AP VANNIARAJAN AND COMPANY,VIRUDHUNAGAR vs. DCIT, NON CORPORATE CIRCLE-2, MADURAI
In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal allowed the assessee's appeal. The core issue was whether the assessee had discharged its onus of proving the identity of the contractors, the genuineness of the transactions, and the actual rendering of services. The Tribunal noted that while the payee entities were non-functional as per ROC master data, this fact alone should not be the sole basis for disallowing the expenses. The assessee had provided substantial documentary evidence, including bills, bank remittances, GST details, and ledger accounts, which demonstrated that entries were made in the books, payments were routed through banking channels, and bills were issued. The Tribunal found that the vendors' default in ROC compliances did not necessarily impact the assessee's affairs. It was observed that the AO had the power to verify the information submitted by the assessee. The Tribunal distinguished the relied-upon judgments (Roshan Di Hatti and Nemi Chand Kothari) as pertaining to loan creditors, whereas this case involved expense creditors supported by extensive documentary evidence. Therefore, the Tribunal held that the assessee had sufficiently discharged its burden under Section 37(1) and set aside the orders of the authorities below, directing deletion of the additions.
What were the facts?
The assessee, A P Vanniarajan and Company, is challenging the order of the Commissioner of Income-tax (Appeals) (CIT(A)) for Assessment Year 2018-19. The CIT(A) upheld the Assessing Officer's (AO) disallowance of Rs. 61,57,949 as bogus expenses. These expenses were contractual payments made to two entities: M/s. KSR Sons Textiles Private Limited (Rs. 7,30,844) and M/s. Summer India Textile Mills Private Limited (Rs. 54,27,105). The AO's basis for disallowance was that both companies were marked as 'Strike Off' and 'Under Liquidation' respectively in the Registrar of Companies (ROC) master data, with their last annual returns filed for Assessment Year 2016-17. The assessee had presented various documents, including bills, bank confirmations, GST details, and ledger accounts, to substantiate the genuineness of these transactions.
What were the issues?
1. Whether the CIT(A) erred in upholding the disallowance of Rs. 61,57,949 as bogus expenses under Section 37(1) of the Income Tax Act, 1961, on the grounds that the payee entities, M/s. KSR Sons Textiles Private Limited and M/s. Summer India Textile Mills Private Limited, were 'Strike Off' and 'Under Liquidation' respectively according to ROC master data. Assessee's Contention: The assessee argued that the CIT(A) erred in law and facts by upholding the additions. They contended that they had discharged their onus by furnishing documentary evidence, including bills, bank confirmations, GST registration and filings, and ledger accounts, which proved the genuineness of the transactions and the rendering of services. They also argued that the status of the vendors with the ROC should not adversely affect the assessee and that the AO and CIT(A) relied solely on MCA data without proper justification. The assessee further claimed that the CIT(A) failed to provide cogent reasons for rejecting the evidence and violated principles of natural justice by not granting a personal hearing. Revenue's Contention: The revenue, through the AO and CIT(A), primarily relied on the ROC master data indicating that the payee companies were non-functional ('Strike Off'/'Under Liquidation') and had not filed returns for the relevant period, thus questioning the genuineness of the expenses.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Heard together (2 matters)
Read from the judgment's own cause title. This page is filed under one of them.
