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2018 (9) TMI 421 - AT - Income Tax


Issues Involved:
1. Addition of ?6,06,000/- out of sales promotion expenses.
2. Genuineness of the purchase invoices from M/s. Soumya Business.
3. Compliance with VAT regulations and discrepancies in VAT returns.
4. Verification of the distribution of silver coins to clients.
5. Legal permissibility of gifting by an LIC agent under IRDS Rules.

Issue-wise Detailed Analysis:

1. Addition of ?6,06,000/- out of Sales Promotion Expenses:
The solitary issue involves the addition of ?6,06,000/- sustained by the Ld. CIT(A) out of sales promotion expenses claimed by the assessee. The assessee, an LIC agent, had claimed ?17,82,474/- as business promotion expenses, which included the purchase of 246 silver coins. The Assessing Officer (A.O.) disallowed the entire amount of ?15,10,354/- claimed for the purchase of silver coins due to various discrepancies and lack of proper verification. The Ld. CIT(A), however, restricted the disallowance to ?6,06,000/- after considering the submissions and material on record.

2. Genuineness of the Purchase Invoices from M/s. Soumya Business:
The assessee provided four invoices from M/s. Soumya Business for the purchase of silver coins. However, the A.O.'s verification revealed that M/s. Soumya Business was not traceable at the given address, and the concerned party was found to be indulging in issuing fake bills. The VAT authority confirmed that M/s. Soumya Business had disclosed sales of ?9,04,354/- only, which did not match the invoices provided by the assessee. The Ld. CIT(A) noted discrepancies in the invoice numbers and the rates of silver coins, further questioning the genuineness of the invoices.

3. Compliance with VAT Regulations and Discrepancies in VAT Returns:
The A.O. conducted an enquiry with the VAT authority, which revealed that M/s. Soumya Business had issued fake bills and was involved in VAT evasion. The VAT returns filed by M/s. Soumya Business did not match the invoices provided by the assessee. The Ld. CIT(A) observed that the invoice numbers declared in the VAT return were different from those presented by the assessee, indicating that the invoices might not be genuine. The Ld. CIT(A) upheld the disallowance of ?6,06,000/- based on these discrepancies.

4. Verification of the Distribution of Silver Coins to Clients:
The assessee claimed to have distributed 246 silver coins to clients as part of business promotion. However, the A.O. found inconsistencies in the list of clients provided by the assessee. The assessee could furnish a list of only 90 clients, and summons issued to some of these clients were returned undelivered. The A.O. noted other infirmities in the claim, such as the same rate of silver coins being charged on different dates, which was not feasible. The Ld. CIT(A) considered these findings while sustaining the disallowance.

5. Legal Permissibility of Gifting by an LIC Agent under IRDS Rules:
The A.O. noted that as per the IRDS Rules, it was not permissible for an LIC agent to give any gift to policyholders. This further questioned the legitimacy of the assessee's claim of having distributed silver coins as business promotion. The Ld. CIT(A) took this into account while evaluating the assessee's claim.

Conclusion:
The Tribunal upheld the order of the Ld. CIT(A), dismissing the appeal filed by the assessee. The Tribunal agreed with the findings of the lower authorities, noting that the assessee had already received reasonable relief from the Ld. CIT(A). The adverse findings, including the discrepancies in the invoices, the involvement of M/s. Soumya Business in issuing fake bills, and the inconsistencies in the list of clients, justified the disallowance of ?6,06,000/-. The appeal of the assessee was thus dismissed.

 

 

 

 

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