ITAT Mumbai Quashes Addition Under Section 69C Based Only on Insight Portal Data

Background and Context

The Income Tax Appellate Tribunal, Mumbai Bench, in ITO Vs INVT Electric India Private Limited, examined whether an addition made under Section 69C could be sustained when the Assessing Officer (AO) had not identified any defect in the assessee’s regularly maintained books of account and supporting records.

The dispute arose from a scrutiny assessment under Section 143(3) for Assessment Year 2022-23, culminating in an order passed by the National Faceless Appeal Centre (NFAC), Delhi on 19/08/2025. The Revenue filed an appeal against the relief granted by the CIT(A), while the assessee filed a cross objection.

The Tribunal ultimately upheld the order of the CIT(A), dismissed the Revenue’s appeal, and allowed the assessee’s cross objection. The ruling reiterates key legal principles surrounding:

  • The limited scope of Section 69C regarding unexplained expenditure
  • The necessity of rejecting books of account under Section 145 or pointing out specific defects before making estimated disallowances
  • The evidentiary value of information from electronic tools such as the Insight Portal
  • The appropriate approach in handling alleged TDS discrepancies reflected in Form 26AS

Facts of the Case

Business profile of the assessee

The assessee, INVT Electric India Private Limited, is engaged in the field of industrial automation and energy power solutions. It forms part of a larger multinational group with:

  • Multiple subsidiaries
  • A substantial workforce
  • A wide network of branches and distribution channels spread across several jurisdictions

A distinctive feature of its operations is that about 95% of its total purchases are sourced from its group entity, Shenzhen INVT Electric Co. Ltd., China, through imports. This high concentration of purchases from a single overseas group entity directly influenced the controversy in the assessment.

Assessment proceedings and AO’s approach

During the assessment for AY 2022-23, the AO issued a show cause notice to the assessee alleging discrepancies in purchases. The basis for these allegations was data purportedly drawn from the Insight Portal, which indicated transactions with certain third-party entities.

In response, the assessee furnished a comprehensive set of records, including:

  • Complete books of account
  • Bank book and ledger accounts
  • Stock register with quantitative details
  • Purchase register
  • Sales register
  • Share capital account
  • Audited financial statements, including profit and loss account and balance sheet

Furthermore, the assessee produced detailed information and ledger accounts for major purchase parties where purchase value exceeded Rs.1,00,000/-, including:

  • Names and PANs (where applicable)
  • Postal addresses
  • Email IDs
  • Sample purchase invoices
  • Details of mode of transport (ship, air, road)

Illustratively, the details included parties such as:

  • Shenzhen INVT Electric Co Ltd., China (principal overseas supplier)
  • Indexel Engineering Private Limited, Kota, Rajasthan
  • Camsol Eng Solution Crs., East Delhi

The assessee clarified that the overwhelming volume of purchases was from Shenzhen INVT Electric Co. Ltd., and that the majority of trade payables were also towards this entity.

Clear denial of transactions with Insight Portal parties

Crucially, the assessee categorically denied having entered into any purchase transactions with the specific parties mentioned in the AO’s show cause notice, which were identified only from Insight Portal information. The assessee consistently maintained that:

  • It had no dealings with the 22 parties flagged by the AO
  • All purchases recorded in its books were only from genuine, disclosed suppliers, predominantly its Chinese group company

Despite this categorical denial and the extensive documents placed on record, the AO did not bring any concrete material to refute the assessee’s position.

Ad hoc disallowance of purchases and Section 69C addition

Without rejecting the books of account and without pointing out any specific mismatch or irregularity in:

  • Stock records
  • Quantitative details of purchases and sales
  • Purchase/sales invoices
  • Bank payments