आयकर अपीलीय अधिकरण ‘डी’ न्यायपीठ, चेन्नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH: CHENNAI माननीय श्री गगन गोयल लेखा सदस्य एवं श्री मनु कुमार गगरर, न्यागयक सदस्य के समक्ष BEFORE HONOURABLE SHRI GAGAN GOYAL, ACCOUNTANT MEMBER AND MANU KUMAR GIRI, JUDICIAL MEMBER आयकर अपील सं./ITA No. 2706/Chny/2026 ननिाारण वर्ा /Assessment Years: 2018-19 A P Vanniarajan and Company v. Deputy Commissioner of No.33, M.C.C Street, Near Theppam, Income Tax, Virudhunagar, Non-Corp Circle-2, Tamil Nadu-626 001. Madurai. [PAN: AAEFA1124F] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) आयकर अपील सं./SA No. 135/Chny/2026 ननिाारण वर्ा /Assessment Years: 2018-19 A P Vanniarajan and Company v. The Deputy Commissioner of No.33, M.C.C Street, Near Theppam, Income Tax, Virudhunagar, Non-Corp Circle-2, Tamil Nadu-626 001. Madurai. [PAN: AAEFA1124F] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर से/ Assessee by : Mr. S. Sundararaman, C.A, Ld.AR प्रत्यर्थी की ओर से /Revenue by : Ms. M. Subashri, JCIT, Ld. DR सुनवाईकीतारीख/Date of Hearing : 03.06.2026 घोषणाकीतारीख /Date of Pronouncement : 08.06.2026
GROUNDS OF APPEAL
The Commissioner of Income-tax (Appeals) (the "CIT(A)") erred both in law and facts of the case in upholding the additions made by the Assessing Officer ("AO")
amounting to Rs. 61,57,949 as bogus expenses on account of contractual payments made to:
a. M/s. KSR Sons Textiles Private Limited amounting to Rs. 7,30,844/- on the ground that the status of the said Company was "Strike Off" as per the master data of Registrar of Companies and the last annual return was made in the assessment year 2016-17. b. M/s. Summer India Textile Mills Private Limited amounting to Rs. 54,27,105/-, on the ground that the said company was under liquidation as per the master data of Registrar of Companies and the last annual return was made in the assessment year 2016-17. 2. The CIT(A) erred in dismissing the following documentary evidences furnished by the Appellant in support of the genuineness of transaction (contractual payments) carried out with the aforesaid parties, without any cogent reasons, namely:-
a. Copies of the bills furnished by M/s. KSR Sons Textiles Private Limited and M/s. Summer India Textile Mills Private Limited. b. Confirmation letter from the Bank that the Appellant had made remittances from their account to the Bank accounts of M/s. KSR Sons Textiles Private Limited and M/s. Summer India Textile Mills Private Limited. c. Details of GST registration of M/s. KSR Sons Textiles Private Limited and M/s. Summer India Textile Mills Private Limited and details of GSTR 1 filed by them in the relevant assessment year. d. Confirmation letter and ledger account of the Appellant in the books of M/s. K.S.R Sons Textiles Private Limited and M/s. Summer India Textile Mills Private Limited. 3. The CIT(A) erred in law and on facts in disregarding the documentary evidence furnished by the Appellant on the premise that such documents were merely in the nature of supporting evidence prepared in the normal course of business and did not constitute independent corroboration of actual rendering of services, without appreciating that the said documents were prepared during the normal course of business at the time the transactions took place, are reliable evidence and clearly prove that the transactions undertaken by the Appellant are genuine.
The CIT (A) erred in law and on facts in holding that the Appellant failed to establish the genuineness of the transactions and the actual rendering of services, without appreciating that the Appellant had duly substantiated the same by furnishing documentary evidence, including details of the corresponding filings in GSTR-1 by the concerned parties, which clearly demonstrate that the transactions were actually carried out and duly recorded, and that such documentary evidence itself prima facie establishes the existence and genuineness of the transactions.
The CIT (A) erred in failing to appreciate that no adverse inference can be drawn against the Appellant for the purported default of M/s. KSR Sons Textiles Private Limited and M/s. Summer India Textile Mills Private Limited, in not filing their returns with the Registrar of Companies for the relevant assessment year.
The CIT (A) and AO erred in solely relying on the Master Data available in the public domain in the Ministry of Corporate Affairs portal which alone is not a reliable source for making it the base of assessment.
The CIT(A) erred in law and on facts in relying upon the decisions in Roshan Di Hatti v. CIT (Supreme Court (19912) 2 SCC 378) and Nemi Chand Kothari v. CIT (Guwahati High Court (2003) 264 ITR 254) to hold that the Appellant had not discharged its onus, without appreciating that the said judgments are factually distinguishable as they pertain to loan creditors, where proof is generally limited to the transaction itself, whereas the present case relates to expense creditors supported by documentary evidence such as invoices evidencing actual rendering of services, and therefore the ratio laid down in the said decisions is not applicable to the facts of the Appellant's case.
The CIT (A) erred in law and on facts in failing to provide any cogent reasons for rejecting the documentary evidence furnished by the Appellant, and concluded without proper justification, that the genuineness of the transactions was not established.
