2020 (8) TMI 303 - AT - Income Tax

Disallowance of Sales Promotion Expenses - appellant could not furnish necessary evidences in support of expenses incurred - HELD THAT - Except for the finding that assessee has not been able to produce the parties no cogent material has been brought by the assessing officer to make the disallowance. Assessee is engaged into the business of sales and marketing. No material is on record that these expenses are excessive or abnormal. The parties to whom the payments are made are well-established parties. It is beyond comprehension as to how the assessing officer's notes that he is not in possession of the correct address of Google India. The assessee has duly furnished the addresses. When there was no response, the assessing officer could very well have issued the summons under section 131. Without issuing any summon to the concerned parties the ignorance of all the documentary evidence for the payment and its genuineness is not at all sustainable. The disallowance is based upon surmise and conjecture. CIT(A) has not applied any mind. He has copied the order of the assessing officer and thereafter virtually dismissed the appeal for non-prosecution. Such an order is not at all legally sustainable. As regards the lack of evidence is concerned, when there are invoices and books of account, what else is required has not been spelt out by learned CIT(A). He has not at all referred that the AO was actually looking for the assessee to produce these parties. An appellate order showing such lack of application of mind is not sustainable. - Decided in favour of assessee.

Summary

Issues involved:
1. Disallowance of Sales Promotion Expenses by the CIT(A) for assessment year 2014-15.

Detailed Analysis:
1. The assessing officer disallowed Sales Promotion Expenses due to non-response from parties and lack of summon under section 131. Assessee submitted invoices with banking channel payments and sales tax registration numbers. No deficiency in evidence was pointed out by the assessing officer.
2. CIT(A) confirmed the disallowance citing lack of evidence and failure to produce parties. Assessee explained differences in expenses and change in management, but submissions were rejected.
3. The Tribunal found assessing officer's disallowance baseless as no evidence of excessive expenses or abnormality was presented. Parties were well-established, and addresses were provided. Failure to issue summons or consider documentary evidence rendered the disallowance unsustainable.
4. CIT(A) dismissed the appeal for non-prosecution without proper consideration, merely echoing the assessing officer's order. Lack of application of mind by CIT(A) was evident, making the order legally unsustainable.
5. The Tribunal set aside the orders of lower authorities and deleted the disallowance, finding them not sustainable. The appeal by the assessee was allowed, emphasizing the lack of evidence for disallowance and the failure of lower authorities to properly consider the case.