GKM SHIPPING & LOGISTICS PRIVATE LIMITED,MUMBAI vs. INCOME TAX OFFICER WARD 2(1)(4),MUMBAI, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “H (SMC)” MUMBAI

BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND MS KAVITHA RAJAGOPAL (JUDICIAL MEMBER)

ITA No. 1377/MUM/2026 Assessment Year: 2015-16

GKM Shipping & Logistics Income Tax Officer Ward 2(1)(4), Private Limited, C/O.Rank Aayakar Bhawan, M.K. Road, Shipping 214, Mahinder Vs. Mumbai- 400 020, Maharashtra. Chambers WT Patil Marg, Opp Dukes Company Chembur East Mumbai 400071 Maharashtra. PAN NO. AAACB 2721 L Appellant Respondent

: Shri Anish Shah, CA Assessee by : Shri Pravin Salunkhe (SR DR) Revenue by

Date of Hearing : 13/05/2026 Date of pronouncement : 29/06/2026 ORDER PER OM PRAKASH KANT, AM

This appeal by the Assessee is directed against order dated 17.11.2025, passed by the learned Additional Commissioner of Income-tax (Appeals) – 3, Bangalore, (in short, “the Ld. CIT(A)”), for the Assessment Year 2015–16, raising following grounds:

“1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) [CIT(A)] erred in confirming the action of the

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learned Assessing Officer in treating the alleged difference in sales as unexplained cash credit and sustaining the addition of Rs. 5,30,683/- under section 68 of the Income-tax Act, 1961, even though there is no suppression of sales of whatsoever nature and all sales effected by the appellant stand fully and correctly recorded in the books of account. 2. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) [CIT(A)] erred in confirming the action of the learned Assessing Officer in making an addition of Rs. 1,39,505/- by invoking the provisions of section 40A (3) of the Income-tax Act, 1961, while ignoring the explanation, supporting evidence, and the applicability of exceptions to section 40A (3) as duly submitted by the appellant. 3. a) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) [CIT(A)] erred in confirming the action of the learned Assessing Officer in disallowing a sum of Rs. 11,30,600/- without appreciating that the air cargo bills represented expenses incurred on behalf of clients and in sustaining the said disallowance under section 37(1) of the Income- tax Act, 1961, without properly appreciating the facts, explanations, and evidences placed on record. b) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) [CIT(A)] erred in confirming disallowance of cash payments made towards loading and unloading labour charges incurred at Air Cargo and Sea Cargo complexes, without appreciating that such services are carried out by TRADE union labour who, as a matter of prevailing industry practice, accept payment only in cash, and that the assessee had no discretion in the mode of payment. The Learned CIT(A) erred in disregarding that the cash payments were duly accounted for, made within statutory limits, incurred out of compelling business exigencies, and hence allowable under the Act. c) On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in confirming disallowance of expenditure of Rs 11,30,600/- without appreciating that the payments were made in ordinary course of & for the purpose of business to Airport Authority of India (AAI), a government- controlled authority, and other statutory agencies, and without undertaking independent verification of the same. 4. a) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) [CIT(A)] has erred in confirming the action of the learned Assessing Officer in disallowing a sum of Rs. 16,18,616/- without appreciating that the transportation expenses represented expenses incurred on behalf of clients and in sustaining the said disallowance under section 37(1) of the Income-tax Act, 1961, without properly appreciating the facts of the case and the explanations and evidences placed on record by the appellant.

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b) On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in confirming the disallowance of transportation charges amounting to 16,18,616, incurred for local movement of cargo without appreciating that the said expenditure was wholly and exclusively incurred for the purposes of business and was well within accepted industry benchmarks for logistics and clearing operations. Out of this amount partly is by cheque and partly by cash. This amount represents around 1% of re-imbursement expenses for the whole year shown in relevant financial year 2014-2015. c) On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in ignoring that the payments were made to unorganized local transporters and small-scale operators under compelling business circumstances, that each payment was within the statutory limit prescribed for transporters under section 40A(3) applicable during the relevant year, and that the genuineness of the expenditure stands established as the corresponding revenue from cargo clearance has already been accepted by the Department; hence, the disallowance is unjust, excessive and improper. 5. On the facts and in the circumstances of the case and in law, Learned CIT(A) erred in passing the order without granting an opportunity of being heard violating the principal of natural justice.

