SURESH AUTO DEAL ,MUMBAI vs. INCOME TAX OFFICER WARD 3(1), KALYAN

3.3 Ld. AO doubted the evidences furnished by way of delivery challans and purchase invoices submitted by the assessee and held that the amount of Rs. 46,94,812/- claimed as sales promotion expenditure is bogus and added the same to the assessee’s income. Assessment was accordingly completed u/s. 143(3) r.w.s. 147 r.w.s. 144B at total income of Rs. 7,63,67,431/-.

3.4 Aggrieved, the assessee preferred an appeal before ld. CIT(A). The appeal was dismissed by ld. CIT(A) with the following observations:

“5.3.4 In this case, as per information shared by the CGST authorities indicate that M/s. Advance Computers and Mobiles India P Itd. (GSTIN No. 27AAMCA525A1ZZ). was the entity which engaged in issuing / generating / providing fake / bogus invoices for passing of fraudulent input tax credit without supply of goods. The ultimate beneficiary have availed not only the bogus input credit but also claimed bogus expenditure and bogus sales resulting suppression of income and routing of funds in a fraudulent way. It is clearly established that M/s. Advance Computers and Mobiles India P Itd. was only issued fake bills and not any goods. During the course of present proceedings also, the appellant failed to furnish the details called for by the AO viz. model Number of the cell phone, company name of the mobile, number of pieces purchases, list of the persons to whom the same were distributed being sales promotion etc. The appellant has not furnished any verifiable documentary evidence in this regard. In the appellate proceedings, burden of proof lies on the appellant to prove that facts and findings of the AO are incorrect. Rather than pointing out the observations of the Assessing officer, the appellant would have filed the details in support of its claim that the expenditure incurred for business promotion. Since the appellant did not come forward with any supporting evidences/information/ confirmation / list of customers, the submissions of the appellant cannot be accepted. Under the circumstances, in view of the facts of the case, the addition of Rs. 46,94,812/- is upheld and all the grounds raised in this appeal are dismissed.” The assessee is in appeal against the order of ld. CIT(A) before the Tribunal.

“1.Copy of Audited Balance Sheet, Profit and Loss Statement, Acknowledgement of Income of return filed, Form 26AS and Computation of Total Income for A.Y. 2018-19. 2.Ledger confirmation from Advanced Computers and Mobiles India Private Limited for the F.Y. 2017-18. 3. Invoices of purchase of mobile handsets along with the lorry receipts 4. Bank statement highlighting the payment made for the purchase of Mobile Handsets 5 .Scheme document declaring the Festive Scheme.

6. Copy of order dated 02.03.2021 passed u/s 143(3) r.w.s.143(3A) & 143(3B) of the Income-tax Act, 1961 of sister concern M/s Suresh Wheels for A.Y. 2018-19” 4.2 It has been further argued that the assessee has achieved nearly three fold increase in sales during this year as compared to the earlier year and has shown a turnover of Rs. 3,29,91,36,150/-. As against this, sales promotion expenses at Rs. 81,06,795/- have been claimed which included impugned purchase of mobile handsets. Relevant purchase invoices, delivery challans and bank statement evidencing payment through RTGS have been submitted by the assessee before the lower authorities as well.

4.3 Ld. AR submitted that these were distributed as incentives to the buyers under ‘GudiPadwa Sales Scheme’ in 2018. However, the ld. AO as well as ld. CIT(A) have ignored these evidences and made the disallowance based on information regarding the supplier from the CGST authorities.

No independent enquiry was conducted by the ld. AO and despite assessee’s request, 133(6) which was not issued to the supplier.

4.4 Ld. AR also placed reliance on several judicial pronouncements in support of the contention that the onus to prove that expenditure was incurred for the purpose of business has been discharged by the assessee and therefore, deduction u/s. 37 should be allowed.

6.2 Admittedly, the assessee submitted supporting documents in the form of purchase invoices, delivery challans, bank statements, ledger account confirmation by the supplier before ld. AO. Since these were being doubted by the ld. AO, a request was made by the assessee to issue a notice u/s. 133(6) to the supplier of mobile handsets for further verification. However, ld. AO did not issue the notice to the supplier nor made any further enquiry regarding actual distribution of the mobile handsets by the assessee. He relied upon the report received from CGST authorities to hold that the impugned transaction was bogus as the supplier was found to be an accommodation entry provider by the GST department.

6.3 After careful consideration of the facts and circumstances, we are of the considered view that the assessee had discharged the initial onus to establish the genuineness of the impugned transaction and the ld. AO failed to bring on record any evidence to the contrary to prove that the mobile handsets were not actually received and distributed for the purpose of sales promotion.

Thus the addition made by ld. AO on account of disallowance of sales promotion expenses to the extent of Rs. 46,94,812/- is not justified and is, accordingly, deleted.