Case Law Details
Harish Narang Vs PCIT (ITAT Delhi)
Bogus Purchases Mean 69C, Not 37(1):Wrong Section, Short Tax: PCIT Right in Invoking 263
GST Scam Meets Income-Tax Law: 115BBE Hits Bogus Purchases- Accommodation Entries Can’t Get Normal Rate Shield-Section 69C Reigns Supreme Where Goods Never Arrived
In Harish Narang Vs. PCIT , ITA No.3637/Del/2025, AY 2018-19, order dated 31.12.2025, Delhi ITAT upheld revision u/s 263 & dismissed Assessee’s appeal, holding that AO’s assessment u/s 147 r.w.s. 144B was erroneous & prejudicial to the interest of Revenue for wrongly invoking section 37(1) instead of section 69C r.w.s. 115BBE in case of bogus purchases.
Assessee was found, on basis of GST Department inputs, Investigation Wing material & independent enquiries, to have taken bogus purchase bills of ₹1.04 crore from paper concerns controlled by Shri Rajesh Mittal, who had admitted before GST authorities that such firms were issuing accommodation entries with cash-back after commission. AO conclusively established that no goods were ever supplied, invoices were deficient, transport details were fake & suppliers were non-existent. Despite this, AO merely disallowed purchases u/s 37(1) as non-business expenditure, instead of treating them as unexplained expenditure u/s 69C attracting 60% tax u/s 115BBE.
Tribunal held that once bogus purchases & non-receipt of goods are established, source of expenditure itself becomes unexplained, squarely attracting section 69C, & reliance on CIT v. Radhika Creations (Del HC) was misplaced as that decision applies where source is explained & expenditure is genuine. ITAT endorsed PCIT’s reliance on Kanak Impex (Bom HC), N.K. Proteins (SC) & AAA Teleshopping (ITAT), & held that non-application of correct charging provision resulting in short levy of tax fully justifies revision u/s 263 under Malabar Industrial Co. (SC) principles. Revision order was thus confirmed & Assessee’s appeal dismissed.
FULL TEXT OF THE ORDER OF ITAT DELHI
The captioned appeal has been preferred by the assessee against order dated 18.03.2025 of the Principal Commissioner of Income Tax, Rohtak, [hereinafter referred to as ‘ld. PCIT’] arising out of assessment order dated 16.03.2023 passed u/s 147 of the Income Tax Act, 1961 pertaining to Assessment Year 2016-17. The word ‘Act’ herein this order would mean Income Tax Act, 1961.
2. The assessee has raised following grounds of appeal:-
1. The Appellant craves for leave to add, amend, vary, omit OR substitute any of the aforesaid grounds of appeal at any time before OR at the time of hearing of the appeal.
2. That all the grounds are without prejudice to each other.
3. That the Ld. Principal Commissioner of Income Tax, Rohtak (“Ld. PCIT) grossly erred in law & on the facts & circumstances of the case in passing the order dated 18.03.2025 (“Impugned Order”) under section 263 of the Income Tax Act,1961 (*the Act”) without jurisdiction.
4. That the Ld. PCIT grossly erred in law & on the facts & circumstances of the case in passing the impugned order without considering the provisions of section 263 of the Act.
5. That the Ld. PCIT grossly erred in law & on the facts & circumstances of the case in passing the impugned order without application of mind to the reply filed by the appellant submitting that the provisions of section 69C are not applicable on the facts of the case.
6. That the Ld. PCIT grossly erred in law & on the facts & circumstances of the case in passing the impugned order on the basis of incorrect reasons.
7. That the Ld. PCIT grossly erred in law & on the facts & circumstances of the case in passing the impugned order merely on the basis of suspicion.
8. That the Ld. PCIT grossly erred in law & on the facts & circumstances of the case in passing the impugned order without application of mind to the material on record.
9. That the Ld. PCIT grossly erred in law & on the facts & circumstances of the case in passing the impugned order without following the principles of natural justice.
10. That the Ld. PCIT grossly erred in law & on the facts & circumstances of the case in passing the impugned order without considering that the Ld. Assessing Officer had not failed in conducting enquiry while passing the assessment order dated 16.03.2023 under section 147 read with section 144B of the Act.
