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Judgment
Per Renu Jauhri, Accountant Member:
This appeal by the Revenue is directed against the order dated 15.09.2025 of the Ld. Commissioner of Income Tax (Appeals), Delhi-23 [hereinafter referred to as the ‘Ld. CIT(A)] arising out of the assessment order dated 31.03.2025 passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by DCIT, Central Circle-3, Delhi (hereinafter referred to as the ‘AO’) pertaining to Assessment Year (A.Y.) 2023-24.
The Revenue has raised the following grounds of appeal:-
“ 1. The Ld. CIT(A) has erred in deleting the disallowance of Rs. 2,43,23,025/- u/s 37 of the Act by accepting unverified ledger accounts and submissions of the assessee without seeking any remand or independent verification from the Assessing Officer.
2.The Ld. CIT(A) has failed to appreciate that non-filing of income-tax returns by the concerned parties, absence of confirmations, and lack of proof of service rendered clearly establish that the expenditure claimed is non-genuine and hit by Explanation 1 to Section 37.
3.The Ld. CIT(A) has erred in holding that no expenditure was debited to the Profit & Loss account during the relevant assessment year merely on the basis of ledger entries submitted at the appellate stage, ignoring the fact that such bogus expenses were booked in the case of bogus entities.
4.The appellant craves leave to add, alter, amend, substitute or withdraw any of the above grounds of appeal at the time of hearing.”
Brief facts are that the assessee is a private limited company and had filed return for A.Y. 2023-24 on 12.12.2023 declaring loss of Rs. 59,12,37,871/- which was processed u/s 143(1) of the Act.
The assessee is engaged in business of running a web portal viz. Gaadi.com which provides services and information regarding used automobiles to consumers and dealers.
A survey was conducted u/s 133A of the Act on 13.12.2023 in the cases of Elegance Globex Services & others during which these entities were found to be used for non-genuine purchases and other bogus transactions. One Mr. Akash, Prop. JMD Globex Services (JMD, in short) is one of the searched entities and it was seen that the assessee had taken accommodation entries amounting to Rs. 90,01,887/-through him during F.Y. 2022-23.
The assessee’s case was selected for scrutiny and in response to the notices issued, it submitted that expenditure of Rs. 90,01,887/- were incurred towards advertising expenses. A copy of the ledger account of JMD was filed before the AO. Since the assessee could not file copy of the sub-contractual agreement, evidences of actual delivery of services etc., therefore, the AO treated these as non-genuine / bogus expenses which were disallowed u/s 37 of the Act.
Further, another disallowance of Rs. 2,43,23,025/- was also made on the ground that the purchases / expenses for which payments were made to the following five parties which was non-filers and, therefore, these transactions were held to be non-genuine like in the case of JMD:-
Inscare Consultants Pvt. Ltd. - Purchase of Rs. 78,61,916/-
Encore Enterprises - Purchase of Rs. 1,05,520/-
Naseem Fatma - Purchase of Rs. 1,35,04,485/-
Photon Finnovative - Purchase of Rs. 27,47,296/-
Kishore Singh - Purchase of Rs. 1,03,808/-Assessment was framed u/s 143(3) at assessed loss of Rs. 55,79,12,959/-.
Aggrieved, the assessee preferred an appeal before the CIT(A).
In order to verify the claims of the assessee, the CIT(A) sought a remand report from the AO which was received on 29.08.2025. After considering the same alongwith the assessee’s rejoinder dated 10.11.2025, the CIT(A) decided both the grounds as under:
“6.4I have perused the submissions dated 28.2.2025 and 24.3.2025 (enclosed at pages 17-37 of the paperbook) and noted that the assessee has filed complete details in relation to transactions with JMD with the Ld. AO. Further, vide submission dated 24.3.25, it was specifically mentioned that no expense has been booked in subject year under consideration and therefore no expense is debited to profit and loss account. To substantiate the same, the assessee submitted party wise list of advertisement expense of Rs 73.48 crores comprising of 141 parties wherein in JMD name is not appearing. Also, in the ledger account of the JMD submitted, it is noted that TDS of Rs 1,18,853 was debited in party's account in FY 2021-22 on expense of Rs 1,18,55,731. Thus, no expense has been debited in the profit and loss account for this year and therefore no addition can be made when there is not expense in profit and loss account. Thus, this ground of appeal of the assessee is allowed. .. .. ..
7.2In the remand report, the Ld. AO has not submitted anything in relation to these 5 parties. It is noted that the basis for making addition of Rs 2,43,23,025 as per the AO is that the transaction with JMD is not genuine who is non-filer, these 5 parties who have not filed return and are also non-filers are equally non-genuine.
