SHOBHA SUDAMRAO TAGAD,AHMEDNAGAR vs. ITO WD-1 , AHMEDNAGAR

ITA 311/PUN/2026Status: DisposedITAT Pune13 October 2026AY 2023-2417 pages
AI SummaryAllowed

What were the facts?

The assessee, Shobha Sudamrao Tagad, filed her return of income for assessment year 2023-24 declaring Rs.1,10,36,610/-. Her case was selected for scrutiny due to high cash withdrawals and a discrepancy between high reported income and no entry in the Assets and Liabilities schedule. During the assessment, the Assessing Officer (AO) noted Adat expenses of Rs.1,66,28,204/- debited in the Profit and Loss Account. The assessee, proprietor of Laxmi Traders, explained this as commission agent business facilitating agricultural produce sales. The AO, however, was not satisfied, observing that the expenses constituted 59.65% of the Adat income and lacked sufficient justification. The AO disallowed the entire Adat expenses. The CIT(A)/NFAC upheld the AO's disallowance. The assessee appealed to the ITAT.

What did the Tribunal hold?

The Tribunal found merit in the assessee's arguments. It was noted that the assessee had produced books of account, bank statements, cash book, ledger accounts, farmer-wise details, and sub-agent details with PAN. TDS was duly deducted, and payments were made through banking channels. The assessee's books of account were audited under section 44AB and not rejected by the AO. The Tribunal also noted that similar Adat commission expenses had been debited in preceding years and accepted by the Revenue, albeit in summary assessments, and no reopening had occurred. Citing the Supreme Court decision in CIT vs. Walchand & Co., the Tribunal held that the reasonableness of expenditure should be adjudged from the businessman's point of view. Given the evidence presented, the compliance with TDS provisions, the acceptance of similar expenses in prior years, and the unrejected books of account, the Tribunal concluded that the Adat commission expenses could not be disallowed entirely based on presumptions and surmises. Therefore, the order of the CIT(A)/NFAC was set aside, and the AO was directed to delete the addition. The grounds raised by the assessee were allowed.

What were the issues?

1. Whether the disallowance of Rs.1,66,28,204/- on account of Adat commission expenses under section 37(1) of the Income Tax Act, 1961, is valid, considering the assessee's contention that the expenditure was wholly and exclusively for business purposes. 2. Whether the CIT(A) erred in confirming the disallowance without finding the payments to be bogus, sham, or fictitious, and solely based on suspicion and the high percentage of expenditure relative to income. Assessee's arguments: The Adat expenses were revenue expenditure incurred for business purposes. The books of account were audited and not rejected. Similar expenses were allowed in preceding years, and the principle of consistency should apply. Payments were made through banking channels with TDS compliance, and recipients were identifiable. The standard of documentation applied by the revenue was inappropriate for agricultural market transactions. Commercial expediency should be judged from the businessman's viewpoint. Revenue's arguments: The Ld. DR heavily relied on the orders of the Assessing Officer and the Ld. CIT(A)/NFAC.

Which sections of the Income-tax Act were involved?

Section 37(1),Section 194N,Section 143(2),Section 44AB,Section 145,Section 250,Section 194H,Section 270A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE

Before: SHRI R. K. PANDA & Ms. ASTHA CHANDRA

For Appellant: Shri Suhas Bora and Ms. Sampada Ingale
For Respondent: Ms. Bhavya I.V., Jt. CIT-DR

PER R.K. PANDA, VP:

This appeal filed by the assessee is directed against the order dated 19.11.2025 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2023-24. 2. Facts of the case, in brief, are that the assessee is an individual and has filed her return of income on 26.09.2023 declaring total income of Rs.1,10,36,610/-. The case was selected for scrutiny under CASS for the following reasons:

1.

High value cash withdrawals reported in SFT or u/s 194N

2.

High income reported in the return and no entry in Schedule Assets and Liabilities of return of income.

3.

Accordingly, statutory notice u/s 143(2) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) was issued and

The order continues below.

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