ITAT Ahmedabad Partly Allows Marketing Expense Claim & Deletes Penalty Under Section 270A

Background of the Dispute

The Ahmedabad Bench of the Income Tax Appellate Tribunal dealt with two connected appeals in the case of Globizz Synergy Private Limited Vs ITO (ITAT Ahmedabad) for the same assessment year, arising from two separate orders of the National Faceless Appeal Centre (NFAC), Delhi, dated 10.12.2025 and 12.12.2025.

  1. One appeal concerned a quantum addition made in assessment framed under Section 143(3) of the Income Tax Act 1961.
  2. The second appeal related to a penalty levied under Section 270A for alleged misreporting of income.

Since both matters revolved around the same set of facts relating to marketing expenditure, the Tribunal heard and disposed of them together.

The assessee is a non-asset based logistics service provider, incorporated in 2013. For the relevant assessment year 2021-22, it declared total income of Rs. 1,51,63,830/-. The Assessing Officer (AO), while completing scrutiny assessment, disallowed the entire claim of marketing expenses amounting to Rs. 31,87,542/-, and later treated the same disallowance as misreporting for the purpose of penalty under Section 270A.

Facts Relating to Marketing Expenditure

Nature of Business and Accounts

  • The assessee operates as a non-asset based logistics company.
  • Its books of account were audited under both the Companies Act 2013 and the Income Tax Act 1961.
  • The statutory audit reports, as noted, did not carry any adverse remark or qualification concerning the claim of marketing expenses.

For the year under consideration, the assessee reported a turnover of Rs. 66,69,91,881/-. Against this turnover, the assessee claimed total marketing-related expenses of Rs. 31,87,542/-, which worked out to roughly 0.5% of revenue.

Break-up of Expenses

The assessee produced ledger extracts to explain the nature of the impugned expenses, broadly grouped as:

  1. Marketing expenses – Rs. 21,79,041/-
  2. Employee benefit expenses – Rs. 2,01,792/-
  3. Office expenses – Rs. 8,06,709/-

The record showed that:

  • Office expenses covered petrol, food, tea and coffee, refreshments, courier charges and other miscellaneous office-related outgoings.
  • Marketing expenses included:
    • Participation in exhibitions,
    • Client visit-related expenditure,
    • Fuel and travel costs reimbursed to staff visiting clients in various cities.
  • Many outstation visits involved small cash spends on client meetings, refreshments and related promotional activities.

The assessee explained that these expenses were predominantly borne by the sales team and subsequently reimbursed by the company, mostly supported by internal or self-prepared vouchers, especially where third-party bills were not practically available.

All payments, as per the assessee, were routed through legitimate banking channels or proper modes, and the expenditure had been duly recorded in regularly maintained books.

Approach of the Assessing Officer and NFAC

Basis for Disallowance

The AO disallowed the entire amount of Rs. 31,87,542/- claimed as marketing expense. The primary ground was lack of adequate third-party documentary evidence. The AO and the NFAC (acting as Ld. CIT(A)) observed: