Purchases by account-payee cheque held sufficient to allow claim even if recipient couldn't be produced

IT-I : Where assessee, a builder, purchased cement from one party by account payee cheques at rates which were reasonable as compared to rates paid to other parties, assessee's claim for deduction in respect of said expenses was to be allowed under section 37(1)

IT- II : Where assessee in support of payment of labour charges, brought on record documentary evidence such as election card, driving licence, ration card etc. of recipients, transactions in question being genuine in nature, assessee's claim for deduction of labour charged was to be allowed

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[2014] 42 taxmann.com 80 (Gujarat)

HIGH COURT OF GUJARAT

Commissioner of Income-tax -IV

v.

Sonar Construction (P.) Ltd.*

I. Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of [Burden of proof] - Assessment year 2003-04 - Assessee was engaged in building and construction activities - It purchased cement from one 'N' - Assessing Officer rejected assessee's claim in respect of said purchases - Commissioner (Appeals) noted that purchase of cement from 'N' was by account payee cheque and that party was a small contractor, who had closed his business and, on account of this reason, assessee could not produce said party inspite of best efforts - It was also noted that purchase of cement was at reasonable rate as compared to rates paid to other parties - He thus deleted disallowance made by Assessing Officer - Tribunal confirmed order of Commissioner (Appeals) - Whether on facts, no substantial question of law arose from Tribunal's order - Held, yes [In favour of assessee]

II. Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of [Burden of proof] - Assessment year 2003-04 - Assessee made payment towards labour charges - Assessing Officer rejected assessee's claim in respect of said payment taking a view that identity of person concerned was not proved - Commissioner (Appeals) was of view that there were sufficient documentary evidence in nature of election card, driving licence, ration card, confirmation of ledger account, etc., by which genuineness of transaction was proved - He thus allowed assessee's claim - Tribunal confirmed order of Assessing Officer - Whether findings recorded by authorities below being which were in no way perverse, no interference in said findings was called for - Held, yes [In favour of assessee]