AO must identify specific expenditures before making additions under section 69C, cannot rely solely on CBIC data

Delhi HC set aside penalty proceedings under section 271AAC(1) for unexplained expenditure under section 69C. The court found that the AO relied solely on CBIC's cumulative purchase amounts without proper details or reconciliation. The AO failed to identify specific import bills or entries that should have been recorded in the assessee's books. The court held that merely accepting CBIC information without meaningful analysis violated natural justice principles. The matter was remanded to the AO for fresh decision in accordance with law, requiring proper identification of specific expenditures before making additions.

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Issues Involved:
The petition challenges an assessment order u/s 143(3) read with 144B of the Income Tax Act, 1961 for Assessment Year 2022-23, alleging violation of natural justice principles.

Assessment of Unexplained Expenditure:
The Assessing Officer added Rs. 70,10,37,475 to the total income as unexplained expenditure u/s 69C of the Act and initiated penalty proceedings u/s 271AAC(1) for concealment of income. The controversy revolves around the declaration of purchases made by the assessee during the relevant year. The assessee claimed its purchases were imports, duly reflected in books, amounting to Rs. 1,51,41,55,705. However, the Assessing Officer alleged purchases worth Rs. 2,21,51,93,180 based solely on CBIC data.

Violation of Natural Justice:
The petitioner contended that the Assessing Officer failed to provide details of allegedly concealed imports, depriving the assessee of a fair opportunity to contest the addition made. The impugned order lacked reference to specific import details and faulted the assessee for not reconciling CBIC data with its declaration.

Judgment Details:
The High Court found the impugned order unsustainable and passed in violation of natural justice principles. The Assessing Officer lacked sufficient material to identify alleged undisclosed expenditure, solely relying on cumulative CBIC data without specific import details. The Court set aside the order, remanding the matter for a fresh decision ensuring necessary details are provided to the assessee for a fair opportunity to explain any additions on account of unexplained expenditure.

Conclusion:
The petition was allowed, and the application disposed of, emphasizing the importance of providing adequate information to the assessee for a fair assessment process in accordance with legal principles.

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