The CIT (A) failed to grant the Appellant an opportunity of being heard, despite a specific request for personal hearing through video conferencing, thereby violating the principles of natural justice.
In light of the Appellant humbly prays that:
a. the order passed by the CIT (A) under section 250 of the Act upholding the addition be set aside. b. the additions made by the AO amounting to Rs. 61,57,949/- be deleted in full. 2. The assessee is a partnership firm filed its return of income at Rs. 8, 16,100/-. The case of the assessee was selected for limited scrutiny on the issue of verification of genuineness of expenses claimed by the assessee. The assessee participated in the proceedings and ultimately case of the assessee was assessed after making certain disallowances u/s 37 of the Act amounting to Rs. 61,57,949/-. The assessee being aggrieved preferred an appeal before the Ld. CIT (A) who in turn confirmed the order of the AO and dismissed the appeal of the assessee. The assessee being further aggrieved approached us through this appeal. We have gone through the order of the AO, order of the Ld. CIT (A) and submissions of the assessee along with arguments of both the sides.
It is observed vide page-4 and 5 of the assessment order that the assessee under consideration made following payments to the parties treated as contractor as under:
Total Sl. Name of the Name as per contractual PAN Remarks No. contractor PAN data base payment made 1. M/s. KSSR & AAECK8634K M/s. KSR & 7, 30,844/- Company is found to be Sons Textiles Sons Textiles “strike off” from ROC Pvt Ltd Pvt Ltd master data. Last annual return for the A.Y. 2016- 17 was submitted to the ROC. Screenshot is reproduced under. 2. M/s. Summer AACCS9432M M/s. Summer 54, 27,105/- Company is found to be India Textile India Textile “Under Liquidation” from Mills Pvt Ltd Mills Pvt Ltd ROC master data. Screenshot is reproduced under. Last annual return for the A.Y. 2016-17 was submitted to the ROC. Screenshot is reproduced under. Total 61, 57,949/- To support the above information the AO further reproduced the master data of MCA as under:-
Company Master Data CIN U18100TZ2012PTC018614 Company Name M/s. K.S.R. & Sons Textiles Pvt. Ltd. ROC Code RoC-Coimbatore Registration Number 018614 Company Category Company limited by Shares Company Sub-Category Non-Govt. Company Class of Company Private Authorised Capital (Rs) 5000000 Paid up Capital (Rs) 200000 Number of Members (Applicable in case 0 of company without share capital) Date of Incorporation 08.08.2012 Registered Address Old. No. 30B / New No.102, East Muniappan Kovil Street, Tiruchengode Namakkal TN-637211 IN. Address other than R/o where all or any - books of account and papers are maintained Email Id accounts@summerindia.com Whether Listed or not Unlisted ACTIVE compliance ACTIVE Non-Compliant Suspended at stock exchange - Date of last AGM 30.09.2016 Date of Balance Sheet 31.03.2016 Company Status (for efiling) Strike Off
Company Master Data CIN U17111TZ1997PTC008133 Company Name M/s. Summer India Textile Mills Pvt. Ltd. ROC Code RoC-Coimbatore Registration Number 008133 Company Category Company limited by Shares Company Sub-Category Non-Govt. Company Class of Company Private Authorised Capital (Rs) 360000000 Paid up Capital (Rs) 351554260 Number of Members (Applicable in case 0 of company without share capital) Date of Incorporation 09.10.1997 Registered Address 176/2AKOZHIKALNATHAM ROAD TIRUCHENGODE, NAMAKKAL, NAMAKKAL, TN-637211 IN Address other than R/o where all or any - books of account and papers are maintained Email Id accounts@summerindia.com Whether Listed or not Unlisted ACTIVE compliance Suspended at stock exchange - Date of last AGM 30.09.2016 Date of Balance Sheet 31.03.2016 Company Status (for efiling) Under liquidation 4. Considering the above information, the AO denied to allow the payments made and claimed as expense by the assessee. In this case the assessee submitted its bank statement showing the payment as per the list made to the above parties by RTGS / transfer. However, name of none of the contractors are appearing in the bank statement. Therefore, in AO’s view, the payments highlighted in bank statement are indeed paid to these contractors against service rendered could not be established with documentary evidence.
