Assessable Value Under Customs Act Is for Levy of Duty Only, Cannot Substitute Proof of Actual Expenditure for Addition u/s 69C: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, upheld deletion of addition made under Section 69C of the IncomeTax Act, after observing that mere difference between customs assessable value and invoice value of imported goods could not establish unexplained expenditure.

The assessee, Azure Power (Raj) Pvt. Ltd., was engaged in the business of power generation through a solar power plant situated in Karnataka. During AY 2017-18, the assessee imported solar modules and cable harness worth Rs. 157.79 crore for its solar power project. The imported goods were capitalized in both accounting and tax books and all payments were made through banking channels.

During the assessment proceedings, the Assessing Officer noticed a difference between the assessable value of imports reflected in CBEC data and the purchase value reported by the assessee in its books. The AO treated the differential amount of Rs. 1.57 crore as unexplained expenditure under Section 69C and taxed the same under Section 115BBE.

Before the CIT(A), the assessee argued that the addition was made solely on account of difference between the customs assessable value and the invoice value of the imported goods. The assessee also pointed out that all payments were made through banking channels and there was nothing on record to show that any expenditure beyond the recorded purchase value had actually been incurred.

The CIT(A) deleted the addition after observing that assessable value under the Customs Act was determined only for levy of customs duty and could not be treated as unexplained expenditure under Section 69C. Reliance was also placed on the Mumbai ITAT decision in ACIT v. Shri Shivaprakash S. Chandak and the Delhi High Court ruling in CIT v. Lubtec India Ltd. to hold that addition under Section 69C requires proof of actual incurrence of expenditure.

Aggrieved, the Revenue filed an appeal before the Tribunal contending that the difference between CBEC data and the purchase value reported by the assessee justified addition under Section 69C.

The Tribunal, comprising Sudhir Kumar (Judicial Member) and Manish Agarwal (Accountant Member), observed that no material had been brought on record to establish that the assessee had actually incurred any unexplained expenditure and agreed with the findings of the CIT(A).

The Tribunal further held that the prerequisite for invoking Section 69C is a finding that the assessee actually incurred the expenditure in question and that in the absence of such finding the addition was not sustainable.

Accordingly, the Tribunal upheld deletion of the addition of Rs. 1.57 crore.

The Revenue’s appeal was dismissed.

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