ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 1(1), CHENNAI, CHENNAI vs. ARCHEAN CHEMICAL INDUSTRIES LIMITED, CHENNAI

PER SS VISWANETHRA RAVI, J.M :

This appeal by the Revenue is against the order dated 07.07.2025

passed by the Learned Commissioner of Income Tax [herein after “CIT(A),

National Faceless Appeal Centre(NFAC), Delhi, for the assessment years

2022-23.

which only issue emanates for our consideration is whether the ld.CIT(A)

justified in deleting the addition made by the AO on account of

unexplained expenditure u/s. 69C of the Income Tax Act, 1961 [herein after

“Act”].

company engaged in the manufacture of industrial salt, bromine and other

industrial chemicals and filed return of income declaring nil income after

set off of brought forward losses. The assessment was completed u/s.

143(3) r.w.s. 144B of the Act , dated 25.03.2024, wherein the AO has made

an addition of Rs.51,81,81,096/- u/s. 69C of the Act treating the difference between imports as per Insight Portal (maintained by the Income-tax Department) and imports reflected in Form GSTR-2A (details of inward supplies as per CGST Act) as unexplained expenditure. In the first appellate proceedings, the ld.CIT(A) after examining the assessment order, reconciliation statements, bills of entry and documentary evidence, held that no unexplained expenditure existed and deleted the addition made u/s. 69C of the Act.

erred in law in deleting the addition made by the AO u/s. 69C of the Act

towards unaccounted imports/purchases without properly appreciating the

facts brought on record. He vehemently argued that the ld.CIT(A) has

failed to appreciate that the assessee could not substantiate the Page - 2 - of 11 reconciliation of imports data as per the insight portal vis-a-vis GSTR-2A

and books of accounts with cogent documentary evidence. He further

submits that the ld.CIT(A) erred in law in accepting the assessee’s

contention that the impugned imports represent returnable empty ISO

containers, without verifying the accounting treatment of such containers,

whether the assessee claimed the value as expenditure treated as

depreciable asset, or amortized the cost over its useful life. Further he

argued that the ld.CIT(A) has erred in holding the assessment order as

non-speaking, in violation of natural justice and the AO had duly issued

show cause notice and considered the assessee’s reply before completing

the assessment. Further, he argued that the ld.CIT(A) failed to examine

the actual impact of expenditure on returnable containers on the

computation of income for the year under consideration and the ld.CIT(A)

further erred in law in deleting the addition merely on procedural grounds

without addressing the substantive findings of the AO on unexplained

purchases and non-verification of entries. He prayed to set aside the

order of the ld.CIT(A) and restore the order of the AO.

order passed by the Ld. CIT(A) is in accordance with the provisions of the

Income-tax Act, 1961 and the facts on record. The Ld. CIT(A) has

examined the assessment order, the material relied upon by the Assessing

Page - 3 - of 11 Officer, and the submissions and evidences furnished by the assessee,

and has rendered findings after due application of mind. The conclusions

arrived at by the Ld. CIT(A) are reasoned, based on record, and supported

by settled legal principles. The Ld. CIT(A) has correctly deleted the

addition of Rs. 51.81,81,096/- made under section 69C of the Act after

examining the detailed explanations and documentary evidences furnished

by the assessee during the assessment proceedings. He argued that the

addition was made solely on the basis of an alleged difference between

the import figures appearing in the Insight Portal and those auto-populated

in Form GSTR-2A, both of which are system-generated, third-party data

sources not maintained or controlled by the assessee. He submits that the

assessee had demonstrated, on the basis of the very data furnished by the

Assessing Officer, that the information contained therein suffered from

duplication of Bills of Entry and specifically identified and highlighted the

duplicate Bills of Entry in the data provided by the Assessing Officer and

thereafter furnished a comprehensive reconciliation by mapping the unique

Bills of Entry with the actual Bills of Entry on record. Further reconciled the

differences by explaining the impact of inclusion or exclusion of statutory

levies such as customs duty, cess and handling charges, as well as the

fact that certain Bills of Entry appeared in one data source but not in the

other. All the Bills of Entry relating to the impugned amount were furnished

Page - 4 - of 11 and explained, and the reconciliation was based entirely on primary

documents.

addition after appreciating the true nature of the transactions, the

accounting treatment followed by the assessee, and the factual material

placed on record. The ld.AR argued that the Assessing Officer proceeded

on the erroneous presumption that the value appearing in the Bills of Entry

in respect of re-import of empty ISO containers represented unaccounted

purchases or expenditure incurred by the assessee and the assessee had

consistently explained, with reference to the Bills of Entry, described the

goods as "re-import of empty unclean ISO/SOC tanks bromine returnable

packing tank container (value for customs purpose only)", and the export

invoices, that the ISO containers were returnable packing material used for

export of Bromine and that such containers continued to remain the

property of the assessee at all times.

owned by the assessee and were not purchased afresh at the time of re-

import and the containers were originally acquired by the assessee,

capitalised in the books of account in earlier years as part of the block of

assets, and depreciation was claimed thereon in accordance with the

Page - 5 - of 11 provisions of the Act. He submits that the assessee had not treated the re-

import of empty containers as purchases or expenditure in the books of

account, as there was no acquisition of a new asset or incurrence of any

expenditure at the time of re-import. Further, the containers, having

already been capitalised and depreciated, continued to form part of the

existing block of assets, and their temporary movement outside India for

export purposes and subsequent return did not give rise to any fresh

accounting entry by way of purchase or expense. He prayed to dismiss the

grounds and supported the order of the ld.CIT(A).

find that the AO did not point out any specific defect, inconsistency or

inaccuracy either in the reconciliation statement or in the Bills of Entry

produced by the assessee. No independent material was brought on

record to establish that the assessee had in fact incurred any expenditure

which was not recorded in the books of account. We note that in the

absence of any finding that actual expenditure had been incurred and

remained unexplained, in our opinion, the essential and jurisdictional pre-

condition for invoking section 69C of the Act was not satisfied. Further, we

find the Ld. CIT(A) has rightly appreciated that a mere difference between

two sets of third-party, system-generated information, by itself, cannot lead

to the conclusion that the assessee had incurred unexplained expenditure.

Page - 6 - of 11 The Ld. CIT(A) has also taken note of the settled legal position, that

section 69C can be invoked only where actual incurrence of expenditure is

established by the appellant/Revenue and the source thereof remains

unexplained, and that additions cannot be made merely on the basis of

assumptions, presumptions or unverified third-party data. We find the

deletion of the addition is thus based on proper appreciation of facts,

documentary evidence, and the correct application of law, and does not

warrant any interference.

Officer, however, ignored the statutory documents, the accounting

treatment consistently followed by the assessee, and the explanation that

the containers were already capitalised and depreciated, and mechanically

treated the notional customs value as unexplained expenditure. We find

the Ld. CIT(A), after examining the Bills of Entry, reconciliation statements,

export invoices, and the manner in which the ISO containers were

reflected in the books of account, rightly held that the re-import of

returnable empty ISO containers could not be construed as unexplained

expenditure under section 69C of the Act. We note that the Ld. CIT(A)

further observed that the Assessing Officer had failed to demonstrate how

a notional value assigned solely for customs purposes, in respect of an

Page - 7 - of 11 asset already owned, capitalised, and depreciated by the assessee, could

be equated with actual expenditure incurred during the relevant year.

the assessee's grievance was examined by the Local Committee

constituted to deal with cases of high-pitched assessments. The ld.AR

placed on record letter dated 23.12.2024 in

CHE/Coord/104/46(25B1)/2024-25, the relevant part of which is

reproduced herein below:

“3. The decision of the Committee is communicated as under: The Committee has gone through the facts of the case, case history notings, the submissions made by the petitioner and the assessment record. It is seen that the returnable containers are already part of fixed asset, not a new purchase. Also, the data of insight portal and GSTR-2A are not emanating from the data of the assessee but was auto populated and assessee cannot update/modify the said data. Nevertheless, the assessee has furnished the reconciliation, which was not considered by the AO. Hence, it is observed that the addition is not backed by sound reason or logic and non-application of mind is also observed. Thus, the committee is of the considered view that the assessment is High Pitched.”

examining the assessment records, reconciliation statements, statutory

documents, and the accounting treatment adopted by the assessee,

accepted the assessee's contention that the addition was made without

proper application of mind, by ignoring primary evidences and by placing

undue reliance on third-party system-generated data. The Local

Committee also took note of the failure of the Assessing Officer to

Page - 8 - of 11 appreciate the nature of the re-imports, the continued ownership of the

ISO containers with the assessee, and the purely notional character of the

values reflected in the Bills of Entry. We find the relevant portion of the

observations of the Local Committee at Para 3 of the Letter of the Office of

Pr. CCIT dated 23.12.2024 is reproduced at pages 13 & 14 of the

impugned order. We, therefore, find the consistent accounting treatment

followed by the assessee, the depreciation already claimed on the ISO

containers as capital assets, and the findings of the Ld. CIT(A) and the

Local Committee, the deletion of the addition under section 69C of the Act

is justified.

findings of the Ld. CIT(A) that the assessment order suffers from non-

application of mind and is violative of the principles of natural justice, we

find during the course of assessment proceedings, the assessee furnished

detailed explanations, reconciliations, Bills of Entry, export invoices, party-

wise ledgers, and supporting documentary evidences explaining the

nature of imports, re-imports, and the differences between the Insight

Portal data and Form GSTR-2A. We find the assessment order does not

demonstrate any analysis of the Bills of Entry or a statutory documents

placed on record and the Ld. CIT(A) correctly concluded that the

Page - 9 - of 11 assessment order is mechanical, non-speaking, and passed without

proper application of mind vide para 6.3 of the impugned order.

year i.e.. Assessment Year 2023-24, an identical issue relating to

reconciliation of imports as per system-generated data vis-à-vis books of

account was examined during assessment proceedings. After considering

the reconciliation statements and documentary evidence furnished by the

assessee, the Assessing Officer accepted the explanation and no addition

was made in the assessment order for the said subsequent Assessment

Year. The acceptance of the reconciliation in the subsequent year

demonstrates that the difference arises only on account of system-

generated data variations and does not represent unexplained expenditure.

The grounds raised by the Revenue are devoid of merit and do not warrant

any interference. Thus, order of the ld.CIT(A) is justified in deleting the

addition made by the AO and grounds raised by the appellant/Revenue

are dismissed.

Sd/- Sd/- (इंटूरीरामाराव) (यस यसयस यसिव�ने� िव�ने�रिव रिव) यस यस यस यस िव�ने� िव�ने� रिव रिव (INTURI RAMA RAO) (SS VISWANETHRA RAVI) लेखा लेखासद�यकेसम� लेखा लेखा सद�यकेसम� सद�यकेसम�/Accountant Member सद�यकेसम� Page - 10 - of 11 �याियक �याियकसद�य �याियक �याियक सद�य सद�य/ Judicial Member सद�य

Chennai, Dated: 15th May,2026. JPV

Copy to: 1. Appellant 2. Respondent 3. CIT - Chennai/Coimbatore/Madurai/Salem. 4. DR 5. GF

PRASANNA Digitally signed by PRASANNA VANI JETTY VANI JETTY Date: 2026.05.19 16:21:45 +05'30'

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