Case Law Details
Cashfree Payment India Private Limited Vs DCIT (ITAT Bangalore)
In a major relief to Cashfree Payments India Private Limited, the Bangalore ITAT held that once an assessee furnishes substantial evidence proving the identity, genuineness and creditworthiness of the lender, the AO cannot make a mechanical addition under section 68 merely because the lender’s balance sheet was not produced.
The assessee had raised ₹120 crores through secured Redeemable NCDs from Trifecta Venture Debt Fund, a SEBI-registered Category II AIF. The Tribunal noted that the assessee had produced the lender’s PAN, SEBI registration, bank statements, debenture documents, confirmations, source of funds details and even explained why the AIF showed NIL income under the pass-through taxation regime of sections 115UA/115UB.
The ITAT observed that the AO ignored overwhelming evidence and focused only on non-production of the AIF’s balance sheet, despite the assessee specifically requesting the AO to invoke section 133(6) and directly call for the records from the lender. The Tribunal remarked that the AO had failed to conduct any meaningful inquiry before invoking section 68.
The Tribunal also delivered a strong finding on section 40A(2)(b), holding that a mere lender-borrower relationship does not trigger related-party disallowance provisions. Since Trifecta had no shareholding, profit participation or specified relationship with the assessee, the disallowance of interest merely because the AO considered 14% interest “high” was deleted in entirety.
Further, the ITAT deleted the proportionate interest disallowance under section 36(1)(iii), observing that the borrowings were admittedly for working capital purposes and not for acquisition of capital assets.
On the issue of ad hoc disallowance of expenses, the Tribunal held that blanket 10% disallowances without identifying specific defects or non-business expenditure cannot survive, especially in large-volume digital businesses where uploading every voucher may not be practically feasible. The matter was restored for proper verification instead of arbitrary estimation.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
1. The Assessee appeals against the appellate order of NFAC, Delhi [ld. CIT(A)] dated 17-Feb-2026 (AY 2023-24), which dismissed its appeal against the assessment order dated 24.03.2025 passed by the Assessment Unit [ld. AO] under section 143(3) read with section 144B of the Income-tax Act, 1961 (“the Act”).
2. The Assessee has raised the following grounds of appeal:
| 1. | The impugned order passed by the Learned CIT(A) and AO, to the extent prejudicial to the Appellant, is not justified in law and on the facts and circumstances of the case. |
| 2. | The Learned CIT(A) and AO have erred in law and on facts in passing the impugned order without jurisdiction. |
| 3. | The Ld. CIT(A) has erred in law and on facts in endorsing the order of the Ld.AO; |
| 4. | The Learned CIT(A) and AO have erred in law and on facts in passing the order against the principles of natural justice, |
| 5. | The Learned CIT(A) and AO have erred in law and on facts in reducing the Video Conferencing (opportunity of being heard orally) to empty formality. |
| Addition of Rs. 120,00 00,000 under section 68 of the Act on account of NCD | |
| 6. | The Learned CIT(A) and AO have erred in law and facts by making additions u/s 68 of the Act of Rs. 120,00,00,000/- on account of Redeemable Non convertible Debentures under section 68 of the Act. |
| 7. | The Learned CIT(A) and AO have erred in not considering the details of the source, which is available from the records. |
| 8. | The Learned CIT(A) and AO have erred in and on facts by not considering the submission made during the assessment/appellate proceedings. |
| 9. | The Learned CIT(A) and AO have erred in law and fact that the Appellant firm has discharged the primary onus cast upon it under the statute. |
| 10. | The Learned CIT(A) anti AO have failed to appreciate that the Appellant cannot be called upon to explain the source of the source. |
| 11. | The Learned CIT(A) and AO have erred in law and on facts in not discharging the secondary onus in a cogent manner and in accordance with the law; |
| 12. | The Learned CIT(A) and AO have erred in not invoking the provisions of section 133(6) or referring the matter to the verification unit to examine the details of the source of payments. |
