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“unexplained expenditure”

Cash Credits & Unexplained ItemsSection 69CSection 69C3,276 judgments

The decision most relied on for unexplained expenditure is CIT v. Bholanath Poly Fab. Pvt. Ltd. (355 ITR 290), cited in 712 judgments on BharatTax.

Leading authorities on unexplained expenditure

CIT v. Bholanath Poly Fab. Pvt. Ltd.
355 ITR 290 · 2013 · High Court
712
citing judgments

If an assessee makes purchases from bogus parties, but the underlying goods are genuinely acquired and sold, only the profit margin embedded in such purchases, and not the entire value of the bogus purchases, should be added to the assessee's income.

Vijay Proteins Ltd. v. Asst. CIT
58 ITD 428 · 1996 · ITAT
430
citing judgments

Where purchases are found to be non-genuine or fictitious, a reasonable disallowance of 25% of such purchases or the peak credit, whichever is higher, can be made. This is applied to address unexplained expenditure under Section 69C when actual goods are likely procured from the grey market.

Nikunj Eximp Enterprises v. CIT
216 Taxmann 171 · 2013 · High Court
325
citing judgments

Purchases may be treated as genuine even if the purchase parties are untraceable or not available for verification, as long as there is no specific evidence from the parties themselves denying the transactions or proving them to be bogus.

CIT v. M.K. Brothers
163 ITR 249 · 1987 · High Court
262
citing judgments

Mere non-production of a party or their denial of a transaction is insufficient to treat a payment as non-genuine if it is duly recorded in books and made through banking channels. Once the assessee furnishes relevant documentation, the burden shifts to the Assessing Officer to prove the transaction is not genuine.

N.K. Proteins Ltd. v. DCIT
84 Taxmann.com 195 · 2017 · Supreme Court
204
citing judgments

When purchases are found to be entirely bogus and based on fictitious invoices from non-existent or unconfirmed suppliers, the entire amount of such purchases is liable to be added back as unexplained expenditure, not merely a percentage thereof.

CIT v. La Medica
250 ITR 575 · 2001 · High Court
150
citing judgments

When purchases are shown to be non-genuine, the entire amount is to be disallowed as unexplained expenditure under section 69C, irrespective of whether the goods were procured from alternative sources.

Vijay Proteins Ltd. v. CIT
58 Taxmann.com 44 · 2015 · High Court
140
citing judgments

When an assessee makes alleged bogus or hawala purchases but subsequently makes genuine sales from those purchases, the addition to income should be restricted only to the estimated profit embedded in such transactions, not the entire purchase value.

N.K. Industries Ltd. v. DCIT
72 Taxmann.com 289 · 2016 · High Court
127
citing judgments

When there is a categorical finding that purchases are bogus and from fictitious suppliers, the Assessing Officer is justified in making a 100% addition of the bogus purchase amount under Section 69C, rather than restricting the disallowance to merely the profit margin. This position has been upheld by the Supreme Court through the dismissal of the assessee's SLP.

