DEV MARKETING,ANDHERI WEST vs. DY COMMISSIONER OF INCOME TAX CIRCLE 24 1 MUMBAI, LALBAUG PAREL

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “D” MUMBAI

BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI ANIKESH BANERJEE (JUDICIAL MEMBER)

ITA No. 1048/MUM/2026 Assessment Year: 2023-24

Dev Marketing, Lower Ground Deputy Commissioner of Income Floor, Centre Square Building, Tax Circle – 24(1), Mumbai. SV Road Andheri (West) Vs. Mumbai – 400058. PAN NO. AALFD 2439 B Appellant Respondent

Assessee by : Shri Mandar Vaidya Revenue by : Shri Mahesh Londhe – SR DR.

: 05/08/2026 Date of Hearing Date of pronouncement : 10/08/2026 ORDER PER OM PRAKASH KANT, AM

This appeal by the Revenue is directed against order dated 27/11/2025, passed by the learned Commissioner of Income-Tax (Appeals)- National Faceless Appeal Centre, Delhi (in short, the learned CIT(A)) for Assessment Year 2023-24, raising following grounds:

“1. The Ld. CIT(A) fell in error of law in not appreciating that the details of the commission expenses, like TDS, returns of the recipients, amount of sales generated by the recipients etc, were produced before the Ld. AO and hence there was no justification for disallowing the commission expenses.

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Disallowance of Donation of Rs. 13,07,500:

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response to the query raised by the Assessing Officer, the assessee explained that out of the total donation of Rs.13,07,500/-, an amount of Rs.9,70,000/- had been donated to various Goshalas engaged in the care of cattle and an amount of Rs.72,540/- had been paid to Vidhya Vikas SHS Junior College towards the educational expenses of a student. In respect of the balance amount, the assessee did not furnish supporting evidence. The assessee further explained that the donations to the Goshalas were accompanied by display of business advertisement banners and that, under a bona fide misconception, the expenditure had been treated as business expenditure. In respect of the payment to the educational institution, it was submitted that the amount represented sponsorship towards the education of the child of an employee.

3.1 During the assessment proceedings, the assessee, while accepting that the amount had inadvertently been treated as business expenditure, requested that the same be considered for deduction under section 80G of the Act. The Assessing Officer rejected the request principally on the ground that no claim under section 80G had been made in the original return and that the assessee had not filed a revised return within the prescribed period. The Assessing Officer also questioned the eligibility of the payments and the supporting evidence furnished in respect thereof. He accordingly disallowed the entire amount of Rs.13,07,500/- and

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added the same to the income of the assessee. The relevant observation of the AO are reproduced as under:

Rejection of Claim of the Assessee

Upon careful consideration of the facts of the case, the reply submitted by the ase the reply assessee, and the provisions of the Income Tax Act, 1961, the claim of the assessee with respect to the donation amounting to 13.07,500 is hereby rejected, and the amount is disallowed as a business expenditure. The reasons for this disallowance and the consequent addition to the business income are detailed below: 1. Claim of Donation as Business Expenditure: The assessee has admitted in their reply that the amount of 13,07,500, claimed as a donation in the Profit and Loss Account, was incorrectly treated as a business expenditure due to an oversight. The assessee has further stated that this amount should have been ciaimed as a deduction under Section 80G of the income Tax Act, 1961, instead of being claimed as a business expense. However, it is pertinent to note that no such deduction under Section 80G was claimed in the original Income Tax Return (ITR) filed for the relevant assessment year (A.Y. 2023- 24). The claim of business expenditure, therefore, stands unsupported by the provisions of the Act, as donations to charitable institutions, including Goshalas, do not qualify as allowable business expenses under Section 37(1) of the Income Tax Act, 1961. Section 37(1) permits only those expenses that are wholly and exclusively incurred for the purposes of the business. The donations in question, even if made with the display of business advertisement banners, do not meet this criterion, as their primary purpose appears to charitable rather than commercial. 2. Payment of 72,460 as Student Fees: The assessee has ciarified that out of the total amount of 13,07,500, an amount of 72,460 was paid as sponsorship for the education of an employee's child, described as an "especially gifted ward." This payment, supported by receipts from Vidya Vikas SHS & JR College, has been categorized by the assessee as a donation. However, the receipts indicate that this amount represents fees paid for a student named Arjun, suggesting a personal expenditure rather than a business-related expense. Even if considered a sponsorship, such payments do not qualify as business expenditure under Section 37(1), as they lack a direct nexus with the assessee's business activities. Furthermore, the assessee's contention that this was a donation eligible for deduction under Section 80G is untenable, as no evidence has been provided to establish that the payment was made to an institution registered under Section 80G, and no such deduction was claimed in the ITR. 3. Request for Revision of IIR and Claim under Section 80G:- The assessee has requested permission to revise the ITR for A.Y. 2023-24 to claim the

