PCIT Vs Executive Trading Co. Pvt. Ltd. (Bombay High Court)
The Bombay High Court dismissed the Revenue’s appeal under Section 260A of the Income Tax Act, 1961, concerning Assessment Year 2017–18, and upheld the ITAT’s deletion of the addition of Rs. 104,99,73,370 made under Section 69C and taxed under Section 115BBE. The Assessing Officer had treated outstanding Letters of Credit as unexplained expenditure based on allegations of bogus purchases and siphoning of bank funds. The Court found that the Assessing Officer had rejected documentary evidence, including stock statements, MVAT assessment, purchaser details, account confirmations and recovery suits, without conducting independent inquiry or verification. The Court noted that no independent material or evidence from the beneficiary entities was identified to support the findings that the documents were forged or the transactions were not genuine. Since the assessee had furnished an explanation supported by documentary evidence and there was no cogent material to discredit it, the Court held that Section 69C could not be invoked. The Tribunal’s deletion of the addition was therefore upheld, and the appeal was dismissed as involving no substantial question of law.
Section 69C Targets Unexplained Source of Expenditure
PCIT-6, Mumbai v. Executive Trading Co. Pvt. Ltd.: Section 69C targets the unexplained source of expenditure—not merely a purchase which the AO alleges to be bogus. Where LC/bank payments establish the source of funds, the addition under section 69C cannot survive merely on the allegation of bogus purchases.
