ACIT, CIRCLE 28(1) , CIVIC CENTRE vs. MAHALAXMI AGENCIES, DELHI

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ITA 5272/DEL/2025Status: DisposedITAT Delhi27 May 2026AY 2022-237 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the assessee's legal ground regarding the invalid notice was not sustainable in light of a jurisdictional High Court decision. The Tribunal upheld the CIT(A)'s deletion of additions related to rent, bogus purchases, unexplained expenses, and sundry creditors, and also rejected the Revenue's ground on salary disallowance.

What were the facts?

The assessee's cross-objection challenged the validity of the assessment notice under Section 143(2) based on CBDT instructions. The Revenue's appeal contested the deletion of additions made by the Assessing Officer concerning rent payments, bogus purchases, unexplained expenses, sundry creditors, and salary expenses.

What were the issues?

Whether the assessment proceedings were void due to a defective notice under Section 143(2). Whether the CIT(A) was justified in deleting the additions made by the AO on various grounds including disallowance of rent, bogus purchases, unexplained expenses, and sundry creditors.

Which sections of the Income-tax Act were involved?

Section 143(2),Section 119,Section 40(a)(ai),Section 69C,Section 68,Section 40A(2)(b)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH, ‘E’: NEW DELHI

Before: SHRI SATBEER SINGH GODARA & SHRI NAVEEN CHANDRA, ACCOUNTNAT MEMBER

For Appellant: Shri Sanjay Kumar FCA, Ms. Uditie Aggarwal, Adv
For Respondent: Ms. Amisha S. Gupt, CIT-DR
Hearing: 27.04.2026Pronounced: 27.04.2026

Heard together (2 matters)

ITA No.5272/Del/2025
CO No.23/Del/2026

Read from the judgment's own cause title. This page is filed under one of them.

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘E’: NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI NAVEEN CHANDRA, ACCOUNTNAT MEMBER

ITA No.5272/Del/2025 With CO No.23/Del/2026 [Assessment Year: 2022-23] ACIT, Circle-28(1), Mahalaxmi Agencies, Room No.1001, Prataksh Kar B-482, Sarita Vihar, Bhawan, Civic Centre, Vs New Delhi-110076 Minto Road, J.L. Nehru Marg, E-2 Block, , New Delhi-110002 PAN-AATFM2647L Appellant Respondent/Cross Objector

CO No.23/Del/2026 (Arising out of ITA No.5272/Del/2025) [Assessment Year: 2022-23] Mahalaxmi Agencies, ACIT, Circle-28(1), B-482, Sarita Vihar, Room No.1001, Prataksh Kar New Delhi-110076 Vs Bhawan, Civic Centre, Minto Road, J.L. Nehru Marg, E-2 Block, , New Delhi-110002 PAN-AATFM2647L Cross Objector/Appellant Respondent

Appellant by Shri Sanjay Kumar FCA, Ms. Uditie Aggarwal, Adv. Respondent by Ms. Amisha S. Gupt, CIT-DR

Date of Hearing 27.04.2026 Date of Pronouncement 27.04.2026

ORDER PER SATBEER SINGH GODARA, JM

This Revenue’s appeal with assessee’s Cross Objection ITA No.5272/Del/2025, CO No.23/Del/2026 for Assessment Year 2022-23, arises

2 ITA No.5272/Del/2025 CO No.23/Del/2026 against National Faceless Appeal Centre/Commissioner of Income Tax

(Appeals)[in short the “CIT(A)”, New Delhi’s order dated 06.03.2025 passed

in appeal number NFAC/2021-22/10363993, involving proceedings under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).

2.

The assessee has raised following grounds of appeal in its Cross Objection No.23/Del/2026:-

Ground 1: That, the learned Assessing Officer has erred in law in assuming jurisdiction and completing the assessment pursuant to a notice issued under section 143(2) of the Income-tax Act, 1961, which was not issued in accordance with the binding Instructions issued by the Central Board of Direct Taxes (CBDT) vide instruction circular F NO. 225/157/2017/ITA-II dated 23.06.2017 as the AO is required to specify the category of the scrutiny selected under CASS (Computer Aided Scrutiny Selection) as to whether, it is a limited scrutiny, manual scrutiny or Complete Scrutiny Assessment and accordingly the Assessment Order dated 15-12- 2022 is liable to be annulled. Ground 2: The said notice under section 143(2) of the Act being contrary to CBDT Instructions, which are mandatory and binding on the Assessing Officer under section 119 of the Act, renders the entire assessment proceedings void ab initio, without jurisdiction and liable to be quashed. 3. The Learned counsel submits at the outset that the assessee’s cross

objection no.23/Del/2026 raise purely a legal issue that the impugned

assessment herein dated 15.12.2022 deserves to be quashed since not framed

after issuance of a valid section 143(2) notice as per CBDT Instructions/

Circular dated 23.06.2017. We find no merit in the assessee’s legal ground in

the light of hon’ble jurisdictional high court’s recent decision in Bharat Bansal

3 ITA No.5272/Del/2025 CO No.23/Del/2026 vs National Faceless Assessment Centre, Delhi in WP(C) No.2238/2026 dated

17/02/2026 adjudicating the very issue in the department’s favour. Rejected

accordingly.

4.

Next comes the Revenue’s appeal ITA No.5272/Del/2025 raising the following substantive grounds:-

1.

Whether on the facts and circumstances of the case the Ld. CIT (A) was justified in deleting the Addition of 25,64,006/- in respect of disallowance u/s 40(a) (ai) made by the AO on account of non deduction of tax on rent payment of Rs. 85,46,688/- after considering the submissions made by assessee, however, no remand report was called for from the AO to verify the same. 2. Whether on the facts and circumstances of the case the Ld. CIT (A) was justified in deleting the Addition of Rs. 48,46,405/-out of total addition 55,74,319/- made by the Assessing officer in respect of excess purchase and added only gross profit i.e. 2.37% of total excess/bogus purchases. 3. Whether on the facts and circumstances of the case the Ld. CIT (A) was justified in deleting the Addition of Rs. 1,48,005/-out of total addition 1,48,606/- as unexplained expenses u/s 69с as the assessee did not submit any explanation for the difference in the ledger account of i.e. discovery sales, Pernod ricard India Pvt. Ltd., Oasis Overseas Exports Pvt Ltd & United Sprits Ltd. and CIT(A) added only gross profit i.e. 2.37% of total excess/bogus purchases. 4. Whether on the facts and circumstances of the case the Ld. CIT (A) was justified in deleting the Addition of Rs. 9,93,76,665/- made by AO in respect of disallowance of sundry creditors as the assessee has failed to submit the details of confirmation ledger account of creditors amounting to Rs.49,68,86,327/- for which 20% was disallowed the AO. Thus, the genuineness of these creditors remained unexplained. 5. Whether on the facts and circumstances of the case the Ld. CIT (A) was justified in deleting the Addition of Rs. 70,80,000/- in respect of disallowance of salary expense incurred for relatives as the details submitted by the assessee are general in nature. The only obvious reason for the claim of this huge expenditure of salary to related persons seems to be to reduce the taxable income of the assessee. 5. We advert to first and foremost issue between the parties involving

section 40(a)(ai) disallowance of Rs.25,64,006/- @30% involving the rent

4 ITA No.5272/Del/2025 CO No.23/Del/2026 payment therein for various shops amounting to Rs.157,08,178/-. The Learned

CIT(A) holds that the assessee was required to deduct TDS only qua rental

payments 71,61,480/-; reading as under:-

“...7. The assessing officer has made the disallowance of Rs. 25,64,006/- (30% of 84,688/- under Section 40a(ia) of the Income Tax Act, 1961) on account of non-deduction of TDS on rent paid. The assessee has submitted that it had claimed total rent of Rs. 1,57,08,178/- for one whole sale shop and 54 retails shops. The copy of shop licences showing the address of the shop taken on rent were submitted before the AO. The assessee has submitted that TDS was applicable only on the rent of Rs. 71,61,480/- and the ‘TDS was not deductible on the balance rent paid. It has been submitted that the rent of Rs. 54,75,000/- was paid to individual parties wherein the rent paid per person was less then Rs. 2,40,000/- per annum and TDS deduction is not applicable. The rent of Rs. 30,71,688/- was paid to Haryana Urben Development Authority and the assessee was not required to deduct TDS on the rent paid to such Authority. The assessee has relied upon some judicial precedents in support of its submissions. The submissions of the assessee have merits as it is clear from the facts that TDS was not required to be deducted out of the payment of rent of Rs. 85,46,688/-. Accordingly, the disallowance of Rs. 25,64,006/- made by the AO under Section 40a(ia) due to non-deduction of TDS on rent is hereby deleted...” 6. That being the case, the Revenue fails to rebut the foregoing clinching finding of fact that no TDS was required to be deducted qua rental payments

made to Haryana Urban Development Authority (HUDA). We thus uphold the

learned CIT(A)’s/NFAC forgoing detailed discussion in very terms. This

Revenue’s first and foremost substantive ground fails therein.

7.

The Revenue’s next twin substantive grounds seek to revive

unexplained/bogus purchases disallowance and unexplained expenses under

section 69C of the Act involving corresponding figures of Rs.55,74,319/- and

5 ITA No.5272/Del/2025 CO No.23/Del/2026 Rs.1,48,606/- which stands partly deleted to the extent of Rs.6,10,266/- and

Rs.1,23,235/-; respectively, followed by gross profit estimation @2.37% on

remaining component thereupon.

8.

That being the case, we are of the considered view that various recent

judicial precedents (2025) 173 taxmann.com 592 (Guj.) Ravjibhai Becharbhai

Dhamelia vs. ACIT; (2024) 160 taxmann.com 110 (Bom) PCIT Vs. Hitesh

Mody (HUF), (2024) 160 taxmann.com 93 (Del) PCIT Vs. Forum Sales (P)

Ltd.; (2025) 172 taxmann.com 283 (Bom) PCIT Vs. Kanak Impex (India) Ltd;

(2025) 178 taxmann.com 424 (Del. – Trib.) DCIT Vs. Kohinoor Foods Ltd.;

and (2025) 177 taxmann.com 836 (Delhi-trib.) DCIT Vs. Tirupati Matsup (P.)

Ltd. have decided the instant issue of bogus purchases with divergent views i.e.

accepting or partly allowing or rejecting the same in entirety; as the case may

be. We thus express our full concurrence with the learned CIT(A)/NFAC’s in

foregoing detailed discussion adding not only granting part relief but also

estimating GP @2.37% guided by market comparables. These Revenue’s

second and third substantive grounds are hereby rejected.

9.

Learned CIT-DR next vehemently submits that the Revenue’s fourth

substantive ground herein is that the learned Assessing Officer has rightly

added the assessee’s sundry credits @20% of the total sum of Rs.49,68,86,327/-

@20%; coming to Rs.9,93,76,665/- which has been wrongly deleted in the

CIT(A)’s detailed discussion; reading as under:-

6 ITA No.5272/Del/2025 CO No.23/Del/2026 The assessing officer has made the addition of Rs. 26,43,874/- under Section 68 of the Income Tax Act, 1961 on account of difference in the closing balance of the sundry creditors as per books and as per the confirmation of parties. The assessee has submitted that the difference in the balances of three parties is primarily due to the reason that rebate and discount given by such parties was accounted for by them in their books in F.Y. 2021-22 whereas the assessee has considered such rebate and discount in its books in next year i.e. F.Y. 2022-23 relevant to A.Y. 2023-24. The assessee has further submitted that the issue is only with regard to year of taxability and has relied upon the decision of Hon’ble Supreme Court in the case of Excel Industries Ltd. The assessee has further submitted that Section 68 has no applicability to the sundry creditors and relied upon on catena of case laws. The submissions of the assessee have been perused and have found to have merit. Accordingly, on the facts of the case and following the judgement of Hon’ble Supreme court in the case of Excel Industries Ltd, the addition of Rs. 26,43,874/- made by the AO under Section 68 is hereby deleted. 10. We have given our thoughtful consideration to Revenue’s and assessee’s

submissions reiterating their respective stands against and in support of the

learned CIT(A)’s foregoing detailed discussion. We find no reason to sustain

the impugned addition as such an estimation at a flat rate of 20% than having

examined each and every corresponding sundry credit entry(ies) does not

deserve to be concurred with. This is indeed coupled with the fact that the

assessee had duly pleaded and proved with its supporting evidence and the

corresponding purchases also stand accepted as in the preceding paragraphs.

We thus uphold the learned CIT(A)’s/NFAC’s impugned appellate discussion

deleting this sundry credits addition in very terms.

11.

The Revenue’s last substantive ground is that of section 40A(2)(b)

disallowance amounting to Rs.70,80,000/- paid to the five specified persons.

7 ITA No.5272/Del/2025 CO No.23/Del/2026 The learned CIT(A)/NFAC records in para 7.6 that all these five payees have

been receiving their respective salaries at the very rate. And also that it is a

revenue neutral instance since they are themselves taxed at a maximum rate

going by the CBDT landmark Circular dated 18.06.1967 and CIT vs Indo Saudi

Services (Travels) Pvt. Ltd. (2009) 310 ITR 306 (BOM.). We thus find no

merit in the Revenue’s last substantive ground as well which is rejected in very

terms.

12.

The Revenue’s appeal being ITA No.5272/Del/2025 and the assessee’s

Cross Objection CO No.23/Del/2026 are dismissed. A copy of this common

order be placed in its respective case files.

Order pronounced in the open court on 27th April, 2026.

Sd/- Sd/- [NAVEEN CHANDRA] [SATBEER SINGH GODARA] ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 27.05.2024 f{x~{tÜ f{x~{tÜ f{x~{tÜ f{x~{tÜ

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