11. That the Ld. PCIT grossly erred in law & on the facts & circumstances of the case in passing the impugned order without considering that the subject matter of the review order is pending in appeal against the assessment order dated 16.03.2023 under section 147 read with section 144B of the Act before the Commissioner of appeals on similar issue.
3. The only issue agitated by the appellant assessee through its above indicated eleven grounds of appeal is regarding the invocation of the revisionary authority under section 263 by the ld. PCIT, Rohtak. Before proceeding further, we deem it appropriate to briefly recapitulate the factual matrix of the case. Return declaring income of Rs.6,64,740/- was filed by the assessee on 06.10.2018. Based upon inputs received from the GST Department, information was available with the Department that the assessee was engaged in the activity of making bogus purchases and had consequently indulged in getting bogus purchases from two parties namely Shri Balaji Wooltex and Shri Rameshwaram International of Rs.82,74,900/- and Rs.21,52,500/- respectively aggregating to Rs.1,04,27,400/-. Pursuant to the information received from the GST authority, it transpired that one Shri Rajesh Mittal along with his associates was controlling and managing nineteen firms and bogus bills were issued in the names of these nineteen firms without delivery of goods. Shri Rajesh Mittal had admitted these fraudulent transactions before the GST authorities conveying that in pursuance to payments for bogus purchases received through banking channels, cash backs were given to beneficiaries of bogus purchases after deducting commission. Pertinently, Shri Rajesh Mittal initially avoided summons of enquiry from GST authorities but had given his sworn statement when taken into custody by the local police authority. As per details on records, a criminal case under relevant sections of the Indian Penal Code was lodged against Shri Mittal vide FIR No.0571 dated 04.06.2019 at Panipat. The details of impugned nineteen firms which included two parties namely Shri Balaji Wooltex and Shri Rameshwaram International (supra) have been clearly mentioned by the Revenue authorities in their order under section 148A(d) of the Act dated 26.03.2022. In the impugned order, the following was concluded
“…. In view of these facts, it is clear that these above tabulated parties are not genuine entities but only paper concerns which were managed by Sh. Rajesh Mittal along wit some associates, for providing accommodation entries. In his statement, Sh. Rajes Mittal accepted that these firms were being used to provide accommodation entries Bank statements of these firms also substantiate the fact that these concerns were not doing any business but used for issuance of take bills.
5. Hence, it is proven that the assessee has under reported the income bytaking accommodation entries amounting to Rs.1,04,27,400/- in the form of purchases from non genuine entities and income has escaped assessment in this case. In light of discussion held above and on the basis of material available on record, it is decided that the case of Sh. Harish Narang is a fit case for issuance of notice under section 148 of the Act for A.Y. 2018-19. This order is passed with the prior approval of the Principal Commissioner of Income Tax, Rohtak.”
4. In consideration of the impugned information, ld. AO proceeded to initiate action under section 148 r.w.s. 147 of the Act. Page-4 and 5 of the order under section 147 r.w.s. 144B of the ld. AO dated 16.03.2023 alludes that the response of the assessee to the statutory notices was lukewarm. Perusal of pages 7 to 19 of the order of ld. AO dated 16.03.2023 (supra) indicates that he has meticulously analyzed the evidences at hand to conclude that the conclusion drawn in the order under section 148A(d), of the impugned entities from whom purchases were allegedly made by the assessee were bogus entities and mere paper concerns created to provide accommodation entries, are correct. It has been noted that the ld. AO conducted pain staking minute enquiries to identify serious anomalies, deficiencies in the invoices of Shri Balaji Wooltex and Shri Rameshwaram International (supra). It was, inter alia, noted that names, addresses of transporters were missing, signatures of proprietors were at variance, contact details of suppliers were incomplete, the details of goods carrying vehicles were found to be incorrect, the assessee had failed to provide copies of cash book, bank pass book, delivery challans, consignment notes, etc. The ld. AO also conducted enquiries under section 133(6) against Shri Balaji Wooltex and Shri Rameshwaram International (supra), however the same went unanswered. The ld AO got enquiries conducted through Verification Unit (VU). The details of enquires