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2020 (2) TMI 1271 - AT - Income TaxOutstanding liability of gift vouchers disallowed - Method of Accounting adopted by the Appellant to determine its liability on account of gift vouchers - HELD THAT - Disallowance of the outstanding liability of gift vouchers in the case of the assessee was supposed to be restricted only to the extent the same were found to be more than 3 years old. Accordingly, we direct the A.O to restrict the disallowance in respect of the gift vouchers on the same basis as had been adopted by the Tribunal while disposing off the appeal of the assessee for A.Y. 2008-09. Although, the ld. A.R in the course of the hearing of the appeal had furnished a chart therein working out the value of the gift vouchers outstanding for more than 3 years, however, in the absence of any supporting documentary evidence the same cannot be summarily accepted on the very face of it. Assessee is directed to furnish the working of the details of the gift vouchers which are outstanding for more than 3 years on the basis of supporting documentary evidence in the course of the set aside proceedings before the A.O. As such, the matter is restored to the file of the A.O for the limited purpose of giving effect to our aforesaid observations. Needless to say, the A.O shall in the course of the set aside proceedings afford a reasonable opportunity of being heard to the assessee. Accordingly, the order passed by the CIT(A) is set aside in terms of our aforesaid observations. The Ground of appeal No. 1 to 3 are allowed for statistical purposes.
Issues Involved:
1. Disallowance of outstanding liability of gift vouchers. 2. Validity of enhancement of assessed income by CIT(A). 3. Condonation of delay in filing the appeal. Issue-wise Detailed Analysis: 1. Disallowance of Outstanding Liability of Gift Vouchers: The assessee, operating a chain of departmental stores, had shown a liability of ?2,17,97,617/- for gift vouchers in its balance sheet for the year under consideration. The AO observed that these gift vouchers, valid for three years, were not accounted for as revenue until redeemed. The AO concluded that the liability ceased after three years, adding 20% of the outstanding liability (?43,59,524/-) to the income. However, the CIT(A) disallowed the entire outstanding amount, enhancing the addition by ?1,74,38,093/-. The Tribunal found that the assessee's method of accounting for gift vouchers was consistent and in line with business prudence. It was noted that some vouchers might never be redeemed due to various reasons. The Tribunal directed the AO to restrict disallowance to vouchers outstanding for more than three years, aligning with the decision in the assessee's case for A.Y. 2008-09. 2. Validity of Enhancement of Assessed Income by CIT(A): The CIT(A) issued a notice under Sec. 251(2) of the Act, proposing an enhancement of the assessed income by disallowing the entire outstanding liability of gift vouchers. The Tribunal found the CIT(A)'s view that the entire liability had ceased as of 31.03.2009 to be without merit. The Tribunal emphasized that the department had consistently accepted the practice of issuing and redeeming gift vouchers. The Tribunal held that only vouchers outstanding for more than three years should be disallowed, rejecting the CIT(A)'s enhancement. 3. Condonation of Delay in Filing the Appeal: The appeal involved a delay of 102 days. The assessee attributed the delay to extensive repair and renovation at its premises, resulting in the misplacement of the CIT(A)'s order by housekeeping staff. The Tribunal, considering the bonafide explanation and lack of malafides, condoned the delay, referencing the Supreme Court judgments in Ramnath Sao Vs. Gobardhan Sao and Collector Land Acquisition Vs. MST Kathiji & Others. Conclusion: The Tribunal allowed the appeal for statistical purposes, directing the AO to disallow only the gift vouchers outstanding for more than three years, as per the Tribunal's decision in the assessee's case for A.Y. 2008-09. The Tribunal also condoned the delay in filing the appeal, setting aside the CIT(A)'s order and restoring the matter to the AO for compliance with the Tribunal's observations.
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