2019 (1) TMI 601 - HC - Income Tax

Addition u/s 69C - Unexplained expenditure - Held that - The wording of the section suggests that it concerns only facts. No element of law is involved here save and except finding of facts which would amount to perversity in the finding of facts. The assessee has given some explanation for the questioned expenditure. The explanation given by the assessee is a plausible one. If a better explanation from the assessee was expected but nonetheless the assessee has given one which is plausible, this Court under section 260A cannot overrule that finding of facts and substitute its own finding. For those reasons, once again appreciating the argument of Mr. Dudheria we dismiss the appeal.

Summary

Issues: Interpretation of Section 69C of the Income Tax Act

Interpretation of Section 69C:
The High Court entertained an appeal under section 260A of the Income Tax Act, 1961, which mandates that appeals can only be maintainable before the High Court on a substantial question of law. The Court noted that section 69C of the Act deals with unexplained expenditure, emphasizing that it primarily concerns facts and does not involve an element of law, except when there is a finding of facts amounting to perversity. The section allows deeming unexplained expenditure as the income of the assessee for the financial year, disallowing it as a deduction under any head of income.

Standard of Review for Explanation of Expenditure:
The Court observed that prior to reaching the High Court, cases typically go through three rounds of review - before the Assessing Officer, the Commissioner (Appeals), and the Tribunal. At the Tribunal stage, all inquiries into questions of facts are closed, unless a finding of fact is so perverse that it gives rise to a question of law. In the present case, the Tribunal's order indicated that the assessee provided an explanation for the expenditure in question, which was deemed plausible. Despite the possibility of a better explanation, the Court, under section 260A, cannot override the Tribunal's finding of facts and substitute its own.

Conclusion:
Appreciating the arguments presented by the appellant's counsel, the Court dismissed the appeal, highlighting the importance of respecting the Tribunal's findings when they are based on plausible explanations provided by the assessee. The judgment underscores the significance of factual findings in matters related to unexplained expenditure under section 69C of the Income Tax Act, emphasizing that the Court's role is limited to questions of law rather than reevaluating factual determinations made by the Tribunal.