RAKESH KUMAR,PANIPAT vs. THE PRINCIPAL COMMISSIONER OF INCOME TAX, ROHTAK, ROHTAK

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘E’, NEW DELHI Before Sh. Raj Kumar Chauhan, Judicial Member & Sh. Brajesh Kumar Singh, Accountant Member ITA No. 3415/Del/2025 :Asstt. Year: 2018-19 Rakesh Kumar, Vs PCIT, H. No. 399/8, Near Kalander Chowk, Rohtak, Panipat, Haryana-132103 Haryana-124001 (APPELLANT) (RESPONDENT) PAN No. ANUPK5074F Assessee by: Sh. Himanshu Sharma, Adv. & Sh. Amit Kaushik, Adv. Revenue by: Ms. Sita Shrivastava, CIT-DR Date of Hearing: 03.03.2026 Date of Pronouncement: 29.05.2026 ORDER Per Raj Kumar Chauhan, Judicial Member: The appeal is directed against the order dated 18.03.2025 of ld. PCIT, Rohtak passed u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) wherein the Assessment Order dated 24.03.2023 set aside on the ground that Assessing Officer has not invoked section 69C r.w.s. 115BBE of the Act.

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as per risk management strategy towards high risk CRIU/VRU

cases, a specific information was received that assessee, Sh.

Rakesh Kumar has carried out following bogus purchase

transaction during the concerned year:

Party with whom transaction made Transaction Amount M/s Shree Balaji Wooltex 4273000 M/s Radha Kanheya Export 2082425 M/s Sri Rameshwaram International 9545313 TOTAL 15900738

u/s 148 dated 29.03.2022, reminder dated 23.09.2022 and

followed by notice u/s 142(1) as find mentioned in para 2 of

the Assessment Order. Show cause notice was also issued

dated 08.03.2023 to which reply was filed:

Type o f Da te of Da te o f Res po ns e Date o f Res po ns e type Rema rks i f a ny. not ic e/c ommun ic not ic e/c ommu c omp lia n ce of t he res po ns e i f ( Ful l/p a rt/a djo u r ati on nic a ti on giv en as se ss e e rec e iv e d nme nt) rec eive d/ n ot rec eive d No tice u /s 14 8 29/ 0 3 / 20 22 3 0 da ys N ot N / A Se rv ed by th e of Inc om e T ax rec eive d J AO a n d a Act 196 1. ac count at e - fili n g p orta l. Remi nde r le tte r 23/ 0 9 / 20 22 5 da ys N ot N / A Se rv ed vide for c o m pli an ce rec eive d ema il an d of n oti ce u/ s 1 4 8 ac count at e - fili n g p orta l No tice u/s 10/ 1 1 / 20 22 2 5/ 1 1/ 2 0 22 Rec eive d 21 /1 220 22 pa rt Re qu es te d 142( 1 ) o f adj ou rn men t Inc ome T ax Ac t 196 1 . Remi nde r le tte r 06/ 0 1 / 20 23 5 da ys Rec eive d 08 /0 1/ 20 2 3 pa rt Re qu es te d for c o m pli an ce 23 /0 1/ 20 2 3 adj ou rn men t of n oti ce u/ s 1 4 8 Adj ou rnme n t a nd 30/ 0 1 / 20 23 5 da ys Rec eive d 06 /0 2/ 20 2 3 st ate d th a t th e re tu rn fil ed on rem in de r fo r 16/ 0 2/ 20 1 9 v ide Ac k . N o . co mplia n ce o f 422 21 79 2 11 602 1 9 fo r the not ic e u/ s 1 4 8 As se ss men t and 142 ( 1) Ye a r 20 18- 1 9 may be t re a ted as re tu rn f il e d i n re s pon se t o n ot ic e und e r s e ct i on 14 8 o f th e A c t. No tice u/s 08/ 0 2 / 20 23 1 5/ 0 2/ 2 0 23 Rec eive d 14 /0 2/ 20 2 3 pa rt 143( 2 )

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said appeal, the ld. PCIT has proceeded to revise the Assessment Order on the ground that the Assessment Order dated 24.03.2023 was passed without applying the provisions of section 69C of the Act and on which tax at special rate as per section 115BBE of the Act was required to be charged. Hence, the ld. PCIT observed that the order passed by the Assessing Officer appear to be erroneous and prejudicial to the interest of the Revenue. It was further observed that the bogus purchases should have been added u/s 69C of the Act and tax should have been realized as per section 115BBE of the Act. The show-cause notice u/s 263(1) was issued on 29.07.2024 which was served through ITBA on the registered e-mail and the assessee has filed reply dated 11.10.2024 opposing the observation of the ld. CIT(A) stating that the section 69C r.w.s. 115BBE of the Act was not applicable to the case of the assessee because all the payments were made through banking channel. The ld. PCIT did not find any satisfactory reply and observed that assessee failed to provide physical movement/transportation of goods from the party to his business premises before the Assessing Officer during the assessment proceedings as well as during the revision proceedings. The ld. PCIT was of the opinion that the transaction made with these three entities was in the nature of accommodation entry and was not in the nature of business

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transaction. It was concluded that the Assessing Officer has not passed the Assessment Order in accordance with the decision rendered in the case of N.K. Proteins Ltd. Vs. DCIT (2017) 84 taxmann.com 195 (SC) and the bogus purchases were in the nature of accommodation entry and was not in the nature of business transaction and accordingly required to be taxed u/s 69C of the Act.

