9911796707
TMI Blog2003 (6) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee filed return on 28-10-1994 disclosing a total income of Rs. 15,64,960 which was taken up for scrutiny. While completing the assessment, the Assessing Officer found that the assessee has debited towards the advertisement and sales promotion Rs. 69,54,507. The Assessing Officer asked the assessee to furnish necessary details and to explain as to how there was a high rise in the expenditure on account of advertisement and sales promotion in the instant year. The assessee stated before the Assessing Officer that the sales had gone up nearly about 17% in the year under consideration and such expenditure was inevitable. The controversy arises when the Assessing Officer added back Rs. 58,12,463 in respect of sales promotion and advertisement expenses, the assessee carried the matter in appeal before the CIT(A) who on the basis of the submission made before him deleted the addition made by the Assessing Officer. 5. The Ld. D.R. stated that the assessee was asked to explain the necessity of a wholesale dealer in incurring expenditure on advertisement and sales promotion as normally it is seen that for the products of cigarettes/tobacco etc. it is the manufacturer who undertakes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng carried out by the party and the account had been opened for the simple purpose of encashing cheques issued by the assessee to M/s. Graphic Circle. He has, therefore, reiterated that the Assessing Officer was quite justified in disallowing the expenses which, according to him, was an arrangement to inflate the expenditure. 6. The Ld. A.R. mentioned that the assessee made payment of Rs. 35,900 only to M/s. Graphic Circle but it was wrongly mentioned as Rs. 5,60,000 by the Assessing Officer and the payments made to M/s. Graphic Circle was wholly and exclusively for the purpose of business and the payments made were fully verifiable. He has therefore asserted that the Assessing Officer erred in disallowing the same by holding that the payment made was an arrangement to inflate the expenditure. He has further mentioned that the Assessing Officer relied on the Inspector's report and certain individuals alleged to have been examined by the Inspectors deputed by him in connection with the payment to M/s. Graphic Circle without handling over a copy of the Inspector's report and without producing the other parties examined by the Inspector for cross-examination by the assessee. It was f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o produce the party which they did not do and also summons under section 131 could not be served as the party is not traceable at the address given by the assessee. He has, therefore, stated that the Assessing Officer was quite justified in disallowing the expenditure. 10. The Ld. A.R. contended that the expenses incurred on payment to M/s. Universal Printer was wholly and exclusively for the purpose of the business and the payments made were fully verifiable. It was further brought to our notice that the Assessing Officer totally relied on the Inspector's report and certain other individuals alleged to have examined by the said Inspector in connection with that payment to M/s. Universal Printers without giving copy of the Inspector's report and without producing other parties examined by the Inspector for cross-examination by the assessee. 11. We have heard both the sides and gone through the record. In this connection our observations in respect of payment made to M/s. Graphic Circle should be followed. For the sake of brevity, we are not repeating the same. 12. As regards the payment to M/s. Tara Enterprises, the Ld. D.R. mentioned that the accounts of M/s. Tara Enterprises w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as, therefore, reiterated that the Assessing Officer has rightly disallowed the expenses and added back the same in the total income of the assessee. 16A. The Ld. A.R. stated that the expenses incurred on payments to M/s. Fleet amounting to Rs. 1,02,538 for hiring cars was wholly and exclusively for the purpose of business and the payments were fully verified by the Assessing Officer. It was further stated that the Assessing Officer erred in disallowing the payment to M/s. Fleet merely on the ground that originally the bills were raised on the principals i.e., I.T.C. Ltd. and duty slips were signed by the I.T.C. personnel but subsequently a fresh bill was raised in the name of the assessee. In this connection we have noticed from the order of the Ld. CIT(A) that the Assessing Officer was told by the I.T.C. that the said amount was paid by H.T.C. and hence a fresh consolidated bill of the said amount was raised on H.T.C. giving bill No. June/66A and the duty slips were signed by the I.T.C. personal and not by the people from the H.T.C. In view of the above fact, we do not find any justification in interfering with the order of the Ld. CIT(A) which is, therefore, sustained on this p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closed. From the order of the Assessing Officer, it appears that he is admitting the fact that the bank account existed and the relevant cheques were encashed by the assessee. We do not therefore find any infirmity in the order of the Ld. CIT(A) which is, therefore, sustained. 