TRIGAT LIFE SCIENCES PRIVATE LIMITED,LUCKNOW vs. DEPUTY COMMISSIONER OF INCOME TAX -6, LUCKNOW

The appellant craves leave to add, amend, alter or withdraw any ground of appeal or raise any new ground of appeal during the pendency of appeal.”

The facts of the case are, that the assessee filed a return of income for the assessment year 2016-17 declaring total income of Rs.27,04,340/-. The case was selected for limited scrutiny to examine, ‘large sales promotion expenses viz a viz gross receipts (Part A-P&L of ITR)’. Accordingly, the scrutiny of the case was taken up for this purpose. The ld. AO noted that the assessee company was involved in trading of pharmaceuticals in the State of Uttar Pradesh, it had drug licenses and got its medicines manufactured under license from approved drug and pharmaceutical manufactures, under its registered brand name. The ld. AO observing that the assessee had claimed large sales promotion expenses, asked the assessee to submit the details of the same justifying the said expenses. However, the assessee did not make any submission in this regard and the ld. AO therefore noted, that no documents were submitted by the assessee that could substantiate the volume and genuineness of sales promotion expenses, as claimed by the assessee in its ITR. Therefore, after considering the fact that certain amount of sales promotions expenses was necessary for business, the ld. AO for want of documentation, disallowed 50% of those expenses and made an addition of Rs. 71,88,348/- in that regard. 3. Aggrieved by this order, the assessee filed an appeal before the ld. CIT(A), Lucknow, which was subsequently transferred to the NFAC. During the course of appeal proceedings, the assessee filed certain fresh evidences in the form of supporting bills for sales promotions expenses, gift items, dinner at restaurant, gift given to Doctors and retail traders and other incentives given to large purchasers of medicines and prayed that the same may be admitted under Rule 46A. However, the Ld. CIT(A) found that the assessee had failed to substantiate the claim with valid reasons and failed to explain why these were not filed before the ld. AO, in spite of the fact that the reasonable and sufficient opportunity had been provided. He also A.Y. 2016-17 Trigat Life Sciences Private Limited observed that the Hon’ble Kerela High Court in the case of C. Unnikrishnan vs. Commissioner of Income-Tax (1998) 233 ITR 485 had observed, that where the material on record makes it clear that no attempt was made before the ld. AO or shows no regard to follow the requirement of Rule 46A, the additional evidence could not be admitted. Furthermore, he pointed out that the Hon’ble ITAT Delhi in the case of Mrs. A.Y. 2016-17 Trigat Life Sciences Private Limited as to how these specific expenses were admissible for deduction, in the light of recent court rulings. We would caution the assessee that the failure to make proper compliances with the ld. AO would imply that the assessee did not have the necessary evidences to prove the genuineness or admissibility of these expenditures. As the assessment has been restored to the file of the ld. AO for de novo assessment, the appeal of the assessee is held to be allowed for statistical purposes. 5. In the result, the appeal of the assessee is allowed for statistical purposes.