1992 (6) TMI 68 - AT - Income Tax

Tribunal Grants Relief on Rebate, Refunds, and Telephone Expenses

The Tribunal allowed the appeal, providing relief of Rs. 3,17,379 on the disallowance of rebate and refunds and Rs. 10,000 on telephone expenses. The ... Accounting Year, Previous Year, Transport Business Issues Involved:1. Disallowance of rebate and refunds claimed by the appellant.2. Enhancement of income by the Commissioner of Income-tax (Appeals).3. Disallowance of telephone expenses.Issue-wise Detailed Analysis:1. Disallowance of Rebate and Refunds Claimed by the Appellant:The appellant, a registered firm with 11 partners, filed a return of income for the assessment year 1989-90 declaring an income of Rs. 79,720. The Assessing Officer (AO) completed the assessment under section 143(1)(a) and later selected the case for scrutiny, issuing a notice under section 143(2). The appellant claimed Rs. 3,53,968 as rebate and refunds on a total turnover of Rs. 1,53,25,431. The AO disallowed Rs. 1,24,088 of this claim, citing lack of evidence and excessive percentage of rebate. The AO allowed Rs. 2,29,881 as a genuine deduction but disallowed the rest due to the high percentage and lack of supporting evidence. The appellant argued that these payments were necessary for business and had been consistently claimed and accepted in previous years. The Tribunal found that the AO did not provide a clear finding against the genuineness of the payments and noted that similar claims had been accepted in past assessments. The Tribunal concluded that the payment of rebate and refunds at 1.98% of turnover was reasonable and necessary for business, thus deleting the disallowance of Rs. 1,24,088.2. Enhancement of Income by the Commissioner of Income-tax (Appeals):The CIT (Appeals) disagreed with the AO's partial allowance and issued an enhancement notice, proposing to disallow the entire claim of Rs. 3,53,968. The CIT (Appeals) sustained an addition of Rs. 3,17,379 after deducting actual refunds of Rs. 51,579. The appellant contested this enhancement, citing judicial decisions that supported the allowance of such expenses. The Tribunal found that the CIT (Appeals) did not properly appreciate the judicial precedents and noted that the Bombay High Court had reversed its earlier decision, allowing secret commissions as deductible expenses. The Tribunal emphasized that similar payments had been consistently allowed in previous years and that the appellant maintained detailed records of these expenses. Consequently, the Tribunal held that the CIT (Appeals)'s enhancement was not justified and deleted the addition of Rs. 3,17,379.3. Disallowance of Telephone Expenses:The appellant also contested an addition of Rs. 10,000 out of telephone expenses. The AO had disallowed this amount, presuming personal use of the telephone installed at the managing partner's residence. The Tribunal noted that the total telephone expense was Rs. 3,01,030, with only Rs. 14,249 attributed to the residence telephone. Given the extensive business operations and the necessity for the partner to contact various branches, the Tribunal found the disallowance unjustified. The Tribunal directed the Revenue to exclude the Rs. 10,000 disallowance from the total income.Conclusion:The Tribunal allowed the appeal, providing relief of Rs. 3,17,379 on the disallowance of rebate and refunds and Rs. 10,000 on telephone expenses. The Tribunal's decision was based on past practices, business necessities, and judicial precedents supporting the appellant's claims.