Itta/201/2003 Of Commissioner Of Income Tax v. T.lakshminarayana Reddy

HON’BLE SRI JUSTICE DILIP B. BHOSALEANDHON’BLE SRI JUSTICE A. RAMALINGESWARA RAOITTA No. 201 OF 2003 JUDGMENT:(per the Hon'ble Sri Justice A. Ramalingeswara Rao) Heard learned Standing Counsel for the Revenue. Noneappears for the respondent even though served. This appeal arises out of the order dated -08-2002 passed bythe Income Tax Appellate Tribunal, Visakhapatnam Bench,Visakhapatnam (for short, ‘the Tribunal’) in I.T.A No.1355/H/97, for theassessment year 1988-89. The appellant raised the following substantial questions of law:“1. Whether on the facts and in the circumstancesof the case the order of the Tribunal suffers fromperversity? 2. Whether on the facts and in the circumstancesof the case the Tribunal is correct in holding that salespromotion commission of Rs.20,09,980/- alleged to havebeen paid by the assessee to M/s.SFTPL is wholly andexclusively for the purposes of business of the assessee? 3. Whether on the facts and in the circumstancesof the case the Tribunal is correct in holding that a sum ofRs.20,09,980/- paid as sales promotion commission isallowable expenditure?” The facts of the case are that the assessment of the asseeseewas completed on 26-03-1991 and the claim of sales promotionexpenditure amounting to Rs.30,76,960/- for the assessment year 1988-89 paid to M/s. Suvarna Filters and Tobacco Products Limited (inshort, ‘SFTPL) was disallowed. Challenging the said disallowance,the assessee preferred an appeal before the Commissioner of IncomeTax (Appeals), Vijayawada who by his order dated 30-10-1991 had setaside the assessment and directed the assessing officer to pass afresh order of assessment, after allowing an opportunity to the assessee to cross examine the witnesses whose statements wereused against him and also keeping in view the directions earlier givenby him for the previous assessment years and the observations madetherein. Pursuant to the said order, some witnesses were summonedby the assessing officer and they were subjected to crossexamination. The assessing officer held that the assessee failed todischarge the onus cast on him and that SFTPL has not rendered anyservices to the assessee in the field of marketing survey as claimedand the payment was therefore not liable to be allowed as admissibleexpenditure. Challenging the said order of assessment, the assesseepreferred an appeal before the Commissioner of Income Tax(Appeals). The appellate authority held that the marketing agency hasrendered services to promote the sale of IMFL products distributed bythe appellant which is reflected in the huge turnover of Rs.4.21 Croresand Rs.2.86 Crores for the respective assessment years 1987-88 and1988-89 in the competitive IMFL trade. He, accordingly, held that theassessing officer was not at all justified in drawing adverse inferenceand rejecting the claim of the appellant and consequent additions ofRs.20,09,980 for the assessment year 1987-88 and Rs.30,76,960/- forthe assessment year 1988-89 being the disallowance of salescommission paid to SFTPL towards sales promotion, were deleted. Challenging the order of the Commissioner of Income Tax (Appeals),the Revenue preferred an appeal before the Tribunal. The Tribunalafter considering rival contentions held that the department hasdrastically failed to disprove the contention of the assessee that neitherthe assessee has/had any share in SFTPL nor any director of SFPTLhappens to be the relative of the assessee. It was also held that it is asettled proposition of law that necessity of a particular expenditure isbest decided by a businessman and it is not for the department to sit injudgment over the necessity or otherwise of an expenditure. Theburden is on the department to prove that the said expenditure is notgenuine if they want to disallow the same for some reason or other. Accordingly, it upheld the order of the Commissioner of Income Tax(Appeals) allowing the claim of the assessee in deleting the additionon that count. Challenging the order of the Tribunal, the presentappeal is filed by the Revenue. Accordingly, it upheld the order of the Commissioner of Income Tax(Appeals) allowing the claim of the assessee in deleting the additionon that count. Challenging the order of the Tribunal, the presentappeal is filed by the Revenue. The Tribunal passed common order in respect of theassessment years 1987-88 and 1988-89 and the present appeal isfiled only against the order passed in ITA No.1355/H/97 relating to theassessment year 1988-89. Learned Standing Counsel for the Revenue submitted that inspite of her best efforts, she could not get information with regard tofiling of appeal against the order in ITA No.1354/H/99 relating to theassessment year 1987-88. However, at the time of arguments, shefairly submitted that the issue raised in this appeal is already decidedby this Court in ITTA No.46 of 2003 wherein identical questions of lawwere considered and the appeal filed by the Revenue was dismissedby judgment dated 27-08-2014. In view of the submission of the learned Standing Counsel forthe Revenue, as per the decision of this Court in ITTA No.46 of 2003,dated 27-08-2014, wherein identical issue was decided, we alsodismiss the present appeal answering the questions of law in favour ofthe assessee and against the Revenue. Miscellaneous petitions, if any, also stand closed. There shallbe no order as to costs. ______________________ DILIP B. BHOSALE, J _______________________________ A. RAMALINGESWARA RAO, J