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2014 (5) TMI 38 - AT - Income TaxDeletion of addition made Inadmissible expenditure Genuineness of expenses incurred under the head advertisement and publicity not proved Cheques issued and equal cash withdrawn Held that - AO rightly was of the view that the assessee has failed to produce the books of account and given reasonable explanation to justify the nature of its claim, how it qualifies for deduction and how whatsoever evidence is brought on record does substantiate the theory put forth by it - Most of the bills issued by M/s. Ratna Enterprises are in seriatim, cheques issued by the assessee firm which were deposited in the said account of M/s. Ratna Enterprises, were withdrawn of equal amount on the same date, cheques and pay-in-slips have been prepared by one and same person in one hand-writing - the assessee has not rebutted the allegations and facts on record and no material rebutting the findings of the AO have been brought on record before the CIT(A) or before the Tribunal. Free of cost distribution of gifts Held that - No identity of the customers have been placed on record, either before the AO or before the CIT(A) or Tribunal the payment through cheques by the party is not sacrosanct and furnishing the particulars is not enough Relying upon CIT vs. Precision Finance Pvt. Ltd. 1993 (6) TMI 17 - CALCUTTA High Court and Kachwala Gems vs. JCIT 2006 (12) TMI 83 - SUPREME COURT the CIT(A) is not justified in accepting the technical rule of evidence and ignoring the circumstances thus, the order of the CIT(A) set aside Decided in favuor of Revenue. Deletion of expenses on sale promotion Held that - Since the additions have been deleted in quantum appeal by the CIT(A), and now the quantum appeal decided by the CIT(A) in favour of the assessee has been reversed by the order of even date the order of the CIT(A) will not survive the CIT(A) has not decided the issue on merits thus, the matter is remitted back to the CIT(A) for Adjudication Decided in favour of Assessee.
Issues Involved:
1. Deletion of addition of Rs.46,09,004/- made on account of inadmissible expenditure. 2. Deletion of addition made by treating the expenditure as sale promotion on a protective basis. Issue-wise Detailed Analysis: 1. Deletion of Addition of Rs.46,09,004/- Made on Account of Inadmissible Expenditure The Revenue challenged the deletion of Rs.46,09,004/- added by the Assessing Officer (AO) as inadmissible expenditure. The AO argued that the assessee firm, engaged in trading Edible Oil, Refined Oil, and Vanaspati Ghee, had shown an expenditure under "Advertisement & Publicity" from M/s. Ratna Enterprises, which appeared dubious. The AO noted that the bills were in seriatim, and the cheques issued by the assessee were deposited and withdrawn on the same day, suggesting a device to reduce taxable income. The AO's detailed scrutiny revealed that the assessee failed to provide necessary information, such as the complete name and address of M/s. Ratna Enterprises, the nature of its business, and the original bills. Despite multiple notices, the assessee did not produce books of account or vouchers for verification. The AO concluded that the expenditure was not genuine, highlighting that the cheques and pay-in-slips were prepared by the same person, indicating a one-man show. The CIT(A) deleted the addition, stating that the free gift scheme was in place, and the purchases from M/s. Ratna Enterprises were genuine. The CIT(A) found that the payments were made through account payee cheques and that the AO did not establish any sham transactions or relationship between the parties. However, upon appeal, it was noted that the assessee did not rebut the AO's findings effectively. The Tribunal found that the CIT(A) ignored critical facts, such as the seriatim issuance of bills and the identical handwriting on cheques and pay-in-slips. The Tribunal reversed the CIT(A)'s decision, restoring the AO's order and allowing the Revenue's appeal. 2. Deletion of Addition Made by Treating the Expenditure as Sale Promotion on a Protective Basis The Revenue's second appeal concerned the deletion of an addition made by treating the expenditure as sale promotion on a protective basis. The AO observed that the assessee had shown an expenditure of Rs.2,31,247/- under sales promotion but had also debited Rs.46,09,004/- under "Advertisement & Publicity," which was considered as sale promotion expenditure. Consequently, 20% of this amount was charged to fringe benefit tax. The CIT(A) deleted this addition, reasoning that the primary addition of Rs.46,09,004/- had been deleted in the quantum appeal. Consequently, the fringe benefit tax charge would not survive. The CIT(A) also deleted the consequential additions on account of interest. The Tribunal, however, noted that since the primary addition of Rs.46,09,004/- was restored by its order, the deletion of the fringe benefit tax addition by the CIT(A) would not survive. The Tribunal set aside the CIT(A)'s order and remanded the matter back to the CIT(A) to decide the issue on merits, considering the Tribunal's order in the quantum appeal and providing adequate opportunity to the assessee. Conclusion The Tribunal allowed the Revenue's appeal in ITA No.207(Asr)/2013, restoring the AO's addition of Rs.46,09,004/- as inadmissible expenditure. In ITA No.306(Asr)/2013, the Tribunal set aside the CIT(A)'s order and remanded the matter for a fresh decision on merits, considering the Tribunal's findings in the quantum appeal. The appeal of the Revenue in ITA No.207(Asr)/2013 was allowed, and the appeal in ITA No.306(Asr)/2013 was allowed for statistical purposes.
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