Globizz Synergy Private Limited Vs ITO (ITAT Ahmedabad)
The two appeals concerned the same assessee and assessment years but arose from separate orders of the National Faceless Appeal Centre (NFAC), Delhi, dated 10.12.2025 and 12.12.2025. One appeal related to quantum proceedings under Section 143(3) of the Income Tax Act, 1961, while the other concerned penalty under Section 270A. Since the issues were interrelated, both appeals were heard together.
The assessee, a non-asset based logistics company founded in 2013, had declared total income of Rs. 1,51,63,830/-. The Assessing Officer disallowed the entire marketing expenses of Rs. 31,87,542/- for insufficient substantiation. The authorities below recorded that the assessee had furnished evidence in the form of self-made vouchers but had not furnished third-party invoices, bills, vendor agreements or details regarding the purpose of expenditure.
The expenses included petrol, food, refreshments, gifts, sponsorship, pamphlets, client visits and event sponsorship. The assessee submitted that its audited books reflected total revenue/turnover of Rs. 66,69,91,881/-, while the marketing expenses represented approximately 0.5% of the total revenue.
The ledger showed marketing expenses of Rs. 21,79,041/-, employee benefit expenses of Rs. 2,01,792/- and office expenses of Rs. 8,06,709/-. The office expenses included petrol, food, tea and coffee, refreshments, courier and other ancillary expenses. Marketing expenses related to exhibitions, client visits and fuel expenses reimbursed to employees travelling to different cities for client visits.
The assessee also submitted that payments were made through legitimate means, the expenses were primarily incurred by the sales team, and self-made vouchers were used for reimbursement of employee expenses relating to client visits and other expenses. It further pointed out that its books were audited under both the Companies Act, 2013 and the Income Tax Act, 1961, without any qualification or adverse observation from the auditors.
The Tribunal noted that the sole basis for disallowing the marketing expenses was insufficient substantiation, particularly because the assessee had furnished self-made vouchers without third-party evidence.
The Tribunal considered the assessee’s turnover of approximately Rs. 66 crore against marketing expenses of about Rs. 31 lakh, the nature of expenses incurred by the sales team during outstation client visits, including cash expenses for entertainment, refreshments and travelling, and the fact that the books had been audited without adverse comments concerning the claimed expenses.
The Tribunal held that disallowing the entire marketing expenditure of Rs. 31,87,542/- was grossly unjust and unfair. At the same time, noting that the expenses were supported only by self-made vouchers, it considered it fair and just to restrict the disallowance to Rs. 5 lakh. The assessee’s quantum appeal in ITA No. 230/Ahd/2026 was therefore partly allowed.
The second appeal challenged the penalty of Rs. 19,89,028/- imposed under Section 270A. The penalty had been levied on the disallowance of marketing expenses, with the Assessing Officer treating the matter as misreporting of income and imposing penalty at 200% of the tax sought to be evaded. The CIT(A) had confirmed the penalty.
The Assessing Officer’s reasoning was that the assessee was required to include its true and correct income in the original return but had not done so, and that the failure constituted misreporting rather than an omission, oversight or technical or venial breach.
The Tribunal considered Section 270A(9), which specifies cases of misreporting of income, including misrepresentation or suppression of facts; failure to record investments in the books; claim of expenditure not substantiated by any evidence; recording of false entries in the books; failure to record receipts having a bearing on total income; and failure to report specified international or domestic transactions covered by Chapter X.
The Tribunal observed that the marketing expense disallowance had not been made because the assessee misrepresented or suppressed facts. It also noted that there was no finding by the Revenue authorities that the expenditure claim was not substantiated by any evidence or that there was any false entry in the books of account.
The Tribunal further observed that the assessee’s case did not fall within the categories specified in Section 270A(9), and the Assessing Officer had not identified the specific sub-clause under which the assessee’s case was being treated as misreporting.
Accordingly, the Tribunal held that the assessee was not liable to penalty for misreporting of income in the facts of the case. The penalty was held to be not sustainable in law and was directed to be deleted.
The Tribunal pronounced the order under Rule 34 of the ITAT Rules, 1963, on 15.07.2026. The appeal concerning the marketing expense disallowance was partly allowed, with the disallowance restricted from Rs. 31,87,542/- to Rs. 5 lakh. The separate appeal challenging the Rs. 19,89,028/- penalty under Section 270A was allowed, with the penalty directed to be deleted.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
Both the appeals relate to the same assessee, for the same assessment years, however arise from separate orders passed by the National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as “Ld. CIT(A)”) dated 10.12.2025 and 12.12.2025 respectively, 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 appeal pertains to disallowance of marketing expenses incurred by the assessee. Orders of the Authorities below reveal that the assessee was noted to be engaged in the business of non-asset based Logistics Company founded in 2013, and had declared total income of Rs.1,51,63,830/-. The entire marketing expenses claimed by the assessee amounting to Rs.31,87,542/- was disallowed for want of adequate substantiation of the same. Orders of the Authorities below concurrently record the fact that the assessee had submitted evidences, but they were found to be only in the nature of self-made vouchers and no third party evidence by way of invoices or third party bills or agreements with vendors, purpose of expenditure etc., were furnished.
