ACIT Vs Bhavin Kumar Rameshkumar Jain (ITAT Mumbai)
Section 69C Cannot Be Invoked When Source of Expenditure Is Explained: ITAT Mumbai Dismisses Revenue Appeal in Bogus 80GGC Case
The Mumbai ITAT (“H” Bench – SMC) dismissed the Revenue’s appeal for AY 2019-20 and upheld deletion of an addition of ₹15,000 made under section 69C towards alleged commission paid for obtaining a bogus deduction under section 80GGC.
Pursuant to a search on Rashtriya Samajwadi Party (Secular), the Investigation Wing unearthed a racket of providing accommodation entries for donations eligible under sections 80GGB/80GGC, supported by statements recorded under section 132(4). Based on this information, reassessment proceedings were initiated against the assessee, who had originally claimed a deduction of ₹3,00,000 under section 80GGC. In response to notice under section 148, the assessee voluntarily withdrew the deduction and offered the entire amount to tax.
While no addition was made in respect of the bogus donation itself, the Assessing Officer invoked section 69C and added 5% of the donation (₹15,000) as unexplained expenditure towards alleged commission, relying solely on general statements recorded during the search in the case of the political party. The CIT(A) deleted the addition, holding that once the donation amount was taxed, the source of the alleged commission stood explained out of the assessee’s disclosed income.
Affirming the CIT(A)’s order, the ITAT held that the sine qua non for invoking section 69C is absence of explanation regarding the source of expenditure. Since the donation amount had already been offered to tax, the presumed commission—if any—was necessarily out of disclosed and taxed income. Generalized third-party statements, without any direct evidence of payment of commission by the assessee, were held to be insufficient to sustain the addition. Consequently, the Revenue’s appeal was dismissed and deletion of addition and consequential penalty proceedings was upheld.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
