INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Disallowance of Sales Promotion Expenses - No cogent material was brought by AO to make disallowance -

Assessee was engaged into the business of magazines subscription, online sales and direct marketing. AO made disallowance of sales promotion expenses on the ground that the parties to whom the payments have been made have not responded to his notice issued under section 133 and assessee was not able to produce the parties or provide the proper addresses of the parties. AO did not issue any summons under section 131 to these parties. No other cogent reason was given by AO except that assessee was not able to produce these parties. Assessee in this regard submitted the invoices. The payments were made through banking channels. Held: Except for the finding that assessee was not able to produce the parties no cogent material was brought by the AO to make the disallowance. No material was on record that these expenses were excessive or abnormal. Assessee had duly furnished the addresses. When there was no response, AO could very well have issued the summons under section 131. Without issuing any summon to the concerned parties the ignorance of all the documentary evidence for the payment and its genuineness was not at all sustainable. As regards the lack of evidence was concerned, when there were invoices and books of account, what else was required was not spelt out by CIT(A). He had not at all referred that AO was actually looking for assessee to produce these parties. Thus, disallowance was directed to be deleted.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2014-15

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