2011 (12) TMI 357 - AT - Income Tax

Addition - Unexplained expenditure under section 69C - The assessee submitted the credit card statement of Rs.2,57,726/- and explained that a sum of Rs.51,175/- was paid by the assessee from his regular bank account - ld. AR for the assessee submitted that the assessee had explained the source of cash expenditure out of the money received by him from his cousin sister who was living in USA for more than 15 years - It was for the AO to make necessary enquiries and place any adverse material to controvert the claim of the assessee which has not been done in this case - Decided in favor of the assessee

Summary

Issues:
Addition of unexplained expenditure under section 69C of the Income Tax Act for assessment year 2006-07.

Analysis:
The appeal was against the order of the CIT(A) regarding the addition of unexplained expenditure under section 69C of the Income Tax Act. The assessee had paid a sum against Citi Bank credit card bills, part of which was explained to be from cash left by his cousin sister for safekeeping. The AO added the unexplained expenditure as the cousin's creditworthiness was not proven. The assessee argued that the cousin, living in the USA for over 15 years, had confirmed the cash transfer and safekeeping. The Tribunal noted that the assessee had provided a notarized confirmation letter and a copy of the cousin's passport showing her visit to India. The onus to explain the source of expenses was considered discharged, and the AO did not conduct further inquiries or provide adverse material to challenge the explanation. The Tribunal held that the addition was unjustified as no substantial queries were made, and the CIT(A) did not seek additional evidence. The Tribunal set aside the CIT(A)'s order and deleted the addition under section 69C.

The Tribunal emphasized that the cousin's confirmation letter and passport copy were crucial evidence supporting the explanation of the source of cash expenditure. The AO's failure to conduct further inquiries or provide contradictory evidence led to the conclusion that the addition was unwarranted. The Tribunal highlighted that the amount in question was not substantial, especially considering the cousin's long-standing residency in the USA. The lack of additional evidence or queries from the authorities reinforced the decision to overturn the addition of unexplained expenditure. The Tribunal ultimately allowed the appeal of the assessee, ruling in favor of deleting the addition made under section 69C for the assessment year 2006-07.