Law:

Section:

I. Section 69C of the Income-tax Act, 1961 - Unexplained expenditure - Assessment year 2001-02 - In absence of any material whatsoever with Assessing Officer to show that assessee had actually incurred any expenditure on purchases outside its books of account, Assessing Officer was unjustified in making addition under section 69C on account of unaccounted purchases [In favour of assessee] The Assessing Officer made certain addition under section 69C to the assessee's income on account of unexplained expenditure incurred on purchase observing that the assessee was involved in the business of receiving bogus purchase entries so as to inflate its profit for claiming deduction under section 80HHC. On appeal, the Commissioner (Appeals) deleted the addition. Held that to enable invocation of the provisions of section 69C, the Assessing Officer needed to be in possession of some material indicating that the assessee had incurred expenditure on purchases which had not been reflected in the books of account. Existence of such material with the Assessing Officer, in fact, is the sine qua non for invoking section 69C. The assessment order did not evince the presence of any material whatsoever with the Assessing Officer to show that the assessee had actually incurred any expenditure on purchases outside its books of account. The assessee had, on the contrary, furnished all its purchase as well as sale bills. It was shown that the export of diamonds made by the assessee had been through the Customs department, which department is responsible for approving the value of diamonds to the exported. The audited balance-sheet and the profit and loss account had been produced before the Assessing Officer by the assessee. The factum of export, in fact, was accepted by the Assessing Officer. Hence, the Commissioner (Appeals) was justified in deleting the addition. II. Section 69C of the Income-tax Act, 1961 - Unexplained expenditure - Assessment year 2001-02 - Where remand ordered by Tribunal was specifically limited to examine credit entries of assessee, Assessing Officer, in order passed pursuant to remand, was not justified in making addition under section 69C [In favour of…

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