STITCHMATIC SHOECRAFTS PRIVATE LIMITED,NORTH WEST DELHI vs. COMMISSIONER OF INCOME-TAX (APPEALS) - INCOME TAX DEPARTMENT, INCOME TAX DEPARTMENT

ITA 6723/DEL/2026Status: DisposedITAT Delhi29 September 2026AY 2022-233 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the disallowance of 20% of the aggregate expenses on an ad-hoc basis was not justified. While acknowledging that 80% of these expenses (employees' benefits, financial head, and miscellaneous outgoings) were accepted in principle, the Tribunal noted the absence of a categorical finding from the lower authorities explaining the basis for such a significant disallowance. The Tribunal also observed that the assessee had failed to plead and prove these expenses. In light of these circumstances, the Tribunal deemed it appropriate to allow a lumpsum disallowance of 5% of the assessee's expenses under the three aforementioned heads. This decision was made with the rider that it should not be treated as a precedent. The necessary computation of tax shall follow as per law. The Tribunal did not expressly leave any issue undecided.

What were the facts?

The assessee, Stitchmatic Shoecrafts Pvt. Ltd., is in appeal against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, dated March 10, 2026. This order pertains to assessment year 2022-23 and arises from proceedings under section 143(3) of the Income-tax Act, 1961. The core of the dispute involves the disallowance of 20% of the assessee's aggregate expenses, amounting to Rs. 36.40 lakhs, made on an ad-hoc basis by the lower authorities. The expenses in question relate to employees' benefits, financial head, and other miscellaneous outgoings incurred in the day-to-day business activities. The assessee had failed to plead and prove these expenses during the assessment and appellate proceedings.

What were the issues?

1. Whether the disallowance of 20% of aggregate expenses amounting to Rs. 36.40 lakhs on an ad-hoc basis is justified, turning on the interpretation and application of Section 143(3) of the Income-tax Act, 1961. Assessee's Contention: The assessee is aggrieved by the disallowance of 20% of its aggregate expenses on an ad-hoc basis. The judgment does not explicitly record the assessee's arguments beyond stating their grievance. Revenue's Contention: The revenue, through the lower authorities, made an ad-hoc disallowance of 20% of the aggregate expenses. The judgment does not explicitly record the revenue's specific arguments beyond the action taken.

Which sections of the Income-tax Act were involved?

Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH: “SMC” NEW DELHI

Before: SHRI SATBEER SINGH GODARA

Hearing: 04.08.2026Pronounced: 04.08.2026

This assessee’s appeal for assessment year 2022-23, arises against the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre [in short, the “CIT(A)/NFAC”], Delhi’s DIN and order no. ITBA/NFAC/S/250/2025-26/1087133812(1), dated 10.03.2026 involving proceedings under section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). Heard both the parties. Case file perused.

2.

Delay of 11 days in filing of the assessee’s/Revenue’s instant appeal is condoned in larger interest of justice and in light of Collector, Land & Acquisition vs. Mst. Katiji & Others (1987) 167 ITR 471 (SC).

3.

It emerges during the course of hearing that the assessee/appellant is aggr

The order continues below.

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