Dabur India Limited vs ACIT /DCIT

“1.

The Ld. CIT (A) has grossly erred in law and on facts in dismissing the appeal filed by the appellant and confirming the addition of Rs. 75,24,511/- merely on surmises and conjectures,

2.

The Ld. CIT(A) failed to appreciate that the Assessing Officer had no new tangible material to form a valid reason to believe that income had escaped assessment. The reopening was based entirely on information from the Investigation Wing, without any independent verification or inquiry.

3.

The appellant humbly submits that the reassessment order is vitiated by gross violation of natural justice, as the appellant was not provided with any copy of the Investigation Report or given any opportunity to rebut the alleged findings through cross examination.

4.

On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in rejecting the contention of the assessee that the addition made by the AO is untenable in the eyes of law, having been made without providing opportunity to cross examine the person on the basis of whose statement the allegations have been made against the assessee and without following the principles of natural justice.

5.

The Ld. CIT(A) and the Ld. AO both failed to consider the books of account, agreements, bank statements, Invoices, ledger account of Oxford Infracon Pvt Ltd linked with invoices and bank statement, Annual VAT Return for West Bengal and audit reports submitted by the appellant during the proceedings and alleging them as mere paper trail is perverse, thereby rendering the order nonspeaking.

6.

On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in rejecting that the inference drawn by the AO merely on the basis of a statement that these firms are not in actual business is baseless and contrary to the facts on record.

7.

On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in rejecting the contention of the assessee in ignoring the fact that the services of loading and unloading taken from Oxford Infracon Pvt Ltd were essential to the business of the assessee and that no other vendor was hired to perform those services, the allegation that the assessee has not taken those services cannot be sustained.

8.

On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in confirming the addition on account of bogus purchases, despite their being adequate material and evidences brought on record by the assessee before the AO to show that the purchases were made in the regular course of business.”

This case was re-opened u/s 147 by the assessing officer for the AY 2015-16 by serving a notice to appellant and tendered a response why this case was re-opened u/s 148. The reasons are enclosed in annexure-1 refer page 1 to 37 of paperbook. The main allegation of the AO is as follows:

a)

Against Dabur: - Payment made is a sham transaction to reduce Income of Dabur so that lower taxes are paid by Dabur. Dabur has not provided truthful copies of payment records, that form 16A is colorful device. Dabur has purchased bogus bills from a paper concern (oxford) and to cover up, payments were made through banking channel.

b)

Against Oxford: Oxford has no real business and is a paper company floated by Shri Kamal Kumar Jain who has appointed dummy directors who are his employees, oxford has not provided copies of ITR return. During the search at Kamal Jain premises, it was found that he was involved in accommodation entries in the form of fake sale and purchase bills.

The CIT(A) also went largely by the above assertation of the AO and dismissed the appeal through following findings and holding that:

Oxford Infracon in a fake entity.

The AO's reliance on statement of director of M/s Oxford Infracon Pvt Ltd. cannot be faulted upon.

It is Dabur's responsibility to prove existence of oxford infracon pvt ltd.

iv.

Mere paper trail and banking channels is insufficient to justify expenses.

Opportunity of cross examination of Oxford Infracon is not required given that the entity is fake and basis statement obtained from directors/ employees of Oxford Infracon.

4. Sumission of the appellant

a)

Before we go into the facts of the case, its important to see the provisions of section 69C and its applicability to the case. The section 69C is reproduced below:

Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year: Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income.

The AO while applying the provisions of Section 69C has no where asked the appellant to justify the source of Rs. 0.75 crs. As no source was sought, the application of 69C at the threshold becomes vitiated and the order of AO and CIT(A) deserves to be quashed on this ground. The best case for the department could have been section 37 of the act which has not been invoked, resultingly this fatal mistake cannot be cured now.

b)

Without prejudice to the above, the fact trail reveals 53 invoices were raised by Oxford Infracon Pvt Ltd to Dabur India limited wherein the payments were made in compliance of Income Tax and Service Tax laws. Further, no proof has been given by department why this transaction is fake and the nature of the wrongdoing by the parties. Mere allegation that the Oxford Infracon is a fake entity does not establish the fact that labour was not supplied by Oxford Infracon to Dabur India Limited.

Dabur India Limited is not concerned with the accounting treatments done by Oxford Infracon in its books and accordingly the assertation of AO and CIT(A) that Dabur India is required to prove the genuinity of Oxford Infracon is beyond the requirements of law.

c)

The appellant submits that the loading and unloading expenses incurred through M/s Oxford Infracon Pvt. Ltd are genuine business expenses and that without incurring these expenses no revenue of Rs. 360.14 crs could have been generated. Further both AO and CIT(A) failed to acknowledge that no other loader and unloader was engaged to perform these activities at the location.

d)

No opportunity of cross examination was given by AO and CIT(A) to verify the assertation of the employee/ directors of Oxford Infracon to the company. In the absence of denial of cross examination, the process of natural justice has been vitiated at the core in the instant case, demanding a re-verification of the allegations of the AO.

e)

Accordingly, it is prayed that the demand of Rs. 0.75 crs should be quashed as no allegation mentioned in section 69C has been brought out by the department.

The appellant wishes to rely upon the following judicial rulings to augment its case:

i.

ITA 692/2009 DELHI HIGH COURT The Hon'ble High Court upheld the direction of lower appellate authorities and held that section 69C is directed to the 'source' of expenditure; it deems an amount to be income where the assessee offers no satisfactory explanation about the source. The assessee had accounted for the expenditure in its regular books, and therefore, the source stood explained. The Court held that Section 69C focuses on source and not on authenticity of recorded expenditure, and accordingly the Assessing Officer erred in making the addition under Section 69C.

[Refer Para 5 and 6 of the Judgement attached as per Annexure-28 on page 600 to 601 of paperbook]

ii.

2026 (5) TMI 618-DELHI HIGH COURT

Pr. Commissioner of Income Tax-4 Versus Kross Diamonds Pvt. Ltd.

by Unexplained purchase additions fail when genuine imports/ purchases of diamonds are documents, banking payments and business backed records. An addition under section 69C for unexplained purchase expenditure is not sustainable where the purchases are accepted as genuine and are supported by bills, vouchers, import documents and banking-channel payments. Cash sales and subsequent bank deposits do not, by themselves, make the purchase source unexplained when substantial opening stock and business imports also support the transaction trail. At most, the identity of retail purchasers may remain in issue, but that does not justify a section 69C addition on these facts. The appellant therefore succeeded.

2026 (4) TMI 262 – ITAT- DELHI Asst. CIT, Central Circle 19(1) Delhi Versus Radiate E Services Pvt. Ltd.

2026 (3) TMI 685 – ITAT DELHI

Paras Rice Products Pvt. Ltd. Versus ACIT, Circle 19 (1)

“69C. Where in any financial year an assessee has incurred say expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may he may be deemed to be the income of the assessee for such

Unexplained expenditure, etc.

Unexplained expenditure, etc. financial year: Provided that, notwithstanding anything

contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income.”

“The Hon’ble High Court upheld the direction of lower appellate authorities and held that section 69C is directed to the ‘source’ of expenditure; it deems an amount to be income where the assessee offers no satisfactory explanation about the source. The assessee had accounted for the expenditure in its regular books, and therefore, the source stood explained. The Court held that Section 69C focuses on source and not on authenticity of recorded expenditure, and accordingly the Assessing Officer erred in making the addition under Section 69C.”