SECTION 69C: UNEXPLAINED EXPENDITURE

CONDITIONS OF UNEXPLAINED EXPENDITURE

  1. Where  in any financial year the assessee has incurred any expenditure and
  2. He offers no explanation about the source of such expenditure or part thereof  or
  3. The explanation, If any , offered by him in the opinion of the assessing officer is not satisfactory ,
  4. 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.

CASE LAW

Following are the case law which are in the favour of the assessee :

  1. Pr. Commissioner Of Income Tax Vs. Late Rama Shankar Yadav (Allahabad High Court) on 18 August, 2017
  2. M/S. Silver Palace,, Pune vs Deputy Commissioner Of … on 29 June, 2018
  3. The Commissioner Of Income Tax-ii Vs. M/S. Lakshmi Hospital, Diwan’s Road – Kerla Court
  4. Commissioner of Income-tax Vs. Lubtec India Ltd. – Delhi Court
  5. Commissioner of Income tax (Central) Vs. Chandulal Sadhuram Khemani – Mumbai Court Judgment
  6. Commissioner of Income Tax, Centralii, Kolkata Vs. Sanjay Jhunjhunwala – Kolkata Court
  7. Commissioner of Income Tax, Central Iii Vs. Ritesh Construction (P) Ltd. – Kolkata Court Judgment
  8. 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.

TAX RATE

  • 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%.

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