2019 (8) TMI 896 - HC - Income Tax

Disallowance of commission - burden of proof - whether the persons disclosed by the appellant assessee rendered services to them and were paid commission? - evidence that the expenditure was wholly and exclusively incurred for the purpose of business - HELD THAT - We are of the opinion that the tribunal has taken a very plausible view. It has inter alia recorded that the assessee was unable to produce evidence to prove its case. In our view, the revenue was under no obligation to prove the negative, the onus of proof being on the assessee. Mr. Murarka filed a compilation to show that his client had produced evidence before the lower adjudication authority but it was not considered by them. We have not even looked into the compilation for the reason that we do not find any foundation for this case recorded in the order of the tribunal. In other words, not even submissions in this direction appeared to have been made before the tribunal. Hence, no such submission was recorded.

Summary

Issues:
Question of fact regarding services rendered and commission paid.

Analysis:
The High Court of Calcutta dealt with an intended appeal under Section 260A of the Income Tax Act, 1961 from a tribunal's judgment dated 11th May, 2016. The main issue in this appeal was whether the appellant assessee rendered services to certain individuals and paid them commission. The tribunal's order was scrutinized, and it was noted that the appellant failed to provide evidence to support their case. The tribunal found that the appellant did not produce any evidence to prove the services rendered, shifting the burden of proof onto the assessee. The Court emphasized that the revenue was not obligated to prove the negative aspect, as the onus of proof lay with the assessee. The appellant's argument of perversity in the tribunal's order was dismissed, as the tribunal's decision was considered plausible due to the lack of evidence presented by the appellant.

The Court highlighted that the CIT (A) had made conclusions based on irrelevant considerations, and the reasoning provided for allowing the deduction of commission expenditure was deemed unsustainable. The lack of evidence regarding the nature of services rendered for the commission paid raised doubts about the business purpose of the expenditure. Consequently, the Court reversed the CIT (A) order and reinstated the AO's decision, ultimately allowing the appeal by the Revenue. The judgment referenced a prior Division Bench decision of the Court, emphasizing the importance of evidence consideration in such cases. The Court found no merit in admitting the appeal based on the arguments presented, leading to the dismissal of the appeal (ITA No. 84 of 2019).

In conclusion, the High Court of Calcutta's judgment focused on the burden of proof regarding services rendered and commission paid by the appellant assessee. The Court emphasized the necessity of providing concrete evidence to support claims and highlighted the significance of meeting the legal requirements for business expenditure deductions under the Income Tax Act. The decision underscored the importance of factual evidence in tax matters and upheld the principle that the burden of proof lies with the party making the claim, in this case, the appellant assessee.