2010 (1) TMI 885

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.... purchases made from an associate company on the ground that the price paid by the assessee was unreasonable and excessive within the meaning of section 40A(2)(a) of the Act. The brief facts in this connection may be noticed. The assessee purchased raw material namely 'Gardresser-Litex' from M/s. Gargi Chemicals Pvt. Ltd. which is an associate concern within the meaning of section 40A(2)b). Upto 24.7.2004 the assessee paid Rs.21/- per litre for the above material. From 28.7.2004, the price was increased to Rs.25/- per litre. The Assessing Officer noticed that certain other concerns of Nova group who were also buying the material from M/s. Gargi continued to pay Rs.21/- per litre even after 28.7.2004. He therefore took the view that the pric....

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....eld that if this evidence is not taken cognizance of, there is no possibility of appreciating the contention of the assessee that M/s.Gargi had sold the material to some other parties @ Rs.25/- per litre and therefore the price paid by the assessee was not excessive or unreasonable. He also rejected a letter issued by M/s.Gargi confirming that the material sold by it from 28.7.2004 to the assessee contained increased concentration and lesser moisture content. Thus he confirmed the disallowance. 4. In the further appeal before us, the disallowance is contested vehemently. Our attention has been drawn to a letter written by the assessee on 29.12.2007 to Gargi Industries asking them to confirm that the Gardresser-litex with lower moisture c....

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....e cases the increase is Rs.18/-. It is also seen from the assessment order for the assessment year 2006-07 which was passed on 18.11.2008 under section 143(3) of the Act that no disallowance was made under section 40A(2)(a) that though the price paid by the assessee for the material was Rs.25/- per litre. It is thus seen that the price charged for the improved quality of the material supplied by Gargi Industries after 28.7.2004 at Rs.25/- per litre cannot be considered to be unreasonable or excessive. In circular no.6-P of 1968 dated 6th July, 1968, the CBDT has explained in paragraph 74 that while invoking the provisions of the section the Assessing Officer is expected to exercise his judgement in a reasonable and fair manner and that it s....

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....wed the expenses. The disallowance having been confirmed by the CIT(A), the assessee is in further appeal before the Tribunal. 6. The assessee has placed the details of the stay of the Managing Directors and the President (Sales) and the expenses incurred in US $ for the same at page 62 of the paper book. The argument before us on behalf of the assessee was that the total foreign travel expenses amounted to Rs.9,12,831/- and the assessee could not adduce any evidence for the aforesaid stay only because it was a reimbursement made to the local persons who had arranged for the hotels and made payments. It was also submitted that it is a fact that the aforesaid persons actually stayed in the hotels for which it was necessary to make payment....