ALACRITY DEVELOPMENTS PRIVATE LIMITED ,BENGALURU vs. THE DEPUTY COMMISSIONER OF INCOME TAX , BENGALURU

IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER

ITA No.1012/Bang/2026 Assessment Year: 2018-19 Alacrity Development Pvt. Ltd., Vs. The Dy. Commissioner of No.138 Raheja Paramount Income Tax, 4th Level, Residency Road, Circle – 1(1)(1), Bengaluru – 560 025. Bengaluru. PAN – AAACD 7447 F APPELLANT RESPONDENT Assessee by : Ms. Nimashri K.A, Advocate Revenue by : Shri N Balusamy, JCIT (DR) Date of hearing : 06.07.2026 Date of Pronouncement : 21.07.2026 O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:

This appeal is filed by the assessee against the order passed by the ld. Commissioner of Income Tax (Appeals) [(CIT)] vide order dated 13/01/2026 for the Assessment Year 2018-19.

ITA No.1012/Bang/2026 Page 2 of 6 income declaring a loss of Rs. 35,25,626/- only. The assessee claimed business promotion expenses amounting to Rs. 67,85,478/-, comprising entertainment expenses of Rs. 5,62,873/-, food expenses of Rs. 6,97,349/- and expenses towards gifts to customers of Rs. 55,25,256/- only.

3.1 During the assessment proceedings, the AO called upon the assessee to substantiate the aforesaid expenditure. In response, the assessee submitted that the expenses were incurred for the purpose of its business and furnished certain sample bills and invoices in support of the expenditure. The AO observed that the assessee had failed to furnish complete supporting evidence and further doubted whether the expensive items purchased by the assessee were actually given as gifts to customers or were used for personal purposes in the guise of business promotion expenses. The AO also observed that giving such expensive gifts to customers was not a general practice in the line of business carried on by the assessee. Accordingly, the AO disallowed 70% of the total business promotion expenses amounting to Rs. 47,49,835/- and added the same to the total income of the assessee.

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ITA No.1012/Bang/2026 Page 3 of 6 that the assessee had maintained regular books of accounts and had furnished audited financial statements, tax audit report, ledger extracts and supporting documents before the AO. The assessee also contended that similar expenditure had been accepted by the Revenue in the preceding years and that the business promotion expenditure had contributed to a substantial increase in its revenue.

4.1 The Ld. CIT(A), however, was not convinced with the submissions of the assessee and confirmed the disallowance made by the AO. The Ld. CIT(A) observed that only selective evidence in the form of a few sample invoices had been furnished and that the assessee had failed to produce complete and verifiable documentary evidence in support of the entire expenditure claimed. The Ld. CIT(A) further observed that the assessee had failed to furnish complete details regarding the recipients of the gifts and establish the business nexus of the expenditure. Accordingly, the Ld. CIT(A) upheld the disallowance of Rs. 47,49,835/- made by the AO. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us.

4.2 The Ld. AR before us submitted that the AO had made an ad hoc disallowance of 70% of the business promotion expenses without pointing out any specific defect in the expenditure claimed. It was submitted that the assessee had maintained regular books of account which were duly audited and had furnished sample bills and invoices before the AO. The Ld. AR further submitted that the assessee was engaged in a relationship- driven real estate advisory business and the expenditure incurred on corporate gifts, hospitality and other business promotion activities was necessary for maintaining business relationships and generating revenue.

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ITA No.1012/Bang/2026 Page 4 of 6 The Ld. AR also filed an application seeking admission of additional evidence comprising further bills, invoices and other supporting documents relating to the expenditure claimed. It was submitted that the additional evidence was necessary for proper adjudication of the issue and, therefore, prayed for its admission and appropriate relief.

6.1 Before us, the assessee has filed an application seeking admission of additional evidence comprising further bills, invoices and other supporting documents relating to the expenditure under dispute. We find that these documents have a direct bearing on the issue under consideration and are necessary for proper adjudication of the dispute.

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ITA No.1012/Bang/2026 Page 5 of 6 We, therefore, deem it appropriate to admit the additional evidence in the interest of justice.

6.2 We further note that neither the notice issued by the AO u/s 142(1) of the Act calling for details in respect of the expenditure nor the submissions made by the assessee in response thereto have been placed before us. In the absence of these documents, it is not possible for us to verify the exact nature and extent of the details called for by the AO and the evidence actually furnished by the assessee during the assessment proceedings. Further, the additional evidence now placed before us was also not available before the AO for examination and verification. Therefore, we are unable to record a conclusive finding on the genuineness and allowability of the expenditure at this stage.

6.3 Considering the above facts and circumstances, we are of the view that the issue requires fresh examination by the AO in the light of the entire evidence available on record, including the additional evidence admitted by us. Accordingly, in the interest of justice and fair play, we set aside the order of the Ld. CIT(A) on this issue and restore the matter to the file of the AO for fresh adjudication. The AO is directed to examine the additional evidence furnished by the assessee along with the materials already available on record and verify the genuineness of the expenditure and its nexus with the business activities of the assessee. The assessee is also directed to furnish all necessary details and supporting documents and cooperate with the assessment proceedings. Needless to say, the AO shall provide a reasonable opportunity of being heard to the assessee and decide the issue afresh in accordance with law. Accordingly, Ground Nos. 2 to 8 raised by the assessee are allowed for statistical purposes.

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ITA No.1012/Bang/2026 Page 6 of 6 7. In the result, the appeal of assessee is allowed for statistical purposes.

Order pronounced in court on 21st day of July, 2026 Sd/- Sd/- (SANDEEP SINGH KARHAIL) (WASEEM AHMED) Judicial Member Accountant Member Bangalore Dated, 21st July, 2026 / vms / Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order * Asst. Registrar, ITAT, Bangalore

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