Ita/617/2009 Of The Commissioner Of Income Tax v. Sri.k.l.baby

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE K.SURENDRA MOHAN WEDNESDAY, THE 8TH SEPTEMBER 2010 / 17TH BHADRA 1932 ITA.No. 617 of 2009() ------------------------------ ITA.48/COCH/2001 of INCOME TAX APPELLATE TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT: ------------------------------------------ THE COMMISSIONER OF INCOME TAX, TRICHUR. BY SRI.P.K.R.MENON, SENIOR ADVOCATE (TAXES), ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX. RESPONDENT/APPELLANT: ----------------------------------------- SHRI.K.L. BABY, KARAKKADAN HOUSE, A.K.P.JUNCTION, IRINJALAKUDA. BY ADV. SRI.P.BALAKRISHNAN. THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 08/09/2010, ALONG WITH ITA NO. 1098 OF 2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: rs. C.N.RAMACHANDRAN NAIR & K.SURENDRA MOHAN, JJ. ------------------------------------------- I.T. Appeal Nos.617 of 2009 & 1098 of 2009 ------------------------------------------- Dated this the 8[th] September, 2010 JUDGMENT Ramachandran Nair, J. The common question raised in both the appeals filedby the Revenue against the same assessee is whether theTribunal was justified in allowing deduction of the claim ofcommission paid by the assessee for the assessment years1997-1998 and 1998-1999. The assessing officer rejectedthe claim for the reason that there is no evidence to provethe transaction. In first appeal, the disallowance wasconfirmed by CIT (A) for the year 1997-1998. However,for the next year 1998-1999, CIT (A) allowed the claim. Insecond appeals, the Tribunal held in favour of the assesseeagainst which these appeals are filed by the Revenue. 2. We have heard the standing counsel appearing forthe appellant and the counsel appearing for the assessee. 3. The assessee was admittedly a dealer in indianmade foreign liquor making retail sales to the customers. IT No.617/2009&1098/2009 2 Assessee's counsel clarified to us that the commission isa wrong term used and what was claimed is 'discount'. If,the assessee has made sales at discounted price, certainly,discounts calls for deduction. However, we see no reasonwhy the assessee could not produce documents towardsproof of discount, because trade discount is given in thesale bills itself. Further, sales register will show salevalue, discount and net price received separately. It isseen from the orders of the lower authorities that theassessee did not produce any evidence either before theAssessing Authority or before the CIT (A). The Tribunalaccepted the claim merely because there was an increasein turn over and increase in profit from previous years.Standing counsel contended that there is no justificationfor the Tribunal to presume the claim to be genuine ortrue based on higher turnover and higher profit receivedfor the relevant years compared to previous years. Ifassessee was in fact given discount, we do not know why itgot included in the income because only net collection is IT No.617/2009&1098/2009 3 IT No.617/2009&1098/2009 3 accounted as income. Moreover, this is a new tradepractice started by the assessee for the first time in theprevious year relevant for the assessment year 1997-1998.In our view, unless the assessee produces books ofaccount and records and prove the claim, it cannot beallowed. One important matter that escaped attention ofthe authorities below is the sales tax assessments for thepurpose of payment of turnover tax. The assessee did notproduce the sales tax assessment which itself would haveproved the claim because discount is entitled to deduction.Even though the Tribunal's order is not sustainable forallowing the claim without any basis or evidence, we feelone more opportunity should be given to the assessee toestablish his claim. Accordingly, we allow the appeals bysetting aside the orders of the Tribunal for both years andthat of the First Appellate Authority for the year 1998-1999 and we remand the case to the Assessing Officer forgiving one more opportunity to the assessee to establishthe claim with evidence and the sales tax records. If the IT No.617/2009 &1098/2009 4 sales tax assessment orders prove payment of discount,the claim will be allowed based on the same and if not onstrict proof of the trade practice with books of accounts. C.N.RAMACHANDRAN NAIR JUDGE K.SURENDRA MOHAN JUDGE css/