Facts
The appeal was against an order made by learned CIT(A7) on 13th September 2019. The Assessee was not satisfied with learned CIT(A7)’s decision in refusing the business promotion expenses worth Rupees 4.04 crores which were claimed by the Assessee. However, the appeal of the Assessee was restricted by a limitation of 363 days. The Assessee had this delay as initially, it was not against the order of learned CIT(A7). Later, the Assessee changed his mind when he was told that he would be liable for penal action under Section 271(1)(c) of the Income Tax Act 1961. Hence, the Assessee filed an appeal against the order.
The assessee’s company specializes in selling health-based wellness products through multi-level marketing. The Assessee is a group Company of Unicity Group, USA. During the order made on 13th September 2019, the A.O noticed that the Assessee had claimed rupees 4.04 crores as business promotional expenses. The Assessee stated that its business started picking up in 2013-2014. It had spent a lot of money on several promotional programs such as the Dubai Reward Trip, Bangkok Reward Trip and Goa Reward Trip. The A.O noticed that the Assessee did not have the necessary documents that prove that these expenses were used by the Assessee to improve the business. Hence, the A.O refused the claim of the Assessee.
Arguments Advanced
The Assessee stated the case of CIT Vs. Prakash B. Nichani wherein which the Assessee had filed an appeal against an order belatedly by 331 days ie. after the revision order was passed by the Commissioner under Section 263 of the Act due to which the Tribunal condoned the delay.
The learned D.R. strongly opposed the petition filed by the Assessee. The Ld D.R. stated that the Assessee did not provide any valid reason for the delay.
The learned A.R. stated that the Assessee had all the documents and had sent it through email but the A.O did not examine all of it before concluding the disallowance of expenses. The learned A.R. further added that it is not mandatory business promotion expenses would help to increase sales. As the Assessee would incur business promotion expenses with the intention of increasing sales. If there is no expectation for the Assessee then he would not be willing to incur these expenses.
The learned R. stated that the Assessee did not furnish all the necessary documents.
Court Observation
The Court observed the case of CIT Vs. Prakash B. Nichani in order to understand whether the reasons given by the Assessee were valid. The Court also observed the reasoning made by the learned A.R. as to why the businessman would be willing to incur expenses with the intention of increasing sales.
Decision
The Tribunal condoned the Assessee for the delay in filing the petition. The Tribunal also agreed with the reasoning of learned A.R. and stated that if business promotional expenses were made regardless of whether or not it is successful it will still be considered as an expense. Hence, the impugned order has been dismissed and there would be a fresh examination for this case.
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