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2.1 For the year under consideration, the assessee filed return of income on 30.09.2015 declaring total income at Rs. 8,63,600/-. The return was processed u/s 143(1) of the Income tax Act 1961 (in short ‘the Act’) and statutory notices were issued and served upon the assessee. 2.2 During the course of scrutiny proceeding, the Assessing Officer observed difference in the agency receipts appearing in the TDS details of Form No. 26AS and agency commission declared in the audited financial results. The Assessing Officer noted that in the From No. 26AS total receipts appearing was of Rs. 1,36,41,648 whereas agency commission reported in the profit and loss account was of Rs. 1,25,12,363 and thus there was a suppression of sales of Rs. 11,29,285. Accordingly, the Ld. Assessing Officer issued a show cause notice to the assessee. In response the assessee explained that the details of the agency commission was as shown in bills raised and entered in the books of account, however TDS deducted as per Form no 26AS might defer on account of TDS deducted by some parties on certain amount of reimbursement expenses paid by them and therefore the receipt shown under the Form No. 26AS include certain reimbursement expenses as well as agency charges, whereas in the books of accounts only agency charges have been credited. The ld Assessing Officer however examined the entire receipt shown in respect of the TDS certificates. In respect of the difference in the receipt declared in TDS details and in the audited

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financial related to M/s Bare Crops Science Limited, the ld. Assessing Officer accepted the contention of the assessee that tax was deducted in the current year whereas said income was reported in the subsequent assessment year. Similarly, ld. Assessing Officer accepted the explanation for difference in receipt of M/s Bare Crop Science for the amount of income credited in GKM consultancy. 2.3 But in respect of difference of receipt as per details of TDS and receipt as per financial result in respect of M/S Indofil Chemicals Industries, the assessee could not explain satisfactorily. The Assessing Officer after complete verification and reconciliation of the TDS credit as well as financial result noted that receipt amounting to Rs. 5,30,683 appearing in TDS certificates was not disclosed for the year under consideration. Accordingly, he added the same as taxable income of the Assessee. 3. Further, the Assessing Officer found difference of Rs. 55,961 in the confirmation of the account filed by party M/s. Sinochem India Pvt. Ltd. In response to notice u/s 133(6) of the Act, the amount of Rs. 1,20,90,532/- was reported by said party as sales of in the confirmation filed , whereas the assessee company only offered sales of Rs. 1,20,34,571/-. In response to show cause notice no objection was filed by the assessee. Accordingly , the ld AO made addition for said amount.

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07.04.2014 Cash Voucher 185 22,000 payment 11/04/2014 Cash Voucher 126 37,535 payment 10/06/2014 cash Voucher 1726 39,970 payment 99,905 Renovation new office 03/12/2014 Cash Voucher 6184 20000 payment 13/02/2015 Cash Voucher 7716 20000 payment

4.1 The ld AO asked the assessee to justify whether cash payment is in violation of provision 40A(3) of the Act. The Assessee submitted that said payments were made to either the airport or sea port authority after banking hours and part of the payments was made to Carpenter etc. during shifting of the office towards repair and maintenance. But the ld. Assessing Officer rejected the contention of the assessee as same was not in compliance with the provisions of the Act along with Rule 6 of DD of Income-tax Rules, 1962.

