CONDITIONS OF UNEXPLAINED EXPENDITURE
- Where in any financial year the assessee has incurred any expenditure and
- He offers no explanation about the source of such expenditure or part thereof or
- The explanation, If any , offered by him in the opinion of the assessing officer is not satisfactory ,
- The amount covered by such expenditure or part thereof may be deemed income of the assessee for such financial year.
BURDEN OF PROOF
- The initial burden of proof lies on the assessee.
- He should offer the explanation with suitable proof in respect source of expenditure incurred.
OPPORTUNITY OF BEING HEARD
- There must be an opportunity of being heard given by the A.O. to the assessee.
Following are the case law which are in the favour of the assessee :
- Pr. Commissioner Of Income Tax Vs. Late Rama Shankar Yadav (Allahabad High Court) on 18 August, 2017
- M/S. Silver Palace,, Pune vs Deputy Commissioner Of … on 29 June, 2018
- The Commissioner Of Income Tax-ii Vs. M/S. Lakshmi Hospital, Diwan’s Road – Kerla Court
- Commissioner of Income-tax Vs. Lubtec India Ltd. – Delhi Court
- Commissioner of Income tax (Central) Vs. Chandulal Sadhuram Khemani – Mumbai Court Judgment
- Commissioner of Income Tax, Centralii, Kolkata Vs. Sanjay Jhunjhunwala – Kolkata Court
- Commissioner of Income Tax, Central Iii Vs. Ritesh Construction (P) Ltd. – Kolkata Court Judgment
- Commissioner of Income-tax -12 Vs. DRM Enterprises – Mumbai Court Judgment
YEAR OF TAXABILITY
- The amount of unexplained expenditure will be treated the income of the assessee in which year such expenditure was incurred
- Set off losses cannot be made against the deemed undisclosed income.
- The amount of income tax calculated on the unexplained investment at the rate of 60% + 25% Surcharge on such tax and cess as applicable. The effectively rate comes to 78.00 % for the A.Y. 2019-20 if such income is reflected in the return of income furnished U/s 139.
- If such income is not reflected in the return of income furnished u/s 139 then penalty of 10% of tax payable. In such case burden including penalty will come to 84%.