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filai by the appellant submitting that the provisions of section 69C are not applicable on the facts of the case. 4 That the Ld. PCIT grossly erred in law & on the facts & circumstances of the case in passing the impugned order on the basis of incorrect reasons. 5 That the Id. PCIT grossly erred in law & on the facts & circumstances of the case in passing the impugned order merely on the basis of suspicion. 6 That the Ld. PCIT grossly erred in law & on the facts & circumstances of the case in passing the impugned order without application of mind to the material on record. 7 That the Ld. PCIT grossly erred in law & on the facts & circumstances of the case in passing the impugned order without following the principles of natural justice. 8 That the Ld. PCIT grossly erred in law & on the facts & circumstances of the case in passing the impugned order without considering that the Ld. Assessing Officer had not failed in conducting enquiry while passing the assessment order dated 24.03.2023 under section 147 read with section I44B of the Act. 9 That the Ld. PCIT grossly erred in law & on the facts & circumstances of the case in passing the impugned order without considering that the subject matter of the review order is pending in appeal against the assessment order dated 24.03.2023 under section 147 read with section 144B of the Act before the Commissioner of appeals on similar issue. 10 The Appellant craves for leave to add, amend, vary, omit OR substitute any of the aforesaid grounds of appeal at any time before OR at the time of hearing of the appeal.” 8. We have heard the ld. AR and the ld. DR. With regard to ground No. 3 pertaining to wrongly invoking regarding section 69C of the Act is not applicable. The ld. AR has filed written submissions, extracted below as under: “B. Submissions on Ground No. 3: Section 69C is not applicable

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a. It is submitted that the additions were made by Ld. AO alleging that the transactions with three disputed parties namely Shree Balaji Wooltex, M/s Radhe Kanheya Exports and M/s Sri Rameshwaram International are non-genuine under section 37 (page 22 of the appeal set) and the same was sought to revised by the respondent. b. That in relation to the same group of parties where purchases were held non-genuine (please refer page 25 of the paper book for parties in the present case and other parties (para 2) in whose cases order have been passed), this Hon’ble Tribunal in below cases has quashed revision orders under section 263 of the Act invoking provisions of section 69C passed by the same officer for the same assessment year 2018-19: 1. Sandeep Kumar Vs. ITO Ward-1 Panipat, ITA No.4348/Del/2025 (Para 12-15 at pages 6-8 of the judgments)-Case related to M/s Maa Kami Yarn. 2. Joginder Kumar & Sons HUF Vs. PCIT, Rohtak, ITA No.l975/Del/2025 (Para 6 at page 16 of the judgments)-Case related to M/s Radhe Kanheya Exports, which is also a party in present case. 3. Arvind Kumar Vs. Principal Commissioner of Income-tax, [2025] 178 taxmann.com 351 (Delhi - Trib.) (Para 11 at page 21 of the judgments)- Case related to M/s Radhe Kanheya Exports, which is also a party in present case. This case in para 12 also dealt NK Protein judgment relied by the respondent. 4. Sunita Grover Vs. Principal Commissioner of Income Tax, Rohtak, ITA No. 3608/Del/2025 (Para 2, 6 at pages 30, 35 of the judgments)- Case related to M/s Shree Balaji Wooltex, which is also a party in present case. 5. Manoj Kumar Vs. ITO, ITA No. 3378/Del/2025 (Para 12-15 at pages 44-45 of the judgments)-Case related to M/s Soni Textile 9. On summarization of the grounds taken in the appeal before us, the question to be determined as to whether the ld. PCIT was justified in setting aside the assessment order on the ground that the Assessing Officer has not invoked section 69C

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r.w.s. 115BBE of the Act. Hence, we proceed to adjudicate all the grounds together.

