Vendor Non-Response Cannot Justify Section 69C Addition Without Positive Evidence: ITAT Mumbai

DCIT Vs Grab A Grub Services Limited (ITAT Mumbai)

Summary: ITAT Mumbai dismissed the Revenue’s appeal and upheld deletion of an addition of ₹10,08,86,697 made under section 69C of the Income-tax Act, 1961 in the case of Grab A Grub Services Limited. The assessee, engaged in logistics and delivery services, had transactions with 49 parties identified by the Assessing Officer as non-filers. Notices under section 133(6) were issued to those parties and 44 did not respond. The AO treated expenditure relating to those parties as unexplained expenditure. The Tribunal noted, however, that the expenditure was recorded in the assessee’s books, the books had not been rejected and payments had been made through banking channels. The assessee had also furnished PAN and GSTIN particulars, invoices, ledger accounts, bank-payment details, GST records, AIS extracts and Income-tax Reporting Portal data.

The Tribunal held that section 69C concerns expenditure whose source is unexplained. Mere non-response by vendors to notices under section 133(6), or their alleged non-filing of returns, did not establish that the expenditure was fictitious or that its source remained unexplained. Relying upon principles emerging from CIT v. Orissa Corporation (P.) Ltd., CIT v. Nikunj Eximp Enterprises (P.) Ltd. and Principal Commissioner of Income-tax v. Sanjay Dhokad, the Tribunal observed that failure of a third party to respond to a statutory notice cannot be converted into an adverse finding against the assessee without further enquiry and positive evidence from the Revenue.