4. We have gone through the orders of the Authorities below, and we have noted that the orders record the fact that the expenses were in the nature of petrol, food, refreshment, gifts, sponsorship, pamphlets, client visit and event sponsorship. In his submissions, filed before us, the ld. Counsel for the assessee has contended that the books of accounts of the assessee were duly audited and reflected total revenue/turnover of the assessee during the year amounting to Rs.66,69,91,881/- against which the assessee had claimed marketing expenses of Rs.31,87,542/- which constituted a meager 0.5% of the total revenue. That the assessee had furnished copy of ledger account of the marketing expenses, which clearly reveal the expenses to have been incurred 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 primarily were incurred by the sales team during time of marketing and therefore, there were self made vouchers for the reimbursement of Employees Expenses for client visit and other expenses. He contended that, the books of account were duly audited by a Chartered Accountant under the Companies Act 2013, and also under the Income Tax Act, 1961, and no qualification or adverse observations are mentioned in the report provided by the Chartered Accountant under the Companies Act, and as well as the Income Tax Act.
6. We have considered the pleadings of the ld. Counsel before us, as above and also gone through the orders of Authorities below, and we find that, the only basis for disallowing the marketing expenses incurred by the Assessee of Rs.31,87,542/- was on account of insufficient substantiation of the said expenses. That the assessee allegedly had furnished only self made vouchers in relation to the same, which were not duly supported by any third party evidences.
7. Undoubtedly, the entire marketing expenses incurred by the assessee has been disallowed by the Revenue authorities. Considering the fact, that the assessee had reflected a turnover of approximately of Rs.66 crores against which the marketing expenses of only 0.5% were claimed to have been incurred amounting to Rs.31 lakhs odd and considering the fact that they were incurred by the sales team of the assessee on their frequent visits made to outstation clients for expenses which included those incurred in cash 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 being duly supported by third party evidences. However, noting that, all the entire expenses were supported by only self made vouchers in the interest of justice, it would be fair and just to restrict the disallowance of expenses to the extent of Rs 5 lakhs. Ordered accordingly.
8. Ground of appeal raised by the assessee is partly allowed as above.
9. In effect, the appeal of the assessee in ITA No.230/Ahd/2026 is partly allowed.
10. Taking up the appeal of the assessee in proceedings, confirming the levy of penalty u/s 270A of the Act, in ITA No.231/Ahd/2026, the assessee has challenged the levy of penalty raising following grounds:-
1. The Ld. CIT(A) erred in law as well as on fact in upholding penalty imposed of Rs. 19,89,028/- by Ld. AO u/s 270A of the Act.
11. The penalty in the present case, has been levied on the disallowance of marketing expenses made, while assessing the income of the assessee amounting to Rs.1,51,63,830/-, the AO levied penalty for misreporting of income at the rate of 200% of the tax sought to be evaded which was confirmed by Ld. CIT(A). The reason with the AO as to why the disallowance of marketing expenses qualified as misreporting, was, as contained at page 9 of his order, wherein he has stated that “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 underreported the income in consequence of misreporting. The 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 underreported the income in consequence to misreporting. In view of this position, absolutely matter relating to discloser of income fully and truly in assessee’s case does not have any legs to stand. The mis-report of income arises in a situation where the assessee is obliged to file a return under section 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 mis reported 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 the law could not be appreciated.
12. The facts of the case are clear that the disallowance of marketing expenses was made solely on the ground that the assessee was unable to sufficiently substantiate the incurrence of the said expenses to the satisfaction of the AO, since the assessee was noted to have produced only self made vouchers as evidence and no third party evidences were furnished. In our order passed in quantum proceedings above, we have noted particulars relating to the expenditure being miniscule in comparison to the turnover of the assessee ; the fact that its books were duly audited both under the Companies Act, and as well as the Income Tax Act, and no infirmity was noted in the same, we have noted the fact of nature of expenses incurred and claimed under the head marketing expenses and 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) failure to record any receipt in books of account having a bearing on total income; and
(f) failure to report any international transaction or any transaction deemed to be an international transaction or any specified domestic transaction, to which the provisions of Chapter X apply.
…….
14. It is abundantly clear that the disallowance of marketing expenses made by the AO of Rs.31 lacs and upheld by us to the extent of Rs.5 lacs ,has not been made for the reason that the assessee misrepresented or suppressed any facts. There is no such finding by any of the Revenue Authorities. It is also not the case of the Revenue that the claim of the expenditure is NOT substantiated by any evidence and or that there is any false entry in the books of accounts. These are the only cases of misreporting categorically specified in Section 270A(9) of the Act, which could have been considered for the purpose of charging, the assessee with having misreporting its income. The assessee’s case does not fall under any of the categories as above nor has the AO pointed out what sub-clause of section 270A(9) does the assessees case fall for holding the assessee to have misreported its income.
15. Therefore, we have no hesitation in holding that the assessee in the facts of the present case, was not liable to penalty for misreporting of income and the penalty therefore, levied in the present case, is held to be not sustainable in law. The penalty levied therefore is directed to be deleted.
16. In result, the appeal of the assessee in ITA No.231/Ahd/2026 is In the combined result, the appeal of the assessee in ITA No.230/Ahd/2026 is partly allowed, while the appeal of the assessee in ITA No.231/Ahd/2026 is
Order is pronounced under provision of Rule 34 of ITAT Rules, 1963 on 15.07.2026
