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Only Profit Element in Sale can be treated as income not the Entire sale consideration

In Shri Nikhil Garg vs Vs ITO (ITAT Jaipur), appeal was filed before the ITAT against the order of the CIT(A).

Background

The Audit Party of I.T. Department observed a difference of Rs. 66,35,957/- between the total turnover declared in the Profit & Loss Account and Sales Tax Assessment Order and the AO completed the impugned reassessment u/s 143(3)/263 of the Act vide order dated 05.03.2015 by making addition of Rs.66,35,957 (difference in turnover). 

ld. CIT(A), who after considering the submissions of both the parties and material placed on record, dismissed the appeal filed by the assessee. Against which, the assessee has preferred the present appeal before the ITAT on the grounds mentioned above.

The Appellant submitted that the assessee has manifestly proved on record that the difference between the declared sales and the sales as per VAT return was “consignment sale” made by the assessee on behalf of the consigner (an independent party), therefore, the additions so made were completely contrary to the provisions of law and the facts and evidences available on record. the consignment sale was not considered as part of total sales of the assessee. and then the entire amount of 'Consignment Sales', thus, cannot be treated as the income of the assessee.

Judgment

The ITAT referred to CIT v President Industries (2000) 158 CTR 372 (Guj) and K Venkatesh vs Income Tax Officer (2016) 47 CCH 0447, held that whether the purported sale is “consignment sale” or “ordinary sale” is immaterial at this stage as even if the said sales undertaken by the assessee is treated as ordinary sale instead of consignment sale then also the entire sales cannot be treated as an income of the assessee. Thus, keeping in view the principles laid down by the Hon’ble High Court as well as the Coordinate Bench of the Tribunal, the ITAT was of the view that the entire sale consideration cannot be treated as income of the assessee but the addition could be made only to the extent of estimated profits embedded in sales,



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