STARLINE BUSINESS PRIVATE LIMITED,DELHI V. ASSESSMENT UNIT INCOME TAX DEPARTMENT, DELHI

ITA 4254/DEL/2024

AI Insights

The case involves Starline Business Private Limited, a company engaged in construction, which appealed against the order of the National Faceless Appeal Centre (NFAC) that upheld the assessment made under Section 69C of the Income Tax Act, 1961. The assessment was based on the allegation that the company received accommodation entries from a shell company controlled by the Jain brothers, which were treated as unexplained expenditure. The tribunal examined whether the reassessment under Section 69C was justified, given that the expenditure was recorded in the company's books and the sources were explained. The tribunal referenced several judgments to support its decision that the addition under Section 69C was not sustainable.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 126931 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Other Referred Cases: CIT Vs. Radhika Creation, Vishal Jhajharia Vs. IT Dept., Alexis Global Private Limited Vs. Asst. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY KUMAR
• Assessee Lawyers: MANISH KHURANA
• Keywords: Unexplained cash credit; Unexplained expenditure; Income from undisclosed sources; Search and seizure; Accommodation entries; Competent authority; National Faceless Appeal; Judgment; Purchases; Deleted; Department; Section 68 of the Act; Section 132; Section 143(2); Section 69C
• Section: 147; 148; 143(2); 132; 68; 69C

Judgement Text

" THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “SMC”: NEW DELHI BEFORE MS. MADHUMITA ROY, JUDICIAL MEMBER ITA Nos.4254/DEL/2024 (Assessment Years: 2015-16) Starline Business Private Limited 5/100, Gajju katra Shahdara East Delhi, Delhi -110032 Vs. Assessment Unit, Income Tax Department Delhi स्थायीलेखासं./जीआइआरसं/PAN/GIR No: PAN No.AAMCS3822M Appellant .. Respondent Appellant by : Sh. Manish Khurana, Advocate Respondent by : Sh. Sanjay Kumar, Sr. DR Date of Hearing 25.02.2025 Date of Pronouncement 23.04.2025 ORDER The instant appeal filed by the assessee is directed against the order dated 18.07.2024 passed by the National Faceless Appeal Centre (in short referred as “NFAC), Delhi was arising out of the order dated 30.03.2022 passed u/s. 147 r.w.s. 144D of the Income Tax Act, 1961, (hereinafter referred to as ‘the Act’) for Assessment Year 2015-16. 2. The brief facts of the case are that the assessee, a private limited company engaged in the business of construction of residential properties filed its return of income on 28.09.2015 declaring Nil income. Subsequently, a search and seizure operation under section 132 of the Act has conducted on 2 ITA NO.4254 /Del/2024 . 17.12.2015 in the case of one Anand Kumar Jain and Shri Naresh Kumar Jain who are in the business of providing accommodation entries to various beneficiaries through cheques/ DD/RTGS/NEFT. Thereafter, on the basis of information received from Investigation Wing that the assessee received Rs.10,94,650/- from the entities controlled by Jain brothers as mentioned hereinabove, with the approval from the competent authority, notice under Section 148 of the Income Tax Act, 1961 was issued on 31.03.2021 alleging escapement of assessment of the said income by the assessee whereupon the assessee duly find its return of income and on 28.01.2022 admitting nil income. The assessee was also provided with reasons for the reopening of the assessment. 3. It is the case of the revenue that the assessee received accommodation entries of the above amount of Rs.10,94,650/- from M/s. Subh Labh Traders (SL Traders) allegedly shell company controlled by the Jain Brothers. The Ld. AO concluded the said transaction were aimed at routing unaccounted income to the books of the appellant, in the guise of legitimate purchase treating the same unexplained expenditure under Section 69C of the Act. The case of the assessee is this that reassessment was originally based on unaccounted cash credits under Section 68 of the Act but when the same was shown to be expenditure, the Ld. AO shifted to section 69C without issuing any fresh notice to the assessee to that effect. 3 ITA NO.4254 /Del/2024 . 4. The notice under Section 143(2) was issued on 08.02.2022 allegedly unexplained credit under Section 68 of the Act whereupon reply dated 17.02.2022 clarifying that the said transaction was a debit (expenditure) and the same was made to purchase good necessary for its construction activities or this business purchases made. The Ld. AO finalized the Assessment Order under Section 69C of the Act on 30.02.2022 without issuing fresh notice to that effect to the assessee or even conducted any enquiry. 5. Moreso, the provision of Section 69C applied only when expenditure is incurred from an unexplained source. The amount in question was recorded in the audited books. Once the sources are, thus, explained, invoking section 69C of the Act is not sustainable in the eyes of law, as was the case made out by the assessee is found to be acceptable. 6. In support of the same, the judgment passed by the Hon’ble Delhi High Court in the case of CIT Vs. Radhika Creation was also relied upon and a copy of the same was filed before us. Further, Judgment of Vishal Jhajharia Vs. IT Dept. was also placed on record in support of the case made out by the assessee. Perusal of record, it appears that it has held that when expenditure in question was shown in regular books of the assessee particularly when the focus of section 69C is on source of expenditure and not an authenticity of expenditure itself, the order passed by the Tribunal holding that source of expenditure was explained and deletion of addition made thereon found to be justified by the Hon’ble High Court. Further, it is the revenue to establish that an 4 ITA NO.4254 /Del/2024 . expenditure is unaccounted and mere presumptions without verification (as in the case in hand) do not justify the addition under Section 69C as held by the Hon’ble Tribunal in the case of Alexis Global Private Limited Vs. Asst. CIT is also relied upon and thus, relying upon the same, the addition made under Section 69C of the Act without making any further enquiry to that effect and furthermore, the expenditure when shown as expenditure in the regular books of accounts and the expenditure when duly explained by the assessee with corroborative evidence, the addition is found to be not sustainable in the eyes of the law and thus deleted. 7. In the result, the appeal of the assessee is allowed. Order pronounced on 23.04.2025. Sd/- (MADHUMITA ROY) JUDICIAL MEMBER Date:- 23.04.2025 Neha/Pk. Sr. Ps Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "