TUSHAR BANSAL,FIROZABAD vs. ITO WARD 2(2)(2), FIROZABAD

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ITA 257/AGR/2026Status: DisposedITAT Agra28 October 2026AY 2023-20246 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the Diwali expenses of Rs. 24,340/- were incurred for celebrating Diwali at the business premises with staff and customers, creating goodwill, and were therefore considered for business purposes. The addition of Rs. 24,340/- was deleted. Regarding general and office expenses, the Tribunal noted that the assessee did not contest the AO's finding that Rs. 76,118/- were personal in nature, so the disallowance to that extent was confirmed. However, in the absence of specific findings by the AO or NFAC that the balance expenses were personal or not for business purposes, the disallowance of the remaining amount was not sustained and was deleted. Therefore, the disallowance of Rs. 76,118/- was sustained, and the balance disallowance of Rs. 5,08,410/- was deleted. The Tribunal found that the disallowance of sales promotion expenses was not discussed separately in the operative part of the judgment, but the overall appeal was partly allowed. The operative direction was to delete the disallowance of Rs. 5,08,410/- and sustain the disallowance of Rs. 76,118/-.

What were the facts?

The assessee, Tushar Bansal, filed his return of income for Assessment Year 2023-24 declaring a total income of Rs. 10,45,200/-. His case was selected for scrutiny due to "Low income from TCS receipts – liquor." The Assessing Officer (AO) made disallowances totaling Rs. 6,08,868/-: Rs. 24,340/- for Diwali expenses, Rs. 3,11,699/- for General and Office Expenses, and Rs. 2,72,829/- for Sales Promotion Expenses. The AO's reasoning included failure to substantiate expenses as business expenditure, lack of bills/invoices, and identification of personal expenses. The assessee's appeal to the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, was dismissed. The NFAC upheld the AO's findings. The assessee then filed an appeal before the Income Tax Appellate Tribunal (ITAT).

What were the issues?

1. Whether the NFAC erred in confirming the disallowance of Diwali expenses amounting to Rs. 24,340/- as not being incurred wholly and exclusively for the purposes of business, contrary to Section 37(1) of the Income Tax Act, 1961. The assessee contended that these expenses were incurred in the normal course of business and created goodwill. The revenue argued, through the AO and confirmed by the NFAC, that the nature of the expenses was not substantiated as business expenditure. 2. Whether the NFAC erred in confirming the ad-hoc disallowance of 60% of general and office expenses amounting to Rs. 3,11,699/-. The assessee argued this was arbitrary and lacked rational basis, and that expenses were recorded in books supported by vouchers. The revenue, via the AO and NFAC, cited the lack of bills/invoices and the identification of personal expenses as justification for the disallowance. 3. Whether the NFAC erred in upholding the disallowance of 100% of sales promotion expenses amounting to Rs. 2,72,829/-. The assessee argued these were incurred for business promotion and allowable under Section 37(1). The revenue contended that the assessee failed to substantiate these as business expenses with proper evidence. 4. Whether the NFAC erred in confirming additions based on presumptions and surmises instead of examining commercial expediency and business necessity, and in making ad-hoc disallowances when books of account were audited and not rejected under Section 145.

Which sections of the Income-tax Act were involved?

Section 37(1),Section 142(1),Section 145,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AGRA (SMC

Before: SHRI SUNIL KUMAR SINGH & SHRI BRAJESH KUMAR SINGH

For Appellant: Shri Anurag Sinha, Advocate
For Respondent: Shri Anil Kumar, Sr. DR
Hearing: 15.09.2026Pronounced: 28.10.2026

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA (SMC) BENCH, AGRA BEFORE : SHRI SUNIL KUMAR SINGH, JUDICIAL MEMBER AND SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER

ITA No. 257/Agr/2026 Assessment Year: 2023-24 Tushar Bansal, Vs. Income-tax Officer, 34, Bagh Chhingamal, Ward 2(2)(2), Income Tax Firozabad (UP)-283203 Office, Firozabad- 283203 PAN :AQWPB9971D (Appellant) (Respondent) Assessee by Shri Anurag Sinha, Advocate Department by Shri Anil Kumar, Sr. DR Date of hearing 15.09.2026 Date of pronouncement 28.10.2026 ORDER PER : BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER: This appeal is directed against the impugned order dated 25.02.2026 passed in appeal No. NFAC/2022-23/10472313 by the ld. Commissioner of Income Tax(Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the “CIT(A)] u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for the A.Y. 2023-24, wherein ld. CIT(A) has dismissed assessee’s appeal.

ITA No.257/Agr/2026

2.

