Unexplained credits inapplicable where purchases are recorded and payments traceable to disclosed bank sources, so additions deleted.

Whether Section 69C applies where purchases are recorded and payments are made from disclosed bank sources was examined: the Tribunal applied the principle that recorded transactions supported by traceable bank payments and third party verifications negate any unexplained credit; accordingly, additions under Section 69C were found unsustainable on the admitted facts and deleted. The reasoning prioritised tracing of funds to accounted sources and sufficiency of books of account and external confirmations over treating payments as accommodation entries.

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Issues: Whether the provisions of Section 69C of the Income-tax Act, 1961 are applicable to additions made by treating payments to certain suppliers as accommodation entries/unexplained credits where the purchases are recorded in the assessee's books and payments are made from disclosed bank sources.

Analysis: The Tribunal examined whether unexplained investment/addition under Section 69C could be sustained when the transactions are recorded in the assessee's books of account and payments therefor were made through disclosed banking channels from accounted sources. The statutory scheme considered includes Section 69C (addition for unexplained credits) read with reassessment provisions under Section 147 and the procedural notices under Sections 148, 148A(b) and 133(6) of the Income-tax Act, 1961. The Tribunal followed the coordinate-bench decision which held that where purchase transactions are disclosed in books of account and payments are traceable to disclosed bank accounts and accounted sources, there is no unexplained receipt or credit warranting an addition under Section 69C. The Tribunal noted that the revenue did not dispute the source of funds for making payments and that verifying responses under Section 133(6) were filed by the third parties; on that basis the application of Section 69C was examined and found unsustainable on the admitted facts.

Conclusion: Section 69C of the Income-tax Act, 1961 does not apply and the addition made under Section 69C is deleted where the purchases are recorded in the assessee's books and payments are made from disclosed banking sources.

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