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deduction under Section 80G and has submitted a revised computation of income along with self-assessment tax and interest. However, under the provisions of Section 139(5) of the Income Tax Act. 1961, a revised return can only be filed within the time limit specified therein, i.e., before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. As of the current date, March 23, 2025, the assessment proceedings for A.Y. 2023-24 are in progress, and the time limit for filing a revised return has lapsed (the end uf A.Y. 2023-24 being March 31, 2024), in the case of Gueize (india) Lid. v. CIT (2006) 157 Taxman 1 (SC), where the Supreme Court held that an assessee cannot make a fresh claim for deduction during the assessment proceedings if it was not included in the original return or revised return filed under Section 139(5) of the Act. As such the claim of the assessee to allow deduction u/s 80G is rejected. 4. Absence of Malafide Intention Not Relevant: The assessee has pleaded that the error in accounting the donations as business expenditure was unintentional and without malafide intention. While the absence of malafide intention is noted, It does not alter the legal position under the Income Tax Act. Allowability of an expense or deduction is determined strictly based on compliance with the statutory provisions, and not on the intent behind the claim. The assessee's misconception regarding the advertisement banners displayed at Goshalas does not suffice to qualify the donations as business expenditure. Conclusion:- In view of the above observations, the amount of 13,07,500 claimed as a donation in the Profit and Loss Account does not qualify as an allowable business expenditure under Section 37(1) of the the Income Tax Act, 1961. Furthermore, since no deduction under Section BüG was claimed in the ITR, the claim cannot be allowed under any other provision of the Act. Accordingly, the entire amount of 13,07,500 is disallowed and added back to the business income of the assessee for A.Y. 2023-24. Penalty proceeding u/s 270A of the Act is also initiated for underreporting of income in consequence of misreporting. Disallowance of Donation of Rs. 13,07,500” 3.2 Before the learned CIT(A), the assessee reiterated its claim for deduction under section 80G and relied upon the decision of the Hon'ble Bombay High Court in CIT v. Pruthvi Brokers and Shareholders Pvt. Ltd., 349 ITR 336 (Bom.), contending that the appellate authority was competent to entertain a fresh claim notwithstanding that the same had not been made in the return of

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income. The learned CIT(A), however, rejected the claim, observing, inter alia, that the assessee had not furnished supporting evidence in respect of the various additions/disallowances and had not filed an application under Rule 46A. He further held that the claim under section 80G had not been made in the original return and relied upon the decision of the Hon'ble Supreme Court in Goetze (India) Ltd. v. CIT, 284 ITR 323 (SC), as also other decisions, to sustain the disallowance. The relevant finding ld. CIT(A) is reproduced as under:

“ ix. TheAppellant assessee in its submissions states that, “…It is submitted that the assessee’s claim of deduction u/s. 80G of the Act, for an amount of Rs,13,07,500/- may kindly be considered, in the light of the decision of the Hon’ble Bombay High Court in Pruthvi Brokers & Shareholders Pvt. Ltd. 349 ITR 336 (Bom.) wherein the Hon’ble Bombay High Court held that the ratio in Goetze (supra) applies only to the proceedings before the AO and NOT before the Appellate Authorities. In this case, the Hon’ble Bombay High Court, after considering the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd v. CIT (supra), held that the appellate authority has the power to entertain any fresh claim, even though the assessee has not made such claim in the return of income. In view of this decision, the Ld. CIT(A) should have entertained the claim of the assessee. 3) In view of the above, it is prayed that the assessee’s claim of deduction u/s. 80G for an amount of Rs.13,07,500/- may kindly be considered….”. x. The appellant assessee has not filed any evidences w.r.t. the additions made by the Ld AO on account of donation paid, property tax paid, commission expenses, no evidences or documentary proofs have been submitted by the appellant before this Appellate authority. xi. Further, in a decision in the case of CIT v. Gold Leaf Capital Corporation Ltd. on 02.09.2011 (ITA No. 798 of 2009), the Hon’ble High Court of Delhi had held that, a negligent assessee should not be given too many opportunities just because that quantum of amount involved is high. The necessary course of action is to draw adverse inference; otherwise it would amount to giving premium to the assessee for his negligence. When the assessee is non-cooperative, it can naturally be

