Hahneman Pharmacy and Laboratory v. ITO

INCOME TAX ACT, 1961

--Revision under section 263--Erroneous and prejudicial orderAddition on account of freight and forwarding charges ----Where CIT had made addition under section 263 on the allegation that assessee had claimed double deduction on account of freight and forwarding charges, the order passed by CIT was quashed because the assessee had to reimburse the said charges to the customers because the customers had paid the said charges on behalf of the assessee on “to pay basis”.--Assessee-firm was engaged in the business of manufacturing and sale of homeopathic medicines. Its assessment was originally concluded under section 143(3) by AO. CIT alleged that the assessee had claimed double deduction on account of freight and forwarding charges and invoked revisionary jurisdiction under section 263 and made addition of the same. Held: The assessee had absorbed the freight and forwarding charges as its expenditure by debiting the same to its profit and loss account by giving corresponding credit to the customers account, as the assessee had to reimburse the freight and forwarding charges to the customers because these charges were paid by the customers on behalf of the assessee as consignment notes were on 'To pay basis'. Therefore, the assessee did not make any double deduction claim towards freight and forwarding charges as wrongly suspected by the CIT.