COMMISSIONER OF INCOME TAX-V vs. M/S RADHIKA CREATION

Proposed questions „a‟ to „c‟, as would be apparent from a plain reading thereof, relate to the addition of Rs 44,38,997/- which has been held to be the unexplained expenditure of the assessee under Section 69C of the Income-tax Act, 1961 (hereinafter referred to as „the said Act‟). The Assessing Officer had examined the details of the said expenditure and found that the same was not authenticated by any vouchers and consequently, made the addition of Rs 44,38,997/- as unexplained expenditure in terms of Section 69C of the said Act. 3. We may point out that during the search and seizure operations, as indicated in para 3.1 of the order passed by the Commissioner of Income-tax (Appeals), no evidence was found indicating that the assessee had any 2010:DHC:2430-DB

What the Assessing officer attempted to do was to go into the authenticity of the expenditure and he returned a finding that the expenditure was not authenticated by vouchers and consequently, he added the said expenditure as unexplained expenditure under Section 69C. We are in agreement with the observations and findings of the Commissioner of Income-tax (Appeals) as well as that of the Income-tax Appellate Tribunal that this is not a case which falls under Section 69C. Clearly, Section 69C refers to the „source of the expenditure‟ and not to the expenditure itself. Consequently, the Assessing Officer was clearly wrong in treating the said expenditure as unexplained expenditure under Section 69C of the said Act and the lower appellate authorities were right in their conclusions in deleting the said addition.

Coming to the second aspect of the matter, we find that both the Commissioner of Income-tax (Appeals) as well as the Income-tax Appellate Tribunal have held that the addition in a block assessment can only be made on the basis of the material found during the search. No material as such was found during the search and seizure operations and it is only in the special audit directed by the Assessing Officer, who was unable to find any material at the time of search, that the authenticity of the expenditures were doubted. We are of the view that both the lower appellate authorities correctly came to the conclusion that this was not a case where the addition would be justified in block assessment proceedings 2010:DHC:2430-DB

With regard to proposed question „d‟, which deals with the question of netting of interest under section 80 HHC, the issue already stands decided in favour of the assessee and against the revenue by virtue of this court‟s decision in the case of Commissioner of Income-tax v. Shriram Honda Power Equipment: 289 ITR 475 (Del). Therefore, no further consideration of the said question is required.

As regards proposed question „e‟, the Tribunal has concluded in favour of the assessee, but, according to the learned counsel for the revenue, the conclusion comprises of two parts. This would be apparent from the following extract of the Tribunal‟s order:- “9.1 We have heard both the parties, perused the records and considered the matter carefully. Liability does not get extinguished merely because the period of limitation for enforcing the claim has expired as held by the Hon‟ble Supreme Court in case of Sagauli Sugar Works (236 ITR 518). There is no material brought on record by the A.O. to show that liability had ceased to exist during the relevant year. Moreover, this is a case of block assessment in which undisclosed income can be determined only on the basis of material found during search. There was no material found during search to show that liability was either bogus or had ceased to exist. The addition made in the block assessment is therefore, not justified. The order of CIT(A) deleting the addition is upheld.”

Consequently, we are left with proposed question „f‟. No perversity in the findings has been pointed out as such this issue also does not arise for the consideration of this court. The appeal is dismissed.