MAHINDRA AND MAHINDRA FINANCIAL SERVICES LIMITED ,MUMBAI vs. INCOME TAX DEPARTMENT , MUMBAI

Per Kavitha Rajagopal, J M:

These captioned appeals filed by the assessee, challenging the order of the learned Commissioner of Income Tax (Appeals) Delhi (‘ld. CIT(A)’ for short), National
Faceless Appeal Centre (‘NFAC’ for short) passed u/s.250 of the Income Tax Act, 1961
(‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2017-18. 2. As the facts are identical, we hereby pass a consolidated order by taking ITA No.
5543/Mum/2025 for A.Y. 2017-18 as the lead case.
ITA No. 5543/Mum/2025 for A.Y. 2017-18
3. The assessee has raised the following grounds of appeal:

ITA No. 5543 & 5548/Mum/2025 (A.Y. 2017-18)
Mahindra & Mahindra Financial Services Ltd.

The learned CIT(A), on the facts and circumstances of the case and in law, has erred in not adjudicating the matter on merits in relation to the addition of INR 165.92 crores made under section 68 of the Act by the learned AO, in respect of cash deposits made by Appellant during the demonetization period by treating the same as unexplained on the basis that the amount of cash deposit reported by various banks on the e-filing web portal
(INR 659.31 crores) did not match with the amount of cash deposit reported by the Appellant in its audited financial statements (INR 825. 24 crores), despite the fact that accepting cash is in the normal course of business of the Appellant and reconciliation between the two amounts along with appropriate explanations establishing the identity, creditworthiness, and genuineness of the borrowers were provided to the learned AD and the learned CIT(A)

Without prejudice to the above, the learned CIT(A) has erred in upholding the applicability of taxrate of 60% and surcharge of 25% thereon under section 1158BE of the Act on the additions for cash deposit under section 68 of the Act instead of tax rate of 30% prevailing during the demonetisation period.

The learned CIT(A) erred in law and on facts in upholding the disallowance of the deduction claimed under section 80G of the Act, in respect of donations made by the Appellant under its Corporate Social Responsibility (CSR) obligations, despite the fact that the donations were made to eligible and approved institutions and are otherwise allowable under section 80G of the Act.

The learned CIT(A), on the facts and circumstances of the case and in law, erred in confirming the consequential levy of interest under section 2348 of the Act.

Each of the grounds of appeal referred to above is separate and may kindly be considered independent of each other.

ITA No. 5543 & 5548/Mum/2025 (A.Y. 2017-18)
Mahindra & Mahindra Financial Services Ltd.

1052,73,86,870/- and the same was processed u/s. 143(1) of the Act. The assessee’s case was selected for scrutiny assessment and notices u/s. 143(2) and 142(1) were issued and served upon the assessee. The learned Assessing Officer ('ld. A.O.' for short) had passed the assessment order u/s. 143(3) of the Act dated 28.12.2019, determining total income at Rs. 1249,74,86,870/- after making addition of Rs. 165,92,00,000/- towards cash credits u/s. 68 of the Act, Disallowance of Rs. 14,56,00,000/- towards
CSR expenses and Disallowance of Rs. 16,53,00,000/- towards expenses incurred on non-convertible debentures.
5. Aggrieved the assessee was in appeal before the first appellate authority, who vide order dated 12.07.2025 had partly allowed the appeal of the assessee.
6. The assessee is in appeal before us, challenging the order of the ld. CIT(A).
7. We have heard the rival submissions and perused the materials available on record. It is observed that the assessee has challenged the assessment order before the first appellate authority who vide order dated 12.07.2025 had partly allowed the appeal filed by the assessee, where the issue of addition made u/s. 68 of the Act towards cash deposit made during the demonetization period has not been adjudicated by the ld. CIT(A) who had remanded this issue back to the file of ld. AO for de novo adjudication without getting into the merits of the case on the basis of the submission of the assessee.
Notably, the ld. CIT(A) is seized off the power to remand the issue to the ld. AO unless the assessment order is passed u/s. 144 of the Act being the best judgement assessment vide proviso to Section 251(1)(a) by Finance Act 2024, which allows the ld. CIT(A) to set aside an ex parte assessment made u/s. 144 of the Act for the purpose of de novo

ITA No. 5543 & 5548/Mum/2025 (A.Y. 2017-18)
Mahindra & Mahindra Financial Services Ltd.

assessment which was effective from 01.04.2024. It is also observed that the assessee is said to have furnished various documentary evidences before the ld. AO such as customer-wise statement of account, signed copy receipts, KYC document compliant with RBI norms, ledger summaries reconciling collections with deposits were filed before the lower authorities and the same was not dealt with neither by the ld. AO nor by the ld. CIT(A). The ld. CIT(A) having co-terminus power ought to have dealt with the same and then passed a speaking order but in the present case in hand, the ld. CIT(A) had merely remanded this issue to the file of ld. AO without getting into the merits of the case which in our view is not justifiable in whatsoever manner may be. The ld.
CIT(A) should have either directed the ld. AO to conduct further enquiries or sought for a remand report after having dealt with the documentary evidences and submissions filed by the assessee. In the absence of the same, we deem it fit to extend the assessee with one more opportunity to present its case along with documentary evidences for which we remand this issue back to the file of ld. Juri ictional AO for considering the issue in hand on the merits of the case. The ld. JAO is directed to peruse the submissions and documentary evidences filed by the assessee and shall also admit any additional evidences, if any, filed by the assessee, if required and to decide the issue on the merits and in accordance with law.
8. Ground no. 1 and 2 raised by the assessee is hereby allowed for statistical purpose.
9. Ground no. 3 pertains to deduction claimed u/s. 80G made under Corporate Social
Responsibility (CSR obligation). It is observed that the ld. AO has made disallowance of Rs. 14,56,00,000/- claimed by the assessee u/s. 80G towards donation made in the ITA No. 5543 & 5548/Mum/2025 (A.Y. 2017-18)
Mahindra & Mahindra Financial Services Ltd.

nature of CSR expenditure. The lower authorities have rejected the same holding that the CSR expenditure incurred by the assessee is a statutory obligation u/s. 135 of the Companies Act, 2013 which does not qualify as a voluntary contribution, thereby disallowing the same.
10. We have heard the rival submission and perused the materials available on record. It is now settled proposition of law by various decisions of the coordinate benches that the donation claimed u/s. 80G towards CSR expenditure is now allowable deduction which the assessee is entitled to. This proposition has also been reiterated by various decisions of the Coordinate Benches and by respectfully following the same, we hereby allow ground no. 3 raised by the assessee.
11. Ground no. 3 raised by the assessee is allowed.
12. Ground no. 4 raised by the assessee being consequential in nature requires no separate adjudication.
13. In the result, ground no. 1 and 2 are remanded back to the Juri ictional Assessing
Officer and Ground no. 3 is allowed.
14. In the result, the appeal filed by the assessee is hereby partly allowed for statistical purpose.
ITA No. 5548/Mum/2025; A.Y. 2017-18
15. The findings recorded in ITA No. 5543/Mum/2025 will apply mutatis mutandis to this appeal also.

ITA No. 5543 & 5548/Mum/2025 (A.Y. 2017-18)
Mahindra & Mahindra Financial Services Ltd.

Mumbai; Dated: 21.11.2025
Karishma J. Pawar, SR. PS
Karishma J. Pawar, SR. PS
Karishma J. Pawar, SR. PS
Karishma J. Pawar, SR. PS

Copy of the Order forwarded to:

(Dy./Asstt.