M/S VIDYA INFRABUILT PVT. LTD.,DELHI vs. ACIT CENTRAL CIRCLE-26, NEW DELHI

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ITA 9058/DEL/2025Status: DisposedITAT Delhi01 July 2026AY 2018-194 pages

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

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the scope of Section 154 is restricted and does not permit enhancements requiring extensive reasoning. Therefore, the addition made under Section 40A(3) through Section 154 proceedings was not permissible.

What were the facts?

The AO made additions for differences in receipts and cash withdrawals. Subsequently, the AO enhanced the addition under Section 154 by disallowing expenses under Section 40A(3). The CIT(A) confirmed these actions.

What were the issues?

Whether an addition under Section 40A(3) can be made through rectification proceedings under Section 154 of the Act.

Which sections of the Income-tax Act were involved?

Section 154,Section 40A(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH “H” NEW DELHI

Before: SHRI SATBEER SINGH GODARA & SHRI SANJAY AWASTHI

For Appellant: Shri KVSR Krishna, CA
For Respondent: Shri Sudip Majumdar, Sr. DR
Hearing: 01.07.2026

ITA No. 9058/DEL/2025 M/S VIDYA INFRABUILT PVT. LTD.

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “H” NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI SANJAY AWASTHI, ACCOUNTANT MEMBER ITA No.9058/DEL/2025 Assessment Year: 2018-19 M/S VIDYA INFRABUILT PVT. Vs. ASSISTANT COMMISSIONER OF INCOME LTD., TAX, K-120, Kirti Nagar, Central Circle-26, Room No.257, New Delhi, Delhi 110015. 2nd Floor, Income Tax Building, E-2, PAN No. AACCV5768M ARA Centre, Jhandewalan Extention, New Delhi, Delhi 110055. Appellant Respondent Assessee by Shri KVSR Krishna, CA Revenue by Shri Sudip Majumdar, Sr. DR Date of hearing: 01.07.2026 Pronouncement on 01.07.2026 O R D E R PER SANJAY AWASTHI, ACCOUNTANT MEMBER:

1.

This appeal arises from order dated 16.10.2025, passed u/s 250 of the Income Tax Act, 1961 (hereafter as “the Act”), by Ld. CIT(A), New Delhi-29.

1.1 In this case, the AO vide order dated 22.04.2021 made an addition of Rs.23,76,769/- on account of difference in receipts as shown in profit and loss account and Form 26AS. The second addition has been made on estimate basis on account of substantial cash withdrawal by the assessee during the course of the year, which according to the AO was not

ITA No. 9058/DEL/2025 M/S VIDYA INFRABUILT PVT. LTD. explained and therefore an addition on estimate basis of Rs.15,00,000/- was made.

1.2 Thereafter, the assessee filed a rectification order before the Ld. AO through which vide order u/s 154 of the Act dated 16.08.2021, not only were the original addition sustained but a further amount of Rs.30,85,735/- was added by way of disallowance u/s 40A(3) of the Act. It is noteworthy that this was done u/s 154 of the Act.

1.3 The aggrieved assessee approached the Ld. CIT(A) where this action of ld. AO was confirmed on merit. after a long drawn discussion on pages 12 & 13 of the impugned order.

1.4 The assessee has approached the ITAT with several grounds challenging this action of Ld. AO/CIT(A).

2.

Before us the Ld. AR argued on merits and stated that the payments were not hit by the provisions of Section 40A(3) of the Act. It was also the submission that while the Ld. CIT(A) was kind enough to give the benefit of rectification on the additions originally made by the Ld. AO but the action of Ld. AO in enhancing the income of the assessee, through proceedings u/s 154 of the Act, deserve to be assailed as both of the authorities below proceeded in the matter as if they was dealing with regular scrutiny proceedings and not rectification proceedings under 154 of the Act.

ITA No. 9058/DEL/2025 M/S VIDYA INFRABUILT PVT. LTD. 2.1 The Ld. DR relied on the orders of the authorities below.

3.

We have considered the rival submissions and have gone through the records before us. Right at the outset, it deserves to be mentioned that the scope of Section 154 is extremely restricted and it certainly does not extend to dealing with any matter requiring a long drawn process of reasoning. It is quite evident that this is what has happened in this case. We may observe that while the assessee has fallen in error in approaching the Ld. AO for relief through Section 154 of the Act but equally the Ld. AO and CIT(A) have fallen in error in enhancing the income of the assessee, after a process involving considerable verification and analysis. Such an action cannot be approved u/s 154 of the Act. Accordingly, it is directed that the addition made by disallowing the impugned amount u/s 40A(3) of the Act should be deleted as such as it is not permissible u/s 154 of the Act.

4.

In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 01.07.2026

Sd/- Sd/- (SATBEER SINGH GODARA) (SANJAY AWASTHI) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 13.08.2026 *Kavita Arora, Sr. P.S.

ITA No. 9058/DEL/2025 M/S VIDYA INFRABUILT PVT. LTD.

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