DEPUTY COMMISSIONER OF INCOME TAX, MUMBAI vs. WELSPUN ENTERPRISES LIMITED, MUMBAI

IN THE INCOME-TAX APPELLATE TRIBUNAL “G” BENCH,
MUMBAI
BEFORE SHRI JUSTICE (RETD.) C. V. BHADANG, PRESIDENT
&
SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER
Deputy Commissioner of Income Tax, Room No.
404, 4th Floor, Kautilya
Bhawan, BKC, Mumbai –
400 051, Maharashtra v/s.
बनाम
Welspun Enterprises Limited
4th
Floor,
Welspun
House,
Senapati
Bapat
Marg,
Lower
Parel,
Delisle
Road
S.O.,
Mumbai
–
400
013,
Maharashtra
स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AABCM4107C
Appellant/अपीलार्थी
..
Respondent/प्रतिवादी

Assessee by :
Shri Harsh Kapadia & Ajay Nagpal, ARs
Revenue by :
Shri Arun Kanti Datta, (CIT-DR)

Date of Hearing
20.11.2025
Date of Pronouncement
23.12.2025

आदेश / O R D E R

PER PRABHASH SHANKAR [A.M.] :-

The present appeal emanating from the appellate order dated
17.05.2024 is preferred by the Revenue against the order passed by the Learned Commissioner of Income-tax, Appeal, CIT(A)-51, Mumbai
[hereinafter referred to as “CIT(A)”] pertaining to assessment order passed u/s. 153A r.w.s. 143(3) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 31.12.2019 for the Assessment Year [A.Y.]
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Welspun Enterprises Limited, Mumbai

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Welspun Enterprises Limited, Mumbai of Rs. 3,84,400/- only against the receipt of Rs 83,64,618/- and therefore, the income declared by both of them did not commensurate with the substantial receipts from the company. He stated that the onus was on the assessee to substantiate the claim of expenses who could have produced the party for verification. However, the assessee chose not to do so. Thus, claim of huge expenses was not found verifiable.
Accordingly, he disallowed these expenses of Rs 2,24,93,043/-, treating the same as non-genuine.
4. In the subsequent appeal before the ld.CIT(A), the assessee explained that it produced all information, details and evidences before the AO in support of the claim. Sri Mohd Salim was a labour contactor who during the previous year supplied labour at various sites. Against each and every RA bill raised, payments had been made. In the course of the search, not only the ledger extracts of the assessee was found, as also supporting documents showing the labour supplied on the respective dates and for what work and from what time to what time the person was engaged by the assessee during the year. The notings on the seized materials were speaking evidences of the genuineness of the transaction with him. As regards lower income compared to receipts, it was submitted that declaration of lower income could not be a point to doubt the genuineness of the transaction and such a fact could have been P a g e | 4
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Welspun Enterprises Limited, Mumbai examined in his individual case only. It was true that the labour contractor pertained to Kolkata but that could not be reason for doubting a genuine transaction as migration of labour pan India is an accepted fact. Nothing in the search was found to suggest that the transaction was not genuine. Mere suspicion cannot bring home the charge especially when the gross receipts paid by the assessee was appearing in his Form 26AS, with the Department. In respect of Chamunda Borewells, likewise it was submitted that the contractor was a civil contractor who during the previous year had done civil work at various sites. The AO disallowed the expenses on the same reasons as stated in the case of Sri Md.Salim.
4.1 It was further argued that the assessee had discharged the onus cast on it by producing cogent evidences. The whole case of the AO has been built up on the suspicion and guess work ignoring the vital information, details and evidences submitted before him. In the course of assessment proceedings, the assessee submitted name, address and PAN of the parties , VAT No., CST No., Excise Registration, Service Tax
Registration of the parties, Purchase Invoices, copy of Purchase
Register, Tax audit report of the parties, copy of bank statement evidencing payment by cheque. The assessee had prima facie established the genuineness of the expenses by producing various documents or P a g e | 5
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Welspun Enterprises Limited, Mumbai evidences and therefore, the onus shifted to the Department to show otherwise. The AO failed to bring on record any evidence in support thereof except to rely on suspicion and guess work.
4.2 It was contended that the second basis on which the AO disallowed was that the assessee could have produced the parties for verification. It was submitted that coordinate Benches of ITAT and High
Courts have held that when purchases are supported by sufficient documentary evidences then merely because the suppliers have not appeared before the AO, one cannot conclude that the purchases were not made by the assessee. Reliance was placed on Nikunj Eximp
Enterprises (P.) Ltd. v. CIT 216 Taxman 171 (Bom),CIT v. Nangalia
Fabrics (P.) Ltd. 220 Taxmann 17 (Guj). etc
4.3 In respect of the observation of the AO relying on statements of certain employees and key persons recorded u/s.132(4) during the course of search claiming that no proper reply was given by these persons on these transactions,it was submitted that and even Shri B. K.
Goenka, Chairman in the deposition had simply stated that he was not into day to day affairs of the company and hence, he could not comment on the same. There is nothing in the statement on the basis of which any adverse view could be taken. The AO also referred certain questions and P a g e | 6
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Welspun Enterprises Limited, Mumbai answers of Shri Rajendra Sinh Rana, General Manager (Accounts &
Taxation) in respect of these expenses. It is stated that he had fairlyexplained the transactions reasonably. There was no admission of whatsoever nature by above persons which could be used against the assessee. It was submitted that on first available opportunity the deponents had retracted the statement made u/s. 132(4). The so-called disclosure / confession / admission made at the time of search therefore could not be a basis of drawing any adverse inference in the hands of the assessee.
5. The ld.CIT(A) observed that the assessee had brought on record relevant details to prove the genuineness of the expenses. He took note of the contention of the assessee that low income declared by the vendor could not be a ground for penalizing the assessee and treating its claim of expenditure as nongenuine. It could surely be a ground for starting an investigation. However, in the present case, the AO had not made any independent enquiry from any of the vendors. The AO himself pointed out that a perusal of the seized material showed that the same consisted of RA Bills for the work done by the contractor along with supporting log sheets and other documents based on which RA bills had been prepared. The contentions of the assessee had merit that running bills, ledger extracts recorded in the books, log sheets etc. duly