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safely concluded that the assessee did not want to adduce evidence as it would expose falsity and lack of genuineness xii. Further, the appellant has not filed an application under Rule 46A of Income Tax Rules, 1962 and also not filed any supporting Affidavit (notarised) etc., so as to show such proper justification as to why the appellant assessee was not able to file the requisite details against the AO’s queries during the assessment proceedings and or provide the said documents before the AO. The aforesaid mentioned circumstances show that, the appellant showed no interested in pursuing its assessment proceedings and has not produced such relevant documentary evidence in support of ground raised in this appeal. Moreover, the maxim ‘vigilantibus non-dormientibusjurasubvenunt’ i.e. the law assists those who are vigilant and not those who sleep over their right, is applicable in this case. xiii. Further, this Appellate authority has noted that, as the appellant has not filed its claim for deduction u/s. 80G of the Act for the donations made vide its original ITR u/s. 139(4) of the Income Tax Act and the appellant has also not filed any belated ITR either. The appellant claims deduction for the first time before the AO after the case of the assessee was selected for scrutiny. But then as per the discussions above, the assessee could have simply filed a return of income for this A.Y. 2023-24 and filed such claim towards such deduction u/s. 80G of the Act before the AO and which he failed to do so. The appellant has made the claim for deduction u/s. 80G of the Act before the AO for the first time without revising or filing such ROI and hence the claim is now in-admissible (reliance being placed by the AO on the Hon’ble Supreme Court Judgment in the case of GOETZE (INDIA) vs CIT[2006] 157 Taxman 1 (SC)/[2006] 284 ITR 323 (SC)/[2006] 204 CTR 182 (SC)). Further, the assessee even now has not shown filed any such appeal / request within the meaning of section 119(2)(b) of the Act before the Authority concerned (as prescribed under the Act) towards any such claim for deduction or such other relief sought. Thus, the excuse, if any is only ex post-facto claim and is found to be non- genuine. The said donation paid is also un-explained within the meaning of section 69C of the Act as no payment receipt /evidences have been filed before this Appellate authority. Thus, the addition/ disallowance made by the AO for the claimed donation paid, is found to be logical and correct. Further, it can be noted from the judicial principle as set-out vide the decision of the Hon. Delhi High Court in the case of Spl. Sidhartha Ltd. (345 ITR 223), wherein it was held that, it is trite that when a statute requires, a thing to be done in a certain manner, it shall be done in that manner alone and the Court would not expect its being done in some other manner. Hence, the ground of appeal no.- 1 is not allowed.”

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3.3 Before us, the learned counsel for the assessee submitted that the claim under section 80G was inadvertently omitted from the return and was specifically raised during the assessment proceedings. It was contended that the learned CIT(A), being an appellate authority, was competent to entertain the additional claim. Reliance was placed upon the decision of the Hon'ble Bombay High Court in Pruthvi Brokers and Shareholders Pvt. Ltd. (supra). The learned counsel further submitted that the necessary supporting material could be furnished and requested that the matter be restored to the file of the Assessing Officer for examination and verification of the assessee's eligibility for deduction under section 80G.

3.4. We have considered the rival submissions and perused the material available on record. It is not in dispute that the assessee had debited Rs.13,07,500/- as donation expenditure in its Profit and Loss Account, but had not claimed deduction under section 80G in the return of income. The assessee subsequently raised such claim during the assessment proceedings after the Assessing Officer proposed disallowance of the amount as business expenditure.

