IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI “C” BENCH : MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER Assessment Year : 2017-18 DCIT, Circle-1(1)(1), Championx Dai-Ichi India Room No. 533, Private Limited, 5th Floor, vs. 3rd Floor, Liberty Building, Aayakar Bhavan, Sir Vithaldas Thackersey Marg, Mumbai-400020. New Marine Lines, Mumbai-400020.

PAN : AAACB0474E (Appellant) (Respondent)

For Assessee : Shri Rushabh Mehta For Revenue : Shri Virabhadra Mahajan, Sr.DR Date of Hearing : 09-02-2026 Date of Pronouncement : 16-02-2026

O R D E R

PER VIKRAM SINGH YADAV, A.M :

This is an appeal filed by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [„Ld.CIT(A)‟], dated 31-07-2025, pertaining to Assessment Year (AY) 2017-18, wherein the Revenue has taken the following grounds of appeal:

“1. On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in deleting the disallowance of commission expenses of Rs.1,99,77,026/- made u/s 37(1), without appreciating that the assessee failed to furnish agreements/credible evidence of actual services rendered.

2. On the facts and circumstances of the case and in law the Ld.CIT(A) failed to consider that most expenses were booked on 31.03.2018 disproportionate to turnover and profits, indicating non-genuineness.

3. On the facts and circumstances of the case and in law the Ld.CIT(A) placed reliance on judicial precedents is misplaced, as the facts of the present case are clearly distinguishable.

4. On the facts and circumstances of the case and in law the order of the Ld.CIT(A) is erroneous in law and on facts, and deserves to be set aside and that of the AO restored.”

2. Briefly, the facts of the case are that the assessment in this case was completed u/s. 143(3) of the Income Tax Act, 1961 („the Act‟), vide order dt. 26-12-2019, wherein the AO has disallowed a sum of Rs. 1,99,77,026/- u/s. 37(1) of the Act on account of commission expenses claimed by the assessee. The assessee thereafter carried the matter in appeal before the Ld.CIT(A), who has since deleted the said disallowance and against the said order and findings of the Ld.CIT(A), the Revenue is in appeal before us.

3. During the course of hearing, the Ld. DR taken us through the order of the Assessing officer and it was submitted that during the course of assessment proceedings, a show cause was issued to the assessee, wherein the assessee was asked to show cause as to why the commission expenditure which has been booked on the last year i.e., 31-03-2019 should not be treated as „sham transaction‟ and disallowed for tax purposes. It was submitted that in response to the said show cause, the assessee has merely submitted that major part of the commission expenses have been booked in the month of March, 2017 for the reason that it has received actual invoice copies in the month of March, 2017 only and TDS has also been deducted on the same and copies of invoices were also submitted. It was submitted by the ld DR that the submissions so filed by the assessee were not found acceptable to the AO for the reason that nature of services rendered and contract with the said party was not submitted. Further, the AO has held that the submission of invoices at year end is not logical if services are rendered regularly and moreover, customers are all large size oil companies, so it is important to justify nature of services rendered. Further, the AO referred to the reduced turnover and reduced profit and has held that the commission payment so made by the assessee is not logical and commensurate with the reported turnover and accordingly he disallowed the commission expenditure, invoking the provisions of section 37(1) of the Act.

4. It was further submitted by the Ld.DR that the Ld.CIT(A) has referred to the assessee‟s submissions dt. 19-12-2019 and has stated that the assessee has filed all the necessary document