Facts of the Case

  • The appeal was filed by the Revenue against the order dated 26 August 2020 passed by the Income Tax Appellate Tribunal (ITAT) for Assessment Year 2012–13.
  • The Assessing Officer (AO) had made an addition of ₹7,17,95,500 treating certain purchases as ‘unexplained expenditure’.
  • The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition.
  • The ITAT upheld the CIT(A)’s order.
  • The Revenue challenged the same before the Delhi High Court.

Issues Involved

  1. Whether the ITAT erred in deleting the addition made under Section 69C of the Income Tax Act, 1961 (unexplained expenditure).
  2. Whether purchases from alleged bogus entities could be treated as unexplained expenditure despite evidence of receipt of goods and payment through banking channels.
  3. Whether any substantial question of law arose for consideration by the High Court.

Petitioner’s Arguments (Revenue)

  • The ITAT wrongly upheld deletion of addition made by the AO.
  • The purchases were shown from entities Ganesh Traders and Trade Link India, which were allegedly bogus and non-existent.
  • The addition was justified as unexplained expenditure due to non-genuine transactions and violation of accounting standards.

Respondent’s Arguments (Assessee)

  • The assessee demonstrated that:
    • Goods had actually been received.
    • Payments were made through proper banking channels.
  • The transactions were genuine and duly recorded in books.
  • The findings of CIT(A) and ITAT were based on factual verification and should not be disturbed.

Court’s Findings / Order

  • The Court noted that for a previous assessment year (AY 2011–12), a similar issue had already been decided in favour of the assessee.
  • Both CIT(A) and ITAT had given concurrent findings of fact that:
    • Goods were actually received.
    • Payments were made through banking channels.
  • The High Court held that:
    • There was no perversity in the findings of lower authorities.
    • No substantial question of law arose.
  • Result: The appeal filed by the Revenue was dismissed.

Important Clarification

  • Mere allegation that suppliers are bogus is not sufficient to invoke Section 69C if:
    • Actual receipt of goods is proved, and
    • Payments are made through legitimate banking channels.
  • High Courts will not interfere where concurrent factual findings exist unless perversity is demonstrated.

Sections Involved

  • Section 69C – Unexplained Expenditure (Income Tax Act, 1961)
  • Principles relating to burden of proof in bogus purchase cases
  • Appellate jurisdiction under Section 260A (substantial question of law)

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:1376-DB/MMH13042022ITA862022_165925.pdf


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