3.5 The Assessing Officer declined to entertain the claim essentially on the ground that it had not been made through a revised return. The learned CIT(A) also sustained the disallowance, substantially following the same reasoning. However, the legal position requires a

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distinction to be maintained between the jurisdiction of the Assessing Officer and that of the appellate authority.

3.6 The Hon'ble Supreme Court in Goetze (India) Ltd. v. CIT, 284 ITR 323 (SC), held that the Assessing Officer cannot entertain a claim for deduction otherwise than by way of a revised return under section 139(5) of the Act. The Hon'ble Supreme Court, however, expressly confined its decision to the power of the Assessing Officer and did not curtail the jurisdiction of the appellate authority to entertain a legitimate claim otherwise than by way of a revised return. The Hon'ble Bombay High Court, in CIT v. Pruthvi Brokers and Shareholders Pvt. Ltd., 349 ITR 336 (Bom.), has thereafter reiterated the principle that an appellate authority is not precluded from entertaining a fresh claim merely because the same was not made in the return of income.

3.7 In the light of the aforesaid legal position, we are of the considered view that the learned CIT(A) was not justified in rejecting the assessee's claim merely on the ground that the deduction under section 80G had not been claimed in the original return or by way of a revised return. The claim was required to be examined on its merits, subject to the assessee establishing that the conditions prescribed under section 80G were duly satisfied.

3.8 At the same time, the acceptance of the assessee's entitlement to raise the claim before the appellate authority does not dispense

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with the requirement of establishing the eligibility for deduction. The material available on record indicates that the Assessing Officer had raised questions regarding the nature of the payments and the evidence supporting the same, and the learned CIT(A) also recorded that the assessee had not furnished adequate documentary evidence in support of the claim.

3.9 In these circumstances, we consider it appropriate, in the interest of substantial justice, to set aside the finding of the learned CIT(A) on this issue and restore the matter to the file of the Assessing Officer for fresh examination. The Assessing Officer shall examine the assessee's claim for deduction of Rs.13,07,500/- under section 80G strictly in accordance with the statutory requirements and after affording the assessee reasonable opportunity to furnish the requisite evidence. Needless to say, the Assessing Officer shall decide the claim objectively and in accordance with law.

3.10 Ground No.4 of the assessee is accordingly allowed for statistical purposes.

Disallowance of commission expenditure

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derived commission income exclusively from the assessee and that several of them had not claimed corresponding expenditure in earning such income. The assessee furnished a list of the persons to whom commission was paid. The Assessing Officer, however, was of the view that the assessee had failed to furnish adequate documentary evidence demonstrating the actual services rendered by the recipients and the business nexus of the expenditure.

4.1 The Assessing Officer further questioned the genuineness of the commission expenditure on the ground that several recipients had declared the receipts under the head “Other Sources” or under presumptive provisions and had not shown corresponding expenditure. He also observed that the assessee had not produced invoices or other independent evidence identifying the services rendered by the respective recipients. The Assessing Officer further pointed out certain discrepancies between the self-prepared vouchers and the details furnished by the assessee regarding the rate of commission.

4.2 The Assessing Officer also took note of the fact that a substantial portion of the assessee's total sales was made to its sister concern, M/s TOP10, and, having regard to the relationship between the partners of the two entities, questioned the necessity and genuineness of commission in relation to such sales. He further observed that, in respect of the remaining sales also, the assessee had not furnished a transaction-wise or recipient-wise correlation

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demonstrating the services allegedly rendered and the sales attributable thereto. The relevant finding of the Assessing Officer is reproduced as under:-