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Welspun Enterprises Limited, Mumbai demonstrated the genuineness of the expenses claimed. There was also merit in the contentions that unlike corporate houses these were contractors at the site who had to be sourced from the local areas and they did not have a formal set up.
5.1 As regard the finding regarding the non-satisfactory reply by Sh. Rajendra Sinh Rana, the assessee had explained that the role of Sh.
Rana was very specific and restricted to finalization of accounts, TDS assessments and compliance of Indirect Tax Laws. He did not look into verification of the vendor bills for disbursement. This work specifically was looked after by a separate team which was at the site and were more aware of the activities carried out. Even during the course of his deposition, he had specifically mentioned that the subcontracting was finalized by the project team. There was also merit in the argument that the Chairman of a company was not the person who looked after such routine affairs. Even during the course of deposition, he had stated that he did not handle day to day affairs of the company and therefore he could not comment on the same.
5.2 The ld.CIT(A) concluded that since the assessee had furnished before the AO, all the primary evidences to prove the genuineness of the expenditure claimed like the name, address, PAN of the party, bills,

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Welspun Enterprises Limited, Mumbai purchase register, ledger account, bank statement etc, it could be reasonably concluded that it had duly discharged the onus cast upon it to prove the genuineness of the expenses claimed. The AO on the other hand, had not made any independent inquiry to negate the contentions of the assessee. In this regard he placed reliance on certain judicial decisions i.e. Smt. K.V Lakshmi Savitri Devi v ACIT [2013] 30
taxmann.com 117 (Hyd - Trib.),the Hon’ble Supreme Court in the case of Umacharan Shaw and Bros v CIT (1959) 37 ITR 271,Pooja Bhatt 66 TTJ
(Mum) 817 and in the case of D.M Kamani HUF 65 TTJ (Pat)
504wherein it was held that suspicion however strong cannot take the place of evidence. Similarly, raising presumption itself does not amount to proof. Thus, the action of the AO in making the disallowance of expenses of Rs. 2,24,93,043/- was not sustained and the addition made was deleted.
6. Before us, ld.DR placing reliance on the assessment order submitted that incriminating materials were available. Besides, contractors were from West Bengal not local. Also no signature, thumb impression was recorded in in RA Bill/No contractual agreement. On the other hand, the ld.AR has placed heavy reliance on the appellate order.It is submitted that no addition could be justified without incriminating materials. Payments were through banking channels and P a g e | 9
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Welspun Enterprises Limited, Mumbai made TDS was duly made.No independent enquiry was conducted by the AO. Engaging contractor discretion of assessee/person examine not the right person/AO did not ask to produce the parties.
7. We have carefully considered all relevant facts of the case and find sufficient merits in the contentions of the assessee. There is absolutely no infirmity in the findings and the decision arrived at by the ld.CIT(A).Section 37(1) of the Act is a residual provision that allows businesses to deduct revenue expenditures not specifically covered under Sections 30 to 36, provided they meet certain conditions. The primary condition is that the expense must not be a capital or personal expense and must be incurred "wholly and exclusively" for the purpose of the business or profession. To claim a deduction under Section 37(1), the following cumulative conditions must be met:
-The expenditure must be revenue in nature, not a capital expenditure .
-It must not be a personal expense of the assessee.
-It must have been incurred wholly and exclusively for the purposes of the business or profession.
-It should not be an expense of the nature specifically described in Sections
30 to 36 of the Income Tax Act.
7.1 Nothing has been brought by the AO on record to show that expenses incurred on labour contractors were capital in nature or were personal expenses and also were not wholly and exclusively incurred for P a g e | 10
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Welspun Enterprises Limited, Mumbai the purposes of business of the assessee. It is settled law that burden of proof is on assessee and in order to claim that an expenditure falls under section 37(1), the burden of proving the necessary facts in that connec- tion is on the assessee. Where an assessee claims a deduction, the onus is on him to bring all material facts on record to substantiate his claim.
It is his duty to prove payment especially when the ITO doubts the genuineness thereof .In the instant case, the assessee has been able to discharge the onus in satisfactory manner duly supporting the claim of deduction with documentary evidences.All the payments have been made through banking channels and TDS has also been duly deducted by the assessee on the impugned payments. It is also worth mentioning here that the assessment in this case has been made u/s 153A consequent to search and seizure operation.However, the AO has utterly failed to bring on record any adverse incriminating materials found during search in respect of these payments.The disallowance made lacks any substance and is devoid of any merit and has been made only on presumptions and surmises. Accordingly, we hold that there is no infirmity in the appellate order which is therefore upheld. The ground of appeal, therefore, fails.
8. In the result, appeal of the Revenue is dismissed.

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Welspun Enterprises Limited, Mumbai

Place: म ुंबई/Mumbai
ददनाुंक /Date 23.12.2025
Lubhna Shaikh / Steno

आदेश की प्रतितलति अग्रेतिि/Copy of the Order forwarded to :
1. अपीलार्थी / The Appellant
2. प्रत्यर्थी / The Respondent.
3. आयकर आयुक्त / CIT
4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT,
Mumbai
5. गार्ड फाईल / Guard file.

सत्यावपि प्रवि ////
आदेशानुसार/ BY ORDER,

उि/सहायक िंजीकार (Dy./Asstt.