Per M.K. Chaturvedi, JM -This appeal by the assessee is directed against .the order of the Deputy Commissioner of Income-tax, Special Range, Thane, passed under section 158BC of the Income-tax Act, 1961 (herein after referred to as ‘Act’) and pertains to the Block Period commencing from 1-4-1985 to 16-11-1995.

2. Briefly the facts: The assessee is a partnership firm. It is a member of Dayaramani Group of Ulhasnagar. It is engaged in the business of Indian made foreign liquor, beer, wines, etc. On 16-11-1995, search and seizure action under section 132 of the Act was conducted at the business premises of the assessee. Among other things, a ‘gift item register’ was found. It is shown under Sl. No. 19 of the Panchnama. Deposition under section 132(4) of the Act was recorded. There was no question in regard to Gift register. The register contained some entries for the period 1994 95. It was not complete. Certain presumptions were drawn by the Assessing Officer on the basis of that register and additions were made, in the block assessment for all the years.

3. At the assessment stage the assessee was required to give details of the ‘sales promotion expenses’. He was asked to produce the records regard- ing the distribution of ‘sales promotion items’. The assessee’s claim in regard to ‘sales promotion expenses’ was approximately 1 to 1.5% of sales. It also debited in the Profit & Loss Account Diwali expenses, advertisement expenses, commission on sales, P.P .Cork Scheme, rate difference, etc. The expenditure" claimed on sales promotion were found to be high as compared to other concerns dealing in the same line of business. The Assessing Officer considered the percentage of sales promotion expenses claimed by M/s. Tulsi Trading Corporation and M/s. Rama Wines. The Assessing Officer proceeded on the basis that the expenses claimed by the assessee under the head "Sales promotion" were high pitched. The onus of proving the factum of expenditure according to the Assessing Officer was on the assessee.

4. It was explained before the Assessing Officer that there was steep competition in the liquor trade. Manufacturing companies were not allowed to advertise their liquor products. The advertisements were through whole seller and agents. The assessee was dealing in less known brands. Purchases were said to be fully vouched and verifiable. The expenses were said to be incurred for boosting the sales. A comparative chart was produced to buttress this point. It was stated that sales got increased year after year, because of the sales promotion expenses.

5. The gift items were said to be given as per the business exigencies. The gift items were of varied nature. The Assessing Officer "recorded in his order that mere filing of list of persons from whom the sales promotion items were purchased and details of payment of the same will not be suffice to discharge the onus which lay on the assessee. He admitted the position that it is not possible to maintain 100% records for the distribution of sale promotion items. But the expenditure which are not fully verifiable should be reasonable and not exorbitant. Therefore, he made estimate of sales promotion expenses.

6. Dr. S. V. Pathak along with Sri M.P. Makhija, learned counsel for the assessee appeared before us. It was vehemently argued that the disallow-ance in the facts of the present case is beyond the ken of Chapter XIV-B of the Act. Our attention was invited on the various provisions laid down under Chapter XIV-B of the Act. It was stated that section 158BA deals with the assessment of "undisclosed income" as a result of search. The word "undisclosed income" is defined under section 158B (b) of the Act. ‘Sales promotion expenses’ once considered in the assessment, cannot be construed to be ‘the undisclosed income’ of the assessee under Chapter XIVB of the Act. Reference was made to the decision of the Delhi High Court rendered in the case of L.R. Gupta v. Union of India [1992] 194 ITR 32. The H