Manoj Kumar Vs ITO (ITAT Delhi)
The reassessment for AY 2018-19 treated purchases of ₹11.47 lakh from a suspected accommodation entry provider as bogus and disallowed them under section 37(1), since the transactions were found non-genuine though recorded in the books and paid through banking channels.
Invoking section 263, the PCIT held the assessment to be erroneous and directed the AO to instead tax the amount as unexplained expenditure under section 69C and apply the higher tax rate under section 115BBE.
The Tribunal held this revision to be without jurisdiction. It noted that section 69C applies only where the assessee fails to explain the source of the expenditure. In the present case, the source of payment for purchases was never doubted; the AO had only doubted the genuineness of the purchases and therefore took a plausible view by disallowing them as business expenditure under section 37(1).
A finding that an expense is bogus or non-genuine is fundamentally different from a finding that its source is unexplained. Hence, merely because the AO chose section 37(1) instead of section 69C does not make the order erroneous or prejudicial to the Revenue.
Relying on coordinate bench rulings that section 69C cannot replace a 37(1) disallowance through revision, the Tribunal quashed the PCIT’s order under section 263 and restored the original reassessment.
Accordingly, the assessee’s appeal was allowed
FULL TEXT OF THE ORDER OF ITAT DELHI