of the VU unit qua Shri Inder Pratap Singh and Shri Sanjeet Proprietors of Shri Balaji and Shri Rameshwaram respectively clearly established that they had admitted that they have not done any business qua impugned firms, whose proprietors, they were allegedly claimed to be. The ld. AO also rejected the arguments of the assessee that the purchases were genuine as the impugned parties had filed GST returns and claimed input tax credit. The ld. Assessing Officer concluded that the purchase made from two parties namely Shri Balaji Wooltex and Shri Rameshwaram International (supra) aggregating to Rs.1,04,92,018/- was bogus. The ld. AO further concluded that the impugned bogus purchases were liable for disallowance under section 37(1) of the Act as they were not incurred for business purposes. The ld. PCIT, Rohtak examined the impugned order dated 16.03.2023 of the ld. AO and concluded that since the same was passed without applying the provisions of section 69C of the Act r.w.s. 115 BBE of the Act, the same fell into the category of an order being erroneous in so far as it is prejudicial to the interest of the Revenue as stipulated in provisions of section 263 of the Act. While passing the impugned order under section 263 dated 18.03.2025, the ld. PCIT extensively dealt with provisions of section 69C, CBDT Circulars, viz 772 dated 23.12.1998 as well as judicial precedences governing the matter. In particular, the ld. PCIT relied upon the decision of Hon’ble Bombay High Court in the case of Kanak Impex (India) Ltd. (Income Tax Appeal No.791 of 2021), of Hon’ble Supreme Court in the case of N.K. Proteins [2017] 84 taxman.com 95 (SC), of this Tribunal in the case of AAA Teleshopping Pvt. Ltd. in ITA No.9633/Del/2019, of Hon’ble Apex Court in the case of Malabar Industrial Co. Ltd. vs CIT in 243 ITR 83(SC). The ld. PCIT concluded in para-6 to 8 of his order as under:-
6 In view of above facts and in my considered opinion, assessing officer has passed the assessment order without making proper inquiries or verification which should have been made and has made an incorrect assessment of facts and incorrect application of law, which makes the assessment order erroneous. Consequently, application of incorrect provisions of law made the assessment order prejudicial to the interest of revenue as revenue has lost tax lawfully chargeable@ 60% u/s 115BBE in respect of special income u/s 69C of the Income Tax Act against the normal tax rate charged by the Assessing Officer. Hence, by invoking the provisions of section 263 of the Income Tax Act, 1961, the order passed by the Assessing Officer shall be revised as the order is passed without making inquiries or verification which should have been made.
6.1 In view of the facts discussed in foregoing paras, it is quite clear that the assessment order dated 16.03.2023 is erroneous and prejudicial to the interest of revenue, in as much as the Assessing Officer should have conducted detailed enquiries on the above issues and made the addition under correct provision of the Income Tax Act, 1961, which he clearly failed to do.
7. The Hon’ble Apex Court in the case of Malabar Industrial Co. Ltd V/s CIT in 243 ITR 83(SC) has held that a bare reading of section 263 of the Act, makes it clear that the pre- requisite to exercise of jurisdiction by the CIT suo-moto under it is that the order of the ITO is erroneous in so far as it is prejudicial to the interest of revenue. The CIT has to be satisfied of twin conditions, namely, (i) the order of AO sought to be revised is erroneous and (ii) it is prejudicial to the interest of revenue. It has also held that the phrase “prejudicial to the interest of revenue” is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the revenue. If due to an erroneous order of the ITO, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue. The phrase ‘prejudicial to the interests of the revenue’ has to be read in conjunction with an erroneous order passed by the Assessing Officer.
7.1 Further, it has been held in the case of Venkatakrishna Rice Co. V. CIT (1987) 163 ITR 129 (Mad) it has been held by the Hon’ble Court that the expression prejudicial to the interest of the revenue must be regarded as involving a conception of facts or orders which are subversive of the administration of revenue. There must be some grievous error in the order passed by the ITO which might set a bad trend or pattern for similar assessment which on a broad reckoning the Commissioner might think to be prejudicial to the interest of revenue administration. The scope of the interference under section 263 is not to set aside merely unfavourable orders and bring to tax some more money into the treasury. Nor is the section meant to get at sheer escapement of revenue. The prejudice must be prejudice to the revenue administration.
