Genuineness of sales promotion fails where fake supplier bills and mismatched VAT records undermine the expenditure claim.

Sales promotion expenditure claimed for purchase and distribution of silver coins was disallowed where the supplier was found to be issuing fake bills and the supporting VAT records did not match the invoices produced by the assessee. The record showed inconsistencies in invoice numbers, pricing, supplier returns and recipient details, while the assessee could substantiate only part of the alleged distribution. On that evidence, the claim lacked reliable corroboration and the disputed portion was treated as not genuine on a preponderance of probabilities, so the disallowance sustained by the first appellate authority was upheld.

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Issues: Whether the disallowance sustained out of sales promotion expenses was justified where the assessee claimed purchase and distribution of silver coins supported by invoices and payment by cheque, but the supplier was found to be issuing fake bills and the invoice particulars and supporting VAT records did not match.

Analysis: The assessee's claim was tested against the surrounding materials, including the enquiry made with the VAT authority, the supplier's VAT returns, the invoice numbers, the pricing pattern, and the list of recipients of the alleged gifts. The record showed that the supplier was not traceable, was reported to be issuing fake bills, and had not reflected the full set of invoices in its VAT return. The invoice numbers produced by the assessee did not tally with those declared by the supplier, the claimed silver rates were inconsistent with market conditions, and the assessee could furnish details of only a part of the alleged recipients. On these facts, the claim of the full expenditure lacked reliable corroboration and the surrounding circumstances justified the inference that the disputed portion was not genuine.

Conclusion: The disallowance sustained by the first appellate authority was upheld and no further relief was allowed to the assessee.

Ratio Decidendi: Where the surrounding evidence shows that the supplier's bills are not reliable and the assessee fails to substantiate the genuineness of the expenditure with consistent documentary and third-party evidence, the claim may be disallowed on a preponderance of probabilities.

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