4.2 Further the Assessing Officer observed that assessee made expenditure of Rs. 12,30,505 for Air Cargo Charges and Rs. 16,18,616/- for transport charges. According to Assessing Officer all the expenses incurred in respect of the clients have been reimbursement by the said parties and therefore there was no

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liability on the part of the assessee to incur such charges. Accordingly, the Assessing Officer disallowed the said sums observing as under:

“7.1 During the year under consideration the assessee has claimed major expenditure under the head Air cargo Charges of Rs 12,30,505/- and Transportation charges of Rs 16,18,6167- in the profit and loss account. It is submitted that during the year under consideration the company is engaged in the business of custom clearing which involves custom documentation, delivery of import & export cargo and billing of reimbursement and service agency charges. On going through the nature of business it is evident the expenditure on account of air cargo charges (Rs 12,30,505/-) and transportation charges (16,18,616/-) are the expense require to be incurred by assessee on behalf of clients. Each and every expenditure which is to be reimbursed by clients are not the expenditure of the assessee company and accordingly the assessee has made the accounts also. In this regard the assessee has already sübmitted that total sales from operations were to the tune of Rs 10,10,52,290/- and against the same. claimed reimbursement of expense of Rs 8,85,39,927/- and balance amount of Rs 1,25,12,363/ is being offered as income on account of consultancy charges. Therefore against this consultancy charges, the claim of Air cargo charges and transportation charges are found excessive and unnecessary rather it has to be raised/recovered from the clients in whose accounts the specific charges incurred under the head reimbursement of expenditure. In this regard the assessee was given show cause to the assessee vide order sheet noting dated 21.08.2017 and hearing fixed on 29.08.2017 The show cause issued to the assessee is as under: 1. "It is thumb rule of business, if someone would like to utilize the services of Air cargo, the client/ party thereof has to bear the cost. It is clearly evident from the above the assessee has paid Air cargo charges of Rs 12,30,505/-despite it is not required for the use of assessee. Please explain as to why the expense thereof should not be considered as excessive and disallowed u/s 37(1) of the Act. Please justify with evidences. 2. It has been further observed the assessee has claimed transportation charges of Rs 16,18,616/ in the profit and loss account. If the above stated rule (as discussed in query 3) follows. the transportation charges are 'not the expenditure of the assesee company rather it should be bear by the parties who are utilizing transport services. In view of these facts the expense are found to be unnecessary and excessive hence please explain as to why the same should not be disallowed u/s 37(1) of the Act." 7.2 In response to this the assessee vide its letter dated 29.08.2017 submitted as under:

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“In addition to the explanation given in previous letter we would like to inform you further that certain material is sent by air where we have to pay D.O charges to airlines. In this case airport authority (government agency) charges are paid from personal deposit of CHA(PD) normally from online payment A/c when NEFT system does not work. We deposit cash which is accepted up to Rs 49,000 through our clerk. Transport charges are generally borne by client, however, small local transport charges which are hired locally are borne by us." The assessee's contentions are not acceptable for the following reasons: i. The submission is insufficient and not up to the mark, as such almost all the above stated charges are to be borne by the clients only, assessee company is only conduit in organizing the transport, clearing goods from custom authorities after paying statutory dues on behalf of assessee. ii. Being agent the assesee has to be bear cost of specific expenditure like salary. conveyance and day to day related expenditure towards Staff, personnels employed for the work. iii. On perusal of the profit and loss account the assessee already claimed expenditure towards salary, staff welfare etc expenditure in the profit and loss account separately. Therefore claiming of these air cargo charges and transportation charges are unnecessary in its account. iv. On going through the bills of Air cargo and transportation it is observed the assessee also mentioned the name of the client on these bills which clearly establish that the assessee company was incurring these expenditure on behalf of these clients. 7.3 In view of the above stated facts the expenditure incurred on account of Air cargo charges (Rs 12,30, 505-99,905 disallowed u/s 40A(3)) 11,30,600 and transportation charges Rs 16,18,616/- are found to be unrelated to the business activity and unnecessary claim in the profit and loss account to suppress the profit of the company hence the same are being disallowed within the meaning of section 37(1) of the Income tax Act 1961.Penalty proceedings u/s 271(1)(c) are being initiated separately for furnishing inaccurate particulars of income.”