7.2. Further, in Jubilant Organosys v. CIT[2004] 265 ITR 420/137 Taxman 515(All.), it was held that under section 263, the Commissioner can correct both the errors of fact and error of law. His jurisdiction is not limited to correcting errors of law alone as there is no such express restriction in the language of section 263.
7.3. Also, in Jai Kumar Kankaria vs. CIT, Cal.171 CTR 483, 251 ITR 707, 120 Taxman 810,it was held that where an order has been passed by the Assessing Officer without application of mind or where the Assessing Officer has made an incorrect assessment of facts or an incorrect application of law, that would satisfy the requirement of the order being erroneous. As regards the words “prejudicial to the interests of the Revenue”, if due to an erroneous order of the Assessing Officer the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. Section 263, 68. [370 ITR 140, 231 Taxman 534].
7.4 The ratio of the above judicial pronouncements is clearly applicable to the facts of the present case.
8. Keeping in view facts and circumstances of the case as discussed above, it is observed that the AO had passed the order dated 16.03.2023 in casual manner without due diligence and without applying correct provisions of the Income Tax Act, 1961. Therefore, the assessment completed u/s 147 r.w.s. 144B of the Act is erroneous in so far as it is prejudicial to the interest of the revenue in terms of provisions of section 263 of the Act, especially in view of Explanation 2 inserted by the Finance Act, 2015 w.e.f. 01.06.2015. Accordingly, by exercise of power conferred u/s 263 of the Income Tax Act 1961, the assessment order passed by the assessing officer on 16.03.2023 u/s 147 r.w.s. 144B of the Act for the A.Y. 2018-19 is set-aside to the above extent with the direction to pass an order afresh after conducting required enquires and verification, in accordance with law, keeping in view of the observations made above and after affording reasonable opportunity of being heard to the assessee.”
5. The ld. CIT(DR), Ms. Amisha S. Gupta, vehemently argued in favour of the order of ld. PCIT(A) qua invocation of her revisionary authority under section 263 of the Act. It was argued that once non-genuineness of the transaction and the bogus element of the purchases were established and the assessee had failed to explain the source of expenditure qua purchase, only recourse left to the ld. AO was to have invoked provisions of section 69C r.w.s. 115 BBE to have made the impugned addition. It was argued that it was not a case where the simplicitor of non-business expenses under section 37(1) can be applied. The ld. DR placed reliance upon the decision of Hon’ble Bombay High Court in the case of Kanak Impex (India) Ltd.(supra).
6. The ld. Counsel for the assessee fiercely argued against the order under section 263 of the Act. The ld. Counsel for the assessee argued that the payments for purchases have been made through banking channel. This fact duly recorded in the books of accounts and hence section 69C cannot be invoked. The ld. Counsel for the assessee placed reliance upon the decision of Hon’ble jurisdictional High Court in the case of CIT vs Radhika Creations [2011] 10 com138 (Del.) holding that section 69C refers to “source of the expenditure” and not to the expenditure itself and therefore that if expenditure is recorded in the books of account it would not be exigible to action under section 69C of the Act.
7. We have heard rival submissions in the light of materials available on records. We have noted that controversy at hand involves statutory provisions of sections 69C, 263, 115BBE and 37 and hence we deem it appropriate to reproduce the same hereunder for total clarity:-
Section-69C
“…69C. 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 Assessing 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.
Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income.”
Section 115BBE
“ 115BBE (1) Where the total income of an assessee –
(a) Includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C, section 69D and reflected in the return of income furnished under section 139 or
(b) Determined by the Assessing Officer includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C, section 69D, if such income is not covered under clause (a) the income tax payable shall be the aggregate of –
(i) the amount of income tax calculated on the income referred to in clause (a) and clause (b), at the rate of sixty percent; and
(ii) the amount of income tax with which the assessee would been chargeable had his total income been reduced by the amount of income referred to in clause (i).”
Section 263
“263(1) The Commissioner may call for and examine the record of may proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.”
Explanation 2. – For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal ‘Chief Commissioner or Chief Commissioner of Principal] Commissioner or Commissioner;-
(a) the order is passed without making inquiries or verification which should have been made;
(b) the order is passed allowing any relief without inquiring into the claim;
(c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or
(d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person….”
Section 37
General.
37. (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36[***] and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head “Profits and gains of business or profession”.
