Sunwoda Electronic India Pvt. Ltd Vs ACIT/DCIT (ITAT Delhi)
The Delhi Bench of the ITAT allowed the appeal of Sunwoda Electronic India Pvt. Ltd. for AY 2019-20 and deleted the entire addition of ₹3.17 crore made under section 69C of the Income-tax Act.
The assessee, engaged in manufacturing lithium-ion batteries, had incurred expenditure on factory construction, fit-outs, renovation and IT installations through three contractors. The Assessing Officer, based on investigation inputs alleging accommodation entries, treated the expenditure as bogus and made an addition under section 69C. Although notices under section 133(6) were initially not complied with, the contractors subsequently responded upon physical verification and furnished details, a fact acknowledged by the AO.
The Tribunal held that section 69C can be invoked only where the source of expenditure is unexplained. In the present case, all transactions were fully recorded in the books, the expenses were either capitalised or shown as capital advances, payments were made through banking channels, and the source of funds was never doubted by the Revenue. Merely branding the vendors as “paper entities” or relying on third-party investigation reports could not justify invoking section 69C.
Relying on the co-ordinate bench decision in Garg Acrylics Ltd., the ITAT reiterated that once purchases/expenses are disclosed and paid from explained sources, no addition under section 69C is permissible. Since the entire addition was deleted on this legal ground, the other issues raised by the assessee were left open as academic.
FULL TEXT OF THE ORDER OF ITAT DELHI