4.3 In this manner, in the assessment was completed u/s 143(3) of the Act on 06.10.2017, and total income was assessed at Rs. 43,38,968/-.

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4.4 On further, appeal the learned CIT(A) sustained the most of the additions. Aggrieved, the assessee is in appeal before the Tribunal by way of grounds as reproduced above. 5. Before us, the learned counsel for the assessee filed a paper book containing pages 1-183. We have heard the rival submissions, perused the orders of the authorities below and carefully examined the material available on record.

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the fact remains that one of the group concerns of the Appellant namely GKM Consultancy did have some transaction with the impugned concern. Instead of providing the debit note from GKM Consultancy, the Appellant could have furnished the Form 26AS and bank account statement of GKM Consultancy showing similar transaction with Indofill which was alleged by the AO to have been carried out by the Appellant. In case the figure of the transaction in the books, Form 26AS and bank account statement of GKM Consultancy matched which those appearing in Form 26AS of the Appellant, the latter's explanation could have been considered as substantiated. However absence of any documentary proof, the Appellant's explanation with respect to its transaction with Indofil Chemical cannot be accepted. 5.1.5. Moreover, once the Appellant came to know that there was an error in so far as TDS deduction details were concerns, it should have made attempts to get the same corrected. The System allows for filing correction statement in case there is any mistake in the TDS return. No such attempt was made by the Appellant. This makes the contention of the Appellant with respect to its transaction with Indofill Chemicals even more suspicious.” 6.1 Before us, the learned counsel for the assessee submitted that the dispute essentially involves reconciliation of receipts appearing in Form No. 26AS vis-à-vis the income disclosed in the books of account and sought one final opportunity to place the relevant reconciliation statements and supporting documents on record.

6.2 Having regard to the facts and circumstances of the case, we find merit in the aforesaid request. The issue involved is essentially factual in nature and is capable of being resolved upon proper verification of the relevant records, including Form No. 26AS, books of account, TDS particulars and supporting documentary evidence. Since the reconciliation sought to be furnished by the assessee has not been examined in its entirety, we consider it appropriate, in the interest of substantial justice, to restore the matter to the file of the Assessing Officer. The Assessing Officer shall afford adequate

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opportunity to the assessee to furnish all relevant material and thereafter adjudicate the issue afresh in accordance with law by way of a speaking order. Accordingly, Ground No. 1 is allowed for statistical purposes.

7.2 Upon consideration of the entire factual matrix, we are of the view that the explanation offered by the assessee cannot be rejected merely on technical considerations. The material on record indicates that the payments were made under business exigencies associated with cargo clearance operations, where delay in payment

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could have adversely affected the conduct of business. In such extra ordinary circumstances, particularly, the Rules 6DD(j) provides that when payment are required to be made after the bank closing hours such payment becomes eligible for deduction. In such circumstances, the benefit of the exceptions contemplated under Rule 6DD of the Income-tax Rules, 1962 deserves due consideration.

7.3 In our considered opinion, the impugned payments fall within the realm of genuine business transactions undertaken under exceptional circumstances and, therefore, do not warrant disallowance under Section 40A(3) of the Act. We accordingly direct deletion of the addition of ₹1,39,505/-. Ground No. 2 is allowed.

