SINGH CONSTRUCTION CORPORATION,DURGAPUR vs. DCIT, CENTRAL CIRCLE 2,, DURGAPUR

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ITA 2182/KOL/2025Status: DisposedITAT Kolkata18 December 2025AY 2018-20194 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 payment made to M/s Bhagwati Mechanical Services could not be treated as bogus. The assessee, a contractor, had engaged M/s Bhagwati Mechanical Services as a sub-contractor and made payments after deducting TDS under Section 194C, which were deposited. The assessee had provided details of payments to 24 sub-contractors, including M/s Bhagwati Mechanical Services, for the assessment year in question and other years, demonstrating a pattern of regular business dealings. The assessee also submitted TDS returns and copies of accounts of the sub-contractor. The Tribunal found that the assessee had furnished all necessary details to the authorities below. Therefore, the mere fact that the recipient had not filed its return of income was not sufficient grounds to deem the expenditure as bogus. The Tribunal set aside the order of the CIT(A) and directed the AO to delete the addition. The ratio decidendi is that an assessee's compliance with TDS provisions and provision of verifiable details regarding sub-contractors should not be negated solely due to the recipient's non-filing of income tax returns, especially when such payments are part of a consistent business practice across multiple assessment years.

What were the facts?

The assessee, Singh Construction Corporation, is in appeal against the order of the National Faceless Appeal Centre, Delhi, dated 26.06.2025, for Assessment Year 2018-19. The Assessing Officer (AO) made an addition of ₹54,37,571/- under Section 69C of the Income Tax Act, 1961, treating a payment to M/s Bhagwati Mechanical Services as bogus expenditure. The AO's basis was that the assessee failed to furnish supporting bills and confirmations for the services rendered, and the recipient had not filed its return of income. The CIT(A) upheld this addition, citing the assessee's failure to establish the recipient's identity and the recipient's non-filing of returns as making the claim unverifiable.

What were the issues?

1. Whether the addition of ₹54,37,571/- made by the AO under Section 69C of the Income Tax Act, 1961, on account of alleged bogus expenditure in respect of payment to M/s Bhagwati Mechanical Services is justified, considering the material and evidence on record? Assessee's Contentions: - The assessee argued that the payment of ₹54,37,571/- was made to M/s Bhagwati Mechanical Services for sub-contract charges after deducting tax at source under Section 194C, which was duly deposited. - The assessee provided details of 24 sub-contractors, including M/s Bhagwati Mechanical Services, to whom payments aggregating to ₹1,55,27,220/- were made, with TDS of ₹1,74,082/- deducted and deposited. - Payments to M/s Bhagwati Mechanical Services were made consistently in AY 2016-17 and AY 2019-20, indicating a normal business transaction. - The assessee filed TDS returns with all particulars of sub-contractors. - Copies of M/s Bhagwati Mechanical Services' accounts showing advances and bills were examined. - The assessee had addressed correspondence to M/s Bhagwati Mechanical Services regarding their failure to file a return of income. - The assessee contended that the payment should not be treated as bogus solely because the recipient had not filed its return of income. Revenue's Contentions: - The revenue, through the AO and CIT(A), argued that the assessee failed to furnish supporting bills and confirmations for services rendered. - The recipient's non-filing of a return of income made the payment unverifiable and justified treating it as bogus expenditure.

Which sections of the Income-tax Act were involved?

Section 69C,Section 194C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH, KOLKATA

Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM

For Appellant: shri Manoj Kataruka &
For Respondent: Shri S.B. Chakraborthy, DR
Hearing: 04.12.2025Pronounced: 18.12.2025

This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 26.06.2025 for the AY 2018-19.

2.

The only issue raised in ground no.1, is against the order of ld. CIT (A) confirming the addition made by the ld. AO of ₹54,37,571/- u/s 69C of the Act on account of bogus expenditure in respect of payment to M/s Bhagwati Mechanical Services, which is contrary to material/evidences on record and thus, bad in law.

2.2. In the appellate proceedings, the ld. CIT (A) dismissed the appeal of the assessee on this issue by holding that there was failure of the assessee to establish the identity of the recipient and further failure of the recipient of payment to file the return of income making the claim unverifiable and thus, justified the addition made by the ld. Assessing Officer

2.3. After hearing the rival contentions and perusing the materials available on record, we find that the assessee is a contractor and has

3.

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

Order pronounced in the open court on 18.12.2025.

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