1986 (8) TMI 84 - AT - Income Tax

Summary

Issues involved: Addition of amount u/s 69C of the Income-tax Act 1961 based on unexplained expenditure.

Factual Background and Findings:
The assessee made payments to contractors which were not recorded in their books. The payments were made on various dates, with entries in different handwritings and inks. The contractors worked only for the assessee, and discrepancies were found in the entries. The Commissioner (Appeals) upheld the addition due to non-recording of payments and erasures in transactions.

Arguments and Submissions:
The counsel for the assessee presented contractor accounts and argued that payments were recorded in the books on different dates, related to business expenditure, and should have been accounted for. The departmental representative supported the lower authorities' decision, questioning the production of the petty cash book.

Judgment and Reasoning:
The Tribunal found the addition unjustified. Section 69C deals with unexplained expenditure, which must be satisfactorily proved. Payments to contractors were debited to personal accounts, likely for business expenses. Even if considered unexplained expenditure, it should be deductible while computing business profits. The revenue's stand was based on entries in other persons' accounts, overlooking the payments recorded by the assessee on different dates. The Tribunal emphasized the need for conclusive evidence before invoking section 69C.

Legal Analysis and Conclusion:
Section 69C aims to cover non-deductible expenses as income from undisclosed sources, such as marriage expenses or gifts. The section requires clear proof that the amount spent is non-deductible and incurred solely by the assessee. The primary onus lies on the revenue to establish this. The Tribunal modified the Commissioner (Appeals) order, directing the ITO to act in accordance with the law.

Outcome:
The appeal was allowed in part, and the addition u/s 69C was deemed unjustified, emphasizing the need for conclusive evidence before invoking such provisions.