Ground No. 3 pertains to the disallowance of ₹11,30,600/- 8. representing air cargo charges claimed by the assessee. The principal basis for the disallowance by the lower authorities is that the expenditure was allegedly incurred on behalf of clients and, being reimbursable in nature, could not be regarded as expenditure incurred wholly and exclusively for the purpose of the assessee’s business. The learned CIT(A) upheld the said addition observing as under: “5.4.1 The Appellant is in the business of clearing and forwarding services from customs. The Appellant company has claimed air cargo expense of Rs. 12,30,505/-and transportation

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expense of Rs. 16,18,636/-. The AO is of opinion that the same should be borne by the clients and not by the Appellant. Based on this belief he has made the disallowance stating as under: 1. The submission is insufficient and not up to the mark, as such almost all the above stated charges are to be borne by the clients only, assessee company is only conduit in organizing the transport, clearing goods from custom authorities after paying statutory dues on behalf of assessee. ii. Being agent the assessee has to be bear cost of specific expenditure like salary. conveyance and day to day related expenditure towards Staff, personnels employed for the work. iii. On perusal of the profit and loss account the assessee already claimed expenditure towards salary, staff welfare etc expenditure in the profit and loss account separately. Therefore claiming of these air cargo charges and transportation charges are unnecessary in its account. iv. On going through the bills of Air cargo and transportation it is observed the assessee also mentioned the name of the client on these bills which clearly establish that the assessee company was incurring these expenditure on behalf of these clients. 5.4.2. The Appellant has contested the same in this appeal stating as under:

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We did handle the cargo we did incur expenditure on transportation. This is our service.

Further we want to state that certain material is sent by air where we have to pay D.O. charges to airlines and Airport Authority (Government Agency) charges are paid from personal deposit of CHA (PD) normally from online payment a/c when NEFT system does not work.

These are incurred for the cargo belonging to customers. However, we have considered these expenses in charging our customers and our business receipts are inclusive. These are not disallowable. The learned assessing officer has disallowed the same by coming to the conclusion that they are for customers and hence not allowable which is done by ignoring that they are collected from customer and credit appears in our Profit and Loss Account. (refer page 7) Transportation charges are generally borne by client however small local transport charges which are hiredlocally are bonrne by the appellant.

5.4.3. The Appellant vide hearing notice dated 27/06/2025 was asked to furnish the following as under:

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Please furnish necessary documentary evidence for air cargo and transport charges claimed during the year. Do not upload ledger and journal account. The Appellant in response to the same has submitted as under: 4. Regarding transportation bills all payments made to local small transporters who operates from Airport and Nhavasheva sea port under various unions who carry goods locally against cash payments / cash memo. We don't operates long distance transports. These are very old data and it will take some time to compile all the details. We request you to grant time of 15 days. 5.4.4. Even after the lapse of more than three months, the Appellant has failed to submit the details called for but has only submitted the details of ledger account of the Air cargo and transportation expense. Further on perusal of the Appellant auditor report it is seen that the said report highlights the operations of the Appellant company as clearing and forwarding services. The relevant excerpt of the auditor report is reproduced hereinunder: ‘’’’’ 5.4.5. Further the Appellant in its written submission has also accepted the fact the transportation charges are borne by the client only, however small local transportation charges are borne by the

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Appellant. On perusel of the P&L of the Appellant, it is seen that during the year under consideration the Appellant has declared total revenue from operations of Rs. 10.10 Cr out of which Rs 8.85 Cr are reimbursement from the clients. As a result, the Appellant's commission or profit is to the tune of Rs. 1.25 Cr out of which the Appellant has claimed air cargo and transportation expenses of Rs. 28.46 lakhs for which no documentary proof has been furnished. In absence of any proof of having incurred the said expenses, the AO has right invoked the provisions of section 37(1) of the Act. 5.4.6. Requirement of section 37 is that the expenditure should be wholly and exclusively laid out and expended for the purpose of business. Merely because the Appellant claims the same would not show that the expenditure was wholly and fully for the purpose of business. This contention was rightly rejected by the Assessing Officer, as nature and object of the outgoing has to be also examined. Word 'wholly' refers to quantum of expenditure and word 'exclusively' refers to motive, object and purpose of the expenditure. Personal expenses or money spend for private purpose is not deductible. The Appellant has failed the business expediency test. Further, whether the expenditure was incurred wholly and fully for the purpose of business has to be established and proven by the Appellant. These facts are within the exclusive knowledge of the Appellant and therefore he is under an obligation to place all facts and circumstances before the authorities. In the present case, the

