VALE INDIA PVT LTD,DELHI V. JCIT,RANGE-27, DELHI

ITA 4325/DEL/2025

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Vale India (P) Ltd. appealed against the order of the National Faceless Appeal Centre (NFAC), which upheld the additions made by the Joint Commissioner of Income Tax (JCIT) under sections 68 and 69C of the Income Tax Act, 1961. The additions pertained to revenue from services and certain trade payables and expenditures that were deemed unexplained. The Tribunal examined the applicability of section 68 to the revenue from services, the nature of trade payables, and the justification for the expenditure claimed. The Tribunal's decision focused on the correct interpretation and application of sections 68 and 69C, leading to the allowance of the appeal and the deletion of the contested additions.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 839928 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Appeal Filed On: 08-07-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: REVENUE SERVICES; REVENUE FROM SERVICES WAS UPHELD BY REITERATING AOS FINDINGS; KHITESH GUPTA
• Assessee Lawyers: PRASHANT MEHARCHANDANI; KANIKA JAIN
• Keywords: Additional evidence; Unexplained cash credit; Unexplained expenditure; Bogus
• Section: 143(3); 142(1); 68; 69; 69C; 234B

Judgement Text

"1 IN THE INCOME TAX APPELATE TRIBUNAL DELHI BENCH “A”: NEW DELHI BEFORE SHRI MAHAVIR SINGH, HON’BLE VICE PRESIDENT AND SHRI MANISH AGARWAL, HON’BLE ACCOUNTANT MEMBER ITA No. 4325/DEL/2025 A.Y. : 2017-18 Vale India (P) Ltd., Vs. JCIT, Range-27, New Delhi Prius Platinum, 1st floor, Room No. 191, CR Bldg., District Centre, Saket, IP Estate, New Delhi-2 New Delhi – 110 017 [PAN: AADCR1648F) (Appellant) (Respondent) Assessee by : Sh. Prashant Meharchandani, Adv. & Ms. Kanika Jain, Adv. Department by : Sh. Khitesh Gupta, Sr. DR Date of Hearing 25.11.2025 Date of Pronouncement 23.02.2026 O R D E R PER MAHAVIR SINGH, VP: This appeal by the assessee is emanating from the order of the Ld. National Faceless Appeal Centre (NFAC), Delhi dated 11.5.2025. Assessment was framed by the JCIT, Range-27, New Delhi vide order dated 30.12.2019 u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as “Act”) relevant to assessment year 2017-18. 2. The assessee has raised the following grounds of appeal: 1. That the Ld. AO /CIT(A) erred on facts and in law in assessing the income of the appellant at INR 2,48,58,016 as against the returned income of nil declared by the applicant. Printed from counselvise.com 2 2. That the final assessment order has been passed by the AO in haste, without any application of mind and without following the due procedure of law. 3. That the CIT(A) has erred in facts and in law in dismissing the additional evidence filed by the applicant. 4. That the AO/CIT(A) erred on facts and in law in considering the revenue from rendition of marketing support and back office support services received by appellant from its group entity, M/s Vale International SA Singapore amounting to Rs. 2,35,57,411/-, pursuant to Service Agreement as unexplained credit u/s. 68 of the Act by not appreciating the following : a. Section 68 is not applicable since there is no element of loan or borrowing in the revenue earned from rendition of services. b. Appellant has already recorded this amount in its audited profit and loss account and duly offered it to tax in its return of income. c. Addition of this amount under section 68 amounts to double taxation of the same income in the hands of the same assessee. d. Nature, source and genuineness of receipts from provision of marketing and back office support services have been sufficiently explained. e. Appellant earns this revenue as actual cost plus 10% markup on all expenses incurred (except reimbursement on actual) for providing marketing and back office support services to Vale SA. f. All the expenses recorded in the books of accounts of appellant have been incurred for business purposes, and the action of the AO is questioning the same amounts to questioning the business rationale of businessman, which is impermissible in law. Printed from counselvise.com 3 5. That the AO/CIT(A) erred on facts and in law in treating trade payables amounting to Rs. 12,78,000 as bogus and unexplained and making addition under section 68 of the Act. 6. That the AO/CIT(A) erred on facts and in law in treating the amount of Rs. 49,605/- as