SMASH FACTOR SPORTS PRIVATE LIMITED,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 2(1), MUMBAI, MUMBAI

ITSSA 427/MUM/2026Status: DisposedITAT Mumbai18 August 2026AY 2020-2125 pages
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What were the facts?

The assessee, Smash Factor Sports Private Limited, is in appeal against the orders of the Commissioner of Income Tax (Appeals) for Assessment Years 2019-20 and 2020-21. These appeals stem from a search and seizure operation conducted on Ms. Tapasee Pannu, a shareholder and director of the assessee. The Assessing Officer (AO) made several additions and disallowances, including treating receipts from foreign entities as unexplained cash credits, disallowing interest on late TDS payment, disallowing payments to a related entity for event management, and treating barter deals involving Ms. Pannu's services as income of the assessee. The assessee challenged the jurisdiction under Section 153C, arguing that the material was impounded during a survey, not seized during a search. The CIT(A) upheld the additions and the assumption of jurisdiction.

What did the Tribunal hold?

The Tribunal decided the appeals on merits. Regarding the legality of the assessment under Section 153C, the Tribunal noted that the CIT(A) had rejected the assessee's contention, holding that incriminating material was found during the search on Ms. Tapasee Pannu or derived from impounded data related to the assessee, and the AO had recorded satisfaction. However, since the additions were deleted on merits, the Tribunal considered the adjudication of this legal ground to be academic and left it open. On the merits of the additions, the Tribunal deleted the additions of Rs. 2,06,59,690/- under Section 68 (conversion of share money into sponsorship income), Rs. 39,77,397/- towards unexplained expenditure to M/s KRI Entertainment, and Rs. 53,69,000/- towards value of barter services with Entertainment Network (India) Ltd. These deletions were based on the Tribunal's decision in a connected appeal (IT(SS)A No. 427/Mum/2026) which dealt with identical additions. For the disallowance under Section 40(a)(ia) concerning accommodation expenses of Rs. 4,10,142/-, the Tribunal found merit in the assessee's alternative contention. While the assessee failed to substantiate its primary plea, the disallowance was restricted to 30% of the expenditure as per the provision for the relevant assessment year, and the balance disallowance was deleted. Thus, the ground was partly allowed.

What were the issues?

1. Whether the assumption of jurisdiction by the Assessing Officer under Section 153C of the Income Tax Act, 1961, was valid, given that the material relied upon was allegedly impounded during a survey and not seized during a search of a third party. - Assessee's contention: The documents were impounded during a survey under Section 133A and not seized during a search in the case of another person, thus Section 153C is not attracted. - Revenue's contention: Incriminating material, including digital data and agreements, was seized during the search on Ms. Tapasee Pannu or derived from impounded data of a related entity, satisfying the conditions for Section 153C. 2. Whether the receipts totaling Rs. 2,95,93,035/- from M/s Parasnath Properties Pte Ltd and M/s JalKumud Shipping Pte Ltd, initially intended as investment and later shown as 'Sponsorship Fee', constitute unexplained cash credit under Section 68. - Assessee's contention: Not recorded. - Revenue's contention: The conversion of investment to sponsorship without verifiable services indicates an attempt to offset losses and evade tax. 3. Whether the disallowance of Rs. 7,91,853/- on account of interest on late payment of TDS is justified under Section 37(1). - Assessee's contention: Not recorded. - Revenue's contention: Such interest is a quasi-penal expense related to a breach of statutory duty and not an allowable business expenditure. 4. Whether the disallowance of Rs. 7,50,000/- paid to M/s KRI Entertainment for event management charges as unexplained expenditure is valid. - Assessee's contention: Not recorded. - Revenue's contention: The assessee failed to provide satisfactory details, nature of services, event details, and supporting documents. 5. Whether the value of services in barter deals with Cinepolis (Rs. 1,00,00,000/-) and Entertainment Network (India) Ltd (Rs. 71,71,948/-), where Ms. Tapasee Pannu provided artist services in exchange for publicity for the assessee's team, should be treated as income of the assessee. - Assessee's contention: Not recorded. - Revenue's contention: The company was the actual beneficiary, and the value of services should be treated as the company's taxable income. 6. Whether the disallowance of Rs. 4,10,142/- made under Section 40(a)(ia) for non-deduction of TDS on accommodation expenses is correct.

Which sections of the Income-tax Act were involved?

Section 153C,Section 68,Section 37(1),Section 40(a)(ia),Section 194-I,Section 143(3),Section 250,Section 133A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI

Before: HON’BLE NARENDER KUMAR CHOUDHRY & HON’BLE JAGADISH

For Appellant: Shri Kapil Hirani, Ld. Adv
For Respondent: Shri Pankaj Kumar, Ld. CIT
Pronounced: 18.08.2026

PER: NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER: These appeals have been preferred by the ASSESSEE against the orders dated 21.05.2026 and 13.11.2025 impugned herein, passed by the Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Ys. 2019- 20 and 2020-21. IT(SS)A No.426 & 427/MUM/2026 Smash Factor Sports Private Lim

The order continues below.

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