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TMI Blog2025 (1) TMI 1122X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of the assessee although the assessee has failed to discharge its onus of furnishing any supporting bills pertaining to payments of Rs. 2,97,16,776/- made to non-filers as required by the Assessing Officer in order to verify the genuineness of the expenses claimed. 3) For that the Appellant craves leave to add, alter and amend any/all of the grounds of appeal before or during the course of hearing of the appeal." 3. Brief facts of the case are that the assessee, Dhar Construction Company, is a Partnership Firm and is mainly engaged in the business of civil and electrical construction contract business, executing contracts for various Govt. departments in the state of Meghalaya and trading of explosive items and had filed the return of income on 30.10.2018 for the Assessment Year 2018-19 vide Acknowledgement No 356113141301018. A notice U/s 143(2) of the Income Tax Act, 1951 was issued on 22.09.2019. The assessee claims to maintain books of account on mercantile basis & the same were produced from time to time along with the various details as required during the course of the assessment proceedings. The Ld. AO disallowed expenditure of Rs. 2,97,16,776/- u/s 69C of the Act c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the deemed income of the assessee if there is no satisfactory explanation about the source of expenditure. Payments made to non-filers were identified, and the assessee was given the onus to prove the genuineness of these transactions. The assessee did not respond to the notice, and these expenditures were considered bogus, resulting in additional additions under section 69C. The assessee provided responses to the show cause notice, citing the pandemic's impact on individuals and emphasizing the deduction of TDS on payments. However, bills supporting the transactions were not provided, making it difficult to verify the genuineness of the expenses. The AO proceeded with the proposed additions under section 69C, resulting in a total assessed income of Rs. 4,01,29,666/- 4.4 The assessee has provided comprehensive explanation in form of written submission for the payments made towards business expenses. It is essential to emphasize that the non-filing of the tax return by the payee should not be construed as evidence against the genuineness of the business or business payments. The appellant, in compliance with statutory requirements has provided detailed explanations regarding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the case of CIT- V vs. M/s. Radhika Creation, reported in (2011) 10 Taxmann.com 138 (Delhi), Hon'ble Bombay High Court in the case of ITO v. Vaman International (P.) Ltd. [IT Appeal No. 794 (Mum.) of 2015, dated 16-11-2016], Hon'ble Delhi High Court in the case of Principal Commissioner of Income-tax (Central)-2 v. Param Dairy Ltd. [2022] 139 taxmann.com 546 (Delhi) and the decision in CIT Vs. Pratap Singh Amar Singh (1993) 200 ITR 788 (Rajasthan) to substantiate the claim that the disallowance u/s 69C was not called for. The relevant paras in the case of Radhika Creation (supra) read as under: "5. Insofar as the first aspect of the matter is concerned, we find that Section 69C clearly stipulates that where, in any financial year, the assessee has incurred an expenditure and he offers no explanation about 'the source of such expenditure or part thereof, or the explanation, if it is offered by him, is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year. Thus, the focus of Section 69C is on the "source" of such expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of purchases was duly recorded in account books and thus source of such purchases stands established and having been made out of funds shown in account books". When the books of account have been maintained and expenditure recorded with full details then no addition can be made under S. 69C vide CIT Vs. Pratap Singh Amar Singh (1993) 200 ITR 788 (Rajasthan). 6. We have heard the rival contentions and given our serious consideration to the facts on record. The assessee was a non-filer. It was submitted by the Ld. AR that the issue of non-submission of bills was neither mentioned in the show cause notice nor in the draft assessment order nor even in the subsequent notices issued and the addition was made against the principle of natural justice. The Ld. AR also read out the provisions of section 69C of the Act and stated that since the expenses were recorded in the books of account, section 69C of the Act was also not applicable. Our attention was also drawn to pages 13 to 16 of the paper book. The net profit ratio was 8% before depreciation and interest to partners. When queried by the Bench as to whether the assessee could justify the expenditure with the support of the primary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .K. Palanisamy Vs. N Arumugham and another (Civil Appeal No. 2099, arising out of SLP (Civil) No. 2308 of 2009), that it is a well settled principle of law that mentioning of wrong provision or non-mentioning of provision does not invalidate an order if the court and/or statutory authority had the requisite jurisdiction therefor. The Hon'ble Supreme Court observed as under: "It is a well settled principle of law that mentioning of a wrong provision or non-mentioning of a provision does not invalidate an order if the court and/or statutory authority had the requisite jurisdiction therefor. In Ram Sunder Ram v. Union of India & Ors. [2007 (9) SCALE 197], it was held: ".....It appears that the competent authority has wrongly quoted Section 20 in the order of discharge whereas, in fact, the order of discharge has to be read having been passed under Section 22 of the Army Act. It is well settled that if an authority has a power under the law merely because while exercising that power the source of power is not specifically referred to or a reference is made to a wrong provision of law, that by itself does not vitiate the exercise of power so long as the power does exist and can be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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