ACIT Vs Radiate E Services Pvt. Ltd. (ITAT Delhi)
Hon’ble Income Tax Appellate Tribunal (ITAT), Delhi Bench, in the case of ACIT vs. Radiate E Services Pvt. Ltd. for Assessment Year 2020–21, has reiterated the legal position regarding the scope of section 69C of the Income Tax Act. The appeal was filed by the Revenue against the order of the CIT(A) deleting additions made by the Assessing Officer on account of alleged unexplained expenditure.
The assessee, a private limited company, had filed its return declaring a loss and was selected for scrutiny. During assessment proceedings, the Assessing Officer made an addition of approximately ₹2.88 crore under section 69C on the ground that the assessee failed to establish the genuineness of payments made to certain vendors, particularly since the vendors did not respond to notices. The CIT(A), however, deleted the addition after examining the evidences submitted by the assessee, including agreements, invoices, ledger accounts, bank statements, TDS records, and GST details.
On appeal, the ITAT upheld the order of the CIT(A) and dismissed the Revenue’s contentions. The Tribunal emphasized that section 69C is applicable only where the source of expenditure is not explained. In the present case, the payments were made through disclosed banking channels, duly recorded in the books of accounts, and supported by documentary evidence. Therefore, the primary condition for invoking section 69C was not satisfied.
The Tribunal further clarified the distinction between “genuineness of expenditure” and “source of expenditure.” It observed that while the Assessing Officer had raised doubts regarding the genuineness of the transactions due to non-response from vendors, he had not disputed the source of funds from which the payments were made. Such circumstances, the Tribunal held, do not fall within the ambit of section 69C.
It was also noted that the assessee had discharged its onus by furnishing complete documentation in support of the transactions. The Assessing Officer, on the other hand, failed to bring any cogent material on record to disprove the evidences submitted. The Tribunal held that mere suspicion or non-compliance by third parties cannot be the basis for making additions, especially when no contrary evidence is brought on record.
Additionally, with respect to a separate addition of ₹20 lakh, the Tribunal upheld the deletion on the ground that no actual expenditure had been incurred by the assessee. It reiterated that the existence of expenditure is a sine qua non for invoking section 69C, and in the absence of any such expenditure, the provision cannot be applied.
This decision reinforces the principle that section 69C is confined to cases where the source of expenditure remains unexplained and cannot be invoked merely on doubts regarding the genuineness of transactions. It also underscores that additions cannot be sustained on the basis of suspicion or third-party non-compliance without bringing substantive evidence on record. Taxpayers are, however, advised to maintain proper documentation and ensure that transactions are well-supported to withstand scrutiny.
FULL TEXT OF THE ORDER OF ITAT DELHI
