MONDAL CONSTRUCTION COMPANY LIMITED,HOOGHLY vs. ACIT, CIRCLE - 23, HOOGHLY, HOOGHLY

At the time of hearing none appeared on behalf of assessee in spite of issuance of notice for hearing more than one occasion and Ld. Departmental Representative (DR), was present for the appellant Revenue. In the absence of any appearance by the assessee, the appeal is being disposed of ex parte qua the Mondal Construction Co. Ltd. Assessment Year: 2012-13 assessee, after hearing Ld. DR for the Revenue on merits in terms of Rule 24 of the Income Tax Appellate, Tribunal Rules, 1963.

The grievances raised by the assessee are as follows:

“1. THAT facts and circumstances of the case, ld. CIT(A) was not justified in disallowing sum of Rs.10,99,907/- debited on account of discount on sale of flat.

The brief facts qua the issue are that the assessee company is engaged in a trading and development of property and derives its income from the said business. Its filed its return on 28.09.2012 for the A.Y 2012-2013 declaring total income of Rs.80,29,984/- as business income. The case of the assessee was selected for scrutiny and notices u/s 143(2) and 142(1) were issued.

On appeal, the ld. CIT(A) confirmed the addition made by Assessing Officer. Aggrieved the assessee is in appeal before us.

After hearing the ld. DR for the Revenue and the written submissions submitted by the assessee which is available on record, we note that ld. CIT(A) was not justified in disallowing the sum of Rs.10,99,907/- debited on account of discount on sale of flat. We note that assessee had debited a sum of Rs.10,99,907/- in the profit & loss account on account of discount on sale of flat. However, the Assessing Officer 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. We note that the said addition has been made without taking the full details of payment made by the assessee and without giving the assessee the proper opportunity to cross examine the respective parties who denied the receipt of this discount. We note that considering the nature of the assessee’s business, the Assessing Officer has failed to bring any cogent evidence to show that the amount debited by the assessee to the tune of Rs.10,99,907/- is bogus. 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. We note that it is decision of the business-men how much discount is to be allowed to a particular person and it is the prerogative of the assessee to run the business as per the business strategy adopted by the assessee. The 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 assessees claim is bogus. The ld. Assessing Officer has not given an opportunity to cross- examine these customers, who denied the receipt of discount. We note that 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. For that we rely on the Mondal Construction Co. Ltd. Assessment Year: 2012-13 judgment of the Hon’ble Supreme Court in the case of Andaman Timber Industries 281 CTR 214 (SC). Therefore, considering the entirety of facts and circumstances of the case, we delete the addition of Rs.10,99,907/-.

In the result, the appeal filed by the assessee is allowed.