| 13. | The Learned CIT(A) and AO have failed to appreciate that the provisions of section 68 are not applicable to the facts in the present case. |
| 14. | The Learned CIT(A) and AO have erred in law and on facts in imposing conditions that are not prevalent under the statute. |
| 15. | Having acknowledged the submissions of the Appellant, the Learned CIT(A) and. AO have erred in law and on facts in not show causing the Appellant before making the impugned addition; |
| Addition of Rs. 11,42,86,000 under section 40A(2)(b) of the Act on account of interest on loans | |
| 16. | The Learned CIT(A) and AO have erred in law and on facts in disallowing u/s 40A(2)(b) of the Act an amount of Rs.11,42,86,000/-. |
| 17. | The Learned CIT(A) and AO have erred in assuming that there exist relations as referred to in 40A(2)(b) of the Act and thereby erred in making an addition under assumptions and surmises. |
| 18. | Without prejudice to the above, the Learned CIT(A) and AO have erred in law and on facts in not providing any basis for the above addition or basis for determining arm’s length interest rate. |
| 19. | The provisions of section 40A(2)(b) of the Act are not applicable to the facts in the present case, and therefore, the impugned addition is liable to be deleted. |
| Addition of Rs. 97,57,000 under section 36(1)(iii) of the Act on account of proportionate disallowance of interest on capital WIP | |
| 20. | The Learned C1T(A) and AO have erred in law and on facts in disallowing u/s 36(1)(iii) of the Act an amount of Rs 97,57,000/-. |
| 21. | The Learned CIT(A) and AO have erred in law and on facts in assuming that the Appellant has used interest-bearing funds for CWIP; |
| 22. | Without prejudice to the above, the Learned CIT(A) and AO have erred in assuming that the funds deployed in CWIP are not used funds for the purposes of business. |
| Ad-hoc disallowance of various expenses | |
| 23. | The Learned CIT(A) and AO have erred in law and on facts in disallowing u/s 37(1) of the Act an amount of Rs.3,79,13,900 as marketing and business promotion expenses. |
| 24. | The Learned CIT(A) and AO have erred in law and on facts in disallowing u/s 37(1) of the Act an amount of 35,44,80,000 being 10% of the total claimed expenses of 354,48,00,000. |
| 25. | Though the appellant has filed supporting evidence in support of the claim of the above expenses, the Learned CIT(A) and AO have erred in perversely stating that the Appellant has not furnished documentary evidence. |
| 26. | Without prejudice to the above, the Appellant is not required to furnish all the documentary evidence in support of expenses, given the nature of activities, quantum of activities and the provisions of the Act. |
| 27. | In disallowing the above expenses, the Learned CIT(A) and AO have erred in law and on facts in not appreciating that the Appellant is subject to audit under the Companies Act as well as under the provisions of the Act. The Learned CIT(A) and AO have erred in law and on fact in not placing reliance on the above reports. |
| 28. | The Learned CIT(A) and AO have erred in law and on facts in engaging in fishing and roving enquiry. |
| 29. | Having accepted 90% of expenses to be genuine and as per the provisions of the Act, the Ld.A0 has erred in disallowing the remaining 10% on ad hoc basis without providing any reasonable basis or grounds for such disallowance. |
| 30. | The Learned CIT(A) and AO have erred in law, and on facts in imposing conditions that are not prevalent under the statute. |
| 31. | The Learned CIT(A) and AO have erred in law and on facts by not considering the submission submitted during assessment proceedings and thereby erred in not passing a speaking order. |
| 32. | The Learned CIT(A) and AO have made an addition based on estimation and on an ad hoc basis, which is not in accordance with the provisions of the Act and more specifically, the provisions of section 144 of the Act. |
| 33. | The Learned CIT(A) and AO have erred in law and on facts in making a disallowance of Rs. 60K on account of CSR. |
| Consequential grounds | |
| 34. | Based on the above additions, the Learned CIT(A) and AO have erred in law and on facts in invoking the provisions of section 115BBE of the Act. |
| 35. | The order is unreasonably high-pitched and therefore liable to be quashed in its entirety. |
