“It is the 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 armchair of the business-men and decide how much expenses should be incurred or how much discount should be offered to the customer.”
In a recent ruling, the Kolkata bench of the Income Tax Appellate Tribunal (ITAT) has allowed a deduction for the discount on the sale of flats under the Income Tax Act and observed that the discount amount cannot be treated as bogus merely because some parties denied the same.
The assessee is engaged in the trading and development of the property. While concluding the assessment proceedings, the Assessing Officer disallowed a sum of Rs.10,99,907/- debited by the assessee on account of discount on the sale of flat.
On appeal, the first appellate authority also disallowed the said amount.
After hearing both the sides, the Tribunal held that the assessee had debited a sum of Rs.10,99,907/- in the profit & loss account on account of discount on the 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 the 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.
According to the Tribunal, 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 considering the nature of the business.
“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 the 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 armchair 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,” the Tribunal said.
Subscribe Taxscan Premium to view the Judgment
