2017 (1) TMI 250 - HC - Income Tax

Deduction of commission payments made to doctors - AO disallowed the said claims on the ground that the assessee had not produced the vouchers - Held that - Admittedly, on facts, it is clear that though the assessee had claimed deduction of amounts allegedly paid to doctors towards commissions, the assessee did not produce the vouchers or any other supporting documents to substantiate the claim. The assessee did not even disclose the names of the recipients. In other words, these are cases where the assessee had miserably failed to substantiate the claim of having made the payments. In such circumstances, even if it is true that in the previous years similar claims were allowed by the Assessing Officer, in so far as the assessment year in question is concerned since the assessee has miserably failed to substantiate the claim, we feel that the First Appellate Authority ought not have interfered with the assessment order. For the same reason, we are also inclined to think that the Tribunal ought not have upheld the order of the First Appellate Authority holding that it was the practice followed in the business. Therefore, the orders passed by the First Appellate Authority and the Tribunal are set aside. - Decided in favour of the Revenue

Summary

Issues:
Challenging orders of the Income Tax Appellate Tribunal regarding deduction claims for payments made to doctors for various commissions.

Analysis:
The appeals were filed challenging the orders passed by the Income Tax Appellate Tribunal regarding deduction claims for payments made to doctors for commissions in specific assessment years. The Assessing Officer disallowed the claims due to lack of vouchers and supporting documents. The assessee failed to disclose the names of the recipients, making it difficult to substantiate the payments. The First Appellate Authority allowed 10% of the commissions paid based on previous years' orders by the Assessing Officer. The Revenue challenged this decision, but the Tribunal upheld it, stating it was a business practice and not against public policy.

The main questions of law raised were whether the Tribunal was right in allowing a percentage of total collections as expenditure when both payments and receipts were unaccounted for, and whether the Tribunal's order was encouraging an illegal economy and against public policy. The court heard arguments from both parties and noted that the assessee failed to substantiate the claim of making payments to doctors. Despite similar claims being allowed in previous years, the lack of evidence in the current assessment year led the court to set aside the orders of the First Appellate Authority and the Tribunal.

Ultimately, the court disposed of the appeals by restoring the assessment order and ruling in favor of the Revenue. The failure to provide sufficient evidence to support the deduction claims resulted in the orders being set aside, emphasizing the importance of substantiating claims with proper documentation and disclosures.