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Income Tax Appellate Tribunal, DELHI “A” BENCH: NEW DELHI
Before: SHRI YOGESH KUMAR U.S & SHRI MANISH AGARWAL
The present appeal is filed by the assessee against the order dated 31.03.2023 by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld.CIT(A)”] in Appeal No. NFAC/2012-13/10069305 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the assessment order dated 29.09.2021 passed u/s 147 r.w.s. 144B of the Act pertaining to assessment year 2013-14.
Brief facts of the case are that the assessee is an individual and engaged in the business of trading of food grains. The return of income was filed on 30.09.2013, declaring total income of INR 4,21,380/-. The AO received information from the office of DDIT (Inv.), Panipat that during the course of search on Shri Hitesh Jain, Page | 1 he admitted in the statement that he was involved in providing bogus bills through certain firms which were stated to have been engaged in providing bogus bills, controlled and managed by Shri Hitesh Jain, and the assessee is one of the beneficiaries. Accordingly, AO recorded his satisfaction that assessee has made payment of INR 58,44,482/- u/s 68 of the Act towards payment made to four [04] firms against purchases and further, addition of INR 5,62,628/- was made u/s 69A of the Act by holding payments received from one party as accommodation entries received after payment of commission.
Against the said order, assessee filed an appeal before Ld. CIT(A) who vide order dated 31.03.2023, dismissed the appeal of the assessee and confirmed the additions made by AO.
Aggrieved by the order of Ld.CIT(A), Revenue is in appeal before the Tribunal by taking following grounds of appeal:-
1. SECTION 147 READ WITHSECTION 1448 OF THE INCOME TAX ACT ON FACTS AND IN LAW THE ORDER PASSEDUNDER SECTION 147 READ WITH SECTION 1448 IS BEYOND FACTS, ILLEGAL, UNJUSTIFIED AND UNCALLEDFOR 2. SECTION 68 OF THE INCOME TAX ACT ON FACTS AND IN LAW THE LEARNED ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING ADDITION OF RS. 58,44,482/- UNDER SECTION 68 OF THE INCOME TAX ACT. SECTION 69C OF THE INCOME TAX ACT 3. ON FACTS AND IN LAW THE LEARNED ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING ADDITION OF RS 5,62,628/- UNDER SECTION 69C OF THE OINCOME TAX ACT. SECTION 147 OF THE INCOME TAX ACT 4. ON FACTS AND IN LAW THE LEARNED ASSESSING OFFICER IGNORED THE FACTTHAT GOODS ARE SOLD OR EITHER KEPT IN Page | 2
STOCK WHICH WAS VERIFIABLE FOR THESTOCK DETAILS FURINSIHED BUT THE LEARNED ASSESSING OFFICER IGNORED ALLTHE INFORMATION SUPPLIED AND REQUEST TO APPLY JUSTIFIED RATE BASED ON LAST YEARS NET PROFITS EARNED BY THE ASSESSEE 5. THE APPELLANT MAY CRAVETO ADD, ALTER, DELETE OR MODIFY ANY OF THEGROUNDS OF THE APPEAL BEFORE THE DATE OF HEARING.” Ground of appeal No.1 raised by the assessee is against the 5. re-opening of assessment u/s 147 of the Act.
During the course of hearing before us, Ld.AR for the assessee has made no submission on this ground of appeal challenging the re-opening of assessment, therefore, Ground of appeal No.1 raised by the assessee is dismissed.
In Ground of appeal No.2 & 3 assessee has challenged the 7. additions made u/s 68 and 69A of the Act. In Ground of appeal No.4, the assessee has challenged the assessment order by observing that the assessee is maintaining proper stock thus, the action of the AO in treating the transactions of purchase and sale as bogus is not in accordance with law.
