The Chennai Bench of Income Tax Appellate Tribunal ( ITAT ) upheld the deletion of a Rs. 4 crore addition for unexplained expenditure under section 69C of Income Tax Act,1961, ruling that there was insufficient evidence to support the claim of off-book payments.
The Revenue-appellant challenged challenged the Commissioner of Income Tax(Appeals)[CIT(A)] order dated 21.02.2024,where the CIT(A) deleted the Assessing Officer(AO)’s addition for unexplained expenditure under section 69C related to trade payables settled outside the books, following an assessment under section 153C for Assessment Year(AY) 2018-19 by the Deputy Commissioner of Income Tax(DCIT) on 28.09.2021.
Anbu Infratech Pvt. Ltd.,respondent-assessee,engaged in drilling bore wells, was subjected to a search in the case of Shri S. Vishnu, resulting in the seizure of loose sheets. The AO noted that these sheets reflected sundry creditors of the assessee, including one Shri Paranthaman, settled by cash.
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Despite the assessee’s explanation that the balance was still shown in their books, the AO added Rs.4 crore as unexplained expenditure under section 69C, considering it settled outside the books. The assessee appealed to the CIT(A).
The CIT(A), after considering the assessee’s submissions, remand report, and rejoinder, referred the matter back to the AO. The AO reiterated the assessment order in the remand report, stating that the amount of Rs. 4 crore was settled outside the books.
However, the CIT(A) reviewed the books of account and evidence provided by the assessee, including ledger accounts, which showed that payments were recorded in the books, not outside. The CIT(A) concluded that the AO’s addition under section 69C was not justified and deleted the addition. Aggrieved, the Revenue filed an appeal.
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The Tribunal heard the rival contentions and reviewed the facts of the case. It noted that the Revenue’s main argument was that the AO’s addition under section 69C was supported by the seized material and the statement of Shri A.N. Boopathy, Director of the assessee.
However, the appellate tribunal found that the seized materials, particularly page 14, did not provide any evidence that the trade payables of Rs.4 crore to Shri Paranthaman were settled outside the books. The CIT(A) had already concluded that the seized material lacked such evidence and that the assessee had provided valid evidence through its books of account.
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The two member bench comprising Mahavir Singh(Vice-President) and Manoj Kumar Aggarwal(Accountant Member) also noted contradictions in Shri A.N. Boopathy’s statement, as identified by the CIT(A), and agreed with the CIT(A)’s findings. Therefore, the Tribunal confirmed the CIT(A)’s order deleting the addition. The appeal of the Revenue was dismissed.
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