ASST CIT 25(2), MUMBAI vs. MOHANDAS T AIDASANI, MUMBAI

ORDER PER SHAILENDRA KUMAR YADAV, J.M: This appeal has been filed by Revenue against the order of Commissioner of Income-Tax (Appeals)-35, Mumbai, dated 13.05.2013 for A.Y. 2010-11 on following grounds:

A.Y. 10-11 [ACIT vs. Mohandas T Aidasani) Page 2

“1. On the facts and in circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs.57,51,784/- which was made by invoking the provisions of section 69C of the I.T. Act by treating the purchase are genuine.

2. On the facts and in circumstances of the case and in law, the ld. CIT(A) erred in relying upon judgment in the case of CIT Vs Nikunj Eximp Enterprises Pvt. Ltd. without appreciating that the facts involved in the appellant’s case are different from the facts of the above case law.”

2.1 Matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of assessee and having considered the same, CIT(A) granted relief to assessee to the extent of Rs.57,51,784/- as discussed by him.

2.2 Same has been opposed before us on behalf of Revenue inter alia submitted that CIT(A) erred in deleting the addition of Rs.57,51,784/- which was made by invoking the provisions of Section 69C of the Act by treating the purchase are genuine. Accordingly, order of CIT(A) be set aside and that of Assessing Officer be restored. On the other hand, ld. Authorized Representative supported the order of CIT(A).

2.3 After going through rival submissions and perused the material on record, we find that Assessing Officer has made A.Y. 10-11 [ACIT vs. Mohandas T Aidasani) Page 3 addition of Rs.57,51,784/- u/s.69C of the Act as unexplained expenditure. The provisions of Section 69C of the Income Tax Act, 1961 reads as under:

“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.” It is evident from the clear reading of Section 69C of the Act that same applies in following tow circumstances; I. Firstly, an expenditure have been incurred and; II. Secondly, the assessee fails to indicate satisfactorily the sources of such expenditure or any part thereof.

2.4 This is deemed provision whereby such unexplained expenditure or part thereof is to be treated as the income of assessee for such year. Thus, the provision apply only where an expenditure have been claimed as revenue expenses in computing the income of the year and the source of such expenditure could not be proved satisfactorily. Assessing Officer has not proved that the two conditions as mentioned in Section 69C of the Act has been hit in assessee’s case. Under the provisions of 69C of the Income Tax Act, 1961, additions on account of unexplained investments can be made as deemed income of assessee, if assessee has made investments A.Y. 10-11 [ACIT vs. Mohandas T Aidasani) Page 4 which are not recorded in the books maintained by assessee and assessee offers no explanation about the nature and source of investments or the explanation offered by assessee is in the opinion of Assessing Officer not satisfactory. As the expenditure was accounted in the regular books, the source is obviously explained. The provisions of Section 69C of the Act are not applicable as there was no unaccounted expenditure. Once the sales are accepted, the purchases cannot be treated as ingenuine in those cases where assessee had submitted all details of purchases and payments were made by cheques, merely because the sellers/suppliers could not be produced before the Assessing Officer by assessee. In this case, sales are not in dispute and payments were made through banking channel and by cheque. There is nothing on record to suggest that money has come back to assessee in any manner. Notices coming back, does not mean, those parties were bogus. They are just denying their business to avoid sales tax/VAT etc. Statement by these parties cannot be concluded adversely in isolation and without corroborating evidences against assessee. No cross examination has been offered by Assessing Officer to assessee to cross examine the relevant parties. The failure to produce parties cannot be considered adversely against assessee. Thus, in facts and circumstances of the case and in view of our legal factual discussion, CIT(A) was justified in deleting the addition made by Assessing Officer of Rs.57,51,784/- u/s.69C of the Act. Same is upheld. A.Y. 10-11 [ACIT vs. Mohandas T Aidasani) Page 5

Pronounced in the open Court on this the 12th day of August, 2016.