REGUS BUSINESS CENTRE (NAGPUR) PRIVATE LIMITED,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX - 13(3)(2), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH MUMBAI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER & SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER ITA No. 3688/Mum/2026 (Assessment Year: 2011-12) Regus Business DCIT-13(3)(2) Centre (Nagpur) Aayakar Bhavan, M. K. Private Limited Vs. Road, New Marine Level 4, Dynasty Lines, Mumbai – Business Park, JB 400 020 Nagar, Andheri (F), Mumbai-400 059 PAN/GIR No. AADCR7338G (Applicant) (Respondent) Assessee by Shri Ninad Patade, Ld. AR Revenue by Shri Swapnil Choudhari, Ld. DR Date of Hearing 15.06.2026 Date of Pronouncement 17.06.2026 आदेश / ORDER PER MAKARAND VASANT MAHADEOKAR, AM: This appeal filed by the assessee is directed against the order dated 02.01.2026 passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as "the learned CIT(A)"] under section 250

2 ITA No. 3688/Mum/2026 Regus Business Centre (Nagpur) Private Limited of the Income-tax Act, 1961 ("the Act") for Assessment Year 2011- 12. 2. The assessee has raised various grounds challenging the impugned order including non-grant of reasonable opportunity of hearing, disallowance of advertisement expenses amounting to Rs.6,43,667/-, disallowance of management fees amounting to Rs.22,23,719/-, short grant of TDS credit and initiation of penalty proceedings. 3. Briefly stated, the facts borne out from the record are that the assessee is a company engaged in the business of establishing, operating, managing and controlling serviced offices, commercial accommodation facilities, cyber cafes and ancillary business services. The assessee filed its return of income for the year under consideration on 25.11.2011 declaring loss of Rs.1,06,37,445/-.The return of income was initially processed under section 143(1) of the Act. Subsequently, the case was selected for scrutiny and assessment was completed by the Assistant Commissioner of Income-tax, OSD Circle-3(2), Mumbai vide order dated 17.02.2014 passed under section 143(3) of the Act determining the loss at Rs.77,70,060/- as against the returned loss of Rs.1,06,37,445/-. 4. While framing the assessment, the Assessing Officer disallowed advertisement and marketing expenses amounting to Rs.6,43,667/- claimed under the head "Advertisement and Legal & Professional Expenses". According to the Assessing Officer,

3 ITA No. 3688/Mum/2026 Regus Business Centre (Nagpur) Private Limited despite opportunity granted, the assessee failed to furnish complete details regarding the parties to whom payments were made, details regarding deduction of tax at source and documentary evidence establishing business expediency of the expenditure. Accordingly, the claim was disallowed under section 37(1) of the Act. The Assessing Officer further disallowed management fees amounting to Rs.22,23,719/- comprising payment of Rs.7,88,201/- made to Regus Asia Pacific Management Limited and Rs.14,35,518/- made to Regus Service Centre Philippines BV. The Assessing Officer observed that except copies of invoices, no material had been furnished demonstrating the nature of services rendered, basis of charging such fees or the business necessity thereof. Accordingly, the claim was disallowed. 5. Aggrieved by the aforesaid assessment order dated 17.02.2014, the assessee preferred appeal before the first appellate authority. The said appeal came to be dismissed vide order dated 07.11.2022.Against the same order, the assessee preferred appeal before the Tribunal. The Coordinate Bench, vide order dated 31.03.2023 in ITA No.29/Mum/2023 restored the disputed issues to the file of the Assessing Officer with a direction to adjudicate the matter afresh on merits after granting adequate opportunity of hearing to the assessee and after considering the evidences and submissions that may be furnished. 6. Pursuant to the directions issued by the Co-ordinate Bench under section 254 of the Act, the Assessment Unit issued notice under section 142(1) dated 13.02.2025 fixing compliance on

