Additions U/s 69C Based Merely On CBIC Information Can't Be Sustained: Delhi High Court

As per Section 69C of the Income tax Act, 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 Income-tax 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.

The Division Bench comprising Justice Vibhu Bakhru and Justice Tara Vitasta Ganju observed that if the AO intends to make any addition on account of unexplained expenditure, it can do so only after apprising himself as to the details of such expenditure and providing the assessee necessary opportunity to explain the same.

While remarking that the AO had no knowledge as to which import or purchase made by the Assessee was not disclosed by the Assessee, the Bench concurred with Assessee's submission that since it was not provided with the information based on which the addition was made, despite demanding the same, it was impossible for them to dispute the alleged additional purchases, except for stating that it had not imported goods of the value as disclosed in CBIC information.

As per the brief facts of the case, the AO during the course of assessment for AY 2022-23, rejected the purchases disclosed by the Assessee at Rs. 151.41 Cr and held the actual quantum of purchases to be Rs. 221.51 Cr, based on the information received from CBIC. Accordingly, AO made additions of Rs. 70.10 Cr as unexplained expenditure under Section 69C and also initiated penalty proceedings under Section 271AAC(1) for concealment of income.

The Bench perused the assessment order and observed that the Revenue made the addition without referring to the details of the imports allegedly concealed by the Assessee and solely relied on the assumption that the information provided by CBIC was correct notwithstanding that it had not disclosed the details of any import bills and that no reconciliation in this regard was carried out.

The Bench found that the Revenue faulted the Assessee for not reconciling the information regarding the quantum of purchases made as received from CBIC with that as disclosed by the Assessee.

The Bench stated that the figures mentioned in the tabular statement are all cumulative figures and do not refer to any bill of entry or particular date of import allegedly made by the Assessee.

The Bench also observed that the reconciliation exercise can only be carried out if the details of invoices or bills of entry were available and without such information, it would be impossible to identify the alleged purchases or imports that were subject matter of dispute.

Thus, the Bench held that the Assessee could not be faulted for not reconciling the data as the information available with the Revenue is wholly insufficient for carrying out any reconciliation exercise.

The Bench remarked that if the Revenue proposed any addition on the ground that the purchases as reflected in the Assessee's books is not correct, the least that the Revenue was required to do was to identify the entries that ought to have been made in the Assessee's books of accounts and which it had failed to do.

Merely proceeding on the basis that CBIC is an apex body therefore, information provided by it cannot be doubted, without even identifying or meaningfully analysing such information, is wholly insufficient to proceed to make an addition, added the Bench.

Hence, opining that if the Assessing Officer could not identify the expenditure made, it could not make an addition on account of unexplained expenditure, the High Court remanded the matter back to the AO for decision afresh in accordance with law and clarifies that if the AO intends to make any addition on account of unexplained expenditure, it can do so only after apprising himself as to the details of such expenditure and providing the Assessee necessary opportunity to explain the same.

Counsel for Taxpayer: Salil Kapoor, Sumit Lalchandani, Ananya Kapoor, Tarun Chanana & Utkarsa K. Gupta

Counsel for Department: I. Singh, Sanjeev Menon, Rahul Singh, Nishant Shokeen & Sumita Singh

Case Title: Bausch And Lomb India Private Limited Vs Assessment Unit

Citation: 2024 LiveLaw (Del) 617

Case Number: W.P.(C) 5768/2024 & CM APPL. 23894/2024

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