ITAT grants fresh Adjudication for Failure of AO to Examine Additional Evidences related to Disallowance of Sales Promotion Expenses [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) granted fresh adjudication for the failure of the Assessing Officer (AO) to examine the additional evidence relating to the disallowance of sales promotion expenses.

The assessee is a supplier of chemical and other pharmaceutical products. The Authorised Representative submitted that the assessing officer has disallowed the claim of sales promotion expenses under the erroneous impression that they have been incurred entirely on providing gifts to Doctors, which violates the Regulations issued by the Medical Council of India.

It was contended that most of the sales promotion expenses incurred by the assessee are distinct and general expenses relating to sales promotion and not related to the payment of doctors. Hence the Regulations of the Medical Council of India would not apply to those types of expenses.

It was further submitted that the assessee could not furnish break-up details relating to Sales promotion expenses in both the years before the tax authorities. She submitted that the assessee is now furnishing the details as additional evidence in both years. And accordingly, prayed that this additional evidence be admitted in the interest of natural justice and the issue may be decided by considering that additional evidence.

The Departmental Representative submitted that the additional evidence has not been examined by the AO.

The Two-member bench comprising of B.R. Baskaran (Accountant member) and Narendra Kumar Choudhry (Judicial member) held that the correct total income of the assessee for these two years could be computed only, if the additional evidence furnished by the assessee was considered.

The bench admitted the additional evidence. Therefore, the order of the Commissioner of Income Tax (Appeal) [CIT(A)] was set aside and was restored to the file of the AO for examining it afresh by duly considering the additional evidence furnished/that may be furnished by the assessee in both the years. After providing adequate opportunity of being heard, the AO may make appropriate decisions in accordance with the law.

To Read the full text of the Order CLICK HERE

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