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A retailer who buys a product from a distributor can not sell the same product below his purchasing price. How practical could it be? Let’s assume a television showroom orders three sets of newly launched twenty one inch model television from a distributor. After some times that very model could not do well in the market and the distributor has already launched a new model. The older model flops and no one would buy that one. Now the retailer would not like to block his cash in those old models so what he decides to do is sell them below the price that he had paid.

In this case the income tax department would punish the retailer just because he sold the set under invoice. This means that clearing stocks on sale basis on different occasions is illegal here. This is where a very loyal retailer has to prepare invoice of some amount above his purchase price. To compensate this loss he then does the same thing with another product. This is why income tax has failed to maintain proper system.