| 36. | The Learned CIT(A) and AO have passed an order by making assumptions and surmises. |
| 37. | The Learned CIT(A) and AO have erred in law and on facts by not granting the TDS credit to the extent of Rs.3,03,750/- in the computation of tax liability. |
| 38. | The Learned CIT(A) and AO have erred in law and on facts in initiating penalty proceedings under section 274 r.w.s. 270A of the Act for under-reporting of income because of misreporting. |
| 39. | The Learned CIT(A) and AO have erred in law and on facts in initiating penalty proceedings under section 271AAC(1) of the Act for non-compliance of notices. |
| 40. | The Learned CIT(A) and AO have erred in raising demand vide issue of notice under section 156 of the Act. |
| 41. | The Learned CIT(A) and AO have erred in law by levying interest under section 234 of the Act. |
| (Tax effect Rs. 93,60,00,000/) | |
| On the basis of the above grounds and other grounds which may be urged at the time of hearing with the consent of the Honourable Tribunal, it is prayed that the order passed under section 143(3) of the Act, as upheld by the Commissioner of Income Tax (Appeals), be quashed and relief sought be granted. | |
3. The Assessee, a company, filed its return for AY 2023-24 on 20.11.2013 declaring a loss of Rs.1,24,27,32,700. The case was selected for scrutiny and notice u/s. 143(2) was issued on 19.6.2024. The assessment was completed on 24.3.2025, making (i) an addition of Rs.120 crores u/s. 68 and (ii) a disallowance of Rs.11,42,86,000 u/s. 40A(2)(b) towards interest (paid at the rate of 14% and considered allowable @ 6%). The AO also noted CWIP of Rs.12,19,61,000, determined interest of Rs.4,39,32,000 and disallowed 8% thereof (Rs.97,57,000). Business promotion expenses of Rs.37,91,39,000 were subjected to disallowance, ultimately restricted to 10% (Rs.3,79,13,900). Further, 10% disallowances were made on rent, software, rates & taxes, legal & professional fees, recruitment, travelling & conveyance, integration fees, domain charges and resale commission expenses for want of requisite details. CSR expenses of Rs.60,000 and 10% of miscellaneous expenses of Rs.46,77,000 were also disallowed. Consequently, the returned loss of Rs.1,24,27,32,700 was reduced to Rs.1,02,62,38,800 and, after adding Rs.120 crores u/s. 68, the assessed income was determined accordingly.
4. The assessee preferred appeal before the ld. CIT(A) wherein the disallowances made by the ld. AO were confirmed and therefore assessee is in appeal before us.
5. Ground Nos. 1 to 5 of the appeal are general in nature; no specific arguments were advanced and therefore the same are dismissed.
6. Ground Nos. 6 to 15 relate to an addition of Rs.120 crores under section 68 of the Act in respect of issue of Redeemable Non-Convertible Debentures (NCDs). The Assessee is a private limited company (incorporated on 23.09.2015), a subsidiary of Cashfree Inc., USA, engaged in payment gateway services and allied activities; it also functions as an account aggregator subsidiary through Cashfree Disbursement Services Pvt. Ltd. The Assessee operates under RBI guidelines dated 17.03.2020 for payment gateways/aggregators and earns fees (percentage/flat) on merchant transactions processed through banking and payment networks. Its equity share capital is Rs.57,645 lakhs and it has issued Compulsorily Convertible Preference Shares [ CCPS] (face value Rs.10 each) aggregating 1,430 lakhs to SBI at Rs.1,38,838 per share. Equity shares are held by Cashfree Inc., USA, with one share each ultimately held by Mr. A. Sinha and Mr. Riju Dutta.
7. During the year, the Assessee raised Rs.120 crores by issuing Redeemable NCDs (face value Rs.10 lakhs each) carrying interest at 14% p.a., secured by hypothecation of its entire assets in favour of Trifecta Venture Debt Fund (45, 1st Floor, Navjivan Vihar, New Delhi – 110 017), a SEBI-registered Alternative Investment Fund (AIF) Category II (certificate dated 13.04.2015). The amount was reflected in the Assessee’s annual accounts as long-term borrowings.
8. As noted in para 8 of the assessment order, the ld. AO required the Assessee to furnish (i) a confirmation, (ii) the lender’s return of income, (iii) the lender’s bank statement, and (iv) the source of repayment. The ld. AO also questioned the interest rate of 14% as being high and asked why section 40A(2)(b) would not apply.