We have considered the above facts along with the paper book furnished by the assessee and vide page no. 39 & 40 we found the copy of ledger account in the books of M/s. K.S.R. & Sons Textiles Pvt. Ltd. and vide page no. 41 & 42 M/s. Summer India Textile Mills Pvt. Ltd respectively. The core issue is whether the assessee has discharged the onus of proving the identity of the contractors, genuineness of the transactions, and actual rendering of services for the contractual payments of Rs. 61,57,949/-. The Assessing Officer had noted that both entities were non-functional as per ROC master data during F.Y. 2017-18 (strike-off/under liquidation with last filings up to F.Y. 2015-16).
The assessee has placed reliance on the ledger accounts (Annexure I-page 1 of annexures compilation for KSR; Annexure III - pages 5-8 for Summer India), which show credit entries for job-work charges and corresponding debit entries for payments. The bills issued by the contractors are placed at Annexure II (pages 3-4) and Annexure IV (pages 10-32), containing details of metres/pcs, weight, rates, and "PAID" stamps. Confirmation letters along with their ledgers are at Annexures VIII & X (pages 52-53 & 71-73), and bank statements of the contractors are at Annexures IX, XI & XII (pages 54-70 & 74-213). The SBI certificate dated 12.03.2021 confirming payments from the assessee’s CC account is at Annexure V (page 33). GST registration evidence is also furnished (Annexures VI & VII).
While the above documents are on record and demonstrate that entries were made in the books, payments were routed through banking channels, and bills were issued, these facts can’t be ignored on the premise that the vendors of the assessee are defaulters as per the Companies Act and by themselves do not conclusively establish the ingenuineness of the expenditure under section 37(1) of the Act. The assessee is required to prove not only the fact of payment but also that the services were actually rendered wholly and exclusively for business purposes by functional entities. No doubt, the ROC status of the contractors during the relevant year remains a material fact indicating that the entities were not in operation. The GST registration w.e.f. 01.07.2017 and subsequent filings (up to F.Y. 2019-20) do have relevance in confirming the position as on the date of transactions in F.Y. 2017-18, although the contractors had not filed their ROC returns or ITRs for the relevant assessment year.
Here it is pertinent to mention that although the vendors of the assessee by defaulters as far as compliances before the Ministry of Corporate Affairs are concerned, but this fact is nothing to do with the affairs of the assessee. The information submitted by the assessee before the AO, Ld. CIT (A) and before us are relevant and sufficient to discharge the burden on the assessee for the purposes of section 37 of the Act. It is also observed that the AO involved AU during the assessment proceedings i.e. was fully empowered and duty bound to verify the information submitted by the assessee before reaching any conclusion against the assessee solely based on the facts that the vendors are defaulters before the MCA.
We have also considered the judicial pronouncements relied upon by the AO and Ld. CIT (A), i.e. Roshan Di Hatti v. CIT (SC.) (1992) 2 SCC 378 and Nemi Chand Kothari v. CIT (Guwahati) (2003) 264 ITR 254. But, the same are not applicable on the facts and law applicable to the assessee. In view of this, we allow the ground taken by the assessee and orders of the authorities below are set aside.
In the result, the appeal of the assessee is allowed.
As the assessee has not pressed the Stay Application filed by it, the same is dismissed as withdrawn.
In the result, the Stay Application filed by the assessee is dismissed.
Order pronounced on the 8th day of June, 2026, in Chennai.
Sd/- Sd/- (मनु कुमार गिरर) (गगन गोयल) (MANU KUMAR GIRI) (GAGAN GOYAL) न्याययक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER चेन्नई/Chennai, ददनाांक/Dated: 8th June, 2026. KB आदेश की प्रयतललपप अग्रेपषत/Copy to: 1. अपीलार्थी/Appellant 2. प्रत्यर्थी/Respondent
आयकर आयुक्त/CIT, Chennai /Madurai/Coimbatore/Salem 4. पवभागीय प्रयतयनधि/DR 5. गार्ड फाईल/GF K Digitally signed by K BABU BABU Date: 2026.06.10 11:33:34 +05'30'
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