23. As regards the disallowance of a sum of Rs. 27,68,607 under the head "display and sampling expenses", the Ld. D.R. mentioned that the assessee could not produce the list of shop where the assessee distributed the packets of cigarettes throughout Calcutta for displaying as well as for sampling. He has therefore supported the view taken by the Assessing Officer and stated that the Ld. CIT(A) was unjustified in reversing the order of the Assessing Officer. 24. The Ld. A.R. for the assessee contended that displaying and sampling expenses amounting to Rs. 27,68,607 was made wholly and exclusively for the purpose of business and which were fully verifiable from the recross of the assessee. He has therefore reiterated that the Assessing Officer was not justified at all in disallowing the same without allowing the assessee any opportunity to rebut the same. 25. We have heard the rival submissions and on a care ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder no obligation to the company to do so'. 28. Coming to more specific observations, Assessing Officer noted that the assessee has debited a total amount of Rs. 5,60,000 as payment to one M/s. Grafic Circle of 'Kudiram Bose Road, PO Hridyapur, 24 Pargana', ostensibly for car hire charges, but inspector's spot enquiry report revealed that no such concern existed at the given address. Enquiries from the local residents and post office further revealed that there was no such concern in existence in past also. These facts are said to have been pointed out to the assessee vide order sheet entry 11th March, 1997 and also by a letter dated 12th March, 1997, but all that the assessee had to say was that "we have furnished all information to you, which was in our possession and control i.e., we submitted to you copies of bills and payment details. We would bring to your kind attention that all payments were made by account payee cheques." The Assessing Officer further made efforts to trace this M/s. Grafic Circle by tracing the bank account details, through discharged cheques of the assessee, from records of the assessee's banker. This exercise revealed that M/s. Grafic Circle was having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent only for the purpose of inflating the expenditure and, thereby reducing the tax liability. 30. The Assessing Officer further noticed that payments of Rs. 5,93,900 were made to M/s. Ma Tara Enterprises of '8 Ekdalia Road', ostensibly for the purpose of hiring persons for sales promotion drives. Again spot enquiries confirmed that no such concern existed at the given address and local enquiries revealed that no such concern was in existence at any point of time. These facts communicated to the assessee were met with assessee's response extracted in paragraph 28 above i.e., "We have furnished all information to you, which was in our possession and control i.e., we submitted to you copies of bills and payment details. We would bring to your kind attention that all payments were made by account payee cheques." The Assessing Officer further made efforts to trace this M/s. Ma Tara Enterprises by tracing the bank account details, through discharged cheques of the assessee, from records of the assessee's banker. This exercise revealed that M/s. Ma Tara Enterprises was having a current account No. 285 with Punjab National Bank, Tangra Branch, Calcutta and this account was operated by on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quiries conducted through inspector, such a concern did exist till 1994. 34. It was further noticed by the Assessing Officer that the assessee claimed a deduction of Rs. 27,68,607 on account of sampling and display expenses. According to the assessee, this amount represented distribution of cigarettes to various vendors for display and as free samples. It is an admitted position that despite several requisitions by the Assessing Officer, the assessee was not in a position to even furnish the list of shops or any other register, report or even other document which could throw some light in the matter. In response to show-cause notice requiring the assessee to show cause as to why, in the absence of necessary clarifications and evidences to substantiate the claim, this expenditure of Rs. 28,68,607 should not be disallowed, the assessee, vide letter dated 18-3-1997 stated that "We would bring to your kind attention that sampling/display expenses have been genuinely incurred during the year from time to time which we have already explained to you. These cigarettes were distributed, through hawkers, sales representatives. We have, however, not maintained the records, in respect of dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to M/s. Fleet, was deleted by the CIT(A) on the ground that once ITC Ltd. itself has confirmed that the payment was to be made by the assessee, the Assessing Officer was not justified in deleting the same on the ground that duty slips were signed by ITC officials. 