2007 (3) TMI 235 - HC - Income Tax

Payment made by assessee to MD (government undertaking) through account payee cheque - there can be no doubt that Mother Dairy is a Government organization and the payment was made by cheque - nothing to indicate that MD raised an unreasonable bill or there was some fraud - Assessee has clearly discharged the onus placed upon it and there was no error in the order passed by the Tribunal that impugned expenditure are business expenditure deduction allowed

Summary

Issues:
1. Dispute over payment made by the Assessee to Mother Dairy for services rendered.
2. Assessment of the claim that the payment to a Government company is presumed to be legitimate.
3. Evaluation of the Tribunal's decision and the onus of proof on the Assessee.

Analysis:
The High Court judgment pertains to a case where the Revenue challenged an order by the Income Tax Appellate Tribunal regarding a payment made by the Assessee to Mother Dairy, a Government organization, for services rendered. The Assessing Officer demanded proof of the legitimacy of the payment, despite the Assessee's argument that transactions with Government companies are presumed valid, especially when made by cheque. The Commissioner of Income Tax (Appeals) supported the Assessee's stance, leading to the Tribunal dismissing the Revenue's appeal.

Upon reviewing the Tribunal's order and other relevant documents, the High Court observed that Mother Dairy is indeed a Government entity, and the payment in question was made via cheque. The Court noted the absence of any indication of impropriety in Mother Dairy's billing or any fraudulent activity. Critically, the Tribunal highlighted the Assessing Officer's failure to seek clarification from Mother Dairy if doubts existed, emphasizing the lack of thorough investigation on the Officer's part.

The High Court concluded that the Assessee had sufficiently discharged its burden of proof in the circumstances presented. Consequently, the Court found no fault in the Tribunal's decision and determined that no substantial legal question arose from the appeal, leading to its dismissal. The judgment underscores the importance of diligently assessing evidence and conducting thorough inquiries before disputing transactions, particularly with entities like Government organizations, to ensure fair and just outcomes in tax matters.