1998 (1) TMI 518 - HC - Income Tax

Summary

Issues Involved:
The judgment involves the interpretation of whether certain expenditures claimed by the assessee are allowable deductions under section 37(1) of the Income-tax Act, 1961, and whether the Appellate Tribunal's decision to allow the entire expenditure without supportive material is sustainable.

Facts and Decision:
The assessee, a registered firm engaged in transportation, undertook contracts with the Kerala State Civil Supplies Corporation for transporting sugar using own and hired vehicles. The Assessing Officer added an unaccounted sum to the assessee's income for the assessment year 1982-83 due to discrepancies in bill payments. The assessee claimed hire charges of &8377; 9,31,920 as expenditure against the income of &8377; 7,40,747, seeking deduction under section 37(1). The Assessing Officer denied the deduction citing lack of evidence. The Commissioner of Income-tax (Appeals) upheld the denial due to insufficient proof of expenditure. However, the Appellate Tribunal found that the expenditure on lorry hire was legitimate, as evidenced by the bills paid by the Corporation, and directed the Income-tax Officer to allow the expenditure.

Court's Analysis and Conclusion:
The High Court agreed with the Appellate Tribunal's approach that corresponding expenditure should be allowed when gross receipts are taxed. It noted that the assessing authority should assess expenditure by best judgment if evidence is lacking. The Court found that the Appellate Tribunal's decision to allow the full expenditure without supportive material was not sustainable. Consequently, the case was remitted to the Appellate Tribunal for assessing the expenditure by best judgment assessment, emphasizing the need for cogent evidence to support expenditure claims.

Outcome:
Both questions raised were answered in favor of the Revenue and against the assessee, leading to the remittance of the case to the Appellate Tribunal for proper assessment of the claimed expenditure by best judgment assessment, with the option to remand the case to the assessing authority if deemed necessary.