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Income Tax Appellate Tribunal, “D” BENCH KOLKATA
Before: Shri Sonjoy Sarma & Shri Rakesh Mishra
order
: April 30, 2025 ORDER
Per Sonjoy Sarma, Judicial Member:
The revenue has filed an appeal and the assessee has filed the corresponding cross-objection against the same order dated 27.08.2024 by the Commissioner of Income Tax (Appeals)-27, Kolkata [hereinafter referred to as the ‘CIT(A)’] relating to assessment year 2017-18.
At the outset, the Registry has informed that there is a delay of 37 days in filing the present appeal. The revenue filed an application for condonation of delay stating reasons for such delay. After considering the application, we condone the delay in filing the appeal and adjudicate the appeal on merits of the case.
C.O. No.60/Kol/2024 Sendoz Commercials Pvt. Ltd
Brief facts of the case are that the assessee filed its return of income for the assessment year 2017-18 on 31.10.2017 by declaring total income of Rs.1,30,29,660/-. The assessment of the assessee was completed u/s 143(3) of the Act on 15.11.2019 by determining total income at Rs.1,30,29,660/-. Subsequently, the Assessing Officer issued a notice u/s 148 of the Act after obtaining necessary approval from the Addl. CIT. In response, the assessee reiterated the same income and filed its return and requested the Assessing Officer to supply the reasons for reopening of the assessment and after supplying of the said reasons, the assessee filed its objection. The Assessing Officer disposed of the objection as raised by the assessee and proceed with the reassessment after furnishing notices u/s 143(2) and 142(1) of the Act. During the reassessment proceedings, the Assessing Officer observed that the assessee had made substantial payment to M/s Tanishi Commotrade Pvt. Ltd. The Assessing Officer sought explanation regarding the identity of the party and genuineness of the transaction. The assessee submitted that it had received 1,18,00,000/- during the F.Y 2015-16 relevant to A.Y. 2016-17. The excess payment was refunded during the financial year 2017-18 and the transactions were duly recorded in the books of account and made through banking transaction only. In this connection, the Assessing Officer issued notice u/s 133(6) of the Act to M/s Tanishi Commotrade Pvt. Ltd. for the purpose of verification of the transaction but no response was received. Subsequently, the Assessing Officer treated the entire payment of Rs.1,23,50,000/- as unexplained expenditure u/s 69C of the Act and added the same to the income of the assessee by taxing it u/s 115BBE of the Act.
Dissatisfied with the above order, the assessee preferred an appeal before the ld. CIT(A) where the ld. CIT(A) after examining all the details and documents furnished by the assessee holding that the amount in 2 C.O. No.60/Kol/2024 Sendoz Commercials Pvt. Ltd question was an advance received from supply of goods which did not materialise and subsequently refunded. The ld. CIT(A) concluded that the transaction was genuine and duly reflected in the books of account and the ld. CIT(A) deleted the addition so made by the Assessing Officer. The relevant part of the order of the ld. CIT(A) is as under:
6.2.1. I have gone through the assessment order as well as the submission of the assessee. On perusal of the same. It is noticed that during the year under consideration, the assessee had paid Rs. 1,23,50,000/- to M/s Tanishi Commotrade Pvt. Ltd. (TPCL) . It is also observed that the AO had made addition of the said sum paid amounting to Rs. 1,23,50,000/- on the ground that the assessee had failed to substantiate that why it had received the advance from M/s TPCL and why it repaid the advance and paid excess sum of Rs. 5,50,000/- and also no reply was received from TCPL u/s 133(6) of the Act. 6.2.2. However, on perusal of the submission of the assessee and documents furnished viz. Confirmation of accounts, ledger copies, relevant purchase orders (POs), relevant bank statements, letter to TCPL by assessee and other documents, it is observed that during the earlier year 1.e., FY 2015-16, the assessee had received advance of Rs.1,18,00,000/- on 17.03.2016 from TCPL for supply of coal. It is also noticed that the said advance was repaid/refunded back