Reasons of Rejection of Reply:- Upon reviewing the submissions made by the assessee in response to the show cause notice regarding the disallowance of commission expenses, it is evident that the claim lacks sufficient merit due to the following reasons. 1. commission recipients have derived income solely from the assessee and have no Lack of Evidence of Genuine Services Rendered. The fact that the other brokerage or commission receipts proves that these individuals are not engaged in any regular or independent brokerage activity. The declaration of income under "Other Sources or presumptive taxation by several recipients further corroborates that they are not rendering professional services in the ordinary course of business. The absence of expenses claimed by most recipients (e.g., conveyance, communication, or other operational costs) to eam this income is highly irregular for genuine commission agents, who would typically incur such costs. This raises serious doubts about the actual performance of services The contention that payments were made at a standard rate of 0.15% on sales does not inherently prove the genuineness of the services unless supported by evidence of specific tasks performed, such as client introductions, sales negotiations, or market efforts, which the failed to substantiate. 2. Reciprocal Income Insufficient Without Business Nexus: Your reliance on the declaration of income by recipients as proof of genuineness is misplaced. The mere fact that recipients have declared the commission as Income does not automatically validate the expenditure under Section 37(1) of the Income Tax Act, 1961, which requires expenses to be wholly and exclusively incurred for the purposes of business and supported by a clear business nexus. No evidence has been provided to demonstrate how these individuals contributed to your sales or business operations. 3. Incorrect Presentation of Facts: The recipient has not provided any invoices to the assessee to substantiate the transactions in question. Instead, the assessee has recorded entries in its books of accounts based on self-prepared vouchers, which lack authenticity and reliability. Upon scrutiny of these vouchers, it is evident that they fail to disclose critical details, such as the quantum of sales attributable to the respective

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commission agents. For instance, in certain vouchers pertaining to Chhaya D. Shah, Dishita Makwana, Sunita B. Shah, and Vatsal D. Shah, while the sales amounts are conspicuously absent, a commission rate of 0.10% is mentioned However, in the chart submitted with the assessee's reply, a higher commission rate of 0.15% has been claimed. This glaring discrepancy between the vouchers and the assessee's submission renders the claim inherently contradictory and raises serious doubts about its veracity. The absence of supporting documentation and the inconsistency in the reported commission rates undermine the credibility of the assessee's assertions, suggesting potential manipulation or fabrication of records, 4.Major Portion of Sales to Sister Concern:- As per the profit and loss account the assessee has reported total sales amounting to Rs. 480,76,09,065/-. Out of this, a substantial portion-Rs. 271,67,49,626/- relates to sales made to M/s TOP10 (PAN: AAHFT7567N), a sister concern of the assessee firm. The connection is evident from the fact that Shri Mahendra Devjibhai Gala, a partner in M/s TOP10, is the elder brother of Shri Dinesh Devjibhai Gala, a partner in the assessee firm. Given this close familial and business relationship, it is highly improbable that any genuine commission payments were made in respect of sales to M/s TOP10. Transactions with related parties, especially of such magnitude, cast significant doubt on the legitimacy of any claimed commission expenses, as they could be a mechanism to inflate costs or siphon funds. Furthermore, the remaining sales are purportedly made to other regular customers of the assessee firm. Even if it is hypothetically assumed that a commission was paid at the rate of 0.15% on these remaining sales, the corresponding sales value would amount to an additional Rs. 460 crore. However, the assessee has failed to furnish any specific details such as a breakdown of sales linked to individual commission agents or supporting evidence tying the commission to specific transactions. This lack of transparency and documentation further weakens the assessee's position and suggests that the claimed commission expenses may be unsubstantiated or fictitious.”

4.3 The learned CIT(A), however, did not record any specific or independent finding on the issue of commission expenditure. The assessee has submitted before us that it is in a position to furnish the requisite material to substantiate the services rendered by the respective recipients and has requested that the matter be restored to the file of the Assessing Officer for examination afresh.

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4.4 Having regard to the nature of the controversy and the fact that the learned CIT(A) has not adjudicated the issue by recording a specific finding, we consider it appropriate to restore the issue to the file of the Assessing Officer. The Assessing Officer shall examine the claim afresh after considering the documentary evidence furnished by the assessee in support of the actual services rendered, the business nexus of the expenditure, the identity of the recipients, the corresponding sales, payment details and such other material as may be relevant for determining the allowability of the commission expenditure under section 37(1) of the Act.

4.5 Needless to state, the assessee shall be afforded reasonable opportunity to substantiate its claim. The Assessing Officer shall thereafter pass a speaking order in accordance with law. We make it clear that we have not expressed any opinion on the merits of the claim of commission expenditure.

4.6 Ground No.1 of the assessee is accordingly allowed for statistical purposes.

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adjudicating the claim afresh pursuant to the directions contained herein.

Order pronounced in the open Court on 10/08/2026.

Sd/- Sd/- (ANIKESH BANERJEE) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 10/08/2026 M. Ranganath Vittal , Sr. P.S.

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.

BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai