THE COMMISSIONER OF INCOME TAX vs. SRI.K.L.BABY

JUDGMENT Ramachandran Nair, J. The common question raised in both the appeals filed by the Revenue against the same assessee is whether the Tribunal was justified in allowing deduction of the claim of commission paid by the assessee for the assessment years 1997-1998 and 1998-1999. The assessing officer rejected the claim for the reason that there is no evidence to prove the transaction. In first appeal, the disallowance was confirmed by CIT (A) for the year 1997-1998. However, for the next year 1998-1999, CIT (A) allowed the claim. In second appeals, the Tribunal held in favour of the assessee against which these appeals are filed by the Revenue.

&1098/2009 2 Assessee's counsel clarified to us that the commission is a wrong term used and what was claimed is 'discount'. If, the assessee has made sales at discounted price, certainly, discounts calls for deduction. However, we see no reason why the assessee could not produce documents towards proof of discount, because trade discount is given in the sale bills itself. Further, sales register will show sale value, discount and net price received separately. It is seen from the orders of the lower authorities that the assessee did not produce any evidence either before the Assessing Authority or before the CIT (A). The Tribunal accepted the claim merely because there was an increase in turn over and increase in profit from previous years. Standing counsel contended that there is no justification for the Tribunal to presume the claim to be genuine or true based on higher turnover and higher profit received for the relevant years compared to previous years. If assessee was in fact given discount, we do not know why it got included in the income because only net collection is &1098/2009 3 accounted as income. Moreover, this is a new trade practice started by the assessee for the first time in the previous year relevant for the assessment year 1997-1998. In our view, unless the assessee produces books of account and records and prove the claim, it cannot be allowed. One important matter that escaped attention of the authorities below is the sales tax assessments for the purpose of payment of turnover tax. The assessee did not produce the sales tax assessment which itself would have proved the claim because discount is entitled to deduction. Even though the Tribunal's order is not sustainable for allowing the claim without any basis or evidence, we feel one more opportunity should be given to the assessee to establish his claim. Accordingly, we allow the appeals by setting aside the orders of the Tribunal for both years and that of the First Appellate Authority for the year 1998- 1999 and we remand the case to the Assessing Officer for giving one more opportunity to the assessee to establish the claim with evidence and the sales tax records. If the &1098/2009 4 sales tax assessment orders prove payment of discount, the claim will be allowed based on the same and if not on strict proof of the trade practice with books of accounts. C.N.RAMACHANDRAN NAIR JUDGE K.SURENDRA MOHAN JUDGE

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