[ [Explanation 1.]-For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.]
[Explanation 2.-For the removal of doubts, it is hereby declared that for the purposes of sub-section (1), any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 (18 of 2013) shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession.]
47 [Explanation 3.-For the removal of doubts, it is hereby clarified that the expression “expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law” under Explanation 1, shall include and shall be deemed to have always included the expenditure incurred by an assessee,-
(i) for any purpose which is an offence under, or which is prohibited by, any law for the time being in force, in India or outside India; or
(ii) to provide any benefit or perquisite, in whatever form, to a person, whether or not carrying on a business or exercising a profession, and acceptance of such benefit or perquisite by such person is in violation of any law or rule or regulation or guideline, as the case may be, for the time being in force, governing the conduct of such person; or
(iii) to compound an offence under any law for the time being in force, in India or 48[outside India; or
(iv) to settle proceedings initiated in relation to contravention under such law as may be notified by the Central Government in the Official Gazette in this behalf].]
(2) [***]
[ (2B) Notwithstanding anything contained in sub-section (1), no allowance shall be made in respect of expenditure incurred by an assessee on advertisement in any souvenir, brochure, tract, pamphlet or the like published by a political party ”
8. The first and foremost controversy, which is seminal to the case is whether the ld. PCIT, Rohtak was correct in exercising her revisionary authority under section 263 of the Act holding that the ld. AO ought to have applied provisions of section 69C r.w.s. 115BBE of the Act as against invocation of section 37(1) of the Act. The section 37(1) of the Act extracted hereinabove clearly postulates that the same can be invoked only qua expenses which are either capital in nature or personal in nature or particularly having an element of lacking commercial expediency. Thus, an assessing authority is empowered to conclude that certain expenses incurred by the assessee do not have any direct business purpose as they lack commercial expediency. The expenditure would be deemed to be lacking commercial expediency if there is no direct co-relation between the expenditure per se and the business purposes of the tax payer. Thus, a direct relationship between the expenses incurred with the business objectives of the tax payer deserves to be established so as to authorize their allowance as genuine business expenses. It is noted that no such controversy was existing in this case which prompted the ld. AO to have made addition under section 37(1) of the Act.
9. This brings us to the question of importance of the factual elements of this case. The case involves unearthing of fraudulent scam managed at the hand of one Shri Rajesh Mittal. The enquiries conducted by the GST authorities clearly indicated that Shri Rajesh Mittal was indulging in input tax credit fraud, wherein he had created bogus dummy firms which was allegedly making bogus supplies to beneficiaries. The ld. AO noted that no goods were actually supplied by these bogus dummy entities. To strengthen his argument, the ld. AO had placed on record, inter alia, the deficiency in the invoices as well as incongruent shortcomings in the vehicles allegedly used for transportation. The ld. AO had thus, conclusively established that notwithstanding payments made through banking channel, no actual purchases were made. The purchases per se were clearly established by the ld. AO as unexplained. The ld. AO clearly brought out that no purchases whatsoever were made by the assessee since no supplies were made. In the light of these enquiries, the Ld. AO held the impugned purchases fall into the mischief of non-business expenses under section 37(1) of the Act. The reliance of appellant upon the decision of Hon’ble Delhi High court in the case of Radhika Creations (supra) appears to be misplaced as the same is clearly distinguished on facts. In the impugned case it was held that if the source of an expenditure was legit, no invocation of section 69C was possible. In the present case the enquiries have clearly indicated that the purchases for which expenses were claimed to have been made actually never happened. The goods were never supplied. In fact, it has been clearly established that the appellant was only paying commission to procure bogus purchase entries. Thus, the ratio laid down in Radhika creations supra stands distinguished on facts per se.
10. The Co-ordinate Bench of this Tribunal in the case of AAA Teleshopping Pvt. Ltd. in ITA No.9633/Del/2019 dated 09.10.2023 dealt with a case in which statement given by party had admittedly indicated that there was indulgence in bogus purchases transaction. The ld. First Appellate Authority had upheld the addition made by the AO under section 69C as bogus purchases and the Hon’ble Co-ordinate Bench have considering the above fact concluded that the order of the ld. CIT(A) do not require any intervention.
