Inability to produce evidence by Legal representative of assessee alone should not be a basis to decide allowability of expenses.
ABACUS Case Law Citation
ABCAUS 3366 (2020) (08) ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming disallowance under the head “Trade Promotion” Expenses.
The Assessment Order had been passed by the Assessing Officer (AO) under section 144 of the Income Tax, 1961 (The Act) because the legal representative of the late assessee could not make proper compliance.
Before the Tribunal, it was submitted that the assessee had already expired and the wife of the assessee had been brought on record as legal representative of the assessee but she was not aware about the total facts and she is unable to produce the required evidences.
It was further submitted that under these facts, the comparative figures of trade promotion expenses as percentage of Commission Income for earlier year and later year should be compared with the present year to decide the issue in dispute instead of inability of the L/R of the assessee to produce evidence because of the facts of the present case.
With the help of the comparison chart, it was submitted that although the percentage of expenditure in the present year was slightly higher but this should be considered that more expenditure was incurred in the present year to promote the business of which the advantage was expected to be received by the assessee in the subsequent year but because of the death of the assessee such advantage could not be received by the assessee but still there should be no disallowance in the present year because the expenditure was incurred for the purpose of the business.
The Tribunal observed that the CIT(A) had noted that the assessee had expired and on his demise, the business was totally closed because the deceased assessee did not have any children and only survivor was his wife who was not educated and has no knowledge about the business.
Inability of Legal representative to produce evidence no basis to decide allowability of expenses
The Tribunal opined that in the light of these facts, inability to produce necessary evidence by the L/R of the assessee alone should not be a basis to decide about the allowability of the expenses in question.
Comparability of percentage of expenses should play an important role
The Tribunal opined that the comparability of percentage of expenses in the Assessment Year in question with the expenses of the succeeding year should play an important role about allowability of the expenses in question because in the succeeding year the assessment was completed u/s 143 (3) and no disallowance was made.
The Tribunal held that confirming disallowance over and above the percentage of the Trade Promotion expenses in the succeeding year will meet the ends of justice as against 100 % disallowance made by the AO and confirmed by CIT(A).
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