Judgments citing unexplained expenditure

Manish Mahipatrai Shah, Mumbai vs. CIT(Appeal), Mumbai

ITA 867/MUM/2022[2014-15]Status: DisposedITAT Mumbai08 Feb 2024AY 2014-15

Bench: Shri Aby T. Varkey, Jm & Shri S Rifaur Rahman, Am आयकर अपील सं/ I.T.A. No.867/Mum/2022 (निर्धारण वर्ा / Assessment Year: 2014-15) Manish Mahipatrai Shah बिधम/ Cit(A)/Nfac 404, Commerce House, Mumbai. Vs. Nagindas Master Road Fort, Mumbai-400023. स्थधयी लेखध सं./जीआइआर सं./Pan/Gir No. : Asfps9884D (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) Assessee By: Shri Vimal Punamiya Revenue By: Shri Biswanath Das (Dr) सुनवाई की तारीख / Date Of Hearing: 23/01/2024 घोषणा की तारीख /Date Of Pronouncement: 08/02/2024 आदेश / O R D E R Per Aby T. Varkey, Jm: This Is An Appeal Preferred By The Assessee Against The Order Of The Ld. Commissioner Of Income Tax (Appeals)/Nfac, Delhi Dated 30.03.2022 For The Assessment Year 2014-15. 2. The Main Grievance Of The Assessee Is Against The Action Of The Ld. Cit(A) Upholding The Action Of The Ao Disallowing The Long Term Capital Gain (Ltcg) Claimed By The Assessee In Respect Of Sale Of Shares M/S. Sunrise Asian Limited (Hereafter “M/S. Sunrise”) Of Rs.11,89,44,328/- U/S 68 Of The Income Tax Act, 1961 (Hereinafter “The Act”). & Thus Denying Deduction U/S 10(38) Of The Act As Well As Upholding Addition Of Rs.59,47,261/- As Commission For Arranging The Bogus Ltcg (5% Of Commission) U/S 69C Of The Act.

For Appellant: Shri Vimal PunamiyaFor Respondent: Shri Biswanath Das (DR)
Section 10(38)Section 132(4)Section 147Section 68Section 69C

aforesaid accommodation entry, would have spent commission @ 5% to the broker/entry providers which he computed at Rs.59,47,216/-, which was also added as unexplained expenditure u/s 69C of the Act. And thus AO made an addition of Rs.12,48,91,544/-. Aggrieved, the assessee preferred an appeal before

Syed Zeeshanuddin, Hyderabad vs. ACIT, Circle-2(2), Hyderabad

In the result, the appeal filed by the assessee is allowed

ITA 355/HYD/2022[2015-16]Status: DisposedITAT Hyderabad31 Jan 2024AY 2015-16

Bench: Shri R.K. Panda, Vice- & Shri Laliet Kumarआ.अपी.सं /Ita No.355/Hyd/2022 (िनधा"रण वष"/Assessment Year: 2015-16) Shri Syed Zeeshanuddin Vs. Asstt. C. I. T. Hyderabad Central Circle 2(2) Pan:Bqgps0128A Hyderabad (Appellant) (Respondent) िनधा""रती "ारा/Assessee By: Shri P. Murali Mohan Rao, Ca राज" व "ारा/Revenue By:: Shri K. Madhusudan, Cit(Dr) सुनवाई की तारीख/Date Of Hearing: 29/01/2024 घोषणा की तारीख/Pronouncement: 31/01/2024 Order Per R.K. Panda, Vice-This Appeal Filed By The Assessee Is Directed Against The Order Dated 14/06/2022 Of The Learned Cit (A)-12, Hyderabad, Relating To A.Y.2015-16. 2. Although A Number Of Grounds Have Been Raised By The Assessee, However, These All Relate To The Order Of The Learned Cit (A) In Confirming The Validity Of Assessment U/S 153A In Absence Of Any Incriminating Material & Thereby Confirming The Addition Of Rs.12,02,000/- Made By The Assessing Officer As Unexplained Expenditure By Applying The Provisions Of Section 115Bbe Of The I.T. Act.

For Appellant: Shri P. Murali Mohan Rao, CAFor Respondent: : Shri K. Madhusudan, CIT(DR)
Section 115BSection 132Section 143(1)Section 143(2)Section 153A

assessment u/s 153A in absence of any incriminating material and thereby confirming the addition of Rs.12,02,000/- made by the Assessing Officer as unexplained expenditure by applying the provisions of section 115BBE of the I.T. Act. Page 1 of 13 ITA No 355 of 2022 Syed Zeeshanuddin 3. Facts ... account of lease rentals based on the above working. In view of the same, the Assessing Officer made addition of Rs.12,02,000/- as unexplained expenditure and brought to tax the same by invoking the provisions of section 115BBE. 5. Before the learned CIT (A), the assessee apart from challenging