9. The Assessee explained that the Redeemable NCDs represented a working-capital loan from Trifecta Venture Debt Fund (SEBI-registered AIF Category II) dated 29.12.2022 for Rs.120 crores at 14% interest, and submitted the AIF’s income-tax return, bank statements of the Assessee and the lender, and loan confirmation (referred to in paras 8.3 to 8.5). The Assessee had requested the ld. AO to obtain the fund’s balance sheet and related details by invoking section 133(6) of the Act, but this was not done.
10. In para 4.4.1, the ld. AO recorded that although the Assessee filed the ITR acknowledgment, the Profit & Loss account and Balance Sheet of Trifecta Venture Debt Fund II were not furnished. The ld. AO further noted that the AIF’s return reflected NIL income and, on that basis, held that the lender lacked creditworthiness and made an addition of Rs.120 crores under section 68 of the Act.
11. In support, the ld. AO relied on various judicial precedents, including the Hon’ble Supreme Court’s decision in Sumati Dayal v. CIT, 125 ITR 124, and sustained the above addition.
12. Before the ld. CIT(A), the addition was confirmed (para 6.1.5) on the ground that the Assessee had not, in his view, established the lender’s financial capacity. The ld. CIT(A) therefore upheld the addition under section 68 of the Act.
13. The assessee is aggrieved and has contested the above addition as per ground Nos.6 to 15 of the appeal.
14. The ld. AR described the Assessee’s business and submitted that, to meet working-capital requirements, it entered into an agreement to allot Redeemable Non-Convertible Debentures of Rs.120 crores to Trifecta Venture Debt Fund, a SEBI-registered Category II AIF; the SEBI registration certificates were placed on record, establishing the lender’s identity. He referred to Trifecta’s income-tax return and bank statements evidencing the Rs.120 crore funding. Of this, Rs.28 crores was invested on 29.12.2022 out of redemption of SBI Mutual Fund units by Trifecta; the investor’s RBL Bank A/c No.5808 and the current account statement (PB p.42) were relied upon. The balance Rs.92 crores was invested on 29.12.2022 from Trifecta’s ICICI Bank A/c No.337, which also reflects receipts from various unitholders; as on that date, the fund balance was Rs.95,00,89,391. A confirmation from Trifecta evidencing the investment (PB pp.49–51) was also filed. He further pointed out that Trifecta Venture Debt Fund I and III reported NIL income (PB pp.40–41) and explained, with reference to sections 115U and 115UA, that the AIF is a pass-through vehicle and income is ordinarily taxable in the hands of the unitholders, hence the NIL return. Relying on the debenture deed, mortgage deed, confirmations and bank statements, he contended that identity, creditworthiness and genuineness—and even the source of source—stood proved. He also submitted that the Assessee did not have access to the AIF’s annual accounts and had requested the ld. AO to call for the same under section 133(6), which was not done, and argued that the section 68 addition, as sustained by the ld. CIT(A), is unwarranted.
15. He submitted, based on publicly available information, that Trifecta Capital is a SEBI-registered Category II AIF platform focused on venture debt (with a selective growth-equity strategy through the Leaders Fund). Since 2015, it has deployed over $680M across 180+ startups, with teams in Gurugram, Mumbai and Bengaluru, and a portfolio spanning consumer/commerce (e.g., Big Basket, Meesho), mobility/logistics (e.g., Blackbuck), fintech (e.g., Cash free, MobiKwik), healthcare (e.g., Pharm Easy) and enterprise/SaaS (e.g., Bizongo, ixigo). He further stated that Trifecta Venture Debt Fund III closed at INR 1,777 Cr (target INR 1,500 Cr; first close in November 2021) and, with capital recycling, has an investible corpus of up to INR 4,440 Cr; Trifecta reportedly has dry powder of about INR 3,000 Cr and has invested about INR 1,500 Cr in 50+ startups since the first close (including Zepto, Rebel Foods, Udaan and Infra.Market).
