Ita/654/2009 Of The Commissioner Of Income Tax,Calicut v. Moidu's Medicare P.ltd., Calicut

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC &THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU FRIDAY, THE 9TH DAY OF SEPTEMBER 2016/18TH BHADRA, 1938 ITA.No. 654 of 2009--------------------AGAINST THE ORDER IN ITA 120/2008 of I.T.A.TRIBUNAL,COCHIN BENCHDATED 19.12.2008 APPELLANT/APPELLANT: -------------------- THE COMMISSIONER OF INCOME TAX, CALICUT BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT: ----------- MOIDU'S MEDICARE P. LTD., CALICUT. R1 BY ADV. SMT.MEERA V.MENON R1 BY ADV. SRI.MAHESH V.MENON THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON09-09-2016 ALONG WITH ITA 673/09, THE COURT ON THE SAME DAYDELIVERED THE FOLLOWING: APPENDIX PETITIONER'S ANNEXURES: ANNEXURE A: COPY OF ASSESSMENT ORDER. ANNEXURE B: COPY OF CIT(A)'S ORDER. ANNEXURE C: COPY OF THE ITAT'S ORDER. // TRUE COPY // P.A. TO JUDGE ANTONY DOMINIC & DAMA SESHADRI NAIDU, JJ. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -I.T.A. Nos.654 & 673 of 2009 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 9[th] day of September, 2016 Antony Dominic, J. JUDGMENT These appeals are filed challenging the orders passed by theIncome Tax Appellate Tribunal, Cochin Bench, in ITA Nos.120/08and 119/08 pertaining to the assessment years 2002-2003 and2001-2002. For the assessment years in question, the assesseehad made deduction of payments said to have been made to doctorstowards MRI Commission, CT Scan and USG Commission, PathologyCollection Commission and CT Commission (National Hospital).However, the Assessing Officer disallowed the said claims on theground that the assessee had not produced the vouchers. AssessingOfficer had also taken note of the contention of the assessee thatthere is no practice of keeping the vouchers. It was also the case ofthe assessee that the payees of the assessees are against disclosingtheir names. : 2 : 2. However, the First Appellate Authority in Annexure Border, referred to the orders passed by the Assessing Officer incertain previous years and allowed 10% of the commissions paid.Revenue challenged the order of the First Appellate Authoritybefore the Tribunal and Tribunal dismissed the appeals byAnnexure C order holding that it was the practice followed in thebusiness and that the assessee had been following the sameconsistently. The Tribunal also held that in its opinion thepayments made were not opposed to public policy. It is in thesecircumstances that the Revenue has filed these appeals and thecommon question of law framed for the consideration of this courtare the following: “1. Whether, on the facts and in the circumstances ofthe case and also in view of the fact that both paymentsand receipts were unaccounted the Tribunal is right inlaw allowing a percentage of the total collections as anexpenditure? And is not the conclusion of the ITATperverse and illegal? 2. Whether, on the facts and in the circumstances of thecase is not order of the Tribunal encouraging illegaleconomy and against public policy?” 3. We heard the Senior Counsel for the Revenue and thelearned counsel for the assessee. 4. Admittedly, on facts, it is clear that though the assessee had claimed deduction of amounts allegedly paid to doctors towardscommissions, the assessee did not produce the vouchers or anyother supporting documents to substantiate the claim. Theassessee did not even disclose the names of the recipients. In otherwords, these are cases where the assessee had miserably failed tosubstantiate the claim of having made the payments. 2. Whether, on the facts and in the circumstances of thecase is not order of the Tribunal encouraging illegaleconomy and against public policy?” 3. We heard the Senior Counsel for the Revenue and thelearned counsel for the assessee. 4. Admittedly, on facts, it is clear that though the assessee had claimed deduction of amounts allegedly paid to doctors towardscommissions, the assessee did not produce the vouchers or anyother supporting documents to substantiate the claim. Theassessee did not even disclose the names of the recipients. In otherwords, these are cases where the assessee had miserably failed tosubstantiate the claim of having made the payments. 5. In such circumstances, even if it is true that in the previousyears similar claims were allowed by the Assessing Officer, in so faras the assessment year in question is concerned since the assesseehas miserably failed to substantiate the claim, we feel that the FirstAppellate Authority ought not have interfered with the assessment : 4 : order. For the same reason, we are also inclined to think that theTribunal ought not have upheld the order of the First AppellateAuthority holding that it was the practice followed in the business.Therefore, the orders passed by the First Appellate Authority andthe Tribunal are set aside. Appeals are disposed of restoring the assessment order andanswering the question of law in favour of the Revenue. Sd/- ANTONY DOMINIC JUDGE Sd/- DAMA SESHADRI NAIDU JUDGE