2018 (4) TMI 343 - HC - Income Tax

TDS u/s 195 - Disallowance u/s 40(a)(ia) - reimbursement of expenses - receiving the amounts and arranging for provisional services connected with the Event - Held that - The Court is of the opinion that the findings of fact in this regard are conclusive. The lower Appellate Authorities, after considering the submissions, clearly held that the record would indicate that the assessee had no privity of contract with the service provider. Having regard to the overall circumstances, the Court is of the opinion that no substantial question of law arises in this regard. Undisclosed income by way of bogus credits - Held that - AO conducted a first level inquiry by issuing notices under Section 133(6) of the Act but stopped further inquiry. After obtaining the PAN particulars, bank account details and other particulars relating to the identity of the creditors, the AO did not further exert himself to obtain any information or documents from the concerned banks. In these circumstances, the lower Appellate Authorities correctly inferred that the assessee had discharged the initial burden of establishing the identity of the creditors, the genuineness of the transactions and the credit worthiness of the third party. No substantial question of law

Summary

Issues:
1. Disallowance under Section 40(A)(ia) of the Income Tax Act, 1961.
2. Alleged undisclosed income by way of bogus credits.

Disallowance under Section 40(A)(ia):
The case involved an assessee organization entering into a contractual relationship with the Federation of International Hockey (FIH) for organizing the Men's Hockey World Cup. The dispute arose regarding the tax deductibility of reimbursements claimed by FIH on behalf of the assessee. The Assessing Officer (AO) contended that the reimbursements included commission, making them taxable and hence tax deductible. However, the assessee argued that the payments were reimbursements of expenses supported by documentary evidence. The CIT(A) and ITAT accepted the assessee's explanation, emphasizing the lack of privity of contract between the assessee and the service provider. The High Court concurred with the lower authorities, holding that no substantial question of law arose in this regard.

Alleged Undisclosed Income by way of Bogus Credits:
Regarding the additions made under Section 68 of the Act, the AO conducted a preliminary inquiry but did not pursue further investigation after obtaining basic details. The lower Appellate Authorities found that the assessee had established the identity, genuineness, and creditworthiness of the creditors, shifting the burden of proof. The High Court upheld this finding, stating that no substantial question of law arose in this aspect as well.

In conclusion, the High Court dismissed the appeal, ruling that no substantial question of law was present in either issue, affirming the decisions of the lower authorities.