Unexplained Expenditure justified as Business Promotion Expenses with Relevant Bank Statements: ITAT deletes Addition u/s 69C [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) removed the addition under Section 69C of the Income Tax Act, 1961 after justifying unexplained expenditure as business promotion expenses with relevant bank statements.

The assessee initially filed their income tax return under Section 139 of the Act on July 31, 2013, declaring a total income of Rs. 20,69,420/-. A search and seizure action under Section 132 of the Act took place in ETPPL group cases on August 10, 2017. Following this, a search warrant of authorization under Section 132 was issued in the assessee’s name on the same day.

Subsequently, a notice under Section 153A was issued to the assessee on May 9, 2019. In response, the assessee filed their income tax return on December 4, 2019, declaring the same total income as before. During the relevant year, the assessee reported a salary of Rs. 17,90,400/- from Spring Travels Pvt. Ltd., along with income from house property and other sources.

The Assessing Officer ( AO ) determined that certain expenditures were paid by the assessee in cash without proper explanation of the source, thus adding them as unexplained expenditure under Section 69C of the Income Tax Act.

However, the Commissioner of Income Tax (Appeals) [CIT(A)] noted that the assessee claimed that the said expenditure of Rs. 30,753/- was paid to HDFC by M/s Spring Travels Pvt. Ltd. and was also treated as business promotion expenses by the company. It was further explained that M/s Spring Travels Pvt. Ltd. had made this payment by cheque.

The CIT(A) found that the expenditure of Rs. 30,753/- was paid from the bank statement of M/s Spring Travels Pvt. Ltd. and pertained to the company. Hence, it was concluded that this should be treated as a perquisite under Section 17(2) rather than being considered as unexplained expenditure under Section 69C of the Income Tax Act.

The bench observed that the CIT(A) did not have the authority to introduce a new source of income and failed to provide proper notice to the assessee regarding the proposed change. Consequently, the additions made by the AO and upheld by the CIT(A) were considered to be on different grounds and were deleted. As a result, the grounds raised by the assessee were allowed.

The decision was made by Yogesh Kumar U.S ( Judicial member ) and M. Balaganesh ( Accountant member ) of the ITAT.

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