2012 (8) TMI 464 - HC - Income Tax

Dis-allowance u/s 40A(3) - purchase of old bottles through cash - non-confirmation from suppliers - Held that - A perusal of the records reveals that majority of suppliers had not furnished the information sought for, which renders that assessee had failed to discharge the onus to prove the existence of the parties/suppliers. However, the Tribunal had held that the Commissioner, having accepted that transactions with nine parties were not genuine, ought not to have applied the provisions of section 40A(3) and remitted the matter back to the AO. On re-appreciation of the entire materials available on record, we do not find that the Tribunal had committed any error in passing the said order. Sales promotion expenses - dis-allowance by AO on finding of fact that said payments were bribe paid to TASMAC employees and failure of assessee to substantiate the claim - Held that - CIT(A) as well as the Tribunal had concurred with the said finding rendered by the AO. Interference in the concurrent finding of fact is unwarranted. Hence, no ground to interfere with the order under challenge - Decided against assessee

Summary

Issues involved:
Challenging assessment order disallowing claimed amounts for purchase of old bottles, sales incentive, and deduction under section 80G for the assessment year 2005-06. Substantial questions of law raised regarding remittance of claim for deduction of purchase of old bottles and disallowance of claim of sales promotion expenses.

Analysis:

Issue 1: Purchase of old bottles
The assessee claimed amounts for purchase of old bottles from local and CST parties. The Assessing Officer found discrepancies in confirming suppliers and treated purchases from fifteen parties as not genuine. The Commissioner partly allowed the appeal but disallowed 20% of purchases under section 40A(3). The Tribunal held that section 40A(3) applies only to genuine transactions and directed the Assessing Officer to determine costs based on the cost of new bottles. The Tribunal's decision was upheld as no error was found.

Issue 2: Sales promotion expenses
The assessee claimed expenses for sales promotion, but the Assessing Officer disallowed the claim as payments were made to employees, not middlemen. The Commissioner and Tribunal concurred with this finding, stating the payments were not substantiated and fell under the Explanation to section 37(1). The court upheld this decision, citing Supreme Court cases on not interfering with concurrent findings of fact unless ex facie perverse.

Conclusion:
The court dismissed the Tax Case Appeals, finding no grounds for interference with the lower authorities' decisions. The judgment emphasized the importance of not interfering with concurrent findings of fact unless they are ex facie perverse. The dismissal was made at the admission stage without costs.