16. He submits that as per information Trifecta Capital offers tailored financing solutions for startups across lifecycles, encompassing venture debt, growth equity, and financial solutions. The firm provides customized financing to emerging businesses across sectors, including B2B, consumer services, consumer brands, ecommerce, mobility, edtech, agritech, fintech, cleantech, software, and healthcare. Before extending debt to startups, it looks for several key factors, such as businesses with strong moats, favorable demand-supply dynamics, robust unit economics, high-calibre founders, and more. Trifecta has also developed a specialized technology and advisory platform with cumulative managed capital exceeding INR 11,000 Cr, to support the treasury and cash management needs of rapidly growing startups With the third fund’s closure, Trifecta Capital has cumulatively raised nearly INR 5,000 Cr across its three venture debt funds and one growth equity fund, investing in over 150 startups.
17. Referring to the business of the assessee, he submitted that Cash free Payments is a leader in India’s payments landscape, processing $80B annually for over 1 million+ businesses since 2015. It enables seamless transactions with a full-stack payments platform offering 100+ payment methods for effortless collections, Instant payouts, Cross-border transactions, One-click checkout for higher conversions and abandoned cart recovery and return prediction. With fast on boarding seamless integration, and compatibility with platforms like Shopify, Wix, WordPress, WooCommerce, and WhatsApp, businesses can start transacting within a day. Cash free Payments owns its end-to-end payment processing technology, ensuring higher success rates and reliability. Built to scale, it can process up to an industry leading number of 12,000 transactions per second, handling peak demand effortlessly. He referred to recent innovation, SecureID is an advanced identity verification stack designed to combat fraud. It offers powerful APIs and KYC components to streamline compliant onboarding and KYC. SecureID has completed more than 1 billion identity and user verifications till date.
18. Thus, he submits that there is neither an issue of genuineness nor of creditworthiness of investments in the company. He further submits that assessee has also mortgaged the property to that debt fund which is also disclosed in the balance sheet but ld. AO insisted on the balance sheet of AIF, where asessee pleading its inability requested the ld. AO to obtain the same u/s 133(6) of the Act, which was not acceded to.
19. The ld. CIT(DR) contended that, since the Assessee did not furnish the AIF’s annual accounts, the ld. AO could not verify the source of funds. He further submitted that bank statements alone do not establish the lender’s creditworthiness.
20. We have considered the rival submissions and examined the records. The Assessee is a payment-gateway company, owned by a foreign entity, in which SBI is also an equity holder.
21. During the year assessee issued Redeemable Non-Convertible Debentures aggregating Rs.120 crores to Trifecta Venture Debt Fund, a SEBI-registered Category II AIF and to substantiate the identity, creditworthiness and genuineness of the transaction furnished
(i) SEBI registration of the lender,
(ii) Address of The Fund and its managers etc.
(iii) PAN of the Fund
(iv) lender’s bank statements showing the receipt of the funds and also the amount invested in the company
(v) the source of funds,
(vi) Debenture Trust Deed and
(vii) Mortgage Deed,
(viii) its own annual accounts,
(ix) debenture application,
(x) confirmation of the lender,
(xi) ROI of the lender,
(xii) explanation why the income of AIF is NIL showing the provisions of the Act
(xiii) Statement of share capital of the assessee showing the US Company and State bank of India The largest banker of the company are investors,
(xiv) Profile details of AIF
(xv) sources of source of funds material on record show that Rs.28 crores came from redemption of SBI Mutual Fund units and Rs.92 crores was funded out of contributions received from the AIF’s unitholders
(xvi) to substantiate the identity, creditworthiness and genuineness of the transaction.
22. As regards NIL income, sections 115UA and 115UB treat such investment funds/business trusts as pass-through vehicles, with income generally taxable in the hands of unitholders (and any residual taxable at the maximum marginal rate). Therefore, the fund’s NIL return cannot, by itself, be a yardstick to deny the lender’s creditworthiness.
23. Thus, assessee has discharged its initial onus of proving Identity, creditworthiness and genuineness of the transaction. The ld. AO has not carried out any independent inquiry to dislodge the evidence produced before him. The evidences produced by the assessee is also supported by plethora of facts about the existence of AIF and its content available in public domain.
