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12. On scrutiny of the aforesaid details, the AO was of the view that the expenditure incurred by the assessee included expenditure on giving TV, Refrigerators, Microwave Oven and Personal Computers to various Doctors. Such kind of gifts, according to the AO, cannot be considered as having any nexus with the purpose of incurring the expenditure and lawful expenditure. The AO was also of the view that the turnover of the assessee had decreased despite incurring of the aforesaid expenditure. Considering all these aspects, the AO was of the view that a sum of Rs.1 crore out of the expenses claimed by the assessee should be disallowed and added a sum of Rs.1 Crore to the total income of the assessee. Accordingly, Rs. 1 crore was added to the income of the assessee.

9. Ld. Submission as to why no rejoinder on shop in 22.11.2016 14 CIT(A) shop was not filed.

These documents are available at page Nos. 1 to 177 of PB-3 filed by the assessee before the Tribunal.

30. The AO in his remand report had given the following submissions of shop-in-shop expenses:-

"ii) The assessee has explained that it expanded its business activities by Franchisee stores, shop-in shop arrangement and exclusive stores to distribute its products. The assessee has stated that this expansion activity commenced during F.Y 2003-04 and at present more than 90 exclusive stores and 800 shop-in shops exist across India. Therefore, considerable amount of expenditure would have been incurred in the initial years of expansion though without immediate effect on turnover i.e., in 1-2 years. The effects on increase in turnover would be seen only in long term perspective. As regards Franchisee credit notes, the assessee's explanation is that day to day expenses and reimbursement to the owner if a minimal return is not achieved by sales, gives rise to these expenses. The disallowance in the assessment order is based on the fact that such expenditure is not incurred in the previous year and has not resulted in increase in Turnover. The fact that the payment has been made to the franchisees, owners of shop-in-shop/owners of the premises where exclusive shops have been started has not been doubted, only that the exact nature of the reimbursement of expenses have not been spelt out. However, Agreements with the Franchisee's, owners of exclusive stores and owners of shop-in shop outlets have not been called for or verified. Moreover, in view of the assessee's explanation of ITA No.802 & 820/Bang/2017 & CO No.82Bang/2017 expansion, the turnover increase/decrease should have been compared with 3-4 preceding/succeeding years."

b. Franchisee expenses credit notes of Rs. 1,58,51,269 : The AO has disallowed this amount on the ground that there was no such expenditure in the earlier years and hence, entire expenditure incurred has been disallowed. The assessee had franchisee expenses reimbursement and franchisee credit notes. The AO has disallowed the entire credit notes issued to the franchisees as there was no increase in the turnover and there was no such expenditure in the earlier years. The appellant has however submitted that they have gone for substantial expansion of franchise stores across India. The appellant has submitted that due to this new method of selling the goods, during the year, they have incurred huge expenses. The appellant has also produced details of such expenses and along with proof of expenses and also copies of the agreements with the franchisee stores. In para 8A of the remand report, she has stated that the disallowance in the assessment order is based on the fact Act such expenditure is not incurred in the previous year and has not resulted increase in Turnover. The fact that the payment has been made to the franchisees, owners of shop-in-shop/ owners of the premises where exclusive shops have been started has not been doubted, only that the exact nature of the reimbursement of expenses have not been spelt out. However, Agreements with the Franchisee's, owners of exclusive stores and owners of shop-in shop outlets have not been called for or verified. Moreover, in view of the assessee's explanation of expansion, the turnover increase/decrease should have been compared with 3-4 preceding/succeeding years.