2017 (1) TMI 879 - HC - Income Tax

High Court overturns ITAT's decision on business expenditure, emphasizes fairness and evidence presentation

The High Court quashed the ITAT's order disallowing a business expenditure claimed by the Assessee due to lack of proof of payment to loaders at the Port ... Disallowance of expenses on incentives paid to the loaders at Port premises - allowable business expenditure - Held that:- Without going into the merits of the matter, solely because the Assessee claims to have been in possession of additional vouchers which would prove the expenditure in question, we are of the opinion that it would be appropriate and in the interest justice to give an opportunity to the Assessee to produce such vouchers before the Assessing Officer and dispose of the appeal. Issues: Disallowance of business expenditure by ITAT due to lack of proof of payment to loaders at Port premises.Analysis:The appellant, an Assessee, filed an appeal challenging the ITAT's order disallowing an expenditure of 77,97,620/- incurred during the Assessment Year 2011-12 as business expenditure. The Assessee claimed that the incentive was paid to loaders at the Port to ensure timely loading, thereby saving demurrages for customers. The Assessing Officer rejected the claim, stating that payments to loaders, being employees of the Port Trust, should only be their legitimate dues. However, the Commissioner of Income-tax (Appeals) allowed the expenditure as business expenditure. The ITAT confirmed the legality of the payment but disallowed the deduction due to the Assessee's failure to prove that the payments were actually made to the Port workers. The ITAT found discrepancies in the vouchers provided by the Assessee, leading to the disallowance of the expenditure.The Assessee requested an opportunity to produce additional vouchers to establish the expenditure. The Court, without delving into the merits of the matter, decided to quash the ITAT's order and remand the case to the Assessing Officer. The Assessee was granted the chance to present additional evidence to prove that the expenditure was for business purposes. The Assessing Officer was directed to make a decision on the issue within one year from the date of the judgment. This decision aimed to ensure fairness and justice by allowing the Assessee to provide further evidence to support their claim before a final decision was made.