42. Regarding disallowance of Rs. 1,50,000 on account of payment made to M/s. Market Links, the CIT(A) noted that the claim of the assessee was only Rs. 1,12,500 and complete details in respect of the same were duly furnished by the assessee but the Assessing Officer, without considering. the explanations of the assessee, disallowed Rs. 1,50,000. The CIT(A) thus deleted this disallowance also. 43. The CIT(A) then moved on to disallowance of Rs. 27,68,607 under the head Display and Sampling Expenses and observed as follows: "The Assessing Officer's main grievance against the appellant is that when it had no contractual obligation from the manufacturer, it chose to spend over Rs. 28 lakhs for this expenses. The AIR argued that in the earlier year the entire expenditure under the sales promotion and advertisement expenses was allowed by the CIT(A). The AIR also cited several case laws in support of the claim. He has state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or car hire charges 4 cars daily X 20 days @ Rs. 750 per car (including fuel, driver and all maintenance) Rs. 60,000 1-6-1993 Bill for car hire charges 4 cars daily X 20 days @ Rs. 750 per car (including fuel, driver and all maintenance) Rs. 60,000 1-7-1993 Bill for car hire charges 4 cars daily X 20 days @ Rs. 750 per car (including fuel, driver and all maintenance) Rs. 60,000 31- 7 -1993 Bill for car hire charges 4 cars daily X 20 days @ Rs. 750 per car (including fuel, driver and all maintenance) Rs. 60,000 30-8-1993 Bill for car hire charges 7 cars daily X 20 days @ Rs. 750 per car (including fuel, driver and all maintenance) Rs. 1,19,000 48. All these bills are drawn up on a format, which is not pre-numbered and does not even contain phone number of the concern, and states the names and address of this concern, besides stating "All kinds of printing, binding and general order suppliers". It is indeed unusual that a printer, binder and general order supplier is making available such a large number of cars to the assessee. It is also interesting to note that the address given in the bill is of a place outside the city and the assessee did not ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o tracing the supplier, but, then, the assessee did not furnish any information at all. It fails on the test of human probabilities that the assessee picks up a 'printer, binder and general order supplier' to supply large number of cars on somewhat continuous basis from a place far way from the city but does not even keep the basic contact details of this major supplier. I find it difficult to believe that it is a mere coincidence that only for this, and similar other suppliers of doubtful existence, cheques get encashed through un-introduced bank accounts which are used only for cash withdrawals of the account payee cheques so deposited. Elaborate exercise done by the Assessing Officer shows that there is reasonable basis to believe that Grafic Circle did not at all exist, that account payee cheques were converted into cash in a fraudulent manner, and that there is no evidence, direct or corroborative, that cars were actually made available to the assessee. The disallowance is, therefore, justified on merits of the case. As has been observed by Hon'ble Supreme Court, in the landmark case of CIT v. Durga Prasad More 82 ITR 540 'it is true that apparent must be considered real until ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and introduction and the cheques were deposited in the account of Grafic Circle, then the Assessing Officer should grant relief to the assessee as per the law.", I am unable to understand what is the relief 'as per the law' in this context and I do not seen any point in sending back the matter on this point when the assessee has not even challenged revenue's finding that the account has been opened without proper introduction. I, therefore, regret my inability to subscribe to the views of the learned colleague. 51.As far as deduction for payment of Rs. 15,40,658 to M/s. Universal Printers is concerned, I find that the actual debit to the profit and loss account is only Rs. 14,99,860 details of which are as follows: 4-2-1994 Towards the cost of printing Wills Pop-Ups on 290 gms Super Lucky Art Board with lamination and Base printed in 3 colours etc... @ Rs. 9.20 per pc - 30,000 pcs + packing and transportation etc. Rs. 2,86,500 18-2-1994 Towards the cost of printing Gold Flake show card on 135 gm Super Lucky Art paper with lamination @ Rs. 14 per piece - 80,000 pcs + packing and transportation etc. Rs. 11,76,000 9-11-1993 Towards the cost of refabrication of Wills ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r's conclusions are based on specific and cogent reasons placed on record and which, for the reasoning I have given, I approve. My observations in paragraph 49 above also, broadly speaking, are relevant on this issue as well. In my view, mere payment through the banking channels per se cannot be a legally sustainable reason to hold that the expenditure was genuine, as is indeed done by the CIT(A). Accordingly, I deem it fit to vacate the order of the CIT(A) and restore the disallowance to the extent of, for the reasons stated earlier, Rs. 14,99,860. 