ITAT Hyderabad: 100% Disallowance of Promotion Expenses Unjustified; 50% Adhoc Disallowance Sustained

Sai Ganesh Educational Society Vs ITO (ITAT Hyderabad)

ITAT Hyderabad: 100% Disallowance of Promotion Expenses Unjustified; 50% Adhoc Disallowance Sustained

In this case, the assessee society claimed sales promotion expenses of ₹25.53 lakh, which had increased sharply by about 495% compared to the previous year. The AO disallowed the entire expenditure due to lack of proper supporting evidence such as bills, PAN details, and verifiable vouchers, and the CIT(A) upheld the full disallowance.

Before the ITAT, it was argued that such expenses were inherent to the assessee’s educational promotion activities and had been consistently incurred in earlier years, though complete documentation could not be furnished.

The Tribunal held that while the assessee failed to fully substantiate the expenditure, complete disallowance was excessive and unjustified, especially when incurrence of such expenses was not in dispute and similar expenses were incurred in earlier years.

Balancing the lack of evidence with business realities, the ITAT directed that only 50% of the expenditure be disallowed, granting partial relief to the assessee. The appeal was thus partly allowed.

FULL TEXT OF THE ORDER OF ITAT HYDERABAD

This appeal filed by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [in short “NFAC”], Delhi, dated 10.17.2025, pertaining to the assessment year 2018-19.