from the records of A.O. Therefore, Ld. A.R. submitted that assessee had allowed rebate and discounts to one of its dealer after having discussion regarding defective sales in an earlier year. It was submitted that amount was debited in the year under consideration as the liability crystallized in the year only..

4. We have heard rival parties and have gone through the material placed on record. We find that the assessee is engaged in the business of trading in Iron and Steels. During the year, the assessee had debited to its P & L accounts amounting to Rs.37.80 lacs for rebate and discounts allowed to M/s. Global Engineers for defective material supplied during financial year 2007-08. The A.O. did not allow the expenses holding that the same were prior period expenses and was not allowable as the assessee was following mercantile system of accounting. The operative part of the assessment order is reproduced below:

"4. Further on perusal of rebate & discount it was observed that the assessee has debited a sum of Rs. 37,80,000/- on 21.05.2008 to M/s Global engineers for compensation against defective material supplied during the F.Y. 2007-08. No, evidences & justification has been filed by the assessee regarding that. Otherwise also assessee is following mercantile system of accounting and the expenses pertained to F Y 2007-08 which is prior period expenses. The assessee has filed a letter dated 28.12.2011wnlch is not acceptable on the merits as discussed above. Since assessee has furnished Inaccurate particulars, penalty proceedings u/s 271 (1 )(c) are initiated separately. (Addition Rs. 37,80,000/-) ."

3 ITA No.956/Del/2013 5. Before Ld. CIT(A), the assessee submitted complete details regarding rebate and discounts allowed to M/s. Global Engineers. It was submitted that the credit note to M/s. Global Engineers was allowed in the year under consideration and the same was issued on account of supplies of defective material in the earlier year after a long correspondence took place between the parties, the issue was finally settled in a meeting held on 12.04.2008. Since the issue was settled in the year under consideration, therefore, the same certainly relates to the year under consideration. It was further submitted that the assessee had been following accounting standard AS-5 which deals with prior period income and expenses and which defines prior period items as those items which are booked in a current year as a result of error committed in the preparation of final statement of earlier year. It was submitted that in the present year, the liability had crystallized. The Ld. CIT(A) has allowed relief to assessee by holding as under: "6. After having carefully considered the assessment order, the submissions made by the appellant as well as the case laws cited by it, I am of the considered opinion that the appellant is entitled to expenditure of Rs.37,80,0001- under the head Rebate & Discount during the current assessment year i.e. A.Y. 2009-10, although, the matter was pertaining to A.Y. 2008-09, but the dispute regarding the same got settled during A.Y. 2009-10 and the liability of the appellant got crystallized during A.Y. 2009-10. Therefore, respectfully following the judgment of Hon'ble Delhi High Court in the case of Triveni Engineering (supra) and in view of the facts and circumstances of the case, the ground of appeal is allowed."

4 ITA No.956/Del/2013 6. We find that Ld. CIT(A) has allowed relief on the basis of facts and circumstances of the case and we do not find any infirmity in the same.

7. In view of above, appeal filed by Revenue is dismissed.

8. Order pronounced in the open court on 16th Jan., 2015.

Sd./- Sd./- (H. S. SIDHU ) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER th Date: 16 Jan., 2014 Sp Copy forwarded to:- 1. The appellant 2. The respondent 3. The CIT 4. The CIT (A)-, New Delhi.

5. The DR, ITAT, Loknayak Bhawan, Khan Market, New Delhi. True copy.

By Order

(ITAT, New Delhi).

S.No. Details Date Initials Designation 1 Draft dictated on 14/1 Sr. PS/PS 2 Draft placed before author 14, Sr. PS/PS Draft proposed & placed before the 3 JM/AM Second Member Draft discussed/approved by Second 4 AM/AM Member 5 Approved Draft comes to the Sr. PS/PS 16/1 Sr. PS/PS 6 Kept for pronouncement 16/1 Sr. PS/PS 7 File sent to Bench Clerk 16/1/15 Sr. PS/PS Date on which the file goes to Head 8 Clerk 9 Date on which file goes to A.R. 10 Date of Dispatch of order