A division bench of the Allahabad High Court, in Pr. Commissioner Of Income Tax, Varanasi v. Late Rama Shankar Yadav, held that addition in respect of unexplained expenditure under section 69A of the Income Tax Act, 1961 is not mandatory even if the assessee do not explain the same or the explanation given by the Assessee found unsatisfactory.
In the instant case, incurred Rs. 60,15,296/- in making purchases during the period 01.04.2004 to 31.03.2005 from one M/s Chirag Deep Video, Varanasi. Assessing Authority treated the said amount as the unexplained expenditure of assessee under Section 69C of the Income Tax Act since he failed to give explanation on the same.
After analyzing the provisions of Section 69C of the Act, the bench observed that The language of the provision stipulates two conditions necessary for deeming the expenditure incurred by the assessee to be his income for the said year (i) where no explanation is offered; and (ii) where the explanation offered is not found to be satisfactory.
“At the same time, the use of the word “may” in the aforesaid provision makes the deeming provision discretionary and not mandatory. In other words, even if not explanation is offered or it is found to be unsatisfactory, it is not mandatory to treat such unexplained expenditure to be the income of the assessee.”
Read the full text of the Judgment below.
