ASSISTANT COMMISSIONER OF INCOME TAX, DELHI vs. LION SERVICES LIMITED, DELHI

PER SUDHIR KUMAR, JM: This is appeal filed by the revenue against the order of Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 27/10/2025 in Appeal No. NFAC/2021-22/10332800 for Assessment Year 2022-23. 2. The Revenue has raised the following grounds of appeal:- 1. On the facts and circumstances of the case and in law, the CIT(A) erred in deleting the addition of Rs. 4,85,90,762/- made by the AO on account of excessive and unsubstantiated consumables expenditure and holding that rejection of books is a perquisite for making a specific disallowance.

Ld. CIT(A) erred in holding that the AO made an adhoc disallowance, whereas the AO made a reasoned disallowance based on objective analysis and also failed to appreciate that the burden of proof under section 37(1) lies upon the assessee, which was not discharged. He further submitted that the action of the Ld. CIT(A) in deleting the addition of Rs. 1,09,08,574/- towards unaccounted sale of goods reported in Form 26AS but not recorded in books, is not sustainable. 5. On the other hand, Ld. AR of the assessee relied upon the order of the Ld. CIT(A). 6. We have heard both the parties and perused the records. As regards deletion of addition of Rs. 4,85,90,762/- is concerned, it reveals from the assessment order that the cost of consumables was increased substantially as compared to earlier year (covid 19 period), therefore, the AO restricted the increase to 15% and remaining expenses of Rs. 4,85,90,762/- was disallowed on adhoc basis without properly analyzing and without properly verifying the reasons put-forth by the assessee for the increase in the cost of consumables and without rejecting the book results shown by the assessee. After considering the detailed explanation with the supporting evidences, Ld. CIT(A) found that the assessee has justified the increase in consumable expenses and has also provided the reasons for fall in the net profit as compared to earlier years. We further note that there is not even any whisper on any application under Rule 46A by the assessee and neither any such documentary evidence is discussed. We find that the adhoc disallowance made by the AO is not justified, hence, the addition made by the AO of Rs. 4,85,90,762/- was rightly deleted by the Ld. CIT(A), hence, we uphold the same and reject the ground raised by the revenue. 6.1 As regards deletion of addition of Rs. 1,09,08,574/- is concerned, it reveals from the assessment order that the amount of Rs. 1,09,08,574/- on account of sale of goods was added to the total income, the assessee could not prove that the same is already included in the sale of services. During the course of appellate proceedings, the assessee has submitted that the sale of spare parts of Rs. 1,34,63,542/- was made to M/s Pro Power Sweeping Company which includes the consumables of Rs. 1,09,08,574/- and M/s Pro Power Sweeping Company had deducted TDS u/s. 194Q from the payment. The assessee 3

produced the ledger account extract and extract of ITR of the relevant page in support of its contention. The AO made the addition of Rs. 1,09,08,574/- on account of sales of goods, since the assessee could not prove that the same is already included in the sale of services. However, the during the appellate proceedings, the assessee has demonstrated with supporting evidences that the sale of consumables was already included in revenue from services, thus, the addition was not justified and rightly been deleted by the Ld. CIT(A), which does not need any interference on our part, hence, we uphold the finding of the Ld. CIT(A) on this issue and reject the ground raised by the revenue.

Sd/- Sd/-

(MANISH AGARWAL) (SUDHIR KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER

SRBhatnaggar

Date: 17-07-2026