24. The ld. AO rejected the explanation chiefly because the Assessee did not produce the fund’s balance sheet and because the fund returned NIL income. We are of the view that the ld. AO failed to appreciate any evidence and facts shown by the assessee but determined to make the addition u/s 68 of the Act.
25. The ld. AO has held that assessee did not file the annual accounts of the Fund who invested the same. It is the categorical statement of the assessee that though assessee has discharged the initial onus u/s. 68 of the Act, if still the AO would like to look at the Balance Sheet of the AIF, the necessary provisions of section 133(6) of the Act may be used. We find that the annual accounts of the Debt Fund are neither available in public domain nor available with the assessee. Though we find that by producing substantial evidence the assessee has shown the identity, creditworthiness and genuineness of the transaction, but , we do not know for what purposes the dl AO would like to see the annual accounts of the AIF, still the AO wanted to examine the Balance Sheet of the AIF, we direct the ld. AO to exercise his powers available to him u/s. 133(6) of the Act, if he still wants to exercise after verification of above details.
26. To that extent, we restore ground Nos. 6 to 15 of the appeal to the file of the ld. AO that if he wants to examine the balance sheet and annual accounts of the AIF, the same may be called for and verified. The assessee may be granted an opportunity of hearing if still the ld. AO wants to take an adverse view. Thus, ground Nos. 6 to 15 are allowed as indicated above.
27. The ld. AO has disallowed a sum of Rs.11,42,86,000 being interest paid to the above lender holding that the provisions of section 40A(2)(b) of the Act are applied. The assessee has paid interest @ 14% p.a. The ld. AO considered it to be reasonable @ 6% and found the balance of 8% as excessive and unreasonable.
28. The ld. CIT(A) confirmed the same.
29. The ld. AR vehemently submitted that the provisions of section 40A(2)(b) can be applied in the case of assessee if payment made to the person referred to in clause (b) of sub-section (2). It was submitted that Trifecta Venture Debt Fund is not at all a person covered thereunder.
30. The ld. DR supported the order of the ld. lower authorities.
31. We have carefully considered the rival contentions and perused the orders of the ld. lower authorities. We find that the assessee is a company and Trifecta Venture Debt Fund is merely a lender who does not have any association, except a borrower and lender with the assessee. It does not hold any interest in the equity or any beneficial interest in the profits of the assessee company.
32. The assessee is a 100% wholly owned subsidiary of Cash free Inc. USA and the equity investment of SBI. The details of shareholders is also available with the annual accounts of the assessee. The ld AO did not show under which clause and by which nexus the Trifecta is the concern falling u/s 40A 92) (b) of the Act so far as the interest payments of the assessee on the above Debenture is concerned. Thus, the provisions of section 40A(2)(b) do not apply to the above transaction.
33. Further the ld. AO did not give any reason that why only 6 % interest is the reasonable rate of interest in the facts and circumstances of the case.
34. The ld. AO is directed to delete the disallowance of interest of Rs.11,42,86,000 made on this account. Thus ground Nos.16 to 19 of the appeal are allowed.
35. Ground Nos. 20 to 22 are with respect to interest expenditure of Rs.97,57,000 u/s. 36(1)(iii) of the Act on account of proportionate disallowance of capital work-in-progress. The ld. AR submitted that assessee maintained its books of accounts in terms of Accounting Standards and further the capital work-in-progress has completed in the subsequent financial year and the cost is amortized as per the provisions of the Act. It was further submitted that even if proportionate interest is capitalized, the same would be allowable over the period of amortization same being revenue neutral exercise and therefore the addition made by the ld. AO is incorrect. The ld. AR further relied upon the decision of the Hon’ble Supreme Court in the case of CIT v. Excel Industries Ltd., 358 ITR 295 para 32 to support his contention.
36. The ld. DR supported the orders of the ld. lower authorities.
37. We have carefully considered the rival contentions and perused the orders of the ld. lower authorities. According to the provisions of section 36(1)(iii) of the At, the amount of interest paid in respect of capital borrowed for the purpose of business or profession is allowable as deduction in computing the income referred to in section 28 of the Act. The proviso was added to the above section wherein it is provided that if the interest is paid in respect of capital borrowed for acquisition of an asset, from the date of borrowing till the date on which such asset was first used, cannot be allowed as deduction under this section. Thus, the deduction cannot be allowed on the interest paid to the lender if the amount is borrowed in respect of acquisition of asset.
