TaxTMI 
TaxTMI 
2019 (6) TMI 914
X X X X Extracts X X X X
X X X X Extracts X X X X
....all sorts of cloth and other consumer goods, filed its return of income for AY 2013-14 on 23-09-2013 declaring total income of Rs. 1,62,35,960. The case has been selected for scrutiny and the assessment has been completed u/s 143(3) of the Act on 22- 03-2016 determining the total income at Rs. 2,97,93,880, where the AO has made additions towards disallowance of Rs. 1,19,72,812 in respect of expenditure incurred under the head, 'Deepavali expenses', donation, general charges, marketing management specialisation expenses, travelling expenses, business promotion and other expenses on the ground that there is substantial increase in expenditure, when compared to previous financial year for which no explanation has been offered by the assessee justifying the sudden surge in expenses. The relevant observation of the AO are as under:- "3, DISALLOWANCE OF UNREASONABLE INCREASE IN EXPENSES During the assessment proceedings it has also noticed that there was substantial increase in expenses, despite the fact that there was - (1) Nominal increase in the turnover of about 14%. However, the net profit is reported at 0.38% which in the preceding year was at 0.42%. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... etc. the products of the company are introduced to interstate customers of Bihar/Jharkand and M P too through music conferences/programmes of Artists etc. at one platform resulting sales promotion. The assessee has not furnished any evidence of having its claimed theses expenses and have also failed to prove that the expenses were increased the purpose of the business. Where there is any fall in the G. P. on the mere increase the business, then in such circumstances also, there is expected on increase in the total profit. Thus the achieving of the total profit is the approach of all the business men's. A mere general statement of the assessee cannot be treated as sufficient to explain & evidence the such unreasonable increase in the expenses. If it was so, there was no need to maintain record & evidence to explain & prove the claim of expenses, incomes etc. Here, the only course could have been adopted by the assessee was to furnish a factual explanation of increase in the expenses & produce the evidence in support of such expenses. However, despite having been allowed sufficient time and opportunity the assessee could not satisfactory explain & prov....
X X X X Extracts X X X X
X X X X Extracts X X X X
..../Zi__^ The expenditure on these item Deepawali expenses" Donations, General charges, Marketing Management specialization expenses, Travelling expenses, Business promotion (Gift), Business promotion (others), Muhurat exepenses & Shlvratri sangeet mahotsav expenses has increased to Rs. 21,14,47,62/- i. e. there is an absolute increase reported of amount of Rs. 13,30,31,25/-.The expenditure has increase by a percentage of 62 % of the last year. Such type of high i. e. 62% increases in these expenses is beyond normal course & not explained & is not understandable. Further, despite having been asked the assessee has not furnished any evidence to prove the correctness. reasonableness, of increase & neither the genuineness of these expenses have been proved, despite the fact that proving the genuineness of these:"expenses, would have been in the interest of the assessee itself. But still the assessee has chosen not to place evidence in support of claiming these expenses. Even producing the bill & voucher of expenditure in support of such increased expenses could not have helped until the assessee did not come forward to explain & justify the increase in the expenses as g....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ppellant. This ground of appeal is against the disallowance of Rs. 111972812/- out of expenses stating steep increase in the expenses. I have perused facts at the case and details and submissions filed by the appellant before the AO and puling the appellate proceedings, I find that at the first plea the appellant has developed wholesale business which was only 784.02 crores in the year 2011-12 has jumped to 387.94 crores in the year under consideration. The expenses on Diwali, travelling, business promotion, muhurat shivratri, sangeet mahotsav etc. are regular from year to year, there is increase in expenses in comparison to earlier years due to various reasons e.g. increase in value of items increase in value of work, parties customers etc. Looking at the nature of expenses and the observation of the AO, it will be difficult to sustain the entire .estimated disallowance because the AO has not brought any concrete material to make any such huge disallowance. Therefore, keeping in view of the nature of expenses and the facts and circumstances of the case it will be reasonable to restrict the disallowance to Rs. 11,97,281/- and therefore the AO is directed to delete the bala....