Addition u/s 69C towards alleged bogus purchase deleted due to failure of AO to bring on record any material/evidence for alleging such transactions.
In a recent judgment, Kolkata ITAT has deleted addition made u/s 69C towards alleged bogus purchase due to failure of the AO to bring on record any material/evidence for alleging such transactions, even not mentioning the details of the bill and the date of transactions on the basis of which the alleged transactions alleged to be carried out by the assessee.
ABCAUS Case Law Citation:
4740 (2025) (09) abcaus.in ITAT
In the instant case, the assessee had challenged the order passed by the Commissioner of Income Tax (Appeals)-NFAC confirming the addition made on account of alleged unexplained Expenditure u/s 69C of the Income Tax Act, 1961 (the Act).
The appellant assessee was engaged in the business of trading of foreign liquor, imports the same and also purchases from Indian companies from different states and sells to different hotels and restaurants.
A search was carried out at the premises of one person (alleged supplier) who along with his manager deposed that he had provided accommodation entries in the form of bogus purchase bills to several parties and the assessee was one of the beneficiaries of it.
The AO has extracted the statement of the searched person in the assessment order and also mentioned about his company being a struck off company as per the Company Master Data on the MCA website. The alleged supplier had stated this company floated by him to be a mere paper concern having no significant business activities and the same was used for bogus billing and providing accommodation entries to various beneficiaries in lieu of commission.
During the re-assessment proceedings of the assessee, the alleged supplier was summoned, but he did not appear before the Ld. AO, therefore, the alleged amount of accommodation entry provided as per his deposition was treated as bogus and added back to the income of the assessee under section 69C of the Act as unexplained expenditure.
The CIT(A) upheld the addition as the assessee failed to furnish any written submission in response to various notices issued for hearing and failed to establish genuineness of purchases from said person.
Before the Tribunal, the assessee filed an affidavit in which it was stated that during the relevant financial year, the assessee had never purchased from the said searched person or his company. It was further stated that neither the searched person or his manager was known to the assessee and they were not connected with the business of the assessee firm.
The assessee contended that the impugned addition was made by Assessing Officer as Unexplained Expenditure u/s 69C was not based on facts & figures as the assesee had not made any purchase from the said alleged supplier and hence the question of claiming such amount as an expenditure in its Profit & Loss Account did not arise.
Further, it was submitted that instead of verifying the list of purchases already filed in the assessment records, the addition had been made without carrying out independent enquiry, the AO made the addition u/s 69C based on surmises and on a report drawn by Investigation Wing of the Department. Hence the addition be deleted.
The Tribunal observed that while the assessee contended that no such expenditure was claimed nor any such purchases were made. The appeal was dismissed on account of non-prosecution. Even in the assessment order, the AO had not mentioned the details of the bill and the date of transactions on the basis of which the alleged transactions had been carried out by the assessee.
The Tribunal opined that in view of the fact that the assessee had filed an affidavit denying any such transactions, the failure of the AO to place on record any such material/evidence for alleging such transactions, and even the date of the transactions not being mentioned, the addition made was liable to be deleted.
The Tribunal pointed out that Section 69C refers to a case where unaccounted transactions have been carried out while in the case of the assessee, the details of the transactions were not even mentioned. The assessee had contended before the CIT(A) as well that no such transactions were carried out with the alleged supplier yet the CIT(A) upheld the addition since according to him the genuineness of the purchases claimed from the paper company could not be established, which was contrary to the submission made by the assessee.
Accordingly, the addition was deleted.
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