TaxTMI 
TaxTMI 
2025 (3) TMI 2053
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....d the following grounds for AY 2016-17: 1 The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law. 2 The Ld. CIT(A) erred in deleting the addition of Rs. 1,90,57,625/-, being 26.75% of GP of unaccounted sales of Rs. 7,12,43,457 (difference between SAP data and RoI) quantified in the assessment order. 2.1 The CIT(A) erred in accepting the reconciliation furnished by the assessee with regard to sales, without appreciating that the assessee has arrived net sales as 109.75 crores after deducting sales returns of 1.23 crores from Sales figure as per SAP data of 110.98 Crores. But while reconciling sales as per return of income, the assessee has taken sales figures as per books at 109.75 Crores and again deducted sales return of Rs. 1.23 Crores. Hence the reconciliation furnished by the assessee is not correct. 2.2 The CIT(A) failed to appreciate that the assessee company has claimed FOC Invoices, discounts N credit notes while reconciling the sales as per books of accounts with sales admitted in the returns of income and the assessee had not produced any evidences in support of such claims during the ....
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....AP software and found difference of Rs. 7,12,43,457/-. The survey team is noted to have confronted this discrepancy with the General Manager (Finance), Shri S.C.Paneerselvam, who according to the AO, was unable to clarify the same and sought additional time to furnish the details. The AO is noted to have observed that, even the Executive Director of the assessee company was unable to furnish any suitable reply for the discrepancy in the sales. Hence, since the assessee company failed to give proper explanation about the discrepancy in the sales to the survey team, the AO had reopened the impugned assessment u/s 147 of the Act. Before the AO, the assessee is noted to have furnished a reconciliation statement along with certain details/ supporting's. The AO however is noted to have rejected the same and held that difference in the sales of Rs. 7,12,43,457/- between SAP data and ITR data remained unexplained and that this constituted suppressed sales of the assessee. The AO accordingly worked out the profit embedded in the suppressed sales at gross profit of 26.75% i.e. Rs. 1,90,57,625/- and added the same to the total income. On appeal, the Ld.CIT(A) was pleased to delete the sam....
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....on provided by the assessee and gave a finding of fact that there is no difference between the sales reported in SAP and the ITR and therefore, deleted the impugned addition. He accordingly urged that the order of the Ld. CIT(A) does not call for any interference. 5.6 We have heard both the parties and perused the material placed before us. The issue involved in this appeal is in narrow compass. The only question before us is whether the Ld. CIT(A) was justified in holding that the assessee had reconciled the difference between the sales as per SAP data with the sales reported in ITR. This is noted to be essentially a fact-based exercise. The reconciliation statement filed by the assessee, which is found placed at Page No.230 of the Paper Book, is as under :- CUSTOMER WISE SALES DATA Rs. Total SD sales report 11098,60,521 Less: Sale Return in SD data it is positive and hence we have to deduct twice to arrive net sales -123,53,029 Sales as per SD Data - IT Dept 10975,07,492 Less As stated above Sales Return Data to be deducted twice -123,53,029 Less: FOC Invoices & Credit note -61,63,728 Less: credit note -9,26,626 Less: Price differen....
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.... SAP data instead of being reduced there from, which was corrected later. 5.8 It is further noted that, the impugned difference in sales arose because the AO had only considered the figure of sales reported in one module of SAP system i.e. 'Sales Register' and had ignored other modules which contained ledgers for sales return, discounts, FOC, price differences etc. We agree with the assessee that it a common accounting practice wherein data is maintained in different modules in SAP i.e., sales will be in Sales Ledger and the Sales Return will be in a separate Ledger or module called Sales Return Register etc. These separate ledgers are merged while finalizing the financial statements and therefore the sales reported in the financials/ITR are a summation of the amounts mentioned across these different ledgers. We agree with the assessee that, had the AO considered all the different SAP modules, which contained separate ledgers for sales return, discounts, FOC, price differences etc. along with the main sales ledger, the net data would have reconciled with the sales figure reported in ITR. It is noted that, this aspect was rightly considered by the Ld. CIT(A) while agreein....
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....re with respect to the sales made by the appellant in the FY 2015-16 relevant to AY 2016-17. In this back ground the undersigned is not inclined to accept the observation of the AO in treating the sales as suppressed and estimating the gross profit out such alleged suppressed sales. Accordingly all the grounds raised by the appellant upon this issue are treated as allowed and the AO is hereby directed to delete the addition of Rs. 1,90,57,625/- made as sales suppression for the A.Y. 2016-17." 5.9 We further observe that, the assessee had also furnished the relevant respective ledgers as appearing in the books of the accounts before the lower authorities. The assessee is also noted to have placed the party wise details for each of the items in the above reconciliation statement along with copy of the accounts of major parties under the said sub-heads i.e. discount, FOC invoices, price difference etc. accompanied with sample vouchers. The assessee had also placed on record the reconciliation of the sales turnover with the VAT returns. It is noted that the Revenue was unable to point out any infirmity in these details which, according to us, corroborated the above reconciliation st....
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....nd not Rs. 130,19,14,906/-, as the AO had omitted to consider the figure of `Sales of services' reported in Item 1(A)(ii)of Part-A P&L A/c of the ITR. Accordingly, the Ld. CIT(A) is found to have worked out the difference in sales figure between the SAP data and ITR at Rs. 1,91,917/- and thereby restricted the addition of profit element to 21.45% of such difference being Rs. 41,166/- as against Rs. 1,65,62,153/- added by the AO. Now the Revenue is in appeal before us. 7.1 Following our conclusions drawn in A.Y. 2016-17 above, we find that in this AY as well, the AO had only considered the figure of sales reported in one module of SAP system i.e. 'Sales Register' and had ignored other modules which contained ledgers for sales return, discounts, FOC, price differences etc. and also ledgers of sales of other products & services. It is observed that, these separate ledgers were merged while finalizing the financial statements and therefore the sales reported in the financials/ITR are a summation of the amounts mentioned across these different ledgers. It is also noted that, while arriving at the sales as per ITR, the AO had only considered the figure of 'sale of good....
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....ourse of finalizing the accounts, both will be merged, and the final figures are reported in the Tally. Obviously, in sales ledger, the sales figure will be higher in the SAP module but for accounts purpose, the sales return has to be reduced from the sales ledger. Thus, the reconciled figure has to be taken into account for Income Tax purposes. 6.3.7 The undersigned carefully examined the submission of the A.R. made during the course of Appellate Proceedings. Based on the reconciliation provided by the Appellant, there exists a difference between the sales reported in the ITR and Sales to be admitted. The sales as per ITR is Rs. 130,49,69,897/- and the sales to be admitted is Rs. 130,51,61,814/-. Thus there exits a shortfall in admission of sales amounting to Rs. 1,91,917/- (130,51,61,814 - 130,49,69,897) Obviously, this is the only sale not disclosed by the Appellant in its return of income. However, the AO in the assessment order based upon the one part of the SAP module has arrived at an erroneous conclusion that the Appellant has suppressed the sales to the extent of Rs. 7,72,12,834/-. 6.3.8 During the course of Appellate Proceedings, the Appellant has not pr....