4 ITA No. 3688/Mum/2026 Regus Business Centre (Nagpur) Private Limited 28.02.2025. Thereafter, show cause notice dated 05.03.2025 was issued. According to the Assessing Officer, no response was received from the assessee. 7. Consequently, the Assessment Unit passed order dated 20.03.2025 under section 144 read with section 254 read with section 144B of the Act. In the said order, the Assessing Officer observed that despite the opportunity granted pursuant to the Tribunal's directions, the assessee failed to furnish supporting evidences in respect of advertisement expenses and management fees. Accordingly, the Assessing Officer reiterated the disallowance of advertisement expenses amounting to Rs.6,43,667/- and management fees amounting to Rs.22,23,719/- and assessed the loss at Rs.77,70,060/- 8. Aggrieved by the aforesaid order dated 20.03.2025 passed under section 144 read with section 254 read with section 144B of the Act, the assessee preferred appeal before the learned CIT(A). 9. The learned CIT(A), vide order dated 02.01.2026 passed under section 250 of the Act, observed that notices were issued during the appellate proceedings requiring the assessee to furnish submissions. According to the learned CIT(A), despite sufficient opportunities the assessee failed to furnish effective response and, therefore, the action of the Assessing Officer was upheld and the appeal was dismissed.

5 ITA No. 3688/Mum/2026 Regus Business Centre (Nagpur) Private Limited 10. During the course of hearing before us, the learned Authorised Representative (AR) submitted that the learned CIT(A) failed to adjudicate the grounds raised before him on merits. Referring to the grounds of appeal and statement of facts filed before the learned CIT(A), the learned AR submitted that detailed challenges were raised against the disallowance of advertisement expenses and management fees. It was contended that the learned CIT(A), instead of adjudicating the issues arising from the assessment order, merely dismissed the appeal without recording findings on the merits of the additions. The learned AR submitted that the impugned order deserves to be set aside and the matter may be restored to the file of the learned CIT(A) for fresh adjudication. 11. The learned Departmental Representative fairly submitted that he had no serious objection if the matter was restored to the file of the learned CIT(A) for adjudication on merits in accordance with law. 12. We have considered the rival submissions and perused the material available on record. 13. On perusal of the impugned order passed by the learned CIT(A), we find that no adjudication has been made on the merits of the aforesaid grounds. The learned CIT(A) has primarily proceeded on the basis that the assessee did not effectively comply with the notices issued during appellate proceedings. However, the appellate order does not contain any discussion

6 ITA No. 3688/Mum/2026 Regus Business Centre (Nagpur) Private Limited regarding the allowability of advertisement expenses, allowability of management fees or the grievance relating to TDS credit. 14. It is well settled that the first appellate authority is vested with wide powers and is duty bound to adjudicate the issues arising from the assessment order by passing a speaking and reasoned order. Once grounds challenging the additions are raised before the appellate authority, the same are required to be examined and adjudicated on merits. The impugned order does not contain any findings on the substantive grounds raised by the assessee. 15. Considering the entirety of facts and circumstances of the case, we are of the view that the interests of justice would be met if the impugned order is set aside and the matter is restored to the file of the learned CIT(A) for fresh adjudication. Accordingly, we set aside the order dated 02.01.2026 passed by the learned CIT(A) and restore all the grounds raised by the assessee to his file with a direction to adjudicate the same afresh on merits, in accordance with law, after granting adequate and effective opportunity of hearing to the assessee. 16. The assessee is directed to extend full cooperation and furnish all relevant details, explanations and documentary evidences as may be called for by the learned CIT(A). Since we have restored the matter to the file of the learned CIT(A), all issues are left open for adjudication in accordance with law.

7 ITA No. 3688/Mum/2026 Regus Business Centre (Nagpur) Private Limited 17. In the result, the appeal of the assessee is allowed for statistical purposes.

Order pronounced in the open court on 17.06.2026.

Sd/- Sd/- (CHALLA NAGENDRA PRASAD) (MAKARAND VASANT MAHADEOKAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 17/06/2026 Dhananjay, Sr.PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant प्रत्यथी / The Respondent. 2. संबंधधत आयकर आयुक्त / The CIT(A) 3. आयकर आयुक्त(अपील) / Concerned CIT 4. धिभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, मुम्बई / DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. 6. आदेशानुसार/ BY ORDER, सत्याधपत प्रधत //True Copy// 1. उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai