Disallowance of subcontractor payments overturned where prior assessment acceptance and banking evidence supported genuineness

Disallowance of payments to sub-contractors was overturned where the tribunal found prior acceptance of the same subcontractor payment in the earlier assessment year, so the Assessing Officer could not reopen and disallow the identical payment within a short interval; outcome: disallowance in the later year deleted. For two other subcontractors the tribunal relied on responses to statutory inquiry notices, payments made through banking channels, and the immaterial quantum of payments to hold the expenditures genuine; outcome: no disallowance for those payments and the appeal allowed with direction to delete the disallowance.

---

---

Issues: Whether the disallowance of subcontractor payments of Rs. 20,46,468 upheld by the First Appellate Authority is sustainable, and whether the disallowance in respect of each of the three subcontractors (Archana Sandip Atkare, Sanjay Chandrika Sah, Shri Govinda Earthmovers) should be deleted or reduced.

Analysis: The Tribunal examined the Assessing Officer's findings, the remand report, and the additional evidence submitted by the assessee. For Sanjay Chandrika Sah, it was noted that the Assessing Officer had accepted similar payments in the preceding assessment year (order dated 15.03.2025) and made no disallowance, whereas the remand report dated 29.04.2025 doubted genuineness; consistency across assessment years militated against reversing acceptance within a month and a half. For the other two parties, the Tribunal observed that both responded to notices under Section 133(6) with details, payments were made through banking channels, TDS was deducted, the amounts were not substantial relative to the assessee's declared income, and the partner's earlier incriminating statement had been retracted; given the CIT(A)'s deletion of the large majority of disallowances and the AO's admission of genuineness for other subcontractors, the total disallowance for these two parties lacked sufficient basis.

Conclusion: The disallowance of Rs. 2,52,525 in respect of Sanjay Chandrika Sah is deleted. The disallowance in respect of Archana Sandip Atkare (Rs. 3,43,050) and Shri Govinda Earthmovers (Rs. 14,50,893) is also deleted. The assessee's appeal is allowed.

---