Nabeel Construction Pvt. Ltd. Vs PCIT (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT) Mumbai heard an appeal filed by Nabeel Construction Pvt. Ltd. against an order dated March 27, 2025, passed by the Principal Commissioner of Income Tax (PCIT), Thane-1, under Section 263 of the Income-tax Act, 1961, for Assessment Year 2021-22.
The assessee, engaged in construction as a sub-contractor, had filed a return declaring an income of ₹ 1,28,91,690/-. During scrutiny, the Assessing Officer (AO) noted purchases of ₹ 39,06,42,323/- against contract receipts of ₹ 42,16,53,285/-. Although the assessee furnished party-wise details of suppliers with PAN and wage statements, the AO, citing a lack of time for verification, proceeded to disallow the entire purchases and wages of ₹ 39,06,42,323/- as non-genuine business expenditure and completed the assessment.
The PCIT, exercising revisionary powers under Section 263, observed that the AO had failed to quote the relevant section and ought to have invoked Section 69C (unexplained expenditure) read with Section 115BBE, and consequently, initiate a penalty under Section 271AAC. The PCIT rejected the assessee’s explanation that the expenditure was recorded in the books and paid through banking channels, holding that the AO’s failure to apply Section 69C made the assessment order erroneous and prejudicial to the revenue. The PCIT directed the AO to re-frame the assessment by re-characterizing the disallowance as unexplained expenditure.