to M/s TCPL in the current year on different dates as M/s TCPL did not make balance payment within stipulated period as per the terms and conditions of the PO and the said deal was cancelled. As far as excess payment of Rs. 5,50,000/- is concerned, the assessee has submitted that it had paid sum of Rs.5,50,000/- in excess due to inadvertence and same was also received back by assessee on 11.01.2018 from M/s TCPL. In respect of the same, assessee had filed copy of letter given by assessee to TCPL. Assessee in support of the transaction entered by it, had furnished the Copy of confirmations, POs, letter from assessee to the said entity i.e. M/s TCPL, relevant bank statements etc. 6.2.3 On perusal of the submission and documents filed by assessee, it is evident that assessee had received advance in earlier, year from M/S TCPL and same was refunded back to M/s TCPL during the year. Further assessee has paid excess amount of Rs. 5,50,000/-while making refund of said advance received in earlier year. Said excess amount has been received back by assessee in FY 2017-18. On perusal of bank statements, it is observed that all the transactions have been made through banking channel and payment of Rs. 1,23,50,000/- are from disclosed bank accounts of the assessee. Source of repayment are from amounts deposited through banking channels in bank account of assessee and such credit in bank accounts have not been disputed by not been disputed by of explain the transaction discharged its onus of from the submission of C.O. No.60/Kol/2024 Sendoz Commercials Pvt. Ltd the assessee and assessment order the same. It is further observed from the submission of the assessee and assessment order that the AO had failed to detect any cash inducement by the assessee and also on the part of the party M/s TCPL during course of the assessment proceedings. 6.2.4. It is noteworthy to mention that the AO had made said addition relying on report of investigation wing. It is observed that the AO had not done any independent enquiry to ascertain the veracity of the transactions entered into by the assessee with M/s TCPL. It is also noticed that the AO had made the said additions on the ground that there was no reply received from the end of M/s TCPL against the notices u/s 133(6) of the Act. However, as per different judgements, it was pronounced that to make a third party to reply against notice u/s 133(6) of the Act, is beyond the control of the assessee. Hence, making additions of refund of trade advances received earlier as unexplained expenditure on ground of non- response from the end of the third parties is not accepted. 6.2.5. It is pertinent to mention that refund/repayment of trade advance received in earlier year in normal course of business being not in nature of expenditure cannot be treated as unexplained expenditure as per section 69C of the Act. Reliance was placed by the assessee on the following judgements: a) In case of M/s. G.T. Homes v The Pr. Commissioner of Income Tax, dated 23.01.2023, the Hon'ble Raipur, ITAT had held as under:
8. As stated by Shri Ravi Agrawal, the Ld. Authorized Representative (for short 'AR') for the assessee that without going into the justification on Mis. G.T. Homes Vs. Pr. CIT, Raipur-1 the part of the Pr. CIT in holding the aforementioned 7 companies as shell companies, the simplicitor repayment of loans during the year could not have been brought within the realm of Section 69C of the Act. Elaborating on his aforesaid contention, it was submitted by the Ld. AR that as Section 69C contemplates addition of an unexplained expenditure which is Incurred by the assessee during any financial year with either no explanation; or an explanation which is not in the opinion of the A.O satisfactory...... therefore, it was beyond comprehension as to on what basis the said statutory provision was triggered by the Pr. CIT. In sum and substance, it was the claim of the Ld. AR that as it was not a case that the assessee company during the year was found to have incurred any unexplained expenditure. but a case of a simplicitor repayment of loan therefore, the provisions of Section 69C could not have been triggered.
Per contra, the Ld. Departmental Representative (for short "DR') relied on the orders of the lower authorities.