53. As for the payment of Rs. 5,93,900 to M/s. Ma Tara Enterprises, I find that the details of this expenditure, as culled out from copies of related bills, are: 2-5-1993 Sales Promoters (Hired boys) 26 days X 40 boys per day @ Rs. 130 per day per boy Rs. 1,35,200 2-6-1993 Sales Promoters (Hired boys) 26 days X 40 boys per day @ Rs. 130 per day per boy Rs. 1,35,200 2-7-1993 Sales Promoters (Hired boys) 25 days X40 boys per day @ Rs. 130 per day per boy Rs. 97,500 31-7-1993 Sales Promoters (Hired boys) 20 days X 40 boys per day @ Rs. 130 per day per boy Rs. 65,000 1-9-1993 Sales Promoters (Hired boys) 25 days X 92 bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t at all exist, that account payee cheques were converted into cash in a fraudulent manner, and that there is no evidence, direct or corroborative, any manpower was actually supplied by this Ma Tara Enterprises to the assessee. There is no mention of phone numbers etc. on the bill and the assessee has not been able to give any reasonable explanation of not being able to produce this concern or give further details about people manning this concern. Even the commercial expediency of this expenditure has not been justified but this aspect is not even relevant at this stage. My observations in paragraph 49 above also, broadly speaking, are equally relevant on this disallowance as well. I may mention that the reasons on account of which CIT(A) has given relief in the matter, in my considered view, are superfluous since merely because a payment is made through banking channels does not mean that the expenditure incurred by the assessee is genuine expenditure. As for the CIT(A)'s observation that 'The transaction is proved. No adverse inference is to be drawn.', I see no support for CIT(A)'s coming to this conclusion. I am, therefore, of the view that the deletion of this disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about the expenditure having actually been incurred, discussions about commercial expediency of such an expenditure are not relevant. Keeping in view all these factors, as also entirety of the case, I deem it fit to restore the disallowance of Rs. 27,68,607 made by the Assessing Officer under the head Display and Sampling Expenses. 56. In my view, therefore, following disallowances made by the Assessing Officer should be restored and, to that extent, order of the CIT(A) should be modified: Payment to Grafic Circle for car hire Rs. 3,59,000 Payment to Universal Printers for printing work Rs.14,99,860 Payment to Ma Tara Enterprises for supply of temporary workers Rs. 5,93,900 Sampling and Display Expenses for distribution of free samples Rs.27,68,607 57. To sum up, the disallowance of Sales Promotion and Advertisement Expenses to the tune of Rs. 52,21,367 is restored. 58. In the result, revenue's appeal is partly allowed. ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 As there is a difference of opinion between the Judicial Member and the Accountant Member, the matter is being referred to the Hon'ble President, ITA T with a request that the following questions may b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decide the matter de novo or whether the Tribunal should have restored the disallowances deleted by the CIT(A):- Payment to Ma Tara Enterprises for supply of temporary workers Rs. 5,93,000 Sampling and Display Expenses for distribution of free cigarette samples Rs. 27,68,607 2. Parties have been heard and record perused. The relevant facts briefly stated are that the respondent is a wholesale dealer of cigarette manufactured by the ITC Ltd. On scrutiny of accounts it was noticed by the Assessing Officer that the expenditure under the head "sales promotion expenses" had considerably gone up to Rs. 69,54,507 as compared with Rs. 14,19,127 for assessment year 1993-94 and Rs. 2,03,507 for assessment year 1992-93. The assessee was asked to explain the reasons for such unusual spurt in expenditure. It was claimed that in view of the increase in turnover by about 17% in the relevant previous year from that of the preceding year, the expenses had substantially gone up. It was claimed by the assessee that the dealer or the distributor is also required to incur expenditure on advertisement and sales promotion. However, on enquiry by the Assessing Officer it was clarified by ITC Ltd. that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnished. The Assessing Officer, accordingly, disallowed the claim. 5. In respect of the payment of Rs. 5,93,900 to M/s. Ma Tara Enterprises for supply of temporary workers, party was not found at the given address. No details of the purported supply of the workers to the assessee were made available to the Assessing Officer. The purpose for which the services of the persons were requires was also not established. The Assessing Officer on enquiry found that the bank account had been opened in the name of the concern without any introduction and that the withdrawals had been made from the bank account immediately after deposit of the cheques. In this case also, there was no mention of the phone No. etc. in the bill. When the assessee was confronted it was simply stated that whatever evidence was available to the assessee had been produced and that the expenditure is genuine. 6. In regard to the display and sampling expenses of Rs. 27,68,607, the Assessing Officer disallowed the claim for want of evidence. The assessee had claimed that free samples had been distributed of the total value of Rs. 27,68,607 in the year under appeal. The Assessing Officer found that there was nothing m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for printing works, Rs. 5,93,900 on account of payment to M/s. Ma Tara Enterprises for supply of temporary workers and Rs. 27,68,607 on account of distribution of free cigarettes samples and for sampling and display. These four additions are restored as per the order of the Ld. Accountant Member. Thus the difference of opinion is confined to the disallowances of Rs. 3,59,000, Rs. 14,99,860, Rs. 5,93,900 and Rs. 27,68,607 being item Nos. (a), (b), (c) and (g) in para-3 above. 