Brief facts of the case: The assessee filed his return of income on 04.10.2023 declaring total income at Rs.10,45,200/-. The case was selected for scrutiny assessment under CASS for the following reason: “Low income from TCS receipts – liquor.” 2.1 The AO made following disallowances in the assessment order. (I). Diwali Expenses: Rs.24,340/- The AO disallowed the said expenses on the ground that the assessee failed to substantiate the nature of the expenses of Rs.24,340/- with evidence to show as to how it was his business expenditure. (II). General Expenses (Rs 3,12,628/-) and Office Expenses (Rs. 2,06,871/-): Rs 3,11,699/-. The AO noted that the assessee had furnished ledger accounts and 24 self-made payment vouchers as against total 560 numbers of transactions but the assessee failed to furnish a single bill/invoice as desired vide notice u/s. 142(1) of the Act dated 12.11.2024. Further, the AO noted that out of 24 vouchers of Rs.1,27,832/-, furnished by the assessee, the expenses of Rs.76,118/- vide 05 vouchers were found to be of the personal nature, which is 60% (76,118/1,27,832). Further, the AO noted that the assessee had incurred total expenses of Rs.5,19,499/- on account of General Expenses and Office Expenses and the assessee had not furnished the bills/invoice of the expenses. Accordingly, the AO 2 | P a g e

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observed that the veracity of expenses remained unverifiable and disallowed sum of Rs.3,11,699/- @ 60% of 5,19,499/- and added to the total income of the assessee. (III). Sales Promotion Expenses: Rs. 2,72,829/- The AO disallowed the said sum on the ground that the assessee failed to substantiate the nature of the expenses with proper evidence to show as to how the expenses are his business expenses.

2.2 Thus, the total disallowance made by the AO under the above heads was Rs. 6,08,868/-.

3.

Aggrieved with the said order, the assessee filed an appeal before the learned CIT(A) who dismissed the appeal of the assessee and observed that the Diwali expenses are personal in nature and not related to the business. The ld. CIT(A) also confirmed the balance disallowances agreeing with the findings of the AO.

4.

Aggrieved with the said order, the assessee is in appeal before us on the following grounds of the appeal: “1. That the Hon'ble National Faceless Appeal Centre (NFAC) has erred both in law and on facts in confirming the action of the Assessing Officer in making ad-hoc disallowance of business 3 | P a g e

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expenses amounting to Rs. 6,08,868 without appreciating the facts and circumstances of the case. 2. That the NFAC has erred in law and on facts in confirming the disallowance of expenses merely on the basis of suspicion and conjectures without bringing any cogent material on record to establish that the said expenses were not incurred wholly and exclusively for the purposes of business. 3. That the NFAC has erred in confirming the disallowance of 100% of Diwali expenses amounting to Rs. 24,340/-ignoring the fact that such expenses were incurred in the normal course of business. 4. That the NFAC has erred in sustaining the ad-hoc disallowance of 60% of general and office expenses amounting to Rs. 3,11,699/ which is arbitrary, excessive and without any rational basis. 5. That the NFAC has erred in upholding the disallowance of 100% sales promotion expenses amounting to Rs. 2,72,829/- without appreciating that such expenditure was incurred for business promotion and was allowable under section 37(1) of the Income Tax Act, 1961. 6. That the NFAC has failed to appreciate that the books of account of the appellant were duly audited by a Chartered Accountant and were not rejected under section 145 of the Act and therefore no ad-hoc disallowance of expenses could legally be made. 7. That the NFAC has failed to appreciate that the expenses were duly recorded in the books of account and supported by vouchers and therefore the disallowance made by the Assessing Officer is unjustified and bad in law. 8. That the NFAC has erred in confirming additions based on presumptions and surmises instead of examining the commercial expediency and business necessity of the expenditure. 9. That the appellant craves leave to add, alter, amend or withdraw any of the above grounds of appeal at or before the time of hearing.” 5. We have heard both the parties and perused the material on record. The AO had disallowed the expenses mainly on the ground that 4 | P a g e

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the assessee failed to substantiate as to how it amounts to the business expense and that the expenses were supported by self-made vouchers and were not verifiable. The assessee is in the business of liquor. It is not the case of the AO that the Diwali expenses debited in the accounts have not been incurred at the business premises of the assessee. The same, being nominal amount and incurred by the assessee to celebrate Diwali at his business premises along with staff members, definitely creates a goodwill for his employees as well as his customers and, therefore, the said expenses are considered to be for the purpose of business. Therefore, this addition is not justified. Hence, the addition of Rs.24,340/- is deleted.

5.1 The balance expenses of Rs. 5,84,528/- were disallowed by the AO on the ground that no verifiable bills and business purpose was explained by the assessee. On perusal of the ledger accounts and 24 self-made payment vouchers in respect of general expenses and office expenses, the AO observed that expenses of Rs.76,118/- vide five vouchers were found to be of personal nature. Further, the AO noted that the assessee did not furnish the bills/invoices of the expenses and therefore, the veracity of the expenses remained unverifiable. During the appellate proceedings before us, the learned AR has not contested the 5 | P a g e

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finding of the AO that the expenses to the extent of Rs.76,118/- were personal in nature. Therefore, the disallowance to that extent is confirmed. In absence of any specific finding regarding the balance expenses being personal in nature or not for business purposes, the disallowance of balance expenses cannot be sustained and the same is deleted. Accordingly, disallowance to the extent of Rs. 76,118/- is sustained and the balance disallowance of Rs. 5,08,410/- is deleted. The appeal of the assessee deserves to be partly allowed.

6.

In the result, the appeal of the assessee is partly allowed.

Order pronounced in the open court on 28/10/2026.

Sd/- Sd/- (SUNIL KUMAR SINGH) (BRAJESH KUMAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 28/10/2026 *aks/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, Agra

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