7.3The assessee during these proceedings have filed ledger account of these 5 parties submitted that the expenditure debited in profit and loss account is Rs 43,42,602 as against Rs 2,43,23,025 reported by the AO. Further, the expenditure of Rs 43,42,602 is on account of finance commission on which TDS of 5% has been made and not advertisement expenditure. It is noted that Ld. AO during assessment proceedings have not made any enquire on this expenditure and not placed any other evidence on record to otherwise prove that the expenditure with these parties is not genuine. Also, non-filing of income tax return by other persons cannot be basis that expenditure incurred by an assessee is not genuine. Thus, this addition is hereby deleted and ground of appeal of the assessee is allowed.”
Aggrieved with the order of the CIT(A), the Revenue has filed present appeal before the Tribunal.
Before us, the Ld. DR has contended that the CIT(A) deleted the additions on the basis of unverified ledger accounts and accepted the assessee’s submissions without seeking remand report from the assessee or making any further verification. In the absence of confirmation of parties which were non-filing and without establishing the services rendered by them, the AO had rightly disallowed Rs. 2,43,23,025/- u/s 37 of the Act, and, therefore, the same deserved to be upheld.
On the other hand, Ld. AR has argued that a remand was duly sought by the CIT(A) from the AO and the same was also submitted by him vide letter dated 29.08.2025, a copy of which has been placed on record. The AO has given his comments on both the disallowances of Rs. 90,01,887/- and Rs. 2,43,23,025/-respectively, as is evident from the remand report. Thereafter, a copy of the remand report was also forwarded to the assessee by CIT(A) vide letter dated 8.9.2025. The assessee gave its submissions which were duly acknowledged and considered by the CIT(A) before allowing relief to it. Thus, the assertion of the Revenue that no remand report was sought from the AO is incorrect. He has further submitted that the CIT(A) had also made enquiries and duly examined the details of the impugned expenditure and noted that the expenditure of on account of finance commission was Rs. 43,42,602/- during the year and not Rs. 2,43,23,025/- on which TDS had also been deducted during the year. Summary of transactions has been filed as under:-
Finally, the Ld. AR submitted that merely because the recipients did not file their IT returns cannot be held against the assessee.
We have heard the rival submissions and perused the material available on record. We note that the CIT(A) has indeed obtained the remand report from the AO on the assessee’s submissions and documentary evidences filed during the appellate proceedings, copies of which have also been placed before us. Vide report dated 29.08.2025, the AO had furnished the following comments: -
“3.Ground No.1: The additions of, Rs. 90,01,887/- on account of transactions with M/s JMD Globex Services and Rs. 2,43,23,025/- on account of transactions with 5 parties who are non-filer/stop filer of return of income, were made without issuing any Show cause notice therefore the order passed is in violation of principal of natural justice.:
3.1It is submitted that for AY 2023-24, SCN was issued to the assessee on 28.03.2025 vide DIN number ITBA/AST/F/143(3)(SCN)/2024-25/1075169128(1) (copy available in paper book at pages 2 to 6 also), which was to be complied by assessee by 30.03.2025. Further to this, an earlier show cause was also issued to the assessee vide notice u/s 142(1) dated 15.02.2025 which is a matter of fact and record and also annexed by the assessee at pages 12-16 of the paper book. Vide the SCN dated 28.03.2025, the assessee was specifically requested to furnish copy of all correspondence with all the vendors during the course of supply of service, copy of invoices raised by assessee, copy of ledger a/c of such vendors, how the supply of goods or services rendered for the purpose of claiming payments, how quality was checked and how milestones were measured in this regard.
It is submitted that the case was transferred at the fag end of limitation period. There were severe constraints including the limitation period involved.
However, if it is considered that due opportunity as per principle of natural justice has not been offered, Ld CIT(A) may consider allowing the further opportunity to the assessee in accordance with the natural justice.”
Thereafter, the comments of the assessee were sought on the remand report and after considering submissions of both the parties, Ld. CIT(A) noted that the expenditure debited in the P & L account in respect of commission paid to these five parties was Rs. 43,42,602/- and not Rs. 2,43,23,025/- as disallowed by the assessee. Further, TDS @ 5% had also been deducted on this expenditure by the assessee. Thus, CIT(A) had duly examined the submissions of the assessee, remand report of the AO and its rejoinder and deleted the addition after considering the entire factual matrix.
In view of above facts and circumstances, we conclude that the amount of finance commission paid was Rs. 43,42,602/- and not Rs. 2,43,23,205/- and TDS on the same @ 5% had been duly deducted and no adverse evidence has been brought on record by the AO in original assessment as well as the remand proceedings to prove that the expenditure was non genuine or that the parties were non-existent. Merely because these parties were non-filers cannot be the reason to disallow the expenditure in the hands of the assessee.
Accordingly, we are of the considered view that the order of the Ld. CIT(A) is well-reasoned and justified and no interference in the same is called for.
In the result, appeal of the Revenue is dismissed.