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TMI Blog2011 (5) TMI 436X X X X Extracts X X X X X X X X Extracts X X X X ..... „advertisement expenses? 2. Whether the Income Tax Appellate Tribunal was correct in law in sustaining the disallowance of the claim of expenses of Rs. 11,68,905/- under the head „printing and stationery on the ground that same was to be considered in the block assessment proceedings and not under Chapter XIV of the Income Tax Act, 1961?" Other appeal is in respect of Assessment Year 1998-99 which also involves the aforesaid two questions with difference in amounts only. It is for this reason, both the appeals were heard together. 2. For the sake of convenience, we may take note of the facts of ITA No.790 of 2006 giving rise to the questions formulated above. Concededly, outc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of expenditure of Rs. 40,78,858/- incurred was also made. The expenses incurred were supported by credit bills but remained to be ledgerized. Out of the sum of Rs. 40,78,858/- a sum of Rs. 21,79,603/- related to Assessment Year 1998-99 and remaining sum of Rs. 18,99,255/- related to the Assessment Year 1997-98. 4. On 29.03.2000, the assessment was framed under Section 143(3) of the Act at an income of Rs. 85,17,334/-. The Assessing Officer (AO) though proceeded to compute income on the basis of revised return, but disallowed the claim of the aforesaid expenditure incurred by holding that the claim of deduction of Rs. 3,69,500/- incurred on „printing & stationery was incorrect and "against the provisions of the Act". Rs. 7,99, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT (A) obtained a remand report of the AO on 16.01.2001, who confirmed that the amounts credited in the account of advertisers are genuine and were incurred for the services rendered. In other words, there was no dispute about the incurring of expenditure. The assessee furnished his comments on 31.01.2001 with submissions that the deductions claimed as aforesaid be directed to be allowed. The CIT (A), however, held that the expenditure incurred was since not ledgerized and thus could be a part of block assessment proceedings. 6. Still dissatisfied, the assessee went in appeal before the Income Tax Appellate Tribunal (hereinafter referred to as „the Tribunal). However, here also, the assessee remained unsuccessful as disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and was an attempt to convert undisclosed income assessable under the block assessment proceeding into allowable deduction. He even asked the assessee to clarify the reason for not recording the aforesaid advertisement bills amounting to Rs. 18,99,255/- during Financial Year 1996-97 when these bills had been raised on dates falling during financial year 1996-97, but reply was not furnished by the assessee. Accordingly, the AO opined that this expenditure had to be dealt with during block assessment, which was pending in the case of the assessee. He disallowed the claim of deduction of Rs. 18,99,255/-. This reasoning of the AO had been accepted by the CIT (A) as well the Tribunal. 9. We fail to understand logic given by the Authorities be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment and not in the block assessment. 11. In the present case, the assessee had revised the return within stipulated period prescribed under the Act. He was, thus, entitled to do so. His plea was that the expenditure was incurred during the year in question and even if the bills were not received and they were not ledgerized, he had right to claim the same as deduction, as he was following mercantile system of accounting. In these circumstances, the AO was required to go into the issue. He, however, did not apply his mind at all on this aspect and merely on the ground that the expenditure was not ledgerized, they proceeded on wrong premise that it could be taken care of in the block assessment year. 12. The orders of the Authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bserved by the AO that since the amount is not ledgerized, it can be taken care of in the block assessment proceeding under Section 158BC i.e. Chapter XIV-B of the Act. 14. Again, this is an expenditure item and for the reasons given while answering the Question No.1, provision of Chapter XIV-B would not be applicable and it was incumbent upon the AO to consider the allowability or otherwise this expenditure in the regular assessment. However, it would be open to the AO to go into the veracity/genuineness of the expenditure. Thus, for the same reason, we remit back this issue as well to the Assessing Officer. If the expenditure is found to be genuine, the same shall be allowed in this assessment year. This issue is answered accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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