2009 (8) TMI 40 - HC - Income Tax

Credit worthiness of loan creditors disallowance of commission paid to dealers where address could not be furnished - AO noticed that the assessee has claimed deduction of Rs.8,08,003/- on account of commission. The assessee was asked to justify the payment of such commission alongwith documentary evidence. - Ultimately the AO was of the view that assessing neither filed the details of persons to whom the discount was paid nor furnished any documentary evidence in the shape of any agreement with these persons and disallowed the deduction - The claim of the assessee is that the discount was given to the customers in order to boost the sales of post paid connections due to tough competitions - List of such connections was furnished to the AO Held that - expenditure are allowed

Summary

Issues:
1. Unsecured loans - Creditworthiness of alleged loan creditors.
2. Addition of commission - Reconciliation and supporting evidence.
3. Disallowance of discount debited to P&L Account - Lack of documentary evidence.

Unsecured loans:
The Revenue appealed against the ITAT's decision to delete the addition of Rs.8,86,957 made on unsecured loans due to the assessee's failure to prove the creditworthiness of the alleged loan creditors. The ITAT upheld the CIT(A)'s decision, noting that the Assessing Officer did not call the alleged creditors for evidence despite the assessee's request. The Tribunal found that relevant vouchers and details were furnished, and no non-payment of commission to dealers was evident. The Tribunal held that the Assessing Officer could not deviate from earlier decisions, and the issue of reconciliation of commission received and paid was adequately addressed. The Tribunal concluded that the stand of the CIT(A) was justified, and the Revenue's appeal lacked merit.

Addition of commission:
The Revenue contested the deletion of the addition of Rs.18,77,779 by the ITAT concerning commission payments, citing the principle of consistency and lack of supporting evidence. The ITAT upheld the CIT(A)'s decision, emphasizing that the Assessing Officer accepted the assessee's explanations in previous years and that necessary evidence was provided during assessment proceedings. The Tribunal noted that no unjustifiability was found in the impugned order and that the payment of commission to dealers was supported by evidence, with necessary tax deductions made. The Tribunal dismissed the Revenue's arguments, affirming the CIT(A)'s decision.

Disallowance of discount debited to P&L Account:
The Revenue challenged the deletion of the addition of Rs.8,08,003 on account of discount debited to the P&L Account, alleging a lack of documentary evidence. The ITAT upheld the CIT(A)'s decision, stating that all necessary details were furnished before the Assessing Officer and no defects were identified during assessment proceedings. The Tribunal observed that the discount was given to customers to boost sales, and the Assessing Officer did not conduct an independent inquiry to disprove the assessee's claim. The Tribunal found that no disallowance was made in earlier years, and the book results were accepted. The ITAT concluded that the findings were based on evidence and not perverse, dismissing the appeal.

In summary, the High Court dismissed the Revenue's appeal under Section 260A of the Income Tax Act, 1961, against the ITAT's decision regarding unsecured loans, commission payments, and discount debited to the P&L Account. The Court found no substantial question of law arising from the Tribunal's findings, which were based on evidence and not shown to be perverse.