10. The Ld. Departmental Representative contended that the order of the Ld. Accountant Member is based on facts and is in accordance with law and accordingly same view may be adopted. However, on the other hand, the learned counsel for the assessee sought to support the order of the Ld. Judicial Member. The contentions advanced before the Division Bench have been reiterated before me by the parties. 11. Having given my careful consideration to the rival contentions and material on record, I am of the considered view that the crux of this appeal is as to whether the respondent had discharged the onus of justifying substantial increase in the expenses on account of advertisement and sales promotion and whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to make enquiries from third parties and after giving an opportunity of being heard to the assessee, make an assessment on the basis of the material produced by the assessee and/or the material gathered by the Assessing Officer. 14. Section 145 of the Income-tax Act, 1961 provides for making of an assessment in the case of an assessee deriving income from profits and gains of business in accordance with the method of accounting regularly followed by the assessee. In this case, the assessee has produced the books of account before the Assessing Officer and also produced prima facie evidence in support of the claim of expenditure. The Assessing Officer found unusual spurt in various expenses. To be precise, as against the expenditure of Rs. 14,19,127 in assessment year 1993-94 and Rs. 2,03,507 in assessment year 1992-93, the assessee had claimed expenses of Rs. 69,54,507 under the head "sales promotion expenses". In view of the considerable increase in the claim of sales promotion expenses, the Assessing Officer was duty bound to ask the assessee to support the claim. The assessee furnished evidence in the form of bills from the parties. It was also stated that the payments had b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnished and that the payments have been made by Account Payee cheques and that the assessee can furnish no further information or evidence. On further enquiry the Assessing Officer found a current Account No. 284 with Punjab National Bank (PNB), Tangra Branch, Kolkata and the name of the account-holder was shown as P. Guha. The Assessing Officer strangely found that the bank account had not been opened through any introduction, nor was any address given in the account opening form. The account in the name of M/s. Grafic Circle had been opened on 27-8-1993 and the same had been closed on 12-2-1995. All the cheques issued by the assessee in the name of M/s. Grafic Circle had been deposited in the said account. However, the withdrawal had been made in the next available working day. The assessee was asked to produce any person from M/s. Grafic Circle, but no one was produced. A notice under section 131 could not be served for want of correct address. It was in the light of these facts that the Assessing Officer came to the conclusion that the assessee had claimed a bogus payment to inflate the expenditure and to reduce the tax liability. 16. As is evident from the facts stated above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the Inspector's report. It has not been the grievance of the assessee that they were not provided with reasonable opportunity of being heard. The Assessing Officer, as pointed out earlier, is empowered to make enquiry and collect information for and against the assessee. In this case it is not disputed that the information was collected by the Assessing Officer through his Inspector. The assessee at no stage demanded copy of the report of the Inspector. The Inspector assists the Assessing Officer in making enquiries for the purpose of assessment. Since the evidence collected by the Assessing Officer was disclosed to the assessee and reasonable opportunity given for rebuttal, there is no reason for restoring the issue to the file of the Assessing Officer for fresh decision. The CIT(A) has unjustifiably deleted the addition merely because the payment made to the party was by way of payees account cheques. It is settled law that the mere payment by Account Payee Cheques is not sufficient to discharge the onus that rests on the assessee. As is observed in this case, it is not difficult for anyone to open a bank account in any name. The bankers were not required to make any enquiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt plot. The assessee was informed by the Assessing Officer about the results of the enquiry. However, the assessee relied upon the evidence that was furnished before the Assessing Officer and claimed that there was no other evidence that could be produced. The Assessing Officer made enquiries from PNB, Park Street Branch. It was strange co-incidence that in this case also the account opened by Sri Niranjan Pal was opened without any introduction against the bank rules. The pattern of deposits of cheques and withdrawals from bank account was found similar with the pattern in the case of M/s. Grafic Circle. The assessee on being confronted with results of enquiry stated that they are relying on the evidence on record. The Assessing Officer on the basis of the enquiry made held that the assessee had made a claim of bogus expenditure. 