2018 (12) TMI 1130 - AT - Income Tax

Disallowance of Discount on sale of flat - Allowable business expenditure - AO disallowed the said discount stating that some of the parties to whom the discount had been given, had informed that no discount received from assessee - Not allowing the assessee to cross-examine the witness by the adjudicating authority - Held that - The assessee has incurred the said expenses for the purpose of business, therefore, he is eligible to claim the deduction on account of discount allowed on sale of flat. Revenue cannot sit on the arm chair of the business-men and decide how much expenses should be incurred or how much discount should be offered to the customer. Since, some of the customers, who denied that no discount was received by them, does not mean that assessee claim is bogus. AO has not given an opportunity to cross-examine these customers, who denied the receipt of discount. Not allowing the assessee to cross-examine the witness by the adjudicating authority, though the statements of those witnesses were made the basis of the impugned addition, is a serious flaw, which makes the order nullity. See case of Andaman Timber Industries 2015 (10) TMI 442 - SUPREME COURT . - Decided in favour of assessee.

Summary

Issues Involved:
1. Disallowance of discount on sale of flat by Assessing Officer.
2. Lack of opportunity for cross-examination of parties by CIT(A).
3. Violation of principles of natural justice by CIT(A).

Analysis:
1. The appeal pertains to the Assessment Year 2012-13 and challenges the order of the Ld. Commissioner of Income Tax (Appeals)-6, Kolkata, arising from an assessment order under section 143(3) of the Income Tax Act, 1961. The assessee, a company engaged in property trading and development, declared its income as business income. The Assessing Officer disallowed a sum debited as a discount on the sale of flats, leading to the appeal.

2. The assessee raised grievances regarding the disallowance of the discount and the lack of opportunity for cross-examination of parties who allegedly received the discount. The CIT(A) upheld the Assessing Officer's decision, prompting the appeal to the ITAT Kolkata. Despite the absence of the assessee during the hearing, the ITAT proceeded with the case as per Rule 24 of the Income Tax Appellate Tribunal Rules, 1963.

3. The ITAT noted that the Assessing Officer's disallowance lacked sufficient evidence and denied the assessee the opportunity to cross-examine parties denying the receipt of the discount. The tribunal emphasized that the decision on discounts lies with the business and not the revenue authority. Citing the case of Andaman Timber Industries, the ITAT emphasized the importance of cross-examination and nullified the addition of the disallowed amount, ruling in favor of the assessee. The judgment was delivered on 07.12.2018, allowing the appeal and deleting the addition of the disallowed amount.