2016 (5) TMI 1536 - AT - Income Tax

Validity of assessment u/s 153A - Jurisdiction u/s.153A - HELD THAT - In the present case the assessment was framed consequent to search in the case of the assessee and duly recording panchanama on the basis of incriminating material. Hence we do not find any infirmity in framing the assessment u/s.153A of the Act and the same is confirmed. This ground of appeal of the assessee is dismissed. Disallowance of sales promotion expenses - agreed addition - AO disallowed it on the basis of consent given by the assessee to make that addition as the assessee has failed to produce the evidence in support of the claim of expenditure - HELD THAT - Revenue authorities have not doubted the incurring of expenditure for sales promotion. However they doubted the quantum of expenditure incurred. The business cannot be carried on without incurring sales promotion expenditure. The ld. AR pleaded before us that most of these payments were passed through banking channels. In such circumstances the disallowance of entire sales promotion expenditure is not proper. If the sale promotion expenditure are not supported by proper bills or vouchers or receipts and payments have been made only by cash then there are chances of inflating of such cash expenditure. Even if it is so the entire expenditure cannot be disallowed. Since there is possibility of inflating of cash expenditure disallowance of certain percentage of the expenditure to be made. From this point of view if the expenditure is not fully vouched the Assessing Officer is directed to disallow only 10% of the unsupported cash expenditure out of this and he shall not disallow 100% of such expenditure. Accordingly we remit this issue to the file of the AO for fresh consideration - Assessee s ground is allowed for statistical purposes. Levy of interest u/s.234A and 234B - HELD THAT - The interest under section 234A is chargeable from the date of expiry of the notice period given under section 153A to the date of completing the assessment under section 143(3) r.w.s. 153A of the Act as held by the Tribunal in the case of ACIT v. VN. Devadoss 2013 (9) TMI 400 - ITAT CHENNAI . The interest under section 234B is to be levied only on the additional tax levied on the enhanced income determined under section 143(3) r.w.s. 153A of the Act. Therefore the period of charging of interest should be from the date of determination of income under section 143(1) or 143(3) to the determination of enhanced income under section 143(3) r.w.s. 153A of the Act.

Summary

Issues Involved:
1. Jurisdiction under section 153A of the Act for framing assessments.
2. Disallowance of sales promotion expenses based on consent given by the assessee.
3. Levy of interest under sections 234A and 234B of the Act.

Jurisdiction under section 153A:
The appeal concerned the jurisdiction under section 153A of the Act for framing assessments for the assessment years 2010-11 to 2013-14. The Assessing Officer completed the assessment under section 143(3) r.w.s. 153A of the Act, making disallowances and additions based on incriminating material seized during a search conducted at the office premises of the company. The company objected to the assumption of jurisdiction by the Assessing Officer due to the absence of any incriminating material seized. However, both the Commissioner of Income-tax (Appeals) and the Tribunal confirmed the jurisdiction under section 153A of the Act, as the assessment was framed consequent to a search and incriminating material. The Tribunal dismissed the ground of appeal challenging the jurisdiction under section 153A.

Disallowance of Sales Promotion Expenses:
The next issue revolved around the disallowance of sales promotion expenses in the assessment years based on an agreed addition by the assessee. The Assessing Officer disallowed these expenses as the assessee failed to produce evidence to support the claim of expenditure. The Tribunal noted that the consent given by the assessee or authorized representative cannot justify the addition, as held in previous judgments. The Tribunal allowed the assessee's plea to produce evidence supporting the business promotion expenses before the Assessing Officer, directing a re-examination of the issue and disallowing only 10% of unsupported cash expenditure, remitting the issue back to the AO for fresh consideration.

Levy of Interest under sections 234A and 234B:
The final issue concerned the levy of interest under sections 234A and 234B of the Act. The Tribunal clarified that interest under section 234A is chargeable from the expiry of the notice period under section 153A to the completion of the assessment under section 143(3) r.w.s. 153A. Additionally, interest under section 234B is to be levied only on the additional tax on the enhanced income determined under section 143(3) r.w.s. 153A. The Tribunal partly allowed the appeals of the assessee for statistical purposes.

In conclusion, the Tribunal upheld the jurisdiction under section 153A for framing assessments, allowed the assessee to produce evidence for sales promotion expenses, and clarified the levy of interest under sections 234A and 234B of the Act. The appeals were partly allowed for statistical purposes, emphasizing the importance of following legal procedures and principles in tax assessments.