18. The principles relating to the burden of proof have been specified above. The initial burden to establish the genuineness of the expenditure and to support the expenditure by necessary evidence was upon the assessee. The assessee furnished bills but on enquiry it was found that the address given on the bills was a fake address. The assessee was conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payee. In this case, the address given by the assessee was found to be fake and no address of the party was available in the bank where account was opened. In such circumstances, no useful purpose will be served to make enquiry about the real owner of the bank account. Assuming for argument sake that assessee is not found to be the real beneficiary of the bank account opened in the name of M/s. Universal Printers, but that by itself may not be sufficient for allowance of deduction in respect of the claim of Rs. 14,99,860 debited in the account of M/s. Universal Printers purportedly for printing of 'Gold Flake' and 'Wills' show card. In my considered view, the disallowance of Rs. 14,99,860 made by the Assessing Officer for want of evidence is justified on the facts and in the circumstances of the case and there is no justification for remanding the matter to the file of the Assessing Officer. The addition of Rs. 14,99,860 deleted by the CIT(A) is thus required to be restored. 19. Now I take up the disallowance of Rs. 5,93,900 on account of payment to M/s. Ma Tara Enterprises purportedly on account of supply of temporary workers. The assessee furnished five bills for the aggregate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee is engaged in the business and it had no contractual obligation from the manufacturer to spend any amount on display and sampling. However, a businessman decides to spend over Rs. 28 lakhs without there being any contractual obligation from the manufacturer is baffling and not appearing to common sense. It is also noteworthy that there is no past history of such expenditure having been incurred by the assessee. The assessee's representative had vehemently argued before the authorities that the expenditure incurred by the assessee falls within the ambit of section 37(1) as an expenditure having been incurred wholly and exclusively for the purpose of business. It had been claimed that the wholly and exclusively mentioned in section 37(1) does not mean necessarily and that ordinarily it is for the assessee to decide whether any expenditure should be incurred or not for the purpose of business. It was also claimed that the assessee may incur expenditure voluntarily for moving the business and not necessarily to earn the profits. Reference was also made to the letter of the ITC which confirmed that the assessee was at liberty to incur expenditure on advertisement and sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eport of the Inspector to the assessee insofar as the assessee was informed about the results of the enquiry and given reasonable opportunity to furnish necessary evidence in support of the genuineness of the claim. The assessee having failed to furnish necessary evidence to support the claim, the disallowance made by the Assessing Officer is fully justified. The addition of Rs. 27,68,607 is thus required to be restored. I direct accordingly. There is no justification for remanding the matter to the Assessing Officer. 22. To sum up, claim made by the assessee in the year under appeal under the head "sales promotion expenses" was more than 500% than the claim made in the preceding year. The claim in assessment year 1992-93 under the head 'sales promotion expenses' was about Rs. 2 lakhs only and for 1993-94 Rs. 14,19,127 only. In the light of disparity of the claim when compared with the claim made for preceding years, the Assessing Officer was duty bound to make enquiries and demand necessary evidence in support of the claim. The evidence furnished by the assessee having been found to be unreliable, the Assessing Officer was justified to disallow the claim. As held by their Lordshi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any prejudice to the assessee. 23. Taking the totality of the facts and circumstances of this case into consideration, I am of the considered view that the Assessing Officer was justified in disallowing the claim of Rs. 3,59,000, Rs. 14,99,860, Rs. 5,93,900 and Rs. 27,68,607 out of the total claim of Rs. 69,54,507 under the head 'Sales Promotion Expenses'. I, therefore, concur with the finding of the Ld. Accountant Member and I am unable to persuade myself to agree with the Ld. Judicial Member for sending the issues back to the Assessing Officer for fresh decision in accordance with the directions contained in the order of the learned Judicial Member. 24. Let the matter be placed before the regular Bench for passing the consequential order in accordance with the majority view. ORDER Per B.K. Mitra, J.M.--The appeal of the Revenue for the assessment year 1994-95 was heard by "C" Bench of the Tribunal. As a result of difference of opinion amongst the Members, the Hon'ble President had nominated the Hon'ble Vice-President (KZ) as Third Member in respect of the following points of difference:-- 1. Whether, on the facts and in the circumstances of the case, the Tribunal should have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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