ITO Vs INVT Electric India Private Limited (ITAT Mumbai)
The Mumbai ITAT dismissed the Revenue’s appeal and upheld the order of the CIT(A) deleting an addition of Rs.9.90 crore made under section 69C on account of alleged unexplained expenditure. The assessee, engaged in industrial automation and energy power solutions, had substantial imports from its group entity in China, which constituted nearly 95% of its purchases. During assessment proceedings, the Assessing Officer relied on information from the Insight Portal and alleged discrepancies relating to purchases from certain third parties. However, the assessee categorically denied any transactions with those parties and furnished complete books of account, stock registers, purchase and sales registers, bank statements, audited financial statements, import documents, and ledger accounts of suppliers to substantiate the genuineness of purchases.
Despite the extensive documentary evidence, the Assessing Officer neither rejected the books of account under section 145 nor pointed out any discrepancy in the stock records, quantitative details, sales, invoices, or banking transactions. Nevertheless, the Assessing Officer made an ad hoc disallowance of 10% of total purchases amounting to Rs.99.04 crore and treated Rs.9.90 crore as unexplained expenditure under section 69C, taxable under section 115BBE.
The CIT(A), after examining the records, held that the addition was unsustainable because no defect had been identified in the books of account or supporting records. The CIT(A) noted that the purchases were properly recorded, supported by documents, and reflected in the stock and sales records. Accordingly, the ad hoc disallowance was deleted.
