ACIT Vs Payal Garg (ITAT Delhi)
ITAT Delhi: Bogus Purchases Cannot Be Added u/s 69C When Source of Expenditure Is Explained – Section 69C Misapplied
The Delhi Bench of the ITAT dismissed the Revenue’s appeal and allowed the assessee’s cross-objection, holding that addition made under section 69C read with section 115BBE in respect of alleged bogus purchases was legally unsustainable. The Assessing Officer had disallowed purchases of ₹4.51 crore from six suppliers by treating them as unexplained expenditure on the ground that the suppliers were non-filers, had low turnovers, or did not properly respond to notices under section 133(6).
The Tribunal observed that the assessee had duly recorded the purchases in its regular books of account, made payments through banking channels, maintained stock registers, furnished transportation bills, GST returns, and godown details, and the books of account were audited and accepted. In such circumstances, the “source of expenditure” stood explained. The Tribunal emphasised that section 69C applies only where the source of expenditure is unexplained, and not where the Assessing Officer merely doubts the genuineness or authenticity of the expenditure.
Relying on the binding judgment of the Delhi High Court in CIT v. Radhika Krishan, the Bench reiterated that section 69C cannot be invoked to disallow expenditure already recorded in the books merely on suspicion of bogus purchases. Since the Assessing Officer had examined the genuineness of transactions and not the source of funds, the essential precondition for invoking section 69C was not satisfied. Accordingly, the addition was rightly deleted by the First Appellate Authority, the assessee’s cross-objection was allowed, and the Revenue’s appeal was dismissed.
FULL TEXT OF THE ORDER OF ITAT DELHI