11. We have noted that Hon’ble Bombay High Court in Appeal No.791 of 2021 in the case of Kanak Impex (India) Ltd. has relied upon the decision of Hon’ble Apex court in the case of N.K. Proteins and of Hon’ble Gujarat High Court in the case of Simit P. Seth and Hon’ble Calcutta High Court in the case of Smt. Premlata Tekriwal held that once an accommodation entries is established on records then the invocation of section 69C would be correct approach.
12. We have also considered as to whether the ld. PCIT, Rohtak, has rightly exercised his revisionary authority under section 263 of the Act. We have noted that Hon’ble Apex Court in the case of Malabar Industrial Co. Ltd. vs CIT in 243 ITR 83(SC) has held that if “due to an erroneous order of the ITO, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue”. We have noted that non-invocation of section 69C r.w.s. 115BBE of the Act by the AO in this case had led to short charge of tax, which was due to the Revenue. To the extent, the exercise of revisionary authority under section 263 has been found to be correct and supported by statute on records.
13. We have also noted that Hon’ble Madras High Court in the case of Venkatakrishna Rice Co. v CIT (1987) 163 ITR 129 (Mad.) have examined the issue of expression “prejudicial to the interest of the Revenue”. The Hon’ble High Court held that availability of certain conception of facts which are subversive of the administration of the Revenue would constitute presence of element of “prejudicial to the interest of the Revenue. In the present case, the entire claim of Input Tax Credit initiated at the behest of Shri Rajesh Mittal to defraud revenue authorities both in Direct as well as Indirect administration clearly alludes that the ratio laid down by the Hon’ble Madras High Court would apply in this case as far as existence of elements “prejudicial to the interest of the Revenue”. Further we have noted that Hon’ble Allahabad High Court in the case of Jubiliant Organosys vs CIT [2004] 265 ITR 420 held that the Commissioner under section 263 can correct both the errors of fact as well as error of law. We have also noted that Hon’ble Kolkata High Court in the case of Jai Kumar Kankaria vs CIT 251 ITR 707 has also echoed the same line of thinking as of Hon’ble Madras High Court in Venkatakrishna Rice co. (supra) that if Revenue is losing tax because of an erroneous order of the assessing authority, the assessment order would be deemed to be prejudicial to the interest of the Revenue.
14. Section 69C extracted hereinabove clearly postulates that the same shall be invoked by as Assessing Officer in the event of two simultaneous events happening. Thus, there should be claim of an expenditure by the assessee and the assessee during the course of assessment proceedings does not offers any explanation regarding the source of such expenditure or the explanation offered by the assessee is unsatisfactory. In the present case, the assessee has claimed an expenditure of Rs.1,04,27,400/- towards purchases. The ld. AO considering the accompanying circumstances, inter-alia, including enquiries by the GST Authorities as also his own independent enquiries concluded that the impugned expenses were bogus expenses. This conclusion was supported by the fact that the source of these expenses being the goods in question were never received by the assessee. The assessee miserably failed to allude any evidences to indicate that the goods were received by him. The learned Assessing Officer having arrived at the above conclusion proceeded to make the addition treating the same as non-business expenses under section 37(1). It is a settled principle of law that when the prescription of a statute is unambiguously clear, no different interpretation can be made. Section 69C of the Act clearly presumes its invocation in cases where source of an expenditure is either not explained by the assessee or unsatisfactorily explained. The impugned condition was totally applicable in the present case. The invocation of section 37(1) of the Act by the ld. AO was therefore faulty and constituted passing of an order which was erroneous in so far as it was prejudicial to the interest of the Revenue under section 263.
15. Having regard to the discussion made in the preceding paragraph and after considering the peculiar facts of the case, observations made by the ld. Assessing officer in the assessment order, and by the Ld. PCIT in his revisionary order, statutory prescription and judicial precedence, governing the facts, we are of the considered view that directions issued by the ld. PCIT vide her order dated 18.03.2025 are based upon correct understanding and interpretation of facts of the case and do not require any intervention at this stage. We therefore confirm the order of the ld. PCIT, Rohtak and dismissed the grounds of appeal raised by the appellant assessee.
16. In the result, the appeal of the assessee is dismissed.
Order pronounced in the open court on 31st December, 2025.
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