Annamma Alexander vs Commissioner of Income Tax

K.S. Paripoornan, J.—At the instance of the assessee, the Income Tax Appellate Tribunal has referred the following questions of law for the decision of this court :

"1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in disallowing the expenditure after holding that the assessee would have certainly spent some money to prosecute the execution proceedings and to defend the suit ?

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in not granting an opportunity to substantiate the assessee''s claim for expenditure ?"

The applicant is an assessee to Income Tax. We are concerned with the assessment year 1970-71. It is common ground that long prior to the relevant accounting year, the assessee obtained a decision from the Supreme Court, viz., a decree for recovery of immovable property with mesne profits. The decree also carried interest at a certain rate. The decree was put in execution in May, 1968, The amount sought to be assessed was income from other sources. It is the interest accrued for the relevant accounting year and also the decree for mesne profits. The short question that is posed for consideration in this case is whether the assessee is entitled to deduction of Rs. 10,000 claimed as having been spent for litigation. It is seen that the claim was disallowed by the Income Tax Officer. The Appellate Assistant Commissioner was inclined to accept the plea of the assessee that some money would have been spent for prosecuting the execution proceedings and to defend the suit. Even so, it held that no details of the expenditure were furnished before the Income Tax Officer. All that was done was that a sum of Rs. 10,000 was claimed before the Appellate Assistant Commissioner without furnishing definite details, stating that the amount was spent for the execution proceedings. It was not taken note of by the Appellate Assistant Commissioner. Before the Appellate Tribunal, a detailed list claiming a sum of Rs. 15,500 was filed. The Appellate Tribunal observed that no particular item was listed as the expenditure incurred in the assessment year, the dates of expenditure were not furnished, and that it is not possible to say whether the expenditure was incurred in the relevant accounting year and for what. Due to paucity of evidence, the Appellate Tribunal declined to entertain the plea. The assessee prayed for grant of time for production of more details. The Appellate Tribunal held that plenty of opportunity was available to the assessee before and after the assessment order was passed and even so proper details were not furnished. In the light of the above, the claim for allowing the expenditure was negatived. The appellate order of the Tribunal is dated January 10, 1978. Worsted at the hands of the Tribunal, the assessee moved the Appellate Tribunal which has referred the above two questions of law for the decision of this court.

We heard counsel for the petitioner (assessee), Ravindranath, as also counsel for the Revenue, P.K.R. Menon, The assessee will be entitled to a reasonable amount by way of deduction if it is shown that the expenditure was factually incurred for prosecution of the execution proceedings and to defend the suit. The burden of proof is entirely on the assessee to substantiate the factum of expenditure and also its permissibility. The Tribunal found that no material was placed either before the assessing authority or before the Appellate Tribunal to show whether any amount was incurred by way of expenditure and if so on what dates. In the absence of relevant particulars and materials regarding the expenditure incurred, the Appellate Tribunal was justified in holding that the assessee is not entitled to claim any amount by way of expenditure for execution proceedings and to defend the suit.

The further plea of the assessee praying for time was also rightly rejected by the Tribunal. Since it is evident that the assessee had ample opportunity before the order of assessment was made and after the assessment, order till the matter was heard and disposed of by the Tribunal on January 10, 1978, we are of the view that the decision of the Appellate Tribunal negativing the plea of the assessee praying for further time is justified.

In the light of the above premises, we hold that the decision of the Appellate Tribunal does not merit interference. We, therefore, answer question No. 1 in the affirmative, against the assessee and in favour of the Revenue. We answer question No. 2 also in the affirmative, against the assessee and in favour of the Revenue.

A copy of this judgment under the seal of this court and the signature of the Registrar shall be sent to the Income Tax Appellate Tribunal, Cochin Bench.