DERAJ ENTERPRISES PVT LTD,NASHIK vs. INOCME TAX OFFICER WARD-1(1), NASHIK, NASHIK

This appeal by the assessee arises out of the order dated 06-01- 2023 passed by the CIT(A) in National Faceless Appeal Centre, Delhi u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) in relation to the assessment year 2018-19.

The assessee is aggrieved by the confirmation of addition of Rs.25,87,143/- towards Sales Promotion Expenses.

Briefly stated, the facts of the case, are that the assessee furnished its return declaring income of Rs.9,05,140/-. During the course of assessment proceedings, the Assessing Officer (AO) observed that deduction of Rs.25,87,143/- was claimed towards Sales Promotion Expenses. On verification of the ledger details, it was observed that the assessee had paid the amount periodically to National India Billion Refinary HCA and Arihant Jewellers. On being called upon to submit the details, the assessee stated that it purchased Gold articles from the above parties for gifting. However, no further details of the persons to whom such gold items were distributed was furnished on the ground of “Confidentiality”. The AO made the addition, which came to be affirmed in the first appeal.

I have heard the ld. DR and gone through the relevant material on record. There is no appearance from the side of the assessee despite notice. I am, therefore, proceeding to dispose of the appeal ex parte qua the assessee.

Adverting to the facts of the case, it is seen that the assessee claimed deduction of Rs.25.87 lakh towards purchase of Gold articles. However, no detail of the recipients of such gold items was furnished by the assessee by stating “for the sake of confidentiality and oral non-disclosure agreement with the customers, we are unable to provide the details of Name and address of the parties to whom the gifts have been paid/given”. The same position prevailed before the ld. CIT(A) as well. It is clear from the above that the assessee did not furnish even the primary details of the recipients of the gold items and, as such, the commercial expediency remained to be proved. It is elementary that deduction can be allowed only on showing that the expenditure was incurred for the purpose of business. The assessee has not furnished any detail of recipients. The ld. DR is correct in apprehending that such gold items may have been utilised by the Directors for their personal use. In the absence of any detail of the recipients establishing link of the jewellery gifting with the business purpose, I am satisfied that the authorities were justified in not granting the deduction. I, therefore, affirm the view taken by the ld. CIT(A).

In the result, the appeal is dismissed. Order pronounced in the Open Court on 13th June, 2023.