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Appellant did not produce any material and documents to show that the expenditure under the aforesaid heads was incurred wholly and exclusively for the purpose of business. 5.4.7. In the case of CIT v. Calcutta Agency Ltd. (1951) 19 ITR 191 (SC), the Hon'ble Supreme Court has held that the onus of providing necessary facts in Order to avail the deduction under Section 37(1) is on the assessee. If, therefore, the assessee fails to establish the facts necessary to support his claim for deduction under Section 37(1), the claim for deduction of expenditure is not admissible. Further in the case of I.H. Sugar Factory & oil Mils (Pvt.) Ltd. v. CIT (1980) 125 ITR, 293 (SC) the Hon'ble Supreme Court has held that where an assessee claims a deduction the onus is on him to bring all material facts on record to substantiate his claim. The assessee did not furnish or produce any evidence as to what was the expenditure and why it was incurred. The assessee has thus failed to qualify the first test of Section 37(1) of the Income-tax Act, 1961. Mere claiming that the expenses were incurred through bank and evidence of payment is available with bank did not itself make the expenditure allowable in the case of assessee as something more is required to allow the deduction U/s 37(1) of the Income-tax Act, 1961. In the case of CIT v. Chandravilas Hotel (1987) 164 ITR 102 (Guj), it was held by the Hon'ble Gujarat High Court that mere production of vouchers in support of the claim for deduction of expenditure would

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not prove the claim made by the assessee. It has duty to prove payment especially when the ITO doubts the genuineness thereof. 5.4.8. It prima facie appears that the Appellant did not want to produce such bill before the Appellate authority knowing that the expenses incurred under these heads are of non-business nature. In the case of Assam Pesticides & Agro Chemicals v. CIT (1977) 277 ITR 846 (Gau), it was held that it cannot be said that even if the taxpayer does not produce any evidence in support of the claim for allowance, the ITO himself independently is to collect evidence and decide that the allowance claimed is baseless having regard to the legitimate business needs of the assessee. It is for the taxpayer to establish by evidence that a particular allowance is justified. The law does not prescribe any quantitative test to find out whether the onus in a particular case has been duly discharged. A decision of the final fact-finding authority is conclusive and binding. 5.4.9. As already discussed, and also settled by Hon'ble Apex Court that the onus is on the assessee to bring all material facts on record to substantiate his claim. In the case of Jaipur Electro (P) Ltd. v. CIT (1996) 134 CTR (Raj) 237, it was held that the doctrine that the businessman is the best judge of business expediency does not affect the right and duty of the assessing authority to know whether it was incurred for business purpose and not for other extraneous considerations.

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5.4.10. It is thus, the view of the various Courts that to be an allowable expenditure under Section 37(1), the money paid out or away must be: (a) paid out wholly and exclusively for the purpose of business or profession; and further (b) must not be; (i) capital expenditure; (ii) personal expense; or (iii) an allowance of the character described in section 30 to 36 and section 80. In the case of CIT v. Shahibag entrepreneurs (P) Ltd. (1995) 215 ITR 810 (Guj), it was held that it cannot be disputed that before an assessee can become entitled to an allowance under Section 37(1), he must satisfy the Department of the purpose for which the amount is spend. In view of the facts mentioned above, the expenses claimed by Appellant under the heads business expenditure are not allowable as such as claimed by Appellant. It is not in dispute that for running every business, these natures of expenses are incurred and allowable. However, considering the facts of the Appellant's case and also material produced during the Appellate Proceedings, 5.4.11. The Appellant has contended that the above expenditure was incurred in the interest of the business. However, the nature and purpose of the said expenditure and the manner in which the said expenditure is relatable to the business of the Appellant has not been established with documentary proof. Further, the Appellant could not

