Gargi Overseas Pvt. Ltd Vs ITO (ITAT Delhi)
The Delhi Bench of the ITAT partly allowed the appeal of Gargi Overseas Pvt. Ltd. for AY 2017-18 and deleted substantial additions made under sections 69C and 68 of the Income-tax Act.
The Tribunal held that purchases aggregating to ₹27.06 crore could not be treated as unexplained expenditure under section 69C, since the transactions were fully recorded in the books, supported by purchase invoices, stock registers, quantitative tally and payments were made through regular banking channels out of disclosed sources. The Revenue had not doubted the source of expenditure, which is a sine qua non for invoking section 69C. Mere reliance on third-party survey statements alleging accommodation entries, without rejecting books or disproving stock movement, was held to be insufficient.
Similarly, the Tribunal deleted the addition of ₹11.17 crore under section 68 in respect of sales made to Kalki Trading Company, holding that the same receipts had already been offered to tax as business income and corresponding stock reduction was reflected in the books. Treating disclosed sales as unexplained cash credits amounted to impermissible double addition, especially when books of account and stock records were not rejected.
The ITAT also reiterated that survey statements have limited evidentiary value and that failure of departmental witnesses to appear for cross-examination vitiated reliance on such statements. Following co-ordinate bench precedents, the Tribunal concluded that neither section 69C nor section 68 was applicable on the facts.
Accordingly, the major additions were deleted, and the assessee’s appeal was partly allowed, granting substantial relief
FULL TEXT OF THE ORDER OF ITAT DELHI
