Unexplained expenditure under section 69C requires proof of actual outlay and source; deletion upheld where transactions were sales.

Section 69C applies only where the assessee has incurred expenditure and its source remains unexplained; a mere reference to third-party search material or a statement recorded during search is insufficient. Here, the appellate finding that the assessee's transactions were sales, not purchases, was accepted, and the assessment order failed to identify any false entry in the books or conduct effective enquiry to show that the amount represented unexplained expenditure. The deletion of the addition was therefore upheld in favour of the assessee.

---

---

Issues: Whether the addition made under section 69C of the Income-tax Act, 1961 on account of alleged unexplained expenditure and non-genuine purchases was sustainable.

Analysis: The assessment order proceeded on search material relating to a third party group and on a statement recorded during search. The appellate finding that the assessee's case involved sale transactions rather than purchases was accepted. It was also noted that section 69C applies only where expenditure is incurred and its source remains unexplained. The assessment order did not identify any specific false or contradictory entry in the assessee's books, nor did it show any effective enquiry to establish that the impugned amount represented unexplained expenditure of the assessee. The deletion of the addition was therefore justified.

Conclusion: The addition under section 69C was not sustainable and its deletion was upheld in favour of the assessee.

---