BASIL COMMODITIES PVT. LTD.,AHMEDABAD vs. THE DY.CIT, CIRCLE-1(1)(1), AHMEDABAD

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ITA 2146/AHD/2025Status: DisposedITAT Ahmedabad12 June 2026AY 2023-245 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the disallowance on commission expenses should be partly allowed as TDS was paid within the prescribed time and the AO did not consider the TDS returns. The disallowance of foreign travel expenses was upheld due to lack of established business nexus. The disallowance of business development expenses was allowed as the assessee provided details and similar expenses were allowed in the prior year.

What were the facts?

The assessee, engaged in trading, claimed commission, foreign travel, and business development expenses. The Assessing Officer disallowed a portion of commission expenses due to non-deduction of TDS, disallowed foreign travel expenses for lack of business nexus, and made an ad-hoc disallowance on business development expenses due to an increase compared to the previous year. The CIT(A) upheld these disallowances.

What were the issues?

Whether disallowance of commission expenses is justified when TDS was paid late but within the due date of filing the return? Whether foreign travel expenses are deductible without establishing a direct business nexus? Whether ad-hoc disallowance of business development expenses is justified solely based on an increase in expenditure from the previous year?

Which sections of the Income-tax Act were involved?

Section 40A(ia)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AHMEDABAD ‘D’ BENCH, AHMEDABAD

Before: MS. SUCHITRA KAMBLE & SHRI NARENDRA PRASAD SINHA

For Appellant: Shri S.N. Divatia, A.R.&, Shri Samir Vora, AR
For Respondent: Shri Rameshwar P. Meena, Sr.DR
Pronounced: 12.06.2026

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD ‘D’ BENCH, AHMEDABAD

BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER

ITA No.2146/AHD/2025 (Assessment Year: 2023-24)

M/s. Basil Commodities Pvt. Ltd., DCIT, Circle-1(1)(1), 408, ISCON Elegance, Aaykar Bhavan (Vejalpur), Nr. Shapath VSG Highway Bodakdev, Nr. Sachin Tower, Vs. Ahmedabad Anand Nagar Road, Gujarat – 380 054 Ahmedabad Gujarat -380054 PAN:AADCB4870F (Appellant) : (Respondent)

Assessee by : Shri S.N. Divatia, A.R.& Shri Samir Vora, AR Respondent by : Shri Rameshwar P. Meena, Sr.DR

: 23.04.2026 Date of Hearing Date of Pronouncement : 12.06.2026

O R D E R PER : SUCHITRA KAMBLE, J M:

The appeal filed by the assessee is against the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [in short “CIT(A)”]dated 18.09.2025 for the Assessment Year (in short “AY”) 2023-24.

2.

The assessee has raised the following grounds of appeal: “1.1 The order passed by U/s.250 passed on 18.09.2025 for A.Υ. 2023-24 by NFAC, [CIT(A)], Delhi (for short CIT(A)" upholding the disallowance aggregating to Rs. 19,93,805/- made by FAO is wholly illegal, unlawful and against the principles of natural justice.

2.1 The Id. CIT(A), has grievously erred in law and or on facts in not appreciating that the appellant had already sought adjournment on 18.07.2025 and 20.08.2025 as apparent from the IT Portal. Therefore, there was a sufficient cause for failure to comply with the notices claimed to be issued by NFAC.

ITA No.2146/AHD/2025 M/s. Basil Commodities Pvt. Ltd

2.2 The Id. CIT(A) ought to have considered fully and properly the facts stated in SOF of the appeal memo as well as the assessment documents/evidence uploaded during the proceedings say the accounts etc. uploaded on 27.02.2025.

3.1 The Id.CIT(A) has grievously erred in law and or on facts in upholding the disallowances aggregating to Rs. 19,93,805/-made by FAO as under: -

Particulars Amount (Rs.) Disallowance u/s 40A(ia) @30% 5,77,800 Out of foreign travel expenses 4,16,005 Disallowance out of business development expenses 10,00,000

3.2 That the in the facts and circumstances of the ld. CIT(A), ought not to have upheld the aforesaid disallowances.

It is, therefore, prayed that the disallowances aggregating to Rs. 19,93,805/- made by FAO and upheld by the CIT(A) may kindly be deleted.”

3.

The assessee is engaged in the business of trading of cotton, cotton bales and chemicals during the relevant assessment year. The assessee filed ITR on 10.02.2024 declaring total income at Rs. 80,98,280/-. The case of the assessee was selected for scrutiny under CASS for the following reasons:- * Mismatch in expenditure by way of penalty or fine for violation of any law for the time being in force. * Low net profit shown by certain specific business codes including other services. * Taxable receipts from other sources shown in schedule TDS2 is higher than the receipts shown in ITR.

