The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has allowed appeals filed by Dabur India Limited for assessment years 2015-16, 2016-17 and 2017-18, deleting the addition made under Section 69C of the Income Tax Act in relation to loading and unloading expenses.

The bench of Kavitha Rajagopal (Judicial Member) and Krinwant Sahay (Accountant Member) has observed that where the expenditure was duly recorded in the assessee’s books, payments were made through banking channels and the assessee had produced the relevant contractual and supporting documents, the source of the expenditure stood explained. Consequently, the addition under Section 69C could not be sustained. 

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The three appeals were heard together as common issues were involved. They arose from the order dated March 31, 2026 passed by the CIT(A)/NFAC, Delhi, for assessment years 2015-16 to 2017-18.

The appeals were directed against additions arising from the reopening of assessments. In the assessment proceedings for AY 2015-16, the Assessing Officer had disallowed loading and unloading expenses of ₹75,24,511 by invoking Section 69C of the Income Tax Act. 

According to the material considered in the proceedings, the Assessing Officer had questioned payments made by Dabur to Oxford Infracon Pvt. Ltd. The allegation was that the transactions represented sham transactions intended to reduce Dabur’s taxable income and that Oxford Infracon was allegedly a paper concern involved in providing accommodation entries.

The assessee disputed these allegations and contended that the transactions represented genuine business expenditure incurred towards loading and unloading services.

The assessee argued that the Assessing Officer had not asked it to explain the source of the expenditure of approximately ₹75 lakh.

The assessee therefore contended that the basic conditions for invoking Section 69C were not satisfied. Its argument was that Section 69C deals with unexplained expenditure where the assessee either offers no explanation regarding the source or the explanation offered is not satisfactory to the Assessing Officer. 

The company further submitted that 53 invoices had been raised by Oxford Infracon and payments had been made in compliance with applicable income-tax and service-tax requirements.

The company also argued that there was no material establishing that the loading and unloading services were not actually supplied. According to the assessee, merely alleging that Oxford Infracon was a fake entity could not establish that the services were not provided to Dabur. 

A significant part of Dabur’s case before the Tribunal concerned the documentary trail surrounding the disputed payments.

The assessee submitted that the loading and unloading expenses were genuine business expenses and that the services were necessary for its business operations. It also pointed out that no alternative loader or unloader had been engaged to perform the relevant activities at the concerned location.

Dabur also complained that it had not been given an opportunity to cross-examine the employees or directors of Oxford Infracon whose statements were relied upon by the tax authorities. It argued that denial of such an opportunity violated principles of natural justice. 

The assessee placed reliance on various judicial decisions, including the Delhi High Court decision in Commissioner of Income Tax v. M/s Radhika Creation, to contend that Section 69C is concerned with the source of expenditure rather than the authenticity of an expenditure already recorded in the books. 

The Tribunal focused on the statutory requirement for invoking Section 69C.

It noted that Section 69C applies where an assessee has incurred expenditure but offers no explanation regarding the source of that expenditure, or where the explanation regarding the source is not satisfactory to the Assessing Officer.

The Tribunal found that Dabur had brought on record evidence showing that the expenditure was reflected in its books of account. 

The Tribunal further recorded that payments had been made through banking channels and that the assessee had submitted a copy of the contract with Oxford Infracon Pvt. Ltd., along with other relevant documents, before the Assessing Officer.

“Under this situation the assessee cannot be said to have not explained the source of expenditure,” the Tribunal observed in substance while examining the statutory requirement under Section 69C. 

The ITAT also took note of Dabur’s financial position while examining whether it could reasonably be said that the source of the expenditure remained unexplained.

The Tribunal recorded that Dabur was a cash-rich company with reserves and surplus of more than ₹2,100 crore and current and non-current investments exceeding ₹1,700 crore.

Against this background, the Tribunal observed that it could not be said that the company was unable to explain the source of an expenditure of approximately ₹75 lakh. 

The Tribunal relied upon the jurisdictional Delhi High Court’s decision in Radhika Creation.

As recorded in the ITAT order, the High Court had held that Section 69C is directed towards the “source” of expenditure. Where expenditure has been accounted for in the regular books, the source stands explained.

The Tribunal noted the distinction between questioning the source of an expenditure and questioning the authenticity of the expenditure itself. It observed that Section 69C focuses on the source and not simply on the authenticity of recorded expenditure. 

This distinction was central to the Tribunal’s decision in Dabur’s case.

After considering the assessment order, the CIT(A)’s findings, the submissions of Dabur and the arguments of the Departmental Representative, the Tribunal concluded that the Revenue had not been able to rebut the assessee’s submissions.

The Tribunal specifically noted the documentary material showing that the expenditure was recorded in the books and the payments were made through banking channels, besides the contract and other relevant documents furnished by Dabur. 

The ITAT therefore held that the addition made by the Assessing Officer under Section 69C and confirmed by the CIT(A) could not be sustained.

The Tribunal clarified that although the assessee had raised 11 grounds of appeal, the substantive issue involved was the dismissal of its appeal by the CIT(A) against the Section 69C addition.

It accordingly allowed the assessee’s appeal on the issue. The findings recorded for AY 2015-16 were directed to apply mutatis mutandis to assessment years 2016-17 and 2017-18 as well.

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