Commissioner Of Income Tax, Del vs Modi Stone Ltd.
2011 Latest Caselaw 2436 Del

          THE HIGH COURT OF DELHI AT NEW DELHI

%                          Judgment Pronounced on: 06.05.2011

+            ITA No. 1203/2006 (A.Y. 1995-96)
             ITA No. 955/2006 (A.Y. 1996-97)
             ITA No. 98/2007 (A.Y.1997-98)

COMMISSIONER OF INCOME TAX, DEL                              .....APPELLANT

                                      - versus -

MODI STONE LTD.                                          .....RESPONDENT

Advocates who appeared in this case:
For the Appellant :     Mr Sanjeev Sabharwal,                                Sr.
                        Standing Counsel

For the Respondent:                        None.

CORAM:-
HON'BLE MR JUSTICE A.K. SIKRI
HON'BLE MR JUSTICE V.K. JAIN

1. Whether Reporters of local papers may
   be allowed to see the judgment?                                       No

2. To be referred to the Reporter or not?                                No

3. Whether the judgment should be reported                               No
   in Digest?

V.K. JAIN, J. (ORAL)

1.           For        the       assessment          year   1995-96,       the

respondent/assessee                claimed         commission   payment          of

Rs4,70,04,000/-               as          deduction     under    the     head

'commission/discount'. No details of the alleged payments

were furnished to the Assessing Officer, who therefore,

disallowed the entire amount. It was noted by the Assessing

Officer that in the Assessment Year 1993-94, the Assessing

Officer had disallowed such payments to the extent of Rs

1,61,35839/-. In an appeal filed by the assessee, the

Commissioner of Income Tax (Appeals) noted that details of

the commission paid along with necessary evidence were

not furnished during assessment proceedings in spite of

specific opportunity given by the Assessing Officer. He was

of the view that since it was the assessee who had claimed

this expenditure, the onus was on him to prove it and that

he had failed to discharge that onus. He, therefore,

maintained disallowance to the extent of commission

payment of Rs 23,22,250/- and Rs 1,73,457/-, but, in view

of the past record and nature of the commission, export

commission of Rs 19,20,478/- and the early retirement

discount to the extent of Rs 4,25,87,555/- was allowed,

thereby restricting the disallowance to Rs 24,95,707/-.

2. For the assessment year 1996-97, assessee

claimed an amount of Rs. 5,68,62,553/- under the head

'discount/commission' in its profit & loss account. In view

of the failure of the assessee to furnish any details, the

aforesaid amount was disallowed by the Assessing Officer.

Following the order passed in the assessment year 1995-96,

the CIT(A) directed the Assessing Officer to disallow the

amount of Rs 69,34,824/- and allow the balance amount of

Rs 4,99,27,729/-. The appeal filed by the Revenue was

dismissed by the Tribunal.

The appeals of the Revenue against the order of

Commissioner of Income Tax (Appeals) for the assessment

year 1995-96 and 1996-94 were dismissed by ITAT vide

common order dated 11th November, 2005 on the ground

that the Revenue had not produced any material before the

Tribunal to prove that the findings of the CIT(A) were not

based on past record.

3. For the assessment year 1997-98, the

assessee/respondent claimed a sum of Rs 3,25,04557/-

under the head 'commission/discount' out of which a sum

of Rs 5,71,429/- was later offered by it for tax on the

ground that the same was reversed in assessment year

1998-99. The balance amount was disallowed by the

Assessing Officer finding that the assessee had not

furnished any details regarding commission and discount

payment. However, in the appeal filed by the assessee, CIT

(A) following his order for the assessment year 1995-96,

reduced the addition to Rs 38,10,251/-. In the appeal filed

by the Revenue, the Tribunal noted that the expenditure

claimed by the plaintiff comprised export commission of Rs

12,70,409/-, which was deleted for the assessment year

1995-96. Rs 13,88,334/- towards District Officer

Commission which was allowed for the assessment year

1995-96 and brokerage on TELCO bills amounting to Rs

94,987/- and in view of these details and past history of the

case, the appeal filed by the Revenue was dismissed.

4. These appeals by the Revenue were admitted on

the following substantial questions of law:

(1) Whether the Ld. ITAT was justified in law in misplacing the burden of proof in contravention of the settled proposition of law while upholding part deletion of disallowance made by the CIT(A)

(2) Whether the impugned order of the learned ITAT is vitiated by perversity on account of apparent non application of mind to the observations made by the AO for the relevant year and in the assessment year 1993-94.

5. The assessment orders clearly show that no details

of the amount alleged to have been paid towards

commission/discount were furnished to him nor was any

evidence produced before him to prove the aforesaid

payments. The Commissioner of Income Tax (Appeals)

rightly noted that it was for the assessee who had claimed

these payments to produce relevant material before the

Assessing Officer to satisfy him with respect to these

payments. But, strangely, the CIT(A) despite noting that the

assessee had not discharged the onus placed on him and

had not furnished necessary details, allowed these

payments on the basis of the past record and nature of the

claim alone. We fail to appreciate how commission of

payment/discount in a previous year could by itself and

without anything more have been made the basis for

allowing such payments for the subsequent years. It is very

much possible that the commission/discount paid during

the previous assessment year (s) was not paid during

assessment years in question or the payment was not to the

extent claimed by the assessee. It was obligatory for the

assessee to produce relevant evidence before the Assessing

Officer to prove the alleged payments, particular when it

was specifically called upon to do so and an opportunity

was subsequently given to it for this purpose. Once it was

found that the onus of proving the alleged payment on the

assessee and he had not produced any evidence to prove

those payments, neither CIT(A) nor ITAT could have allowed

these payments, without having any material before them to

substantiate such payments. The CIT(A) as well as the

ITAT, in our view, committed a serious error of law in

upholding these payments despite finding that no material

had been produced by the assessee to substantiate these

payments. The ITAT was not justified in rejecting the appeal

of the Revenue on the sole ground that the Department had

not produced any material to prove that the findings of

CIT(A) were not based on past records. It was for the

assessee to prove the alleged payments during the

assessment years 1995-96, 1996-97 and 1997-98 and not

for the Department to prove otherwise.

6. For the reasons given in the preceding paragraphs,

we hold that the ITAT committed an error of law in allowing

the aforesaid payments despite onus of proving being on the

assessee and no evidence having been produced by the

assessee to prove those payments, and thereby misplacing

the burden of proof on the Revenue.

Questions of law are accordingly answered in

favour of the Revenue and against the assessee.

(V.K. JAIN) JUDGE

(A.K. SIKRI) JUDGE

MAY 06, 2011 BG