TaxTMI 
TaxTMI 
2012 (9) TMI 405
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....hire charges were paid behind the appellant's bank, without disclosing the same to it or affording to it any opportunity to controvert or deal with the same; b) by relying upon enquiries conducted in respect of sampling and display of the goods dealt with by the appellant without disclosing the same to the appellant or affording it any opportunity to controvert or deal with the same; c) by not providing to the appellant copies of the reports relating to local enquires conducted in respect of the three concernes to whom car hire charges, printing charges and manpower hire charges were paid and without affording to the appellant an opportunity to cross-examine the persons from whom such enquiries were alleged to have been made. The appellant assessee filed return of income on 28.10.1994 in respect of assessment year 1994-95 showing a total income of Rs. 15,464,906/-. On perusal of the profit and loss account it was found that the appellant had debited a sum of Rs. 69,59,507/- towards advertisement and sale. In the assessment year 1993-94 the amount so debited was Rs. 14,19,197/- and in the assessment year 1992-93 was Rs. 2,03,507/-. In the course of scrutiny of such return, the as....
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....count payee cheque such the deductions as claimed ought to be allowed. With regard to the expenses relating to sampling and display of products, the appellant assessee claimed that the cigarettes were distributed through hawkers, sales representatives and that they have no record in respect of each individual shop. It is relevant to note that in the aforesaid reply the appellant assessee did not call upon the Assessing Officer to give a copy of the Inspector's Report or any other or further material. Nor did the assessee call upon the Assessing Officer to summon the individuals interrogated by the Inspector for cross-examination in the course of the assessment proceeding. The Assessing Officer in conclusion of its assessment by the assessment order dated 31.03.1997 disallowed the various deductions claimed by the assessee particularly deduction on account of expenses incurred through M/s. Grafic Circle, being expenses incurred for hiring of vehicles to the tune of Rs. 5,69,000/-, through M/s. Universal Printers to the tune of Rs. 15,56,658/- on account of expenses incurred for printing through M/s. Ma Tara Enterprises to the tune of Rs. 5,93,900/- on account of hiring manpower a....
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....ll as sampling and to produce all documents and evidence in support thereof. The learned accounting member, however, did not agree with the learned Judicial Member that there was violation of principles of natural justices in the assessment proceeding and was of the opinion that the assessee was duly confronted with the inspector's report by Assessing Officer in his letter dated 12.03.1997 and the assessee's response thereto was duly considered by the Assessing Officer before passing the assessment order. With regard to the expenses incurred for display and sampling it was the opinion of the accounting member that the assessee had not discharged its initial burden by adducing adequate and cogent materials in support of such claim for deduction and therefore the finding of the CIT (Appeals) in this regard was completely unjustified. The learned accounting member further held that in view of the failure of the assessee to discharge its initial onus regarding his claim towards expenses on account of display and sampling the disallowance of such expenditure could be made even without considering the inspector's report. In view of the difference between the learned members of the tr....
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....of his contention. Mr. Bandopadhyay, appearing on behalf of the department submitted that the appellant assessee had been given ample opportunity to rebut the materials collected in the course of enquiry against him and the contents of the inspector's report were substantially communicated to him by the letter dated 12.03.1997. The assessee did not ask for the inspector's report nor prayed for summoning any person for cross-examination in the course of the assessment proceedings and did not suffer any prejudice in that regard. Hence the assessee is precluded from raising such issue at the appellate stage. It was further submitted by Mr. Bandopadhyay that the burden lay on the assessee to establish the claim for deduction as held in 208 ITR 468 and mere payment through account payee cheques was not sufficient to discharge such onus. We have considered the submissions of the parties. The issue which falls for decision is primarily whether the assessment proceeding in the instant case was conducted in a fair manner so much so conforming to principles of natural justice. It is settled law that principles of natural justice cannot be construed in isolation from the factual matrix of....
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....sampling/display expenses have been genuinely incurred during the year from time to time, which we have already explained to you. These cigarettes were distributed through Hawkers, Sales Representatives. We have however not maintained the records, in respect of distribution for each individual shop." From the aforesaid correspondence, we have no doubt in our mind that the principles of natural justice have been substantially complied with in the instant case. The appellant assessee was duly communicated with the substance of the inspector's report, the identity of the persons who had been interrogated by the inspector and also repeatedly called upon to furnish necessary particulars of the shops through which the expenses on account of sampling and display were made. An adjournment was sought for to respond to the contents of the inspector's report which was duly granted. A perusal of the reply to the said letter dated 12.03.1997 makes it evident that the assessee did not feel prejudiced in any way in the manner of conduction of such proceeding and categorically indicated that it has submitted whatever materials were within their possession and control in support of their claim an....
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....has been made, we are of the view that no prejudice is caused to the appellant assessee. Such enquiries were made to ascertain the address of the said entities for serving notices upon them under Section 131 of the Income Tax Act. Repeated opportunities to the appellant assessee to disclose the identity of the said entities and/or to bring them before the Assessing Officer had yielded no result. Undoubtedly it was the initial burden of the assessee to establish the identity of such persons and/or to produce them to support its claim. The assessee having failed to do so the Assessing Officer had no alternative but to make enquiries in the bank accounts of those entities to establish their identities. However, such effort also proved futile inasmuch as neither any address was given in the said account opening forms nor there was no introducer to such account. In this backdrop it cannot be said that enquiries made by the inspector in respect of the bank accounts of those entities were in violation of principle of natural justice or caused any prejudiced to the assessee. We have already indicated the purpose of such enquiry was to issue notices under Section 131 of the Income Tax Act....