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Judgment
PER VIMAL KUMAR, JM:
The appeal of Revenue is against order dated 09.04.2025 of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘the Ld. CIT(A)’] passed u/s 250 of the Income Tax Act, 1961, [hereinafter referred to as ‘the Act’] arising out of assessment order dated 20.12.2022 of Ld. Assessing Officer/Assessment Unit (hereinafter referred as “the AO”) u/s 143(3) r.w.s 144B of the Act for Assessment Year 2020-21.
Brief facts of the case are that the assessee is a Private Ltd. Company, filed its return of income on 06.01.2022 declaring loss of Rs.78,41,441/-. The case was selected for scrutiny under CASS for the reason of larger payments to people who had not filed their Income Tax Returns. Notice u/s 143(2) dated 28.06.2022, Notices u/s 142(1) dated 23.09.2022, 12.10.2022, 19.10.2022, 07.11.2022 and 16.11.2022 and show cause notice dated 01.12.2022 were issued to the assessee. The assessee made part compliance. On completion of proceedings, Ld. AO vide order dated 20.12.2022 made additions of Rs.6,38,823/- on account of disallowance u/s 37(1) and addition of Rs.2,88,17,674/- u/s 69C on account of unexplained expenditure. Against order dated 20.12.2022 of Ld. AO, the assessee filed appeal before the Ld. CIT(A) which was partly allowed vide order dated 09.04.2025, addition of Rs.6,38,823/- was upheld and addition of Rs.2,88,17,674/- was deleted.
Being aggrieved, the Department of Revenue preferred the present appeal on following grounds:
“(i)Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 20,00,000/- being payment made to Sanjay Kumar without correctly appreciating the facts of the case."
(ii)"Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 2,68,17,674/-without appreciating that none of the vendors filed its reply and also the assessee was not able to establish the genuineness of the transactions/actual receipt of service."
(iii)"Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating that provisions of sections 69C of the Act are clearly applicable, if explanation offered by the assessee about the source of expenditure is not satisfactory in the opinion of the assessing officer."
(iv)"The appellant craves to be allowed to add any fresh ground(s) of appeal and or delete or amend any of the ground(s) of appeal."
Ld. Departmental Representative submitted that Ld. CIT(A) erred in deleting the addition of Rs.20,00,000/- being payment to Sanjay Kumar without correctly appreciating the facts of the case. Ld. AO had given cogent reasons. Ld. CIT(A) erred in deleting addition of Rs.2,68,17,674/- without appreciating that none of the vendors filed its reply and the assessee failed to establish the genuineness of the transactions/ actual receipt of service. Section 69C clearly was applicable as explanation offered by the assessee about the source of expenditure was not satisfactory. The findings of Ld. CIT(A) are factually incorrect. Ld. AO had given notices and made verifications.
Ld. Authorized Representative for respondent assessee submitted that for making addition of Rs.20,00,000/- Ld. AO relied on GST data which was categorically denied by the assessee. Ld. AO failed to justify his allegations. Ld. CIT(A) held that no payment was made, no ITC claimed, no expenses were booked, Addition u/s Section 69C requires “expenditure incurred”; when no expenditure exists, addition is unsustainable was rightly deleted as
AO doubted genuineness of payments to Sunil Kumar, Mahesh Kumar, Rakesh Kumar & Expert vision Solutions Pvt. Ltd.
Assessee furnished agreements, Invoices, ledger accounts, bank payments with TDS, confirmations, ITR acknowledgements, GSTR-2A.
AO rejected evidence as "paper documents" without contrary proof CIT(A) (paras 4.5.3 to 4.5.10, page no 43 to 46 of CIT(A) order held that payments were genuine, made through banking channels, supported by contracts with Bharti Telemedia Ltd, and profit element earned by assessee proved business reality.
Section 69C applies only where source of expenditure is unexplained. Here, source is explained.
Section 69C applies when assessee fails to explain source of expenditure. The AO had not doubted the receipts received from M/s Bharti Telemedia Ltd out of which payment to the vendors to the tune of Rs.2,68,17,674/-was made.
Here, source is explained: payments made from disclosed bank accounts, duly recorded in books, with TDS deducted.
AO's objection relates to vendors' compliance, not assessee's source.
CIT(A) (para 4.5.2 onwards) correctly held section 69C not applicable.
Genuineness of Transactions Proved by the appellant by discharging its onus by providing:
a. Copy of Agreement
b. Copy of Ledger Account
c. Copy of Invoices
d. Confirmation from Vendor
e. Purchase Order
f. GSTR2A of the assessee
g. TDS Returns
h. Bank Payment details
It is not the case of the revenue that the expenses are incurred out of the Books so as to Attract 69C.
AO has not produced any incriminating document to contradict the above but has only mechanically ignored the submissions of the assessee.
When the provision of section 69C are invoked, the revenue does not doubt the genuineness of incurrence of the expenditure. Only the source of such expenditure is doubted. Whereas in the instant case AO is doubting the genuineness of the expenditure & not the source.
Reliance was placed on following judgements:
a. PCIT v. Tejua Rohit kumar Kapadia (2018) 402 ITR 482 (SC)/94 Taxmann.com 325 Upheld deletion of u/s 69C addition where source explained, payment by cheque & no evidence to show that amount was recycled back to assessee...
b. Hon'ble Supreme Court in the case of CIT vs. Odeon Builders (P.) Ltd. [2019] 110 taxmann.com 64 (SC) AO cannot disallow expenses solely on third-party non-compliance without disproving genuineness.
c. PCIT Vs. Sanjay Dhokad ITA No: 795/2018 Bombay High Court followed in DCIT Vs. ABA Builders Ltd (ITAT Delhi 'C' Bench) ITA 1351/Del/2022 Non applicability of 69C where source of expenditure is not doubted.
d. DSV Air & Sea (P.) Ltd. v. ACIT. ITAT Mumbai 'K' Bench ITA No.2296 (MUM) OF 2022 No Addition U/s 69C merely on the fact that the vendor party had not filed its ITR
e. Kishinchand Chellaram V CIT (1980) 125 ITR 713 (SC)Burden of proof is on the revenue to show that the purchases in question were bogus by bringing proper evidence.
f. Mehta Parikh & Co. v. CIT [1956] 30 ITR 181, 187 (SC) - "suspicion, however strong, cannot take the place of proof.
From examination of record in light of aforesaid rival contention, it is crystal clear that Ld. AO made addition of Rs.20,00,000/- by relying on GSTR data which was denied by assessee. Ld. AO failed to give evidence in support of his allegation. Ld. CIT(A) found that since no payment was made, no ITC claimed and no expenses were booked. Since, no expenditure existed the additions of Rs.20,00,000/- was unsustainable. Therefore, the decision of deletion of Rs.20,00,000/- by Ld. CIT(A) deserves to be upheld.
Ld. AO made additions of Rs.2,68,17,674/- by doubting genuineness of payments to Sunil Kumar Mahesh Kumar, Rakesh Kumar & Expert vision Solutions Pvt. Ltd. Assessee had furnished agreements, invoices, ledger accounts, bank statements etc. which was rejected by Ld. AO. Ld. CIT(A) held payments to be genuine. Since, they were made through bank channel supported by contracts with Bharti Telemedia Ltd., and profit element earned by assessee proved business reality. The expenses incurred out of the Books so as to Attract 69C. In view of above material facts the findings of Ld. CIT(A) are upheld. Therefore, the grounds of appeal are rejected.
In the result, the appeal filed by the Revenue is dismissed.