(a) Income‑tax‑‑‑

‑‑‑‑Appeal to Appellate Tribunal‑‑‑Grounds of appeal‑‑‑Issue raised by the assessee at the Appellate stage without having the same agitated through specific grounds of appeal would not arise out of the orders of both the Authorities below, same could not be raised before the Tribunal in appeal.

(b) Income‑tax‑‑

‑‑‑‑Profit and loss expenses‑‑‑Disallowance of‑‑‑History of the case‑‑ Relevance‑‑‑Admissibility of claim of 'expenses under each‑ head for every year is to be considered independently on the basis of facts available for that year‑‑‑Expense disallowed for one year for non -production of evidence in support of the claim could be allowed for another year when the claim is substantiated with the evidence‑‑ ‑History of the case may be relevant for estimating the quantum of an expense to be allowed in case the claim is not substantiated with any material but it cannot be a sole deciding factor for admissibility or non‑admissibility of the claimed expenses.

(c) Income‑tax‑‑‑

‑‑‑‑Profit and loss expenses‑‑‑Sale promotion and advertisement expenses‑‑‑Five per cent. disallowance of expenses by referring to history of the case without mentioning any other reason was confirmed by the First Appellate Authority‑‑‑Validity‑‑‑Such disallowance made and confirmed was not sustainable‑‑‑Case was remanded to the Assessing Officer for de novo consideration and decision on the issue of claim of expenses under the head sale promotion and advertisement expenses with the direction that the assessee be specifically confronted on the issue specifying the reasons for addition to be made if any out of the claim under said head and the opportunity to substantiate, its claim be also provided.

1998 PTD (Trib.) 1935; 1988 PTD (Trib..) 1027: 1972 SCMR 39 and 149 ITR 131 ref.

Syed Abrar Hussain Naqvi for Appellant.

Mrs. Iram Adnan, D.R. for Respondent.

Date of hearing: 13th October, 2001.

ORDER

1. The combined order, dated 1‑3‑1999 of CIT/WT .(Appeals) Zone‑I Lahore pertaining to assessment years 1994‑95 to 1997‑98 have been contested on the following sole .common ground through the departmental appeals for all the years under consideration:‑‑‑

"The learned CIT(A) has erred in confirming the disallowance made by the Assessing Officer out of the claim for sale promotion and advertisement expenses."

2. Learned representatives of both the parties are present and have been heard.

3. The assessee/appellant in this case is a Public Limited Company which derives income from manufacture and sale of Milk and Milk Products. Returns of income for the assessment years 1994‑95 to 1997‑98 were 'filed to declare following results:‑‑‑

4. The declared trading results tar all the years under consideration were accepted. However, additions under various heads of P&L account including the sale promotion and advertisement expenses made by the Assessing Officer while framing the assessment. Income for the years under consideration was assessed under section 62 of the Income Tax Ordinance, 1979 (hereinafter called ‑ the Ordinance in the following manner:‑‑

Assessment year

1994‑95(Rs.3,65,89,136) Net loss

1995‑96Rs.21,45,93,107 Net income

1996‑97Rs.19,88,92,920 Net income

1997‑98Rs.14,94,26,452 Net income

5. The grounds on which the assessments framed were challenged by the assessee before the first appellate authority including the disallowance made @ 5 % of the total claim of expense under the head sale promotion and advertisement expenses. The CIT (Appeals) while deciding the issue of addition made under the head sale promotion expenses confirmed the action of the Assessing Officer in the following manner:‑‑

"During the course of appeal proceedings Mr. Iqbal Chughtai admitted that the issue had been decided against the assessee by the Tribunal. For this‑ reason, the ITO's action is confirmed."

The sole issue raised by the assessee through the appeals for all the years under consideration is that the CIT(Appeals) has erred in confirming the disallowance made by the Assessing‑Officer out of the claim from sale promotion and advertisement expenses. '

6. Learned AR, however, at the time of hearing of appeal also objected the validity of amortization of sale promotion expenses over a period of 2 years. According to learned AR the amortization of any expense is not provided under any provision of Income Tax Ordinance or Rules. In support of his contention learned AR referred to the decision of the Tribunal reported as 1998 PTD (Trib.) 1935. It is also the contention of learned AR that a misconception of law of admission against the law was not to be perpetuated and it was the duty of the Court to apply correct law. To fortify his contention the learned AR cited the following case‑laws:‑‑

