Income Addition on Unexplained Expenditure is valid When Assessee fails to Explain the Source of Expenditure: ITAT [Read Order]

The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) has held that income Addition on unexplained Expenditure is valid when assessee fails to explain the source of expenditure

Shri Pujala Singh, the assessee challenged the order of the CIT (A) in confirming the addition of Rs.55.60 lakhs; Rs.197.90 lakhs; Rs.1.0 lakh; and Rs.43.32 lakhs respectively on account ofunexplained expenditure. 

The Assessing Officer based on the seized document shows that the assessee has incurred an expenditure of Rs.55,60,000/- under the head “Owner Payment (Sudhakar)”. In absence of any satisfactory explanation regarding the source of the said expenditure, the Assessing Officer made the addition of the sameand the assessee failed to furnish any explanation to explain the source of the said expenditure.

The Assessing Officerbrought to tax an amount of Rs.43,32,000/- to the total income of the assessee. The CIT (A) upheld the various additions made by the Assessing Officer. Further, the assessee was given ample opportunity during the course of search and post-search enquiries and even by the Assessing Officer during the course of assessment proceedings. However, the assessee was unable to explain.

The assessee is not in a position to substantiate the nature of these entries and therefore, the assessee is liable to explain the source of the same.  It was observed that the seized documents were admittedly found from the premises of the assessee where the details of expenditure are mentioned. The assessee was unable to explain the source of such expenditure.

The ITAT bench of Shri R.K. Panda, Accountant Member and Shri K. Narasimha Chary, Judicial Memberuphold the order of the learned CIT (A) on this issue by sustaining the addition made by the Assessing Officer.

 It was directed by the Assessing Officer to compute the final addition on account of unexplained receipt and give set off of the above addition if any, the surplus is available.  Needless to say that the Assessing Officer shall give the due opportunity of being heard to the assessee while computing the final addition.  The appeal of the assessee is partly allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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