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TMI Blog2023 (8) TMI 913X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant was debatable and required investigation and arguments on facts and in law. Thus, it cannot be said that allowance of deduction of sales promotion expenses by the AO resulting in a mistake apparent on record. Therefore, absent mistake apparent on record, the action of the AO fell beyond the scope of Section 154. Accordingly, order passed by the AO u/s 154 is quashed. Appeal of assessee allowed. - Shri Prashant Maharishi, Accountant Member And Shri Rahul Chaudhary, Judicial Member For the Appellant/Assessee : Shri Nishant Thakkar, Shri Hiten Chande For the Respondent/Department : Ms. Vranda U. Matkari ORDER PER RAHUL CHAUDHARY, JUDICIAL MEMBER: 1. The present appeal is directed against Assessment Order dated, 29/01/2016, passed under Section 143(3) read with Section 144C(13) of the Income Tax Act, 1961 [hereinafter referred to as the Act ] for the Assessment Year 2011-12, as per directions issued by Dispute Resolution Panel-2, Mumbai- [hereinafter referred to as the DRP ] under Section 144C(5) of the Act. 2. The Appellant has raised 28 grounds of appeal directed against the rectification order passed by the Assessing Officer under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d after taking into consideration the aforesaid decision of the Tribunal allowed deduction for sales promotion expenses and did not make disallowance in respect of the same. 5. Subsequently, notices dated 18/03/2020, 23/12/2020 and 28/12/2020 and were issued by the Assessing Officer seeking to rectify the Assessment Order, dated 29/01/2016 in exercise of power of rectification of mistake apparent on record in terms of Section 154 of the Act. In response, the Appellant filed reply dated 26/03/2020 and 30/12/2020 challenging the proposed rectification on the ground of jurisdiction as well the proposed addition of sales promotion expenses on merits. However, the Assessing Officer was not convinced and passed rectification order dated 31/03/2021, inter alia, making disallowance of sales promotion expenses of INR 11,30,18,798/- 6. Being aggrieved by the order dated 31/03/2021, passed under Section 154 of the Act rectifying the Final Assessment Order, dated 29/01/2016, passed under Section 144C(1) read with Section 143(3) of the Act. 7. When the appeal was taken up for hearing the Learned Authorised Representative for Appellant submitted that there was a delay in filing the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9] was also provided to the Assessing Officer vide letter dated 11/03/2015. Thus, there was no error in the order passed by the Assessing Officer let alone error apparent on record. He further submitted that the Circular No 5 of 2012, was issued by the Central Board of Direct Taxes (CBDT) was issued on 01/08/2012, and therefore, the same did not apply to the Assessment Year 2011-12 which ended on 31/03/2011. The judgment of the Hon ble Supreme Court in the case of Apex Laboratories Pvt. Ltd. Vs. Deputy Commissioner of Income Tax, LTU: [2022] 442 ITR 1 (SC)[22-02-2022] came much later on 22/02/2022. He further submitted that the Tribunal had, vide order, dated 26/12/2016, passed in the case of the Appellant for the Assessment Years 2004-05 (ITA No. 6681 6454/Mum/2013), 2005-06 (ITA No. 6682 6455/Mum/2013 (and 2007-08 (ITA No. 6558 6456/Mum/2013), after taking into consideration Circular No. 5 of 2012 issued by CBDT and the decision of Mumbai Bench of the Tribunal in the case of Syncom Formulations (ITA No. 6429 6428/Mum/2012, dated 23/12/2015) deleted the disallowance of sales promotion expenses made by the Assessing Officer. Thus, as on the date on which the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. He further submitted that the Circular No. 5 of 2012 dated 01/08/2012, being clarificatory in nature, was effective from the date of implementation of the aforesaid Regulation, i.e., from 14/12/2009. The Assessing Officer failed to follow the aforesaid circular which was binding upon the Assessing Officer while passing the Assessment Order dated 29/01/2016 resulting in a mistake apparent on record which was rectified by the Assessing Officer in exercise of powers under Section 154 read with Section 116 of the Act. In order to support his contentions the Ld. Departmental Representative also placed reliance of the decision of the Hon ble Supreme Court in the case of Apex Laboratories Private Limited (supra). On the basis of the aforesaid, the Ld. Departmental Representative submitted that the Assessing Officer was within jurisdiction to pass rectification order in terms of Section 154 read with Section 116 of the Act. 11. We have considered the rival submissions and perused the material on record including the judicial precedents cited by both the sides during the course of hearing. 12. Section 154 of the Act provides that with a view to rectifying any mistake apparent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23/12/2015) wherein it was held that the Circular No. 5 of 2012 issued by CBDT would apply prospectively with effect from 01/08/2012. Thus, the issue was clearly debatable on law. The Assessing Officer did not have the benefit of the judgment of Hon ble Supreme Court in the case of Apex Laboratories Pvt. Ltd. (supra) at the time of exercising jurisdiction as the same came much later on 22/02/2022. Further, in our view, even on facts, the issue required investigation. We note that the Assessing Officer has, in paragraph 4-5 of the Rectification Order, recorded as under: 4. It is also clarified that the sum equivalent to value of freebees enjoyed by the aforesaid medical practitioner or professional associations is also taxable as business income or income from other sources as the case may be depending on the facts of each case. It is noticed from the perusal of P L a/c, a break-up of the sales promotion expenses has been reproduced which is as follows: Sr. No. Particulars of expenses Amounting (In INR) Broad Nature of Expenses 1 Rent/Op Lease Mfg Faculty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 Congress Subscript 2,15,51,520.44 Field trainings and medical congress 14 Documentation Book (Promotional Expenses) 1,22,99,827.00 Expenses incurred on medical books Total 11,30,18,798.22 5. Nevertheless, it is evident from the breakup of sales promotion expenses as tabulated above that by the narration of expenses, the expenses are in the nature of freebies to medical practitioners and are in the violation of the provisions of Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 which need to be disallowed. 14. On perusal of column Broad Nature of Expenses of the table forming part of Paragraph 4 of the Rectification Order (reproduced hereinabove), it was not apparent the all the sales promotion expenses were incurred on freebies. To the contrary, the broad nature of expenses given in the table suggested that the sales promotion expenses were not in the nature of freebies such as Market Res ..... X X X X Extracts X X X X X X X X Extracts X X X X
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