ITAT Mumbai remands bogus purchase and labour charge disallowance in Meghdoot Enterprises case

The Mumbai Bench “D” of the Income Tax Appellate Tribunal has set aside the order of the Commissioner of Income Tax (Appeals) and remanded the matter concerning disallowance of purchases and labour contract charges in the case of M/s Meghdoot Enterprises for Assessment Year 2013–14 to the Assessing Officer for fresh adjudication.

Disallowance under Section 69C and relief by CIT(A)

The assessee, engaged in the business of construction of commercial and industrial godowns, had filed its return declaring total income of ₹53.36 lakh. During scrutiny assessment under Section 143(3) of the Income-tax Act, 1961, the Assessing Officer noted substantial expenditure claimed towards purchases and labour contract charges. Holding that the assessee failed to substantiate the genuineness of these expenses, the Assessing Officer made an addition of ₹6.68 crore under Section 69C, assessing total income at ₹7.21 crore. On appeal, the CIT(A) deleted the addition, primarily relying on the remand report and observing that the Assessing Officer had not controverted the documentary evidence allegedly furnished by the assessee during remand proceedings.

Tribunal finds non-speaking order, restores matter to AO

The Tribunal noted that the assessee had repeatedly failed to appear and had not placed complete documentary evidence on record, either before the lower authorities or before the Tribunal. It further observed that the CIT(A), despite being the first fact-finding authority with co-terminus powers under Section 250(4), had passed a non-speaking order without examining the merits of the evidence or recording independent findings. Holding that the assessee had not discharged its initial onus to establish the genuineness of the impugned expenditure, the Tribunal accepted the Revenue’s contention that the matter required proper verification. Accordingly, the issue was remanded to the Assessing Officer for de novo assessment after granting the assessee one final opportunity to substantiate its claims with supporting documentary evidence.