Commissioner of Income Tax vs Lubtec India Ltd.

The Revenue is aggrieved by an order dated May 19, 2006, passed by the Income Tax Appellate Tribunal, Delhi Bench " D", IT(SS)A. No. 126 (Delhi) of 2000 relevant for the block period April 1, 1988, to April 21, 1998. During the course of search and seizure operations in the premises of the assessee, the Revenue recovered two sheets of paper marked as annexure A-72 in which certain items were jotted down in pencil such as dinner, gift, projector, slide projector, etc., and some figures were noted against of each item. Some of the items in those two sheets related to advertisements in newspapers, magazines and hoardings, etc.

According to the Revenue, the assessee had incurred expenditure, as mentioned in those two pages, and was thereafter asked to explain the source of the amount. In response, the assessee denied having incurred the expenditure. It was submitted by the assessee that it did not have the amount of money reflected in those two sheets and was incapable of spending the amount, that is, Rs. 29,51,278 which was mentioned in the documents. The Assessing Officer was not satisfied with the explanation and therefore added back the amount to the income of the assessee.

Feeling aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) who allowed the appeal and deleted the addition. It was held that there was nothing to show that the assessee had incurred the expenditure.

The Revenue then preferred an appeal before the Tribunal and since that was dismissed, the present appeal u/s 260A of the Income Tax Act, 1961, has been preferred before us.

The addition is sought to be made in view of the provisions of Section 69Cof the Income Tax Act, 1961, which reads as follows:

69C. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year:

Provided that notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income.

It is quite clear that what is postulated in Section 69C of the Act is that first of all the assessee must have incurred that expenditure and thereafter, if the explanation offered by the assessee about the source of such expenditure is not found satisfactory by the Assessing Officer, the amount may be added to his income.

In the present case, there is nothing to show that the expenditure was in fact incurred by the assessee. The assessee had denied having incurred the expenditure and had contended that it did not have that kind of money. The Tribunal noted that the Assessing Officer had not made any enquiry whatsoever to find out whether such expenditure was actually incurred by the assessee. Since a part of the expenditure related to advertisements in newspapers, it could have been easily verified by the Assessing Officer, but he did not do so.

We find no fault in the view taken by the Tribunal since there is nothing on record to show that the expenditure was actually incurred by the assessee nor did the Assessing Officer take any action to find out whether the expenditure was actually incurred or not.

No substantial question of law arises.

Dismissed.