Disallowance of ₹22.18Cr Manpower Service Payment: ITAT Deletes Addition made on Shapoorji Pallonji and Company on Genuine Payments with TDS [Read Order]

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) dismissed the Revenue's appeal against the Commissioner of Income Tax (Appeals)'s [CIT(A)] order, which had deleted a disallowance of ₹22.18 crore for manpower services paid by Shapoorji Pallonji and Company Pvt. Ltd. for AY 2012-13. The tribunal held the payments were genuine as they were made through banking channels with proper TDS deduction.

The assessee, a company in the construction business, had its case reopened under Section 148. The Assessing Officer (AO) added ₹22,18,98,416/- to the income, treating the payment made to contractor Smt. Mayaben V. Parmar as 'unexplained and non-genuine expenditure'. The AO's action was based on an investigation report which noted that the payee had withdrawn cash immediately after receiving the payment from the assessee.

Aggrieved, the assessee appealed to the CIT(A). The CIT(A) deleted the addition, observing that the payments were made through proper banking channels and after deducting Tax Deducted at Source (TDS). The CIT(A) held that the payments could not be deemed unexplained merely because the payee subsequently withdrew cash.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

Before the ITAT, the assessee reiterated that it had discharged its onus by providing evidence of payments through banking channels and TDS certificates, and argued the addition was based on mere suspicion. The Revenue supported the AO's stance, contending that the payment was non-genuine as the assessee could not substantiate the payee's subsequent cash withdrawals for labour payments.

The representative brought the various documentary evidences submitted before the lower authorities evidencing the fact that the payments towards manpower supply are made through banking channel after deducting TDS.

The bench of Justice (Retd.) C V Bhadang and Ms. Padmavathy S held that the AO had erred by relying entirely on the investigation report without conducting an independent inquiry. The tribunal noted that the assessee had provided sufficient documentary evidence to prove the genuineness of the transactions. It relied on the assessee's own case decided by the Bombay High Court, which held that additions cannot be made on suspicion alone.

The ITAT concluded that the CIT(A) was justified in deleting the addition, as the payments were genuine and the subsequent actions of the payee were beyond the assessee's control. The Revenue's appeal was dismissed, and the Cross-Objections filed by the assessee were dismissed as not pressed.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates