Panchsheel Traders and Agencies vs Commissioner of Income Tax

V.K. Singhal, J.—In this application u/s 256(2) of the income tax Act, 1961 (''the Act'') in respect of the assessment year 1978-79 the petitioner has submitted that the following question of law arises out of the order of the Tribunal dated 8-11-1985:

Whether under the facts and circumstances of the case, the Appellate Tribunal was justified in not rectifying its order dated 28-9-1984 and rejecting the miscellaneous application of the applicant?

In the order dated 28-9-1984 the application of the provisions of section 145(1) of the Act was invoked.

The assessee has shown the sales of Rs. 31,67,647 and declared the gross profit of Rs. 4,05,741. The gross profit rate comes to 12.7 per cent. In the preceding three years, namely, 1974-75, 1975-76 and 1976-77 the GT rate applied was 14.88 per cent, 14.58 per cent and 15.38 per cent, respectively. The appeal before the Commissioner (Appeals) was allowed on 18-12-1980. The revenue challenged the matter before the Tribunal and the order passed by the Commissioner (Appeals) was set aside. The matter was restored to the file of the Commissioner (Appeals) with the directions to give a finding on the following facts and to redetermine the issue:

Whether the discount in sub-dealers is reflected in the profit and loss account or in the trading account?

What was the position of such discount, if any, given in preceding years?

What was the amount of such discount given for the assessment year under appeal and earlier years, if any?

If quantitative tallies were maintained in account other than spare parts, then what exactly is the profit in those accounts and the spare parts account and what should be the reasonable profit in the spare parts account?

The Commissioner (Appeals) on 21-2-1983 again deleted the addition of Rs. 53,909 which was again challenged before the Tribunal and the order of the Commissioner (Appeals) was set aside on 28-9-1983 on the ground that the assessee has not maintained the stock books and that the question of discount given to the sub-dealers and the information which was directed to be given by the Tribunal has not been provided. Against this order a miscellaneous application was filed stating that the stock books with reference to the motors, pumps, etc., have been maintained which constitute major sales to the extent of Rs. 31,05,341.78 and for the sale of spare parts of Rs. 62,305.14 it was not possible to maintain the stock books which position has been accepted by the Tribunal even. The stock books were produced before the ITO who has verified this fact on the basis of the submissions made by the assessee before him for the comments. When this miscellaneous application came up before the Tribunal it was observed:

It is not disputed by either of the parties that stock tally of bigger and block items such as engines and pumps were not provided. It is also not denied that the comparative detail of discounts provided to customers on major items such as an engine, pumps, etc., for a few years was never provided. The only reliance placed by the assessee is on the separate trading account for major items and those of minor items and its verbal submissions rediscounts on part of the sales which could not be supported by any evidence.

The Tribunal came to the conclusion that there is no error apparent on record and dismissed the application. Another miscellaneous application was filed by the assessee where the same argument was advanced and the Tribunal observed:

...what was observed by the Tribunal was in relation to the quantum of discounts that were allowed on the block item for which comparative chart was not filed by the assessee for various years, which could have substantiated the assessee''s case.

In regard to the assessment to be made on an assessee or their obligations cast on the assessee which have to be fulfilled suo motu by the assessee. The obligations would include filing of a comparative chart in respect of discounts allowed to the customers on block items over the years to justify his case. It would be incorrect to say that the department must accept the mere statement of an assessee that discounts have been given on block item more in the years as compared to earlier year without they being supported by the quantitative information of the items sold as well as the quantum of discount allowed, which further has to be supported by the discounts actually allowed in the bills or by means of credit advice given to the customers. In the instant case, the assessee has not done any of these allegations.

The submission of Mr. Kalia on behalf of the petitioner is that the Tribunal has wrongly observed that the entire discount/commission has been debited to profit and loss account. The discount was allowed to sub- dealers from the bills and, thus, the sale price affected the gross profit rate. In the year 1975-76 the assessee had no sub-dealer and they were appointed for the first time for the assessment year 1977-78. The addition of Rs. 2,000 was made by the ITO in the assessment year 1975-76. The main stress of the learned counsel for the petitioner is that the Tribunal has erred in bringing a new factor of furnishing suo motu comparative charts.

At this stage we are not concerned whether the Tribunal was justified in issuing directions to furnish the comparative charts of the discount allowed to the sub-dealers because the order of the Tribunal dated 5-12-1981 is not in dispute before us. The fact remains that the comparative chart as directed by the Tribunal was not furnished and on that basis the miscellaneous application was dismissed. Had it been a matter the dispute (sic) related only with regard to maintaining the stock register, we could have directed the Tribunal to refer the case as from the documents produced it was evident that the register was maintained by the assessee for major items, but the matter relates to directions given by the Tribunal vide its order dated 5-12-1981, which had become final and even the Commissioner (Appeals) had passed consequential order giving effect to the order of the Tribunal in which four directions were given. The Tribunal was justified in its order dated 8-11-1985 dismissing the application for reference holding that no question of law arises out of the order of the Tribunal.

Consequently, the reference application has no substance. It is dismissed accordingly.