3.1 Notice under Section 143(2) of the Income Tax Act was issued on 19.06.2024 and the same was responded by the assessee on 28.06.2024. Section 142(1) notices were issued on 19.07.2024 and 24.01.2025 which were replied by the assessee. The Assessing Officer observed that in the profit and loss account, the assessee has shown commission and brokerage expenses at Rs. 19,26,000/- under the head ‘Administrative and Selling & Distribution expenses’. The assessee did not deduct tax at source on the said commission and brokerage amount paid at Rs. 19,26,000/-. As per Section 40(a)(ia) of the

ITA No.2146/AHD/2025 M/s. Basil Commodities Pvt. Ltd Income Tax Act, the assessee was required to deduct tax at source. Thus, the Assessing Officer made addition of 30% of Rs. 19,26,000/- which comes to Rs. 5,77,800/-. The Assessing Officer further observed that during the year under consideration, the assessee has shown ‘business development expenses’ at Rs. 377.88 Lakh whereas in the earlier year it was shown at Rs. 240.83.88 Lakh. In A.Y. 2022-23, the Assessee has shown gross turnover at Rs. 62,321.38 Lakh whereas in the year under consideration, the assessee has shown gross turnover at Rs. 19824.32 Lakh. The Assessing Officer observed that in A.Y. 2022-23, the assessee has shown NP rate of 1.87% whereas in the year under consideration, the assessee has shown NP rate of minus 0.52%. Thus, the assessee inflated the business development expenses on abnormal higher side, just to reduce profit as per the observation of the Assessing Officer. Therefore, the Assessing Officer made disallowance of Rs. 10,00,000/- on account of abnormal higher side expenses claimed by the assessee under the head ‘business development expenses’ and added the same to the total income of the assessee. The Assessing Officer further observed that the assessee claimed ‘foreign travelling expenses’ at Rs. 4,16,005/-. The Assessee did not explained the nexus of foreign travel with the business of the assessee and has not given satisfactory explanation, therefore, the Assessing Officer disallowed the said foreign travelling expenses amounting to Rs. 4,16,005/- and added to the total income of the assessee.

4.

Being aggrieved by the Assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal.

5.

The Ld. AR submitted that as regards to addition of Rs. 5,77,800/- being 30% of commission and brokerage expenses of Rs. 19,26,000/- u/s 40(1)(ia) of the Act, the assessee has paid the TDS within the prescribed time limit, however the Assessing Officer did not consider the TDS returns details during the assessment proceedings. As regards to addition of Rs. 10,00,000/- on ad- hoc disallowance out of business development expenses of Rs. 377.88 Lakh claimed by the assessee by mentioning that the expenses claimed by the

ITA No.2146/AHD/2025 M/s. Basil Commodities Pvt. Ltd assessee is abnormal, the assessee has given the relevant documentary evidences to the Assessing Officer but the same was not considered and the ad- hoc disallowance was made without any basis. As regards to addition of Rs. 4,16,005/- on account of foreign travelling expenses, the assessee has given the details of foreign travel, but the same was ignored by the Assessing Officer.

6.

The Ld. DR relied upon the Assessment Order and the order of the CIT(A).

7.

We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee has given the reconciliation statement of TDS deducted and paid as per the commission and brokerage expenses. The Assessing Officer has not considered the TDS return filed by the Assessing Officer as well. Therefore, the same should have been taken into account by the Assessing Officer. The Assessing Officer is directed to take into account the commission expenses as submitted at page 164 of the paper book and allow the same. Thus, Ground No. 3.1 to the extent of disallowance u/s 40A(ia) @ 30% is partly allowed.

8.

As regards to foreign travel expenses, the assessee though has given the details of the foreign tours, but whether the same was related to the business or personal has not been explained. Besides, there was no direct nexus established by the assessee regarding the output of these foreign tours. Thus, the Assessing Officer has rightly disallowed the foreign travel expenses. Ground No. 3.1 to the extent of disallowance of foreign travel expenses is dismissed.

9.

As regards to disallowance of business development expenses of Rs. 10,00,000/-on ad-hoc basis, the assessee has given the details of the projects on which the assessee incurred expenses (more specifically mentioned at page no. 177 of the paper book as well as page no. 178 (A.Y. 2022-23)) These expenses were allowed in the earlier year. Merely on the ground that the assessee incurred more expenses in this assessment year cannot be the criteria for disallowing the same. Therefore, the Assessing Officer was not right in

ITA No.2146/AHD/2025 M/s. Basil Commodities Pvt. Ltd disallowing the same, when all the details were there before the Assessing Officer. Thus, Ground No. 3.1 to the extent of disallowance of business development expenses are allowed.

10.

In result, appeal of the assessee is partly allowed.

Order pronounced in the open court on 12.06.2026

Sd/- Sd/- (NARENDRA PRASAD SINHA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER

Ahmedabad; Dated:12.06.2026

* Kishore, Sr. P.S.

Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Ahmedabad 5. Guard File By order,

Assistant Registrar/Sr.PS/PS ITAT, Ahmedabad Bench

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