DCIT Vs R. Bharathi & Anr. (Appellate Tribunal under SAFEMA, New Delhi)
Bogus Expense May Mean Tax Evasion, Not Benami Property: SAFEMA Tribunal Rejects Revenue’s Appeals Against Job Workers
Summary: A batch of 18 appeals was filed by the DCIT, Benami Prohibition Unit, Chennai, challenging the order of the Adjudicating Authority dated 27 June 2025. The Adjudicating Authority had refused to confirm provisional attachment of shares allegedly held benami in the names of job workers or contractors of Shobikaa Impex Private Limited.
The proceedings arose from a search u/s 132 in the case of Shobikaa Impex. The Department alleged that the company inflated expenses to reduce taxable income by booking bogus job-work or contractual expenses without receiving goods or services & without making actual payments.
These expenses were credited as trade payables in the names of job workers. Corresponding assets were allegedly created by increasing investments, fixed deposits & closing stock. As on 31 March 2017, trade payables outstanding for over one year amounted to ₹117,65,37,129.
During FY 2017-18, the trade-payable liabilities were allegedly converted into share capital by allotting equity shares of face value ₹100 at a premium of ₹750 per share in the names of the job workers. The shares were subsequently bought back or transferred.
