TMI Blog1997 (5) TMI 426X X X X Extracts X X X X X X X X Extracts X X X X ..... gister contained some entries for the period 1994 95. It was not complete. Certain presumptions were drawn by the Assessing Officer on the basis of that register and additions were made, in the block assessment for all the years. 3. At the assessment stage the assessee was required to give details of the sales promotion expenses . He was asked to produce the records regard- ing the distribution of sales promotion items . The assessee s claim in regard to sales promotion expenses was approximately 1 to 1.5% of sales. It also debited in the Profit Loss Account Diwali expenses, advertisement expenses, commission on sales, P.P .Cork Scheme, rate difference, etc. The expenditure claimed on sales promotion were found to be high as compared to other concerns dealing in the same line of business. The Assessing Officer considered the percentage of sales promotion expenses claimed by M/s. Tulsi Trading Corporation and M/s. Rama Wines. The Assessing Officer proceeded on the basis that the expenses claimed by the assessee under the head Sales promotion were high pitched. The onus of proving the factum of expenditure according to the Assessing Officer was on the assessee. 4. It was e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must mean income which is hidden from the department. It was stated that nothing connected with the sales promotion expenses was hidden from the department. It was duly disclosed in the returns. It was considered at the time of making the assessments. In the assessment years 1991-92 and 1992-93 while making assessment under section 143(3), the Assessing Officer made some disallowances also on this court. 7 .Dr. Pathak placed before us the gist of the schemes for distribution of sales promotion articles announced by the assessee. These schemes were announced on the occasion of festivals, etc. The items of free gifts were mentioned in the format of the schemes. The amount of gifts varied with the volume of purchases. 8. It was further argued that the assessee is dealing with the less known brands of liquors. Therefore, to boost the sale, it is necessary to make the offer of gift more attractive. The Assessing Officer made the comparison of the assessee-company with M/s. Tulsi Trading Corpn. which is dealing in McDowell s Whisky and King Fisher , Beer. Similarly, M/s. Rama Wines deals with Haywards Whisky and London Pilsnor Beer . These are well-known brands. The assessee is deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive. I am proposing a new scheme under which undisclosed income detected as a result of search shall be assessed separately at a flat rate of 60 per cent. An appeal against the order can be filed directly before the Income-tax Appellate Tribunal. 12. Our attention was further invited on clause 32 of the Notes on Clauses (212 ITR 306)(St.). The following portion was read: In order to make the procedure of assessment of search or requisition cases effective, it is proposed to introduce new provisions for assessment of undisclosed income detected as a result of search or requisition. Under the new provisions, the undisclosed income detected as a result of search initiated or requisition made after 30th June, 1995, shall be assessed separately as income of a block of ten previous years. Where the previous year has not ended or the due date for filing a return of income for any previous year has not expired, the income recorded on or before the date of search or requisition in the books of account or other documents maintained in the normal course relating to such previous years will not be included in that block. 13. It was emphasised that Chapter XIV-B deals with assessment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot ignore the regular assessment. Under Chapter XIV-B, the Assessing Officer cannot review the additions made in the original assessment. The jurisdiction is limited to the assessment of undisclosed income found as a result of the search only. The purport of the section cannot be pressed beyond its true limits. 15. Sri M.V. Rao, the learned Departmental Representative appeared before us. It was argued that section 158BA begins with a non obstante clause. It, therefore, prevails over the other provisions of the statute. How undisclosed income is to be computed for the block period is described under section 158B(b). It is stated that such income is to be computed in accordance with the provisions of Chapter IV, on the basis of evidence found as a result of search or requisition of the books of account or documents and such other materials or information as are available with the Assessing Officer. Therefore, Assessing Officer can rely upon other material and information for making the assessment of the block period. The scope of the word material is much wider. Reliance was placed on the decision of the Tribunal rendered in the case of MontBlanc Properties Industries (P.) Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the onus was on the assessee to prove that the expenditure was incurred for the business purposes. He failed to discharge the onus. Therefore, the addition was justified. Reliance was placed on the following decisions: (1)Leeladhar Sukh Das v. CIT [1995] 211 ITR 441 (All.) (2)East India Pharmaceutical Works v. CIT [1997] 224 ITR 627 (SC) and (3)Lachminarayan Madan Lal v. CIT [1972] 86 ITR 439 (SC). It was further stated that it is mandatory on the part of the assessee to prove the user for the items purchased for the purposes of presentation. The assessee did not prove beyond the shadow of doubt the user of the gift items. The addition was, therefore, rightly been made by the Assessing Officer. Reliance was placed on the decision of the Madras High Court rendered in the case of Kanthimathy Plantations (P.) Ltd v. State of Tamil Nadu [1995] 215 ITR 203. 17. We have heard the rival submissions in the light of the material placed before us and the precedents relied upon. Levy Ullamann, the great French Jurist said that a definition of law should have two aims - firstly, to make precise the meaning of law, and secondly, to call up in the mind of the reader a true picture of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere, it may be regarded that an exhaustive explanation of the things intended to be caught in the net of the section is specified. But where the expression is merely include , it does not have a restrictive operation so as to confine the scope of the section only to those things specific in the words following. When the Legislature wants to enlarge the natural meaning of a word or a phrase it uses the word includes and, in such a context, an inclusive definition means that over and above the natural meaning of the word, the specially provided meaning of the word will also have to be attributed for the purpose of interpretation of that particular statute or that particular Chapter. But the word include is susceptible of another construction, which may become imperative, if the context of the Act is sufficient to show that it was not merely employed for the purpose of adding to the natural significance of the words or expression defined. It may be equivalent to mean and include and in that case it may afford an exhaustive explanation of the meaning which, for the purposes of the Act, must invariably be attached to these words or expressions. Words in a section are not to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... XIVB assessment could be made only in respect of the undi-sclosed income. Such undisclosed income must come as a result of search. This section does not provide a licence to the revenue for making roving enquiries connected with the completed assessment. It is beyond the power of the Assessing Officer to review the assessments completed unless some direct evidence comes to the knowledge of the department as a result of search which indicates clearly the factum of undisclosed income. Without such evidence or material the Assessing Officer is not empowered to draw any presumption as to the existence of undisclosed income. A presumption is an inference of fact drawn from other known or proved facts. It is rule of law under which courts are authorised to draw a particular inference from a particular fact, until and unless the truth of such inference is disproved by other evidence. We find that the scheme of Chapter XIVB does not give power to the Revenue to draw the presumption in regard to the undisclosed income. The Assessing Officer could proceed on the basis of material detected at the time of search and the evidence gathered. Under section 132(4), the authorised officer may, duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness practice. He did not reject the amount of sales promotion expenses in toto. He made estimate. What induced him to make such estimate? What was the basis for such estimate? He made comparison with the other traders. It was explained that the other traders were dealing in well-known brand of the product whereas the assessee was dealing in the less known brand of the product. Therefore, such comparison was not proper. Circular cannot override the law it is true, but how the circular transgressed the boundaries of law was not explained. It was issued just to clarify the provision. It only explained the purport of law nothing more, nothing less. Addition under section 158B (b) cannot be based on jejune reasonings or guess work. It is imperative that the department must have in its possession cogent material and/or evidence to support the addition. It is not open for the Assessing Officer to grope in the dark. It is obvious from the perusal of impugned order that no attempt was made to examine the evidentiary value of the gift book. Its contents are not discussed in the order. How it proves a fact is not known to us. Its nexus with the undisclosed income was not established. Its r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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