Payments shown in company books can't be treated as unexplained expenditure under s.69C or perquisite under s.17(2) without s.251(2) notice

ITAT held that additions treating company-paid amounts as unexplained expenditure under s.69C and as perquisite under s.17(2) could not be sustained. Once payments appeared in the company's books and were routed through regular banking channels, they could not be added as unexplained expenditure in the assessee's hands; further, CIT(A)'s recharacterisation as a perquisite constituted a new income stream beyond his enhancement powers and was made without the requisite s.251(2) notice. The additions by AO and CIT(A) were deleted and the assessee's grounds were allowed.

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Issues Involved:
The judgment involves appeals arising from orders of the Commissioner of Income Tax (Appeals) against assessment orders passed by the Assistant Commissioner of Income Tax for Assessment Years 2013-14 and 2014-15 under the Income Tax Act, 1961.

Issue 1: Unexplained Expenditure
The assessee declared income in the original return, but a search and seizure action revealed discrepancies. The seized document indicated an expenditure of Rs. 30,753 paid to HDFC, which the AO treated as unexplained expenditure under section 69C of the Act. The assessee contended that the expenditure was actually paid by M/s Spring Travels Pvt. Ltd. and supported this claim with the company's bank statement.

Issue 2: Treatment of Expenditure
The Commissioner of Income Tax (Appeals) acknowledged that the expenditure was paid by M/s Spring Travels Pvt. Ltd. and considered it a payment made on behalf of its Director under section 17(2) instead of treating it as unexplained expenditure under section 69C of the Act. The Commissioner's decision was based on the source of funds and regular banking channels used for the payment.

Judgment:
The Appellate Tribunal found that the expenditure of Rs. 30,753 was indeed paid by M/s Spring Travels Pvt. Ltd. through regular banking channels and claimed as business promotion expenses by the company. The Tribunal disagreed with the AO's classification of the expenditure as unexplained in the hands of the assessee under section 69C. The Tribunal also criticized the Commissioner for treating the sum as a perquisite in the hands of the assessee under section 17(2) without proper authority or notice to the assessee. Consequently, the Tribunal allowed the appeals filed by the assessee, noting that the decision for one assessment year applied equally to the other due to identical facts.

Separate Judgment:
No separate judgment was delivered by the judges in this case.

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