TaxTMI 
TaxTMI 
2026 (7) TMI 1881
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....in separate proceedings, one pertaining to the quantum proceedings under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), while other pertaining to the levy of penalty under section 270A of the Act. Since the issues raised in both the appeals are interrelated, both the appeals were taken up for hearing together. 2. We shall first take up assessee's appeal in ITA No. 230/Ahd/2026. The grounds raised by the assessee reads as under:- 1. The Ld. CIT(A) erred in law as well as on fact in upholding an addition made of Rs. 31,87,542/- by Ld. AO being marketing expenses treated as non-genuine under the Act. 3. As is evident from a bare perusal of the above, the solitary issue involved in the present ....
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....rred on account of the following:- i) marketing expenses of Rs. 21,79,041/- ii) Employee Benefit Expenses of Rs. 2,01,792/- iii) Office Expenses of Rs. 8,06,709/- 4.1. That the office expenses incurred were in relation to petrol expenses, food expenses, tea and coffee and refreshment expenses, courier expenses, and other office ancillary expenses. The Marketing Expense was incurred for the Exhibition, Client Visits, and Fuel expenses, which were reimbursed to employees for their visits in different cities to different clients, which was very frequent. 5. It was further pointed out, that all payment of such expenses was made through legitimate means. The assessee has further contended, that the expenses prima....
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....sh for entertainment, refreshment, travelling etc. and also noting the fact that the books of accounts were duly audited both under the Companies Act, and as well as the Income Tax Act, and no adverse comments have been made by the auditors, with regard to the claim of such expenses made by the assessee in their report, We are of the view that the disallowance of entire expenses claimed by the assessee on account of marketing expenses amounting to Rs. 31,87,542/- is grossly unjust and unfair. The incurrence of marketing expenses by any business entity cannot be completely ruled out, and considering the nature of expenses being incurred by the sales team on outstation client visit, there may be certain instances of the expenses incurred not ....
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....e misreport of income arises in a situation where the assessee obliged to file return u/s 139 of the Act. In the present case, admittedly, the assessee did not include the income in the return. Therefore, it can be said that the, assessee misreported his income from the return filed by the assessee. The failure on the part of the assessee to disclose this income was either by an omission or by way of an oversight or that it was a mere technical or venial breach of law could not be appreciated. This finding of the AO at para iv is reproduced hereunder:- (iv). The assessee was duty bound to include her true and correct income in the original return, which the assessee has not included intentionally to avoid burden of tax and underrep....
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....noting the above facts, we have restricted the disallowance of marketing expenses only to the tune of Rs 5 lacs. 13. The assessee has been charged with misreporting its income as per section 270A(9) of the Act, which lists the specific instances of misreporting as under; Penalty for under-reporting and misreporting of income. 270A. ........ (9) The cases of misreporting of income referred to in sub-section (8) shall be the following, namely:- (a) misrepresentation or suppression of facts; (b) failure to record investments in the books of account; (c) claim of expenditure not substantiated by any evidence; (d) recording of any false entry in the books of account; (e) ....