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furnish necessary supporting documents to substantiate its claim of it being incurred for the purpose of the business of the Appellant. Thus, the AO has rightly disallowed the total expenses of transport and air cargo in absence of any verification possible with respect to the said expenses. The findings of the Assessing Officer affirmed in the assessment Order are factual. Nothing has been produced during the appellate proceedings to show that these findings are perverse and contrary evidence and material on record. 5.4.12. In this regard, reliance is placed on the decision of ITAT Cuttack in the case of Sunrise Jewellers, Rayagada vs Ito, Rayagada Ward, Rayagada on 12 March, 2021 ITA No. 91/CTK/2018 wherein the Hon'ble Tribunal has held as under: "during the course of assessment proceedings the assessee did not give details as required by the AO in respect of certain expenses as quoted (supra) and for want of sufficient evidence/vouchers. The AO disallowed the lumpsum of the total expenditure claimed. The contention of the Id. AR is not acceptable that the adhoc disallowance cannot be made. During the course of assessment proceedings the AO specifically asked to the assessee for production of the evidence/bills and vouchers but the assessee did not produce any vouchers. He has rightly confirmed 10% of the total expenditure. The AO was unable to verify the actual expenses incurred by the assessee

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with proper supporting vouchers. Therefore, the ground raised by the assessee is rejected. 5.4.13. High Court of Karnataka in the case of Tata Coffee Ltd. [2020] 121 taxmann.com 139 (Karnataka) has held that where assessee claimed deduction on account of miscellaneous expenditure under section 37(1) but failed to produce relevant evidence to justify said expenditure, Assessing Officer was justified in making adhoc disallowance of same. 5.4.14. The Hon'ble Delhi High Court in the case of Sandeep Marwah [2019] 101 taxmann.com 123 (Delhi)/[2019] 260 Taxman 231 has held as under: Where assessee claimed deduction in respect of business promotion expenses, in view of fact that assessee did not produce material and documents to show that said expenditure was incurred for business purpose, mere fact that payments were made through credit card would not be sufficient to prove their genuineness and, thus revenue authorities were justified in making disallowance of 50 per cent of expenses claimed as deduction 5.4.15. ITAT Cuttack in the case of Rajendra Kumar Sahoo vs. ACIT, Circle-1(1), Cuttack [2021] 123 taxmann.com 131 (Cuttack - Trib.)[16- 03-2020] has held that where assessee debited certain amount towards business promotion expenses and travelling expenses, since assessee inserted these entries in books of account merely with

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support of some internal vouchers and no complete bills and vouchers were produced by him, Assessing Officer was justified in disallowing 25 per cent of such expenditures.”

8.1 Having carefully considered the rival contentions, we find that the controversy requires a detailed factual examination. The crucial issue requiring determination is whether the impugned expenditure was merely incurred as a pass-through or reimbursable expense recoverable from clients, or whether the assessee, in the course of carrying on its business as a clearing and forwarding agent, was required to incur such expenditure as a matter of commercial necessity and business expediency. It is also necessary to verify whether corresponding reimbursement invoices were raised upon the concerned clients; whether such reimbursements were actually received; and, if not received, whether the ultimate liability came to be borne by the assessee itself in the course of carrying on its business operations.

8.2 In the absence of complete factual verification on these aspects, we are of the considered view that the matter requires fresh examination at the level of the Assessing Officer. We, therefore, set aside the findings of the authorities below on this issue and restore the matter to the file of the Assessing Officer with a direction to examine all relevant documents, invoices, reimbursement records and supporting evidence that may be

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furnished by the assessee and thereafter decide the issue afresh in accordance with law. The ground no. 3 of the appeal of the assessee is accordingly allowed for statistical purpose.

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Sd/- Sd/- (KAVITHA RAJAGOPAL) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 29/06/2026 Kunal Kr, 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