Since Ground of appeal Nos. 2, and 4 are inter-connected 8. therefore, they all are taken up together and decided as under:-
9. Before us, Ld.AR for the assessee submits that assessee had made purchases from four [04] parties namely, M/s Satish Kumar Sushil Kumar of INR 30,16,557/-; M/s. Shubham Agro (India) of INR 6,38,082/-; M/s. Anupam Enterprises of INR 12,16,465/- & M/s. K.N. Agro Foods of INR 15,97,300/-. Besides this, assessee has sold goods to M/s. Jai Bharat Trading Company of INR Page | 3 5,62,628/-. He submits that the purchases made were duly recorded in the books of accounts and quantitative details were also maintained. Besides this, goods sold were also recorded in the books of accounts and payments towards the purchases as well as sales were routed through banking channel. During the course of assessment proceedings, the assessee had filed confirmations from all these parties which are available at pages 41 to 45 of the Paper Book wherein all the parties have confirmed the transactions made by the assessee with them. Ld.AR further submits that all the sales and purchases were duly reported in the VAT returns filed in regular course and copies of the bank statement and monthly VAT returns were also filed before AO who has failed to point out error in the same. Ld. AR further submits that goods purchased were transported for which necessary evidences of the transportation receipts were also filed. Ld.AR submits that during the course of assessment proceedings despite of request neither the statement of Shri Hitesh Jain which are relied upon for making additions were supplied nor an opportunity for cross-examination was provided to the assessee. The assessee filed the copies of bills alongwith other evidences which were not even disbelieved by any independent inquiry/verification on the part of the AO and AO has solely relied upon the information supplied by Investigation Wing alleging that the purchase and sales made with these parties are bogus transactions. Ld.AR further submits that no evidence whatsoever was brought on record to suggest that assessee has received back the cash after payment of commission against the purchase made from four [04] parties and payment was received through RTGS of the sales made. Page | 4
10. Ld.AR also drew our attention to the fact that addition u/s 68 of the Act was made towards the purchase of goods where the credits of goods which were duly recorded in the stock register and the sales made thereof out of such goods were never doubted. He further submits that section 68 of the Act could be invoked with respect to any credit found recorded in the books of accounts and not applicable to purchases therefore, provisions of section 68 of the Act are wrongly invoked by AO. Likewise, AO has made the addition u/s 69C of the Act for alleged bogus sales whereas section 69C relates to unexplained expenditure and thus, the additions made deserved to be deleted. He prayed accordingly.
11. On the other hand, ld. Sr. DR vehemently supported the order of lower authorities and submits that during the course of search, Shri Hitesh Jain has accepted engaged in the business of providing accommodation entries in the shape of purchases bill, sales, expenses etc. after charging commission and the assessee has purchased the goods from the firms managed and controlled by him. He, therefore, requested that the action of the Ao in making the additions towards bogus purchases and sales are justified and requested to confirm the same.
12. Heard the contentions of both parties and perused the material available on record. In the instant case, addition of INR 58,48,482/- was made u/s 68 of the Act as unexplained credits though the payments were made of this amount for the purchase of goods. For ready-reference, provision of section 68 is extracted here under:-
Cash credits. 68. “Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : Provided that where the sum so credited consists of loan or borrowing or any such amount, by whatever name called, any explanation offered by such assessee shall be deemed to be not satisfactory, unless,— (a) the person in whose name such credit is recorded in the books of such assessee also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided also that nothing contained in the first proviso or second proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.”
From the above, it is established that provision of section 68 could be applied where there were credits in the books of accounts and the assessee has failed to explain the sources thereof to the satisfaction of the AO. As observed above, total payment of INR 58,48,482/- was made to four [04] parties which were alleged as managed and controlled by one, Shri Hitesh Jain for providing accommodation entries and since assessee has recorded purchase of goods against the payment of this amount made to these four parties, therefore, this cannot be treated as unexplained credit and Page | 6 provisions of section 68 of the Act cannot be invoked for making addition of the amount paid for alleged bogus purchases.
Likewise, an addition of INR 5,62,628/- is made u/s 69C of the Act as unexplained expenditure. For ready-reference, provision of section 69C is extracted here under:- Unexplained expenditure, etc. 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.”
From the perusal of the above, it is seen that provisions of section 69C of the Act are applicable to the cases where assessee had failed to offer the explanation towards any expenses and further provides that deduction towards such undisclosed expenditure is not allowable in terms of section 69C of the Act. In the instant case, assessee has received a sum of INR 5,62,628/- against the sales of goods made to the parity which was alleged as managed and controlled by Shri Hitesh Jain for providing accommodation entries. Therefore, it is the case of claiming any expenditure what to say of unexplained expenditure. Accordingly, provisions of section 69C are not at all applicable on such receipts.
It is also seen that AO has not invoked the provision of section 145(3) of the Act and accepted the sales made against the purchases claimed to have been made from these four [04] parties Page | 7 and the trading results declared are also accepted. Further, sales have also been accepted, which was alleged as bogus sales. All the purchases were transported through transporters for which necessary copies of transport receipts (bilty) etc. were filed. It is also seen that despite of requests, neither the statements of Shri Hitesh Jain were provided to the assessee nor an opportunity for cross- examination was granted. Once the Revenue has alleged that the assessee has made bogus purchase/bogus sales to any party controlled and managed by some persons, it is the duty to provide the statements of such persons as well an opportunity of cross- examination of such person must be given which has not been done in the instant case.
Looking to the overall facts and considering the factual matrix that the AO has accepted the trading result and no doubts were raised about the stock records produced, therefore, in our considered opinion, additions made are liable to be deleted more particularly, when the AO has made the additions by invoking incorrect sections.
In view of the above facts, we hereby direct the AO to delete the additions so made. Ground of appeal Nos. 2, 3 and 4 raised by the assessee are accordingly, allowed.
In the result, appeal of the assessee is partly allowed. Order pronounced in the open Court on 10.10.2025.