unexplained and making addition u/s. 69C of the Act. 7. That the AO has erred on facts and in law by imposing interest of Rs. 63,43,788/- u/s. 234B of the Act. 8. That the AO erred on facts and in law in initiating penalty proceedings under section 274 read with section 271AAC of the Act. 3. Brief facts of the case are that the assessee company was incorporated in India on 10.10.2005 and has been set up for exploration and mining activities in India. The assessee was involved in exploration activities but was not able to commence any commercial mining activity till December, 2013. In January 2014, it became a coal marketing support office of its group company and has exited its exploration business from India in December, 2013. For the year under consideration, the assessee had duly filed its income tax return on 30.11.2017. Thereafter, a notice u/s. 143(2) of the Act was issued to the assessee on 24.8.2018 by the ACIT, Circle 26(1), New Delhi for initiating scrutiny assessment proceedings for the year under consideration. The case was subsequently transferred to Joint Commissioner of Income Tax, Range 27, Delhi. The AO issued various notices under section 142(1) of the Act seeking information / details as required. In response to the above questionnaire, the assessee submitted requisite details /information through various submissions. Further, queries were raised during the course of assessment proceedings and requisite details / information were filed from time to time and placed on record before the AO. Pursuant to the above submissions, assessment order u/s. 143(3) of the Act dated 30.12.2019 was passed by the AO wherein the addition u/s. 68 on account of unexplained credits Rs. 2,35,57,411 was made for revenue services Printed from counselvise.com 4 received from Vale SA on the ground that assessee failed to establish genuineness of the transaction; addition u/s. 68 for unexplained liability Rs. 12,78,000 recorded as trade payable in respect of BSR and Co. LLP (BSR) and addition towards Unexplained expenditure Rs. 49,605 was made on account of difference in amount recorded in Assessee’s Books as payment to M/s Binary Global Limited (BGL), and BGL’s response to notice u/s. 133(6). 4. Against the aforesaid additions, assessee appealed before the Ld. CIT(A), who vide his order dated 11.5.2025 has not allowed the appeal of the assessee by holding that addition u/s. 68 for revenue from services was upheld by reiterating AO’s findings and the additional evidence was dismissed because no justification was given for not submitting these documents before the AO; addition u/s. 69 for unexplained liability was upheld since BSR’s ledger showed the bill was paid and nothing was payable to BSR and addition u/s, 69C for unexplained expenditure was upheld based on the information obtained form BGL under section 133(6). Aggrieved, assessee is in appeal before the tribunal. 5. At the time of hearing, Ld. AR has submitted that lower authorities erred in considering the revenue from rendition of marketing support and back office support services received by assessee from its group entity, M/s Vale International SA Singapore amounting to Rs. 2,35,57,411/-, pursuant to Service Agreement as unexplained credit u/s. 68 of the Act by not appreciating the fact that Section 68 is not applicable since there is no element of loan or borrowing in the revenue earned from rendition of services. It was further submitted that assessee has already recorded this amount in its audited profit and loss account and duly offered it to tax in its return of income and addition of this amount under section 68 amounts to double taxation of the same income in the hands of the same assessee. It was further submitted that nature, source and genuineness of receipts from provision of marketing and back office support services have been sufficiently explained and assessee earns this revenue as actual cost plus 10% markup on all expenses incurred (except reimbursement on actual) for providing marketing and back Printed from counselvise.com 5 office support services to Vale SA, all the expenses recorded in the books of accounts of appellant have been incurred for business purposes, and the action of the AO is questioning the same amounts to questioning the business rationale of businessman, which is impermissible in law and needs to be deleted. It was further submitted that lower authorities erred in treating trade payables amounting to Rs. 12,78,000 as bogus and unexplained and making addition under section 68 of the Act and also erred in treating the amount of Rs. 49,605/- as unexplained and making addition u/s. 69C of the Act. 6. Ld. DR relied upon the orders of the authorities below. 