Having given a thoughtful consideration to the Issue in hand, i.e., addition of the repayment of outstanding loans by the assessee firm to 7 C.O. No.60/Kol/2024 Sendoz Commercials Pvt. Ltd companies, which, as observed by the Pr. CIT were shell companies, we are unable to fathom as to how and on what basis the Pr. CIT had arrived at a conclusion that the amount of the impugned repayments was to be added u/s 69C of the Act. Before proceeding any further, we deem it fit to cull out the provisions of Section 69C of the Act, which reads as under: "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] 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.]" As stated by the Ld. AR, and, rightly so, as it is not a case that the assessee was found to have incurred any unexplained expenditure, but admittedly a case of repayment of outstanding loans by the assessee firm to 7 companies which are stated to be shell companies, we find substance in the claim of the Ld. AR that it is beyond comprehension as to how the repayment of the said amounts could have been subjected to addition u/s.69C of the Act. We, thus, not being able to persuade ourselves to subscribe to the aforesaid observation of the Pr. CIT, Le., to the extent he had directed to A.O to make an addition of the amount of Rs.2,07,61,437/- (supra) u/s.69C of the Act, set-aside his order and restore that of the order of the A.O passed u/s.143(3) dated 27.12.2019 to the said extent." b) In case of 'Corus Vitrified Pvt. Ltd., Morbi v Principal Commissioner of Income Tax-1, Rajkot the Hon'ble ITAT, Rajkot had held as under: "5. We have heard the rival contentions and perused the material on record. We observe that the aforesaid issue on the basis of which proceedings w/s 263 of the Act proceedings were initiated, was duly examined by the Assessing Officer at the time of assessment and specific show cause notice was issued to the assessee with respect to this issue proposing to make addition u/s. 68 r.w.s. 115BBE of the Act. This issue was raised by the Assessing Officer vide show cause notice dated 10-12- 2019. In response, the assessee submitted vide submission dated 17-12- 2019 that the repayment of unsecured loan was made from sale proceeds from one of the debtors M/s Bhabha Exports and the assessee also provided a copy of bank statement in support of the same. Thus, we observe that the issue under consideration was duly examined by the Assessing Officer in the assessment proceedings and conscious decision was taken after due application of found. Accordingly, it is not a case of lack of Inquiry by the Assessing Officer Secondly, as regards applicability C.O. No.60/Kol/2024 Sendoz Commercials Pvt. Ltd of section 69C of the Act, we observe that section 69C applies In case of unexplained expenditure, source of which remains unexplained, in the assessee's case, repayment of loan does not constitute any expenditure and further the source of such repayment was also explained by the assessee both before the Assessing Officer as well as PCIT. Accordingly, in our view Section 69C of the Act cannot be invoked in the instant facts. 6.2.6 Also, said transactions are part of the books of accounts of the assessee and source of repayment are not disputed by AO. As such application of Section 69C of the Act is not tenable in case of assessee. Reliance was placed by the assessee on the following judgements: a) In case of 'Earthmoving Equipment Service Corporation v. Deputy Commissioner of Income-tax, 22(2), Mumbai [2017] 84 taxmann.com 51 (Mumbai Trib.)', the Hon'ble ITAT, Mumbai had held as under: 7. On merits, Ld. AR has assailed imposition of penalty on various grounds and placed reliance on various judicial pronouncements which we have duly considered. We find that first of all Section 69C could not be applied to the facts of the case as the payments were through banking channels which were duly reflected in the books of accounts and therefore, there was no unexplained expenditure within the meaning of Section 69C incurred by the assessee. Further, we find that the assessee was in possession of purchase invoices and various other documentary evidences qua these purchases. A bare perusal of the purchase invoices reveals that the assessee has purchased consumables etc. from the alleged bogus suppliers, which are connected, at least to some extent, with the business of the assessee. The assessee, during quantum proceedings itself fled revised computation of income after disallowing the alleged bogus purchases by citing the reason that the suppliers were not traceable during assessment proceedings. Nevertheless, the assessee was in possession of vital evidences in his possession to prima facie substantiate his purchases to some extent particularly when the payments were though banking channels, Merely because the suppliers could not be traced at the given address would not automatically lead to a conclusion that there was concealment of income or furnishing of inaccurate particulars by the assessee. The assessee made a claim which was bona fide and the same was coupled with documentary evidences but the same remained inconclusive for want of confirmation from the suppliers. Therefore, overall facts of the case do not justify imposition of penalty on the assessee and therefore, the same deserves to be deleted on merits of the case. All the cited case laws support the view taken by us in the matter. Therefore, by deleting the impugned penalties, we allow assessee's appeal." b) In case of "The DCIT/CIRCLE Bhiwlara V-Shri Prahalad Ral Rathi dated 13.04.2023, the Hon’ble TAT, Jodhpur had held as under:
C.O. No.60/Kol/2024 Sendoz Commercials Pvt. Ltd "2.9 We have given a thoughtful consideration to the issue in hand. We have carefully gone through the submissions made, nival contentions, material/placed on the records and the law applied to the issue in hand. At the outset, we have no agitation in observing that the Ld CIT(A) rightly deleted the impugned additions at Rs. 162 crores made by the AO u/s 69C of the Act. It is not disputed that all the transactions have been carried out through banking channels only. Even all the transactions carried out with ad with India Nivesh are through channels. The AO has nowhere established that loss on occasion of share trading was a bogus or sham loss claimed. The attempt of AO to compare the balance amount of 1.62 crore with the share trading loss was an example of mere suspicion without any supporting material. Repayment of Rs. 1.62 crores was made through banking channel. The audited accounts were submitted and the AO completely failed to point out any discrepancy or error in the accounts which were not even rejected by him. The said provisions contemplate that any expenditure not accounted for or there is no source behind incurring such expenditure then only section 69C could be invoked. However, such is not the case of the AO as he failed to point out any expenditure incurred without source or which is unrecorded. Hence provisions of S.69C were wrongly invoked. We find no infirmity in order of the Id. CIT(A) while deleting the said addition. Therefore, the ground of appeal number 2 taken by revenue is hereby dismissed". c) In case of 'M/s.Dell International Services India Private Limited, V The Joint Commissioner of Income Tax, LTU, Bangalore. IT(TP)A No.562/Bang/2015 dated 18.08.2022 the Hon'ble ITAT, Bangalore held as under: “107. We have considered the rival submissions and perused the material on record. We notice that the assessee has submitted the party wise breakup of the expenses and has submitted that the difference in the amount as per breakup and the amount as per profit and loss account is due to the amounts being debited to other line items in the profit and loss account or subsequent reversal. The submission that the entire amount is debited to the Profit and Loss account and accounted in the regular books of accounts, the same cannot be disallowed under Section 69C has merits as the source for the said expenditure is automatically explained. In our considered view the DRP has rightly considered the submissions and deleted the additions and we see no reason to interfere with the same." 6.2.7. In view of the various judicial pronouncements cited by assessee together with various evidential documents submitted by the assessee, the refund of trade advance received in earlier year to M/s TCPL cannot be said to be unexplained expenditure of the assessee as the said transaction were not in nature of expenditure and as such no addition can be made u/s 69C of the Act. Additionally, as discussed above where the said repayment was recorded in books of accounts and were made through banking channel and source of same was not disputed by the AO addition made by the AO u/s 69C is tenable. Hence, the addition of C.O. No.60/Kol/2024 Sendoz Commercials Pvt. Ltd Rs.1,23,50,000/-by the AO u/s 69C of the Act is liable to be deleted. Therefore, this ground of appeal raised by the assessee is allowed.”
5. Aggrieved by the said order, the revenue filed the present appeal before this Tribunal stating that the ld. CIT(A) erred in deleting the addition of Rs.1,23,50,000/- made u/s 69C of the Act. The primary argument of the revenue is that the assessee failed to substantiate the genuineness of the transaction with M/s Tanishi Commotrade Pvt. Ltd. especially in the absence of the response to the notice u/s 133(6) of the Act.
6. On the other hand, the ld. AR supported the order of the ld. CIT(A) and further contended that the reopening of the assessment u/s 147 of the Act was itself bad in law as there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The ld. AR argued that the reopening was based on mere change of opinion which is impermissible under the law, therefore, the appeal of the revenue may be dismissed on this ground alone. He also stated that the reopening was based on only borrowed satisfaction and the Assessing Officer did not independently applied his mind and without looking into the material facts but simply made the addition in the hands of the assessee.
7. We, after hearing both the parties and perusing the materials available on record, find that in the present case, the ld. CIT(A) passed the impugned order after considering the fact that the assessee maintained regular books of account and the transactions with M/s Tanishi Commotrade Pvt. Ltd. were duly recorded and the payments were made through banking channel by making corresponding entries which were also reflected in the bank statement. From the facts on file, we also find that the amount, in question, was initially received as advance for supplying of the goods which did not materialise leading to C.O. No.60/Kol/2024 Sendoz Commercials Pvt. Ltd the refund of the amount in the subsequent year and this fact has thoroughly examined by the ld. CIT(A) while passing his order stating that the transactions were genuine. Moreover, section 69C of the Act pertains to unexplained expenditure whereas the assessee failed to offer any satisfactory explanation about the source of such expenditure but in the present case, there was no such expenditure was done in fact the assessee had received the amount as advance and subsequently it was refunded as the supply did not materialise. We note that the assessee has also adequately explained the nature and source of the transaction which are corroborated by sufficient documentary evidence. Therefore, the provisions of section 69C of the Act are not attracted in this case. The additions, in any, could have been made only in the assessment year 2016-17 in which the money was received. Accordingly, the appeal of the revenue is hereby dismissed.
So far as the cross-objection filed by the assessee is concerned, since we dismissed the appeal of the revenue, therefore, the cross- objection filed by the assessee is not required to be adjudicated and it becomes infructuous. Hence, the cross-objection is also dismissed.
In view of this, both the appeal of the Revenue and the cross- objection of the assessee are dismissed. Kolkata, the 30th April, 2025.