DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1), NEW DELHI, DELHI vs. AZURE POWER (RAJ) PVT LTD, DELHI

आदेश / ORDER

PER SUDHIR KUMAR, JUDICIAL MEMBER:

This appeal is filed by the Department against the order of Ld. CIT(A) vide DIN: ITBA/NFAC/S/250/2023-24/1059449397(1) dated 08-Jan-2024 for the Assessment Year 2017-18.

“Vide Ground 4, the Appellant has challenged the action of the AO in making an addition of Rs.1,57,79,479/- u/s 69C of the Act. In this regard the Appellant has made a detailed submission which have been reproduced at para 4 above. The Appellant has submitted that the AO has erred in making the impugned addition on the basis of difference between the assessable value of the imported goods and its invoice value. The Appellant has further submitted that the AO has further erred in making the addition u/s 690 since the Appellant has not incurred any expenditure to the tune of Rs.1,57,79,479/- and as such provisions of section 69C are inapplicable. The Appellant has also placed reliance on various case laws in support of above contention. I have considered the submissions of the Appellant. I have also perused the assessment order. I find that the AO has made the addition of Rs.1,57,79,479/- u/s69C of the Act simply on account of difference between the assessable value of the imported goods as per the Customs Act, 1962 and the invoice value. The AO has not brought out anything on records to establish that such expenditures have been actually incurred by the Appellant. This is evident from the assessment order; relevant part is reproduced below; “The assessee also submitted the details of purchases made by the Company during the year: Details of Quantity Amount/Unit Total amount Mode of transportation Product Imported paid

Cable 8,202 1817.73 14909021 Sea Route Hamess

Modules 6,210,000 38.19 237159900 Sea Route

Modules 1,449,000 38.19 55337310 Sea Route

Modules 10.350,000 38.19 395266500 Sea Route

Modules 1,656,000 38.19 63242640 Sea Route

Modules 9,315,000 38.19 355739850 Sea Route

Modules 4,364,250 38.19 166670708 Sea Route

Modules 1,242,000 38.19 47431980 Sea Route

Modules 6,341,712 38.19 242190000 Sea Route

Total 157,79,47,909

Further the assessee has also submitted that the Company has made purchases from Azure Power India Private limited, which further made these purchases from Amphenol Technology (Shenshen) Co Ltd and Solar FE Holdings Pte Ltd, and all the payment has been made through banking channels.

On perusal of the CBEC data it is observed that the total assessable value of Imports was Rs.159,37,27,388/- and the duty paid was Rs. 7,75,493/-. Though the duty paid is accepted to be capitalized as per the assessee submission, the difference between the Purchases reported and Purchases details received from CBEC data of Rs.1,57,79,479/- would be brought to tax accordingly, as unexplained Expenditure within the meaning of section 69C of the Income Tax Act 1961. Keeping in view the forgone observation the assessment is concluded by making an addition of Rs.1,57,79,479/- to the retuned Income of the assessee for the AY 2017- 18.’’ Thus, from the above, it is crystal clear that he AO has made the addition of Rs.1,57,79,479/- u/s 69C merely on account of difference between the assessable value of the imported goods as per the Customs Act, 1962 and the invoice value of such goods. In this regard it is observed that as regards the invoice value of the imported goods, there is no dispute between the AO and the Appellant. The costs paid by the Appellant in importing the goods has been accepted by the AO. However, these imported goods have been assessed by the customs authorities at a higher value for the purpose of levy of customs duty. This excess value has been treated by the AO as unexplained expenditure which is liable to be taxed u/s 690 of the Act. In this regard, I find that on similar set of facts, Hon’ble ITAT Mumbai in the case of ACIT vs. Shri Shivaprakash S Chandak, ITA No. 3765/Mum/2019, CO No. 122/Mum/2021 dated 13/05/2022has held that the difference in assessable value of imported goods under the Customs Act and the invoice value of such goods can not be a ground for addition. Relevant part of the order is reproduced below for reference: 9. ...............................................................................................................On the verification of the detail it is found that there is difference between the invoice value in rupees and assessable value for customs. Assessable value for custom is on higher side in each of the invoices than the invoice value. The learned Assessing Officer as well as the learned CIT (A) both has overlooked the fact that there can be difference between the invoice value and the assessable value of goods imported as per the Customs Act. Therefore, unless that Is reconciled it cannot be said that assessee has purchased goods out of books of account. Further, the mere difference between the invoice value and the assessable value cannot result into an addition .................................................................... The relevance to the assessable value is not the reason to make an addition as it is value only for the purposes of levy of customs duty. Assessee is directed to produce all the invoices mentioned in the information received from customs authority and also the respective custom duty paid against each of the invoices. The learned Assessing Officer is directed to examine the same and if still a different arises, the assessee may be given opportunity of hearing to explain the same and thereafter the issue may be decided on the merits of the case. Thus we allow the Grounds raised by the Id AO accordingly. Similar direction also applies to appeal of the assessee.” Thus, respectfully following the above decision of Hon’ble ITAT Mumbai, I hold that the AO has erred in making addition of Rs. 1,57,79,479/- u/s 69C merely on account of difference between the assessable value of the imported goods as per the Customs Act, 1962 and the invoice value of such goods. Further, I am also in agreement with the submission of the Appellant that prerequisite for invoking provisions of section 69C is that there should be certain expenditures incurred by the assessee which remain unexplained. In the case of the Appellant, there is no finding by the AO that the expenditures added u/s 69C have been incurred by the Appellant. In absence of such crucial finding, the provisions of section 69C has wrongly been made applicable in the case of the Appellant. In this regard I place reliance on the decision of Hon’ble Jurisdictional High Court of Delhi in the case of CIT vs Lubtec India Ltd (2009)311 ITR 175, wherein it has been held that provisions of section 69C can be invoked only when there is a finding that the expenditure have been actually incurred. Relevant part of the decision is reproduced below: 6. It is quite clear that what is postulated in section 69C of the Act is that first of all the assessee must have incurred that expenditure and thereafter, if the explanation offered by the assessee about the source of such expenditure is not found satisfactory by the Assessing Officer, the amount may be added to his income. 7. In the present case, there is nothing to show that the expenditure was in fact incurred by the assessee. The assessee had denied having incurred the expenditure and had contended that it did not have that kind of money. The Tribunal noted that the Assessing Officer had not made any enquiry whatsoever to find out whether such expenditure was actually incurred by the assessee. Since a part of the expenditure related to advertisements in newspapers, it could have been easily verified by the Assessing Officer, but he did not do so. 8. We find no fault in the view taken by the Tribunal since there is nothing on record to show that the expenditure was actually incurred by the assessee nor did the Assessing Officer take any action to find out whether the expenditure was actually incurred or not. 9. No substantial question of law arises. ” Thus, in view of facts of the case and respectfully following the decision of Hon’ble Jurisdictional High Court of Delhi in Lubtec India Ltd. (supra), I hold that the AO has erred in making an addition of Rs. 1,57,79,479/- u/s 69C of the Act without giving a finding that the Appellant has actually incurred expenditures to the tune of Rs.1,57,79,479/-. Thus, in view of above discussions and findings, I hold that the AO has erred in making the addition of Rs. 1,57,79,479/- u/s 69C of the Act. The said addition is, therefore, directed to be deleted. Ground is, thus. Allowed.”