38. We find here that the borrowing is made by the assessee of Rs.120 Crores for working capital and not acquisition of any asset. It is also not shown by the revenue authorities that such amount is used for acquisition of any capital assets. Therefore, the applicability of the above provision does not apply to the facts of the case. Accordingly, we direct the ld. AO to delete the disallowance of Rs.95,75,000 being proportionate disallowance of interest on capital work-in-progress since there is no borrowing for the purpose of acquisition of any asset. Accordingly ground Nos. 20 to 22 of the appeal are allowed.
39. Ground Nos. 23 to 33 of the appeal are with respect to disallowance of 10% of the expenditure incurred by the assessee. The assessee has claimed an expenditure of Rs.5,44,80,000. The ld. AO has disallowed 10% thereof. Further, in respect of marketing & business promotion expenditure of Rs.3,79,00,000, the ld. AO has made the above disallowance holding that assessee did not furnish the complete details. It was the claim of the assessee before the ld. AO that all the expenses are complete in nature, however the assessee has expressed its inability to upload all the vouchers and relevant supporting bills due to the voluminous details. The ld. AO therefore held that 90% of such expenditure is allowable and confirmed disallowance @ 10%.
40. The ld. CIT(A) further held so that in the absence of details furnished it could not have been allowed.
41. The ld. AR submitted that all the details are provided before the ld. AO, but it is not feasible to submit all these details physically but submitted electronically before the ld. AO. He submitted that the ad hoc disallowance made by the ld. AO is devoid of any merit. He referred to his submission that assessee has furnished the complete books of account, ledgers, bank statements, invoices, tax deduction details, audited financial statements. The ld. AO did not mention what details are required which have not been submitted by the assessee. He submits that the disallowance made by the ld. AO is merely on ad hoc basis which could not have been made. He also submitted a letter dated 7.4.2026 before us wherein the link was provided of Google Drive wherein all the details are available of these expenses.
42. The ld. DR supported the order of the ld. lower authorities.
43. We find that the assessee has submitted various details of the expenses. However, the ld. AO found that assessee has debited an expenditure of Rs.4182,90,00,000. The AO did look into the various expenditures incurred by the assessee and held that assessee was asked the confirmation letters of the above parties along with their PAN, address, copy of I.T. Return, all the vouchers and bills and copies of agreement. He held that assessee did not file list of parties and vouchers and therefore he disallowed 10% of expenses. The AO did not say that assessee did not furnish all other details asked by the AO. As the ld. AO has merely applied ad hoc disallowance for the reason that all the vouchers and bills are not furnished, we restore these grounds of appeal back to the file of the ld. AO to verify the details furnished by the assessee and then if he finds that there are expenses which are not incurred wholly and exclusively for the purpose of business, only those expenses could be disallowed after giving assessee an opportunity of hearing. Even otherwise the ad hoc disallowance of 10% without pointing out the specific nature of expenditure for which the AO was not provided with the details and vouchers could not be sustained. Accordingly, we direct the ld. AO to verify the details and thereafter decide the issue afresh looking at the nature of the business and volume of the transaction. Accordingly ground Nos. 30 to 32 of the appeal are allowed.
44. Ground No.33 is with respect to disallowance of CSR expenditure in the books of account, which is incurred by the assessee, but same was not disallowed in the computation of total income. We do not find any infirmity in the order of the ld. lower authorities in making this disallowance of Rs 60.000/-, we confirm the same. Therefore ground No.33 is dismissed.
45. Ground Nos.34 to 41 are all consequential in nature, premature and therefore these are dismissed, except to the extent of verification of TDS credit of Rs.3,03,750 which may be verified and credit may be granted to the assessee in accordance with law.
46. In the result, appeal filed by the Assessee is PARTLY ALLOWED.
Order pronounced in the open court on 11th May 2026.
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