2015 (4) TMI 915 - AT - Income Tax

Addition u/s 69C of the Income Tax Act, 1961 on account of unexplained investments - Transactions recorded in regular books of accounts - Assessee paid taxes on profit earned on all transactions - No expenditure incurred or found incurred by the assessee - Held that - There is no dispute to the fact that transactions entered into by the assessee with the Litika Group were mere paper transactions as accepted by the AO. There is also no dispute to the fact that all the amounts of such paper purchase/sale transaction were routed through banking channels. No transaction of cash dealing was found either during the course of search at Litika Group nor during the course of survey at assessee s premises. It is also a matter of record that all these transactions were entered by the assessee in its regular books of accounts. Such circuitous transactions were entered into books of accounts and the profit earned thereon had been duly shown in the Profit and Loss account. There is also no dispute to the fact that on entire profit earned on actual transactions as well as circuitous transactions of purchase and sales, the assessee had paid due taxes on profit earned on all these transactions. In the instant case the assessee has neither incurred any expenses nor was not found to have incurred any expenditure, therefore, there is no question of explanation regarding source of such expenditure. Accordingly, there was no justification on the part of the AO s action for making any addition u/s.69C. Neither during the course of search at Litika Group nor during the course of survey at assessee s premises nor during the enquiries made after survey reveal that assessee had transferred cash of ₹ 3.99 crores to Litika Group. There is also nothing on record to suggest that assessee and Litika Group were involved in some scam/scandal involving money laundering or violation of any law. After considering all these factual position, the CIT(A) recorded detailed finding at para 3.3 of his appellate order and held that provisions of Section 69C are not attracted. It is also not the case of the department that excess payment received during the year amounting to ₹ 3.99 crores was not forming part of the gross results of the assessee on which profit was earned and taxes were duly paid. The detailed finding recorded by the CIT(A) at pages 10 to 14, para 3.3 have not been controverted by department by bringing any positive material on record. Accordingly, we do not find any reason to interfere in the findings recorded by the CIT(A) resulting into deletion of addition made u/s.69C of the Act. - Decided against the revenue.

Summary

Issues Involved:
1. Deletion of addition made under Section 69C of the Income Tax Act on account of unexplained investment.
2. Applicability of Section 69C in the context of transactions conducted through banking channels.

Issue-wise Detailed Analysis:

1. Deletion of Addition Made Under Section 69C:

The Revenue appealed against the order of CIT(A) which deleted the addition of Rs. 3,99,50,717 made under Section 69C on account of unexplained investment. The Assessing Officer (AO) had added this amount to the income of the assessee, presuming it to be unexplained expenditure. The CIT(A) observed that the transactions with the Litika Group were mere paper transactions, routed through normal banking channels, and duly accounted for in the books of accounts. The CIT(A) noted that the profit from these transactions was declared in the Profit and Loss account, and taxes were paid accordingly. The CIT(A) concluded that there was no evidence of unexplained expenditure and thus, the addition made by the AO was not justified.

2. Applicability of Section 69C:

The CIT(A) held that Section 69C, which deals with unexplained expenditure, was not applicable in this case. The AO presumed that the assessee had transferred an equivalent amount of Rs. 3,99,50,717 to the Litika Group outside the books of accounts. However, there was no evidence found during the survey or assessment proceedings to support this presumption. The CIT(A) emphasized that all transactions were conducted through banking channels and duly recorded in the books of accounts. The profit from these transactions was taxed, and there was no loss to the Revenue. The CIT(A) concluded that the provisions of Section 69C were not attracted since there was no unexplained expenditure incurred by the assessee.

Conclusion:

The Tribunal upheld the CIT(A)'s decision, noting that the transactions were accounted for in the books, profits were declared, and taxes were paid. There was no evidence of unexplained expenditure, and the provisions of Section 69C were not applicable. The appeal by the Revenue was dismissed, and the addition made by the AO under Section 69C was deleted.