2017 (5) TMI 367 - HC - Income Tax

Disallowance of procurement expenses - Held that - Though these appeals were heard and from a perusal of the order passed by the tribunal, it is apparent that it has come to a conclusion that there cannot be any justification for such 10% dis-allowance. There is nothing like a reasonable token disallowance. The tribunal found that its earlier order of 30th December, 2005 was thus violated. It deleted the retention of disallowance of 10% made by the Commissioner of Income Tax (Appeals). As far as the Revenue s appeals are concerned, from the discussion and from para 7 onwards, it is apparent that the tribunal found that such dis-allowances as were made cannot be sustained for the reasons that the tribunal has set out. We do not think that we should re-appreciate and reappraise the factual matters. Our further appellate jurisdiction does not enable us to do this. The concurrent orders, therefore, cannot be termed as perverse or vitiated by any error of law apparent on the face of the record. - Decided against revenue

Summary

Issues:
1. Disallowance of procurement expenses and computer expenses.
2. Disallowance of commission payment.
3. Appeal against the order of the Commissioner of Income Tax (Appeals).
4. Justification of 10% disallowance.
5. Validity of tribunal's decision on disallowances.

Analysis:
1. The respondent, engaged in stock broking operations, had its procurement expenses disallowed by the assessing officer as nongenuine. Additionally, the capital expenditure on computer software was also disallowed. The Commissioner of Income Tax (Appeals) deleted both disallowances in an order dated 7th October, 2005.

2. The Revenue challenged the Commissioner's order before the tribunal. The tribunal found that the disallowances could not be sustained. The Revenue's appeal was dismissed, and the tribunal deleted the 10% disallowance made by the Commissioner, stating there was no justification for such a disallowance.

3. The tribunal's decision was based on the finding that the earlier order of 30th December, 2005, which allowed the appeal and set aside the first appellate authority's order, was violated. The tribunal concluded that the disallowances made by the assessing officer could not be justified.

4. The High Court, in its judgment, declined to re-evaluate the factual matters, stating that its appellate jurisdiction did not permit such a review. The court found no perversity or error of law in the concurrent orders. Consequently, the appeal was dismissed, and no costs were awarded.

This comprehensive analysis covers the issues related to the disallowance of expenses, challenges to the Commissioner's order, the 10% disallowance, and the validity of the tribunal's decision on the disallowances.