1988 PTD 1027 (Trib.), 1972 SCMR 39 and 149 ITR 131 (Kar H.C.)

7. Learned AR in his argument stated that the order dated of the Tribunal the Tribunal on this issue pertaining to assessment years 1987‑88, 1989‑90 and 1990‑91 were per incuriam. According to learned AR his contention was for the application of correct principle of law irrespective of the consequences i.e. whether it was beneficial for the assessee or not. It is the contention of learned AR that this being a legal issue could be raised at the appellate stage. Learned AR contended that the amortization of expense under the sale promotion and advertisement expenses done by the Assessing Officer during all the years under consideration was against the law and, therefore, was unjustified. Learned AR further contended that the CIT(Appeals) was not justified in confirming the action of the Assessing Officer whereby the addition under the head sale promotion and advertisement expenses was made @5 % of the Total claim. Learned AR admitted that Assessing Officer was correct in mentioning that ITAT confirmed the amortization of sale promotion and advertisement expenses over a period of two years vide order, dated 20‑3‑1994. However, it is the contention of learned AR that the Assessing Officer was not correct in interpreting the said order, dated 20‑3‑1994 of ITAT for the assessment years 1987‑88, 1989‑90 and 1990‑91 in the manner, that the disallowance under the head sale promotion and advertisement expenses was to be made @ 5 % of the total claim. According to learned A.R.' no such findings were given by the ITAT in its order, dated 20,3‑1994. Learned AR further contended that assessment is to be made separately and independently on the basis of facts and circumstances of each year and no addition particularly in the P&L account could be made merely on the basis of the history of the case. Learned AR also stated that for the assessment year 1992‑93 no addition under this head was made and being the later year than the assessment years 1990‑91 and 1991‑92 formed the latest history which should have been followed by the Assessing Officer. Learned AR further stated that in the case of the assessee/appellant the expenses claimed were fully verifiable and each and every payment was made through cheques.

8. Learned DR in her arguments defended the impugned order. According to the learned DR the issue regarding the amortization of sale promotion and advertisement expenses which was not the subject‑matter of the impugned order could not be raised at this stage. According to the learned DR no specific ground on the issue has been raised by the assessee in the grounds of appeal. Learned DR further contended that the learned AR of the assessee was not justified in raising this issue, before the Tribunal because the so‑called illegality, was never contested by the assessee before the Assessing Officer or the First Appellate Authority nor the assessee has sought any remedy through filing of rectification applications.

9. Arguments of learned representative of both the parties have been heard as well as the orders of the authorities below and the documents submitted by learned AR have also been perused. The perusal of assessment order reveal that as per statements of accounts filed alongwith the returns for all the years under consideration the assessee by itself deferred the 50% of sale promotion and advertisement expenses for the next year while working out the income. Further, no rectification application have admittedly been filed by' the assessee on the issue before the Assessing Officer, first appellate. authority or the ITAT. The issue raised by the learned AR of the assessee at this stage without having been agitated through specific grounds of appeal also does not arise out of the orders of both the authorities below. The assessee has been allowed the 1 /2 of the sale promotion and advertisement expenses as claimed by him. In our opinion the Assessing Officer was justified in allowing the amount of expenses keeping in view the claim of assessee. Under the circumstances of the case the issue could not be raised at this stage.

10. We also do not agree with the contention of learned AR that ITAT in its order, dated 20‑3‑1994 for the assessment years 1987‑88, 1989‑90 and 1990‑91 has nor confirmed the disallowance out of the P&L expenses claimed under, the head sale promotion and advertisement expenses. In our opinion the Tribunal in the said order has confirmed the order of the first appellate authority whereby firstly the disallowance but of the expenses claimed on account of sale promotion and advertisement expenses was restricted to 5% of the total claim and secondly the balance expenses , were amortized for 2 years. However, we agree to the contention of the learned AR that the admissibility of claim of expenses under each head for every year is to be considered independently on the basis of facts available for that year. An expense disallowed for one year for non‑production of evidence in support of the claim could be allowed for another year when the claim is substantiated with the evidence. History of the case may be relevant for estimating the quantum of an expense to be allowed in case the claim is not substantiated with any! material but it cannot be a sole deciding factor for admissibility or non admissibility of the claimed expenses. The perusal of the assessment orders reveal that disallowance @ 5 % of the total claim under the head sale promotion and advertisement expense for all the years under consideration was made by the Assessing Officer by merely referring to the history of the case without mentioning any other reason. In our opinion the findings of the first appellate authority whereby the disallowance made @ 5 % of total claim under the head for all the years under consideration, was confirmed are not sustainable. It is deemed fair to remand back he case to the Assessing Officer for de novo consideration and decision on the issue of claim of expenses under the head sale promotion and advertisement expenses with the direction that the assessee be specifically confronted on the issue specifying the reasons for addition to be made if any out of the claim under this head and the opportunity to substantiate its claim be also provided.

11. The appeals for all the 4 years under consideration stand disposed of in the manner as indicated above.

C.M.A./M.A.K./187/Tax (Trib.) Case remanded.