The Pune Bench of Income Tax Appellate Tribunal (ITAT) has quashed disallowance of payment made to subcontractors workers on basis of admissions or confessions made during survey proceedings .
The assessee V M Matere Infrastructures engaged in the civil construction works. When the survey action was conducted on the premises of the assessee, it was found that assessee given subcontracts work to 11 workers. Many of them were the workers of the assessee company.
The Assessing Officer (AO) found that assessee did not follow the procedure for awarding the contracts after analyzing the submissions of the assessee AO disallowed entire sub contract expences.
Aggrieved by the order, the assesee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], who granted partial relief to the assessee. Thus, the assessee filed a second appeal before the tribunal.
When the matter was considered before the bench, Nikhil S Pathak, the counsel for the assessee submitted that no disallowance was warranted on account of the patent made to these 1 sub contractors , all the payment made to them are genuine. The disallowance was made only on the admissions and confessions of the parties during the survey proceedings .
M.G. Jasnani, the Counsel for the revenue submitted that Assessing Officer’s detailed reasoning inter alia observing that the assessee had failed to prove genuineness of its impugned sub-contractual expenses during the course of survey and thereafter in assessment proceedings.
Further, these eleven recipient parties had turned-out to be the assessee’s employees only wherein they had been awarded subcontract works in civil construction without following any due procedure.
Thus, the survey statement of the managing director of the assessee failed to prove the genuineness of the impugned sub-contractual expenditure claims.
The tribunal observed that as per Section 292C of the Income Tax Act, 1961 envisages that any material found or seized during the course of search or a survey, as the case may be, carries presumption of correctness and contents thereof.
Also the CBDT circular dated 10.03.2003, reiterated on 15.12.2014 that the departmental authority’s ought to collect actual evidence than admissions or confessions made by the concerned parties
Therefore the two member bench of Satbeer Singh Godara (Judicial Member) and Dr. Dipak P. Ripote, (Accountant Member) held that once the departmental survey action even could not find anything specific against the assessee or his sub-contracts despite having the benefit of Section 292C of the Income Tax Act. Therefore, the bench allowed the appeal filed by the assessee.
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