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the expenditure. He thus, submits that the provisions of section 69C cannot be invoked on the facts of the present case and, therefore, the assessment order is neither erroneous nor prejudicial to the interest of the Revenue. Regarding the directions of the ld. PCIT for making fresh enquiries and investigation, ld. AR submits that from the perusal of the revisionary order, it could be seen that nowhere int eh order it is stated by ld. PCIT that what enquires were left to be undertaken by the assessee who held the purchases as bogus which fact is not doubted by the ld. PCIT. 10. Ld. AR also placed reliance on the judgment of the Co-ordinate Bench of ITAT, Rajkot Bench in the case of Shashikant Bhavajjibhai Rajpara vs. PCIT in ITA No. 59/RJT/2022 vide order dated 22.03.2023 and also in the case of the Coordinate Bench of the ITAT Rajkot in the Vijubha Jitubha Jadeja vs. PCIT in ITA No. 105/RJT/2022 vide order dated 02.08.2023 wherein the Coordinate Bench has held that once the AO has disallowed the bogus expenditure u/s 37(1), the CIT(A) cannot direct to invoke the provisions of section 69C and further u/s 115BBE of the Act in the order passed u/s 263 of the Act. He thus prayed for quashing of the order of the ld. PCIT. 11. On the other hand, the Ld. Sr DR for the Revenue vehemently supported the orders of Ld. PCIT and submit that in the instant case, the assessee has failed to justify the purchases made thus the same is unexplained expenditure for which the source was not established to the satisfaction of the AO and therefore, Ld. Pr. CIT has rightly direct the AO to invoke the provisions of section 69C r.w.s. 115BBE of the Act. He thus requested that the order of Ld. PCIT deserves to be uphold. 12. Heard both the parties and perused the material available on record. The case of the assessee was reopened u/s 147 of the Act by alleging that the purchases claimed to have been made from M/s Maa Karni Yarn of Rs. 26,81,300/- is bogus and thereafter, the AO referred the statements of the persons managing and controlling various firms including M/s Maa Karni Yarn and disallowed the purchase of Rs.26,81,300/- u/s 37(1) of eh Act by holding the same as bogus purchase. The Ld. PCIT in terms of the show cause notice dated 07.08.2024, issued the show cause notice wherein it is observed that the purchases held as bogus should be disallowed u/s 69C of the Act. The provisions of section 69C are as under:

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“69C 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 Offertory the amount covered by such expenditure or part thereof at the case may be may se deemed to be the income of the assessee by such for such financial year. Provided that notwithstanding anything standing contained in any other provision of this Act such unexplained expenditure which deemed to be he income of the assessee shut not be allowed as a deduction under any head of income.” 13. The provisions of section 1158BE of Act are reproduced as under:- “115BBE (1) Where the total income of the assessee- (a) Includes any income referred to in section 68, section 19, section 64 section 698. section 6PC, section 690 and reflected in the return of income furnished under section 139 or (b) Determined by the Assessing Officer includes any income referred to in section 68 section 69, section 69A, section 69B, section 69C, Section 69D if such income is not covered under clause (a) the income tax payable shall be the aggregate of (i) amount of income tax calculated on the income referred to in clause (a) and clause (b), at the rate of sixty percent, and (ii) the amount of income tax with which the assessee would been chargeable had his total income been reduced by the amount of income referred to in clause (i).” 14. From the perusal of section 69C, it is observed by us that provisions of section 69C are applicable where assessee incurred any expenditure for which he has failed to offer any Explanation or the Explanation given was not found satisfactory by the AO. 15. However, in the instant case, it is not the case of the revenue that the assessee has failed to explain the source of purchases made from M/s Maa Karni Yarn but it was the allegation of the AO the purchases made from the said party was bogus and nowhere in the assessment order, the AO raised any doubts about the source of such

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purchases. Therefore, he invoked the provisions of section 37(1) of the Act and disallowed the purchases made by the assessee. This being so, the provisions of section 69C of the Act are not applicable on the facts of the instant case. 16. The Co-ordinate Bench of ITAT, Rajkot in the case of Shashikant Bhavajjibhai Rajpara vs. PCIT (supra) has made following observations: “7. We have considered the above contentions made by the ld counsel for the assessee, we find merit in the same. As per the ld Pr. CIT the disallowance of Rs. 29 30,229/- made by the AO came within the purview of section 69C of the Act. We have gone through the provision of section 69C of the Act and also disallowance made by the AO in his assessment order which is reproduced above. As is evident from bare perusal of the order of the AO, disallowance related to expenses incurred by the assessee in relation to subcontractor which were not found to be genuine. Section 69C on the other hand, brings to tax the disallowance related to expenses incurred by the assessee, source of which remain unexplained. Therefore, purview and scope of section 69C is totally different from the disallowance of expenses found to be not genuine. The basic premise with the Id. Pr. CIT therefore for finding error in the order of the AO, that the disallowance made by him of contractors' expense came under the purview of section 69C of the Act is found to be untenable in law. This finding of error, as a consequence whereof, that the same not being subjected to tax at a special rate provided under section 1158BE of the Act also as a result does not survive.” 17. Further this view is followed by the Co-ordinate Bench of ITAT, Rajkot in the case of Vijuba Jutubha Jadeja vs. PCIT reported in [2023] (9TMI 206). 18. In view of the above discussion, in our considered opinion view for disallowance of purchases claimed in the Profit & Loss account held as bogus, provisions of section 69C of the Act could not be invoked and, therefore, the assessment order is neither erroneous nor prejudicial to the interest of revenue for not invoking the provisions of section 69C r.w.s. 115BBE of the Act. Accordingly, we quash the revisionary order passed by ld. PCIT u/s 263 of the Act. Thus, all the grounds of appeal taken by the assessee are allowed.

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