TaxTMI 
TaxTMI 
2015 (3) TMI 674
X X X X Extracts X X X X
X X X X Extracts X X X X
...., filed its return of income for Assessment Year 2008-09 on 30.9.2008 admitting income of Rs. 28,28,340. The case was selected for scrutiny and the assessment was completed under section 143(3) of the Income Tax Act, 1961 (in short 'the Act') vide order dt.31.12.2010 wherein the income of the assessee was determined at Rs. 3,14,12,608 as against returned income of Rs. 28,28,340 in view of the following additions / disallowances : (i) Unexplained income due to suppression of Gross Profit. Rs.1,15,17,562 (ii) Unexplained cash addition to partner's current accounts. Rs.50,00,000 (iii) Unexplained cash addition from C. Sekhar. Rs.10,00,000 (iv) Unexplained Credit Notes Rs.1,04,96,706 2.2 Aggrieved by the order....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tional activities on behalf of ITC which has not been debited to the P&L account as it has been reimbursed by way of credit note by M/s. ITC Ltd. 2.2 The ld. A.O. has grossly erred in adding the above as unexplained credit notes on the basis that the expenses are not genuine solely due to payments being made in cash. The ld. A.O. has failed to appreciate the fact that cash payment made are towards disbursement of sale promotional payments which would be in the range of Rs. 100 to Rs. 4000 per shop depending on the size of the retailer. All such retailers are small kirana shop owners who would not possess any bank accounts for the payments to be made in cheques. The nature of the assessee business is such that all payments would be requir....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d as an expenditure in the profit and loss account or while computing the income of the assessee for the relevant period. According to the learned Authorised Representative of the assessee, the cash payments made towards disbursement of sales promotion activity for freebies on-shop display rentals, etc., would be in the range of Rs. 100 to Rs. 4,000 depending on the size of the retailer and all such retailers would be small kirana / pan shop owners, who may not operate bank accounts for payments to be made by cheques. It is submitted that the said payments, made in cash by the assessee, are not in the nature of expenditure claimed in the profit and loss account, but are made by the assessee in the capacity of an agent of M/s. ITC Ltd., whic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Assessing Officer has not made any addition / disallowance on this issue. In the light of the above, the learned Authorised Representative of the assessee prayed that the addition / disallowance ofRs.1,09,96,706 on account of 50% of the value credit notes received from M/s. ITC Ltd., as being unexplained be deleted. 5.2 Per contra, the learned Departmental Representative supported the finding and action of the authorities below in making and confirming the disallowance of 50% of the value of credit notes as unexplained. 5.3.1 We have heard both parties and perused and carefully considered the material on record. There is no dispute with respect to the fact that the assessee distributes products of M/s. ITC Ltd. like cigarettes and pro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ctivity were fully vouched for and the details of claims made from M/s. ITC Ltd. for reimbursement thereof were always available for verification, but the Assessing Officer primarily made the disallowance due to paucity of time, since the assessment was getting barred by limitation. We find from the impugned order, that the learned CIT (Appeals) has just upheld the adhoc disallowance made by the Assessing Officer without any examination or cross verification. In this factual matrix, we are of the view that the authorities below have failed to fully and thoroughly examine the assessee's claim of the incurring of expenditure on sales promotion on behalf of M/s. ITC Ltd. and its reimbursement, due to paucity of time. We also find that ther....