assets (i.e., cable harness and modules) amounting to Rs. 1,57,79,47,909/- from Azure Power

India Private Limited for the purpose of construction of its solar power plant. Such imported

goods have been capitalized both in the accounting books and tax books. Further, custom duty

of Rs. 7,75,493/- was payable on import of cable harness and no custom duty was payable on

import of modules. AO noticed the difference of assessable value of imports as per CBEC i.e.

Rs. 159,37,27,388/- and the purchase value of Rs. 157,79,47,909/- reported by the assessee

and made addition of differential amount of Rs. 157,79,479/- as unexplained expenditure. It

is settled law that assessable value as per customs cannot be considered as the basis of making

addition. Further, in the plethora of judicial precedents, it has been held that addition u/s. 69C

merely on the basis of data obtained from the indirect tax authorities is not sustainable. It is

also settled position in law under the provisions of section 69C of the Act that the onus is on

the revenue authorities to prove that an assessee has actually incurred any expenditure during

the financial year which is unexplained in nature. However, no material has been brought on

record in the present case to suggest that the difference between the assessable value and

purchase invoices was actually incurred by the assessee. The prerequisite for invoking the

provisions of section 69C is that there should be certain expenditures incurred by the assessee

which remain unexplained. In the instant case, there is no finding by the AO that the

expenditures added u/s. 69C have been incurred by the assessee. In the absence of such

crucial finding, the provisions of section 69C has wrongly been made applicable in the case

of the assessee. From the above decision of the Hon’ble Jurisdictional High Court of Delhi in

the case of CIT vs Lubtec India Ltd (2009)311 ITR 175, the Court has held that provisions

of section 69C can be invoked only when there is a finding that the expenditure have been

actually incurred, therefore, in our considered view, in the instant case the ld. CIT(A) has

rightly deleted the addition of Rs. 1,57,79,479/- u/s 69C of the Act, which does not need any interference on our part, hence, we uphold the same and reject the ground raised by the Revenue.

Sd/- Sd/- [MANISH AGARWAL] [SUDHIR KUMAR] ACCOUNTANT MEMBER JUDICIAL MEMBER

Delhi Dated: 08-05-2026 Copy to:- DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1), NEW DELHI, ROOM NO. 153A, C.R. BUILDING, I.P. 1 ESTATE, NEW DELHI-110002, DELHI-110002, DELHI AZURE POWER (RAJ) PVT LTD, 3RD FLOOR, ASSET NO. 301, 304, 307, 2 WORLDMARK 3 AEROCITY, NEW DELHI- 110037, NEW DELHI-110037, DELHI 3 THE PCIT / CIT, 4 THE D.R., ITAT, DELHI BENCH 5 GUARD FILE