IMPRESSIONS SERVICES PRIVATE LIMITED,DELHI vs. ADIT CIRCLE 10(1), DELHI

PER AMITABH SHUKLA, AM:

This appeal by Assessee is directed against the order of National
Faceless Appeal Centre, (NFAC), Delhi [for short hereinafter referred to as the “(Ld. CIT(A)”] dated 17.10.2023 for Assessment Year 2018-
19. 2. Grounds of appeal no. 1 to 4, are regarding in sufficiency of juri iction of the AO, for invoking the impugned proceedings.
During the course of proceedings, the Ld. Counsel for the assesse

ITA No.- 3275/Del/2023

Impressions Services Pvt. Ltd.
Page 2 of 6

submitted that the impugned grounds are not pressed.
Accordingly, grounds of appeal nos. 1 to 4 are dismissed.
3. The next issue, that arises from ground of appeal nos. 5 and 6 is regarding an addition of Rs. 1,98,02,291/- made by the AO
U/s 69C of the Act. The Ld. Counsel for the assessee submitted that, the assesse company is engaged in the business of providing house keeping and allied services like manpower, repair and maintenance, carpenter, electrician etc. The company is also engaged in the sale of products related to house keeping etc.
During the year under consideration, the assesse had made purchases of Rs. 74,83,345/- from M/s Rajbhar Trade Commercial and of Rs. 1,23,18,946/- from M/s Aadrash Vanijya Udyog aggregating to Rs. 1,98,02,291/-. The Ld. Counsel submitted that the Ld.AR had received information from GST Authority regarding fake invoices and bogus claim of input tax credit (ITC). Pursuant to the information and his enquiries, the Ld. AO concluded that the impugned purchases were bogus and proceeded to make the addition U/s 69C of the Act. The Ld. First Appellate Authority concurred with the findings of the Ld. AO. The Ld. Counsel for the assesse submitted that very invocation of Section 69C is erroneous since the source of the payment has not been doubted by the Ld.

ITA No.- 3275/Del/2023

Impressions Services Pvt. Ltd.
Page 3 of 6

AO nor did he reject the audited books of accounts u/s 145. The Ld. Counsel submitted that the purchases made are integrally related with the business of the assesse and that all the payments were made through the banking channels. It was urged that mere non-availability of the party at his last known premise cannot be a case for drawing of adverse conclusions by the Ld. AO. In support of his contentions, the Ld. Counsel placed reliance upon decision of this Tribunal in ITA No.1779/Del/2019 Assessment Year: 2014-
15., dated 28/6/23 in the case of Cherry Hill Interiors Pvt. Ltd.
The Ld. DR would like us to believe on the correctness of the order of lower authorities. It was a inter alia, contended that mere payment through banking channels would not establish genuineness of the transaction.
4. We have heard rival contentions, in the light of material available on record. We have noted that in the decision of Cherry
Hill (supra), the coordinate bench of this Tribunal has observed as under:
“…..6.The Ground No.2 raised by the assessee is challenging the addition made on account of unverifiable purchases in the sum of Rs.45,54,184/- u/s 69C of the Act.
7. We have heard the rival submissions and perused the material available on record. The assessee during the year made purchases from M/s Plyzone to the tune of Rs.53,02,819/-.
The ld. AO sought to examine the veracity of the said purchases by issuing notice u/s 133(6) of the Act to the said vendor after obtaining the name and address from the assessee. The said notice was returned unserved. The assessee, however, furnished the copy of ITR of the vendor, copy of ledger account of the vendor as appearing in the books of the assessee, copy

ITA No.- 3275/Del/2023

Impressions Services Pvt. Ltd.
Page 4 of 6

of confirmation from the vendor, copy of assessee’s bank statement to prove that the payments to the said vendor had been made by account payee cheques together with copy of invoice. The assessee also pointed out that it had paid VAT of Rs.7,48,635/- on the said purchase from M/s Plyzone. The assessee also placed on record the VAT return of the vendor.
The assessee also submitted that the Tamil Nadu VAT authoritieshad conducted audit of the transactions on which VAT was claimed by the assessee for FY 2013-14, i.e., the year under consideration and that no adverse findings were reported. However, the ld. AO did not heed to the contentions of the assessee and proceeded to make addition on account of unverifiable purchases u/s 69C of the Act in the sum of Rs.53,02,819/- in the assessment on the ground that the assessee had failed to prove the genuineness of the transactions.
8. Before the ld. CIT(A), the assessee was directed to file copy of confirmation from the vendor, registration certificate from the vendor, VAT returns and VAT assessment orders of the assessee. The assessee filed registration certificate of vendor, copy of PAN and ITR of vendor, VAT returns filed online with Government of Tamil Nadu showing input-output and input tax credit. From the perusal of the said return, the ld.CIT(A) concluded that the VAT return showed purchases from Plyzone only to the tune of Rs.7,48,635/- and, hence, he granted relief to the assessee only to that extent and confirmed the disallowance for the remaining portion of Rs.45,54,184/- (Rs.53,02,819/- (-) Rs.7,48,635/-).
9. At the outset, we find that this addition cannot survive as it is made u/s 69C of the Act by the ld. AO. The provisions of section 69C of the Act could be made applicable only where a particular expenditure has been incurred by the assessee for which source is not satisfactorily explained by the assessee. In the instant case, the purchase made by the assessee had been duly accounted in its books and payments for the same had been duly made by account payee cheques and also reflected in the books of account. The books of account filed by the assessee had not been rejected by the Revenue. Hence, the payments made for purchase of goods to the vendor M/s Plyzone having reflected already in the books are properly explained with its respective sources emanating from the books of account. Hence, no addition could be made by invoking the provisions of section 69C of the Act. Reliance in this regard is also placed on the decision of the Juri ictional High Court in the case of CIT vs. Radhika Creations in ITA
692/2009 dated 30.04.2010 wherein it was held that the focus of section 69C of the Act is only on the source of such expenditure and not on the authenticity of the expenditure itself.
The main grievance of the Revenue in the instant case is that the expenditure incurred is unverifiable and accordingly not genuine per se. Whereas in order to invoke the provisions of section 69C of the Act, the prerequisite is that the expenditure has been genuinely incurred and only the source of such expenditure is not satisfactorily explained by the assessee. Hence, it can be safely concluded that the lower authorities grossly erred in invoking the provisions of section 69C of the Act. Accordingly, ground No.2 is allowed. ..”

ITA No.- 3275/Del/2023

Impressions Services Pvt. Ltd.
Page 5 of 6

Accordingly, in respectful compliance to the decision of Hon’ble
Coordinate Bench in the case of Cheery Hills (supra), we are of the view that there is no case for making any addition u/s 69C of the Act. Accordingly, the orders of lower authorities is set aside and the Ld. AO is directed to delete the impugned addition of Rs.
1,98,02,291/-. The grounds of appeal no. 5 and 6 raised by the assesse are therefore allowed.
6. Ground of appeal no. 7, is regarding charging of interest under section 234B, 234D and 245A as well as initiation of penalty
U/s 271AAC(1) of the Act. The charging of interest under Income
Tax Act is consequential in nature. Similarly, the initiation of penalty U/s 271AAC(1) of the Act, is premature. Accordingly, ground of appeal no. 7 is dismissed.
7. In the result, the appeal of the assesse is partly allowed.
Order pronounced in the Open Court on 05.03.2025 (ANUBHAV SHARMA)
ACCOUNTANT MEMBER

Dated: 05/03/2025. Pooja/-

ITA No.- 3275/Del/2023

Impressions Services Pvt. Ltd.
Page 6 of 6