Addition u/s 69C of the Income Tax Act on account of unexplained expenditure deleted by AO

The Income Tax Appellate Tribunal (ITAT) has deleted an addition of Rs. 10,76,146 made under Section 69C of the Income Tax Act for unexplained expenditure. The addition was based on information from the Sales-tax Department alleging the assessee had used bogus purchase entries. However, the ITAT followed its previous ruling in the assessee's own case for an earlier assessment year, where it was held that the Assessing Officer must disprove the evidence provided by the assessee rather than relying on conjectures.

THE INCOME TAX APPELLATE TRIBUNAL
“SMC” Bench, Mumbai
 Shri Shamim Yahya (AM) & Shri Amarjit Singh (JM)

 I.T.A. No. 6758/Mum/2019 (Assessment Year 2010-11)

ITO-23(3)(6)
Room No.608, 6th Floor,
Earnest House, Nariman
Point, Mumbai-400 021
PAN : AAAFR4672H
(Appellant) 

Vs. 

R.A. Industrial Metals
185, 2nd Floor, Bullion
Exchange Building
Sheik Memon Street
Zaveri Bazar,
Mumbai-400 002
(Respondent)

Assessee by Shri Vimal Punmiya
Department by Shri Anoop

Date of Hearing 18.05.2021
Date of Pronouncement 01.07.2021

 O R D E R

Per Shamim Yahya (AM) :- 

This appeal by the Revenue is directed against the order of learned CIT(A)-29 dated 30.08.2019 and pertains to Assessment Year 2010-11.

2. The grounds of appeal read as under :

1. On the facts and in the circumstances of the case and in law, the learned CIT(A)erred in deleting the addition of Rs.10,76,146/- made u/s. 69C of the Act on accountof unexplained expenditure without appreciating the fact that the addition was made on the basis of specific information from the Sales-tax Department that the assessee was involved in availing accommodation entries of bogus purchases.”

3. Brief facts of the case are that the assessee filed the original return of income for AY 2010-11 on 15.10.2010 declaring total income at Rs.2,53,130/-. In this case information was received from the investigation wing of Sales Tax Department,Mumbai who had identified certain accommodation entry providers/bogus suppliers and the beneficiaries who had utilized the services of these bogus entry providers and  as per the information received during the year under consideration, the assessee hastaken accommodation entries for purchases from 12 accommodation entry providersBased on this information, it was found that assessee has obtained bogus billsfrom bogus suppliers. Accordingly, the assessment was re-opened u/s147 by issuingnotice u/s.148 dated 25.03.2013. The assessment was completed u/s143(3) r.w.s 147of the IT Act determining total income at Rs. 14,93,477/- on 31.01.2014 after making addition of Rs.10,76,146/- by calculating the peak after merging the accounts of all the bogus parties from whom the purchases made during the year u/s.69C of theIncome Tax Act, 1961 being 'unexplained expenditure' and addition @ 0.50% on Rs.3,28,40,379/- i.e. Rs.1,64,202/- in order to equalize the G.P. in respect of tainted and non tainted purchases as well as variation of GP.

4. Upon assessee’s appeal Ld.CIT(A) deleted the addition qua the ground raised byfollowing the ITAT decision in assessee’s own case. The Ld.CIT(A) has held as under:-

This issue has come up in the appellant's own case for earlier assessment year i.e. A.Y.2009-10 and the Hon'ble ITAT Bench "D" vide order No. ITA No 1850/Mum/2015dated 12.06.2017 has decided the issue in favour of the appellant. The decision of the Hon'ble ITAT of it's order dated 20/11/2009 is reproduced as under:-

"8. we have carefully considered the rival contentions and perused the material place before us including the impugned orders and case law relied upon by the assessee. Theundisputed facts of the case are that the revenue has received information from the Sales tax Department, Government of Maharashtra that the assessee is one of beneficiary of the transactions by hawala operators who provided accommodation entries to the assessee and that the purchases from the said parties were not confirmed as the notice issued u/s. 133(6) of the act were returned unserved. Whereas during the course of assessment proceedings as well as in the appellate proceedings, the assessee has produced various books of accounts corroborating the fact that the material was actuallypurchased and sold, payments were made through banking channel, stock tally register showing receipts and issues of materials and bills thereof, reconciliation .of sales and purchases and delivery challan etc. In our view, it is settled legal position that once the assessee has filed all the necessary details before the AO, it is for the AO to disprove the evidences ^submitted by the assessee and point out further defects in the books of account before making addition on Account of bogus purchases. In the instant case before us, the whole conclusion has been drawn by the '" -; revenue authorities merely on conjectures, surmises and presumption that the assessee might have taken '' the hawala entries from the hawala operators and the cash so generated was used for making purchases from the gray market. However, no concrete findings with the necessary evidences were given by the authorities for making the addition/enhancement. In view of the facts and circumstances of the are not in agreement with the conclusion drawn by the FAA that the addition as made by the AO amounting to Rs.58,89,729/- u/s. 69C was correct with the further enhancement by Rs.25,10,887/- by the Ld-CIT(A). Accordingly. we set aside the order of the Ld.CIT(A) on this issue and direct the AO to delete the additions.

4.2.4 This issue has been clearly held by the Hon’ble ITAT in the appellant’s own case for earlier year i.e. 2009-10. Therefore, respectfully following the judgment of the jurisdiction ITAT the issue is decided in favour of the appellant. The addition made by the AO is directed to be deleted.

5. Against the above order revenue is in appeal before us. We have heard both the parties and perused the records.

6. We find that in assessees own case ITAT in similar facts has decided the issue in favour of assessee. But, Ld. DR has referred to case laws that at least difference of G.P. of normal purchase and bogus purchase should be added. However, on the facts of the case, we consider it appropriate to follow the ITAT order in assessees own case and uphold the order of Ld.CIT(A).

7. In the result, revenue’s appeal is dismissed.

Pronounced in the open court on 01.07.2021

 Sd/-                                                             Sd/-
 (AMARJIT SINGH)                                    (SHAMIM YAHYA)
 JUDICIAL MEMBER                                  ACCOUNTANT MEMBER

Mumbai; Dated : 01/07/2021
Sr.PS. Thirumalesh

Copy of the Order forwarded to :
1. The Appellant
2. The Respondent
3. The CIT(A)
4. CIT
5. DR, ITAT, Mumbai
6. Guard File.

BY ORDER,
 //True Copy//

 (Assistant Registrar)
 ITAT, Mumbai