Workenstein Collaborative Spaces Pvt. Ltd Vs DCIT (ITAT Chennai)
In a significant ruling concerning the genuineness of business expenditures, the Income Tax Appellate Tribunal (ITAT) of Chennai has allowed the appeal of Workenstein Collaborative Spaces Pvt. Ltd., thereby deleting a substantial disallowance made by the tax authorities. The decision centered on whether a company can be penalized for the non-compliance of its suppliers. The Tribunal’s order, dated August 29, 2025, provides clarity on the principle that the burden of proof on the assessee is discharged once primary evidence of a transaction is presented.
The case originated from an assessment for the financial year 2021-22, where the Assessing Officer (A.O.) identified purchases of over $3.4 million made from 21 parties who had not filed income-tax returns. A detailed verification was conducted for two of these suppliers, M/s. Deligent Metal and M/s. Interface flor India Pvt. Ltd. When these parties failed to respond to notices issued under Section 133(6) of the Income-tax Act, the A.O. concluded that the transactions were not fully verifiable. Consequently, 25% of the total purchases was disallowed as non-genuine, leading to an increase in the company’s taxable income.
Workenstein Collaborative Spaces Pvt. Ltd. challenged this decision before the Commissioner of Income Tax (NFAC), but the disallowance was confirmed. The CIT(A) upheld the A.O.’s view, stating that the company had failed to establish the identity, creditworthiness, and genuineness of the suppliers and their transactions “beyond doubt.” This led the company to file a second appeal before the ITAT, but with a delay of 149 days.
