TaxTMI 
TaxTMI 
1994 (8) TMI 60
X X X X Extracts X X X X
X X X X Extracts X X X X
....hence, they are being disposed of by this common order. 2. Briefly stated, the first ground is that the learned CIT (Appeals) erred in upholding the validity of the reopening of the assessment under section 147(a) of the Income-tax Act, 1961 and, secondly, the CIT (Appeals) erred in holding that expenses which are complimentary and supplementary to advertisement are also covered by section 37(3A) of the Act. 3. Since the fate of the second ground would depend on the survival or otherwise of the first ground, we first take up to decide whether the IAC was justified in assuming jurisdiction under section 147(a) of the Act, or not. 4. Before going into the facts of the case, it would be pertinent to note that sub-section (3A) of secti....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... expenses which in his opinion should have been subjected to partial disallowance under section 37(3A), have escaped his attention due to lack of disclosure and hence called for the details of such expenses which the assessee readily furnished. The Assessing Officer observed that the account head styled as "Sales Promotion Expenses" did not find a place in the Profit & Loss Account and the expenses which hitherto were classified under that head were now scattered and classified into various other heads including the head "Miscellaneous Expenses". He further observed that the regrouping was done in such a manner as would render it difficult for any Assessing Officer exercising due diligence to discover the quantum of "sales promotion" expens....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the Assessing Officer, should have been disclosed separately, Sri Dastur contends that the assessee is not bound to give the break-up of these expenses either under any provision of law or under the prescribed form of return and would have furnished the details had it been asked for by the Assessing Officer. In other words, what the learned counsel contends is that since the assessee is not legally bound to disclose it and since the Assessing Officer did not ask for the details, it does not amount to a non-disclosure. 9. As for the necessity of doing away with the head "Sales Promotion Expenses" and regrouping of certain expenses, Sri Dastur contends that in any large company, generally it is an on-going process carried out in consul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntended that the assessee had been regularly filing the details of miscellaneous expenditure suo motu till assessment year 1978-79. It is only during assessment years 1979-80 and 1980-81, the assessee failed to file such details and that was with a view to avoid the provisions of section 37(3A) of the Act being attracted. Besides these, he mainly relied on the order of the learned CIT (Appeals) and pleaded that the reassessment proceedings are valid in law. 13. We had the opportunity of travelling through a number of judicial pronouncements along with both the learned counsels. However, we shall refer to them as we proceed to appreciate the rival arguments. 14. We take up the first argument of Sri S.E. Dastur mentioned at para 8 above....
X X X X Extracts X X X X
X X X X Extracts X X X X
....od the import of the notification and hence did not constitute omission or failure on the part of the assessee to disclose all material facts. 16. The next argument put forth on behalf of the assessee, as mentioned in para 9 above, is that it is not obligatory to furnish the details of Miscellaneous Expenses unless specifically asked for by the Assessing Officer. Under normal circumstances, we would have considered this to be a valid argument. But, in the instant case, the circumstances and the conduct of the assessee compel us to draw adverse inference. Up to assessment year 1978-79, the assessee used to furnish the break-up of miscellaneous expenses suo motu when section 37(3A) was not on the statute book. For the next two years during....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s, is not explained by the learned counsel in spite of a specific question put to him which was replied to by simply mentioning "as an ongoing process". Sales promotion expense Is an important item for any industry and more so for a consumer goods industry. When a high-profile company, as one in the instant case, manufacturing and selling a wide range of consumer goods, totally eliminate the head 'Sales Promotion Expenses', it ought to have disclosed this fact by way of a suitable note which would have been an important disclosure to the shareholders of the company as well as to the other users of the balance sheet. In the case of Tarachand Ghanshyamdas v. CIT [1983] 139 ITR 571 (Cal.), the assessee had disclosed two accounts at the time of....