7. We have heard the rival contentions and perused the records. As regards addition of unexplained cash credit u/s. 68 of the Act amounting to Rs. 2,35,57,411/- is concerned, we find that Section 68 is not applicable since there is no element of loan or borrowing in the revenue earned from rendition of services. It is settled law that Section 68 is applicable only where there is ‘cash credit’ from a ‘creditor’ or ‘investor’ etc., and not on revenue receipts of an assessee, hence, it does not apply the present case wherein assessee’s income from provision of services has been mistakenly considered as ‘unexplained cash credit’ and also this amount does not bear the nature of any loan or credit, but it actually revenue receipt in the hands of the assessee, duly offered to tax, hence, the provisions of 68 are not applicable in the present facts. It is also noted that assessee has already recorded this amount in its audited profit and loss account and duly offered it to tax in its return of income and there is no finding in the assessment order that this amount has not been included in the return of income. It is also noted that this addition amounts to double taxation of the same income in the hands of the assessee. However, as per settled law the double taxation of the same income in the hands of the same assessee is not sustainable in law. It is also noted that identity and creditworthiness of the alleged creditor, i.e. Vale SA has been sufficiently established and not even been questioned by the AO/CIT(A). In view of above, the addition made u/s. 68 deserve to be deleted. We hold and direct accordingly. Printed from counselvise.com 6 7.1 As regards addition of Rs. 12,78,000/- u/s. 68 is concerned, as explained above, we find that Section 68 applies to cases where in an amount has been received from a creditor or investor. It does not apply to future liability for expenses recorded in the books of accounts. In the instant case, the assessee recorded a liability i.e. trade payable of Rs. 12,78,000/- towards BSR in relation to auditing expense and not any cash credits per se. Accordingly, the AO is wrong in making addition on account of trade payables instead of cash credits u/s. 68 as bogus and unexplained, completely disregarding the explicit language of section 68, which applies to unexplained cash credit and not to such future liability. It is also noted that AO has not proposed this addition in show cause notice dated 19.12.2019. In view of above, the addition made u/s. 68 on this account deserve to be deleted. We hold and direct accordingly. 7.2. As regards addition of Rs. 49,605/- u/s. 69C of the Act is concerned, we find that Section 69C is applicable in cases where assessee has incurred any expenditure but is unable to explain the source of such expenditure. It is noted that assessee has made total payment of Rs. 3,62,355/- to BGL and recorded the same in its profit and loss account, which the AO has failed to consider the same. Even as per BGL’s response to notice u/s. 133(6), it has received Rs. 3,62,355/- from assessee. However, the AO has mistakenly considered the figure of Rs. 3,12,750 recorded by Assessee and IT maintenance charges and ignored the balance amount recorded as repair and maintenance charges and service tax and accordingly, the AO has treated the amount of difference Rs. 49,605/- as unexplained expenditure u/s. 69C of the Act. In view of above, the addition made u/s. 69C on this account is baseless and hence, deserve to be deleted. We hold and direct accordingly. 8. The other grounds relating to imposing of interest u/s. 234B and initiating of penalty proceedings u/s. 274 r.w.s. 271AAC, both are consequential in nature. Printed from counselvise.com 7 9. In the result, the Assessee’s appeal is allowed in above terms. Order pronounced in the Open Court on 23.2.2026. Sd/- Sd/- (MANISH AGARWAL) (MAHAVIR SINGH) ACCOUNTANT MEMBER VICE PRESIDENT SRBhatnaggar Date: 23-2-2026 Copy forwarded to: - 1. Appellant 2. Respondent 3. DIT 4. CIT (A) 5. DR, ITAT Assistant Registrar, ITAT, Delhi Benches Printed from counselvise.com "