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TMI Blog2023 (11) TMI 1147X X X X Extracts X X X X X X X X Extracts X X X X ..... declare purchases and sales received from Sabyasachi products which is on consignment basis. However, as per the requirement of VAT, assessee has to declare both the purchases as well as sales in its Books of Accounts and assessee has to declare the goods kept under its control i.e., opening goods on consignment basis and total purchases for the year less purchase returns during the year under consignment. Since the goods are received by the assessee on consignment basis assessee may have to return consigned goods back to Sabyasachi in case of defective or unsold stocks. In the line of trade particularly with respect to consignment sales assessee is not the owner of the goods and he is responsible to make the sales on behalf of the other party and in return assessee is eligible to get only the percentage of agreed commission. Assessee has squared up the purchases and sales in its financial records and no doubt assessee has declared substantial amount as purchases return back to Sabyasachi. It is the responsibility of Sabyasachi to declare the above activities in its Books of Accounts. Since assessee is only a commission agent assessee has recorded the transactions to squar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377;.3,85,86,048/-). In this regard, assessee was asked to furnish complete details of the purchases return and goods on consignment and also asked to justify its allowability. 4. In response, Ld. AR of the assessee submitted that assessee has not purchased the goods in actual but taken up on consignment basis, the details of purchases return of consignment goods is not maintained. However, the presentation has been made in profit and loss account only for the purpose of VAT Audit since under VAT Act, goods on consignment are deemed as purchase. 5. After considering the submissions of the assessee the Assessing Officer rejected the same by observing that assessee by its own admission in accounting the purchases and consignment basis in a differential manner for the purpose of Income Tax and for the purpose of VAT. By doing so the opening and closing stock of Inventories are not being reflected properly in the profit and loss account resulting in suppression of actual taxable profits. Assessee has admittedly not established the correctness and its allowability as expenditure with regard to purchases return and goods purchased on consignment. 6. Further, he observed that ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Honor's kind consideration: Ground 1 ADDITION On ACCOUNT OF PURCHASE Return - Rs. 6.98.35.282/- 1.1 The Learned Assessing Office (the LAO ) has erred in law and on the fact of the case in making disallowance of Rs. 6,98,35,282/- without understanding the reconciliation between the books and the VAT returns. 1.2 The appellant is a Consignment Agent of M/s Sabyasachi Couture and earns commission on the sales done by it. 1.3 As explained to the LAO and also as explained in statement of facts in case of consignment purchase the goods are received on returnable basis and get accounted as purchase only when they are actually sold to the third party 1.4 The LAO was explained the accounting treatment in case of consignment purchase and sales during the course of the assessment. The LAO has failed to understand the accounting treatment of purchase in case of consignment basis. As explained in the foregoing paragraph, purchase gets accounted only when the property in goods get transferred to the third party ie. the buyer. Thus in case of consignment sales, when the sales actually take place, the purchase gets accounted 1.5 However as per the VAT Law entire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following rulings of various Court and various High Courts (1) MAP REFOILS INDIA LTD. vs National E Assessment Centre Delhi 2022 TAXSCAN (HC) 1103 According to the petitioner, the respondent authority passed the final assessment order, which contained a significant addition of Rs. 92,42,86,979, without giving the petitioner a chance to be heard The matter was relating to assessment done under the National Faceless Assessment Scheme. The Hon'ble High Court held as under It is not in dispute that in facts of the case no draft assessment along with show cause notice as required under section 144B(1) and section 144B(7) is given to the petitioner so as to enable the petitioner to give explanation for proposed addition during the hearing before the National Faceless Assessment Centre. Section 144B(1)(xii) provides that on receipt of show cause notice, assessee may furnish his response to the National Faceless Assessment Centre and as per clause (xiv), assessment unit shall make a revised draft assessment order after considering the response of the assessee and send it to the National Faceless Assessment Centre. As per the provisions of Section 1448(7) in case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olation of principles of natural justice. Impugned order dated 2nd of March, 2020 is passed by the Deputy Commissioner of State Tax, Patna Central Circle, Bihar, Patna who issued a notice asking the petitioner to show cause by a particular date. However, for unexplained reasons and circumstances, without any prior intimation or knowledge, the matter was preponed and without affording any opportunity of hearing, decided, holding the view of the revenue. The order does entail civil and pecuniary consequences, causing prejudice to the petitioner. On all fours, principles of natural justice. stand violated. (v) Andaman Timber Industry vs CCE (2015) 127 DTR 241/281 CTR 241 (SC) Hon'ble Supreme Court held that no doubt, the Ld.CIT(A), as a principle of natural justice, should have facilitated this opportunity of cross examining the parties by the assessee. We, by respectfully following the decision of the Hon'ble Apex Court in Andaman Timber Industry vs CCE (supra), deem it fit to quash the assessment order on the basis of violation of principles of natural justice (vi) M. R. Metals Vs Deputy Commissioner, Writ Petition No.31148 of 2022 (9) TR 6517 (Andhra Pradesh High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elying on the Assessment Order. Ld. AR of the assessee submitted that the tax authorities have not considered the fact that purchases were not claimed by the assessee as an expense in first place. He raised the question can the Assessing Officer make disallowance when assessee itself has not claimed it as an expenditure. Further, he brought to our notice Page No.18 of the Paper Book and he brought to our notice Note -14 of notes forming part of the financial statements where assessee has declared sale of Sabyasachi products and also commission received from Sabyasachi products. He submitted that in Note-16 as observed by the Assessing Officer assessee has made the reconciliation of purchase of products from Sabyasachi wherein assessee had opening balance of goods kept on consignment basis as under: - Note 16 Purchase of sabyasachi products (Amount in Rupees) Particulars Year ended March 31, 2013 Year ended March 31,201 2 Opening balance of goods on consignment 38,586,408 13,070,211 Purchases 255,964,084 202,677,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts and assessee has to declare the goods kept under its control i.e., opening goods on consignment basis and total purchases for the year less purchase returns during the year under consignment. 15. Since the goods are received by the assessee on consignment basis assessee may have to return consigned goods back to Sabyasachi in case of defective or unsold stocks. In the line of trade particularly with respect to consignment sales assessee is not the owner of the goods and he is responsible to make the sales on behalf of the other party and in return assessee is eligible to get only the percentage of agreed commission. Based on the record submitted by the assessee we observe that assessee has squared up the purchases and sales in its financial records and no doubt assessee has declared substantial amount as purchases return back to Sabyasachi. It is the responsibility of Sabyasachi to declare the above activities in its Books of Accounts. Since assessee is only a commission agent assessee has recorded the transactions to square up the sales and purchases in its Books of Accounts and declared only the commission income as its main source of income. Therefore, we are not incl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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