Unexplained expenditure under section 69C cannot cover opening balances or supported mining payments without evidence of current-year incurrence.

Section 69C applies only where expenditure is incurred in the relevant year and its source remains unexplained. Sundry creditors reflected as opening balances brought forward from earlier years could not be treated as unexplained expenditure, and the deletion of that addition was upheld. Payments to labour contractors for mining expenses were also supported by bills, work details, ledger accounts, tax records and contractor returns; absent any defect in the documents, the addition based mainly on survey statements was unjustified, and that deletion was also upheld.

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Issues: (i) Whether the addition under section 69C could be sustained in respect of sundry creditors shown as opening balances brought forward from earlier years. (ii) Whether the addition under section 69C could be sustained in respect of payments made to labour contractors for mining expenses.

Issue (i): Whether the addition under section 69C could be sustained in respect of sundry creditors shown as opening balances brought forward from earlier years.

Analysis: The disputed amount was found to be an opening balance carried forward from earlier years and no expenditure was incurred in the relevant previous year. The assessee had produced supporting evidence, including payment details and other documents, and the addition was made treating the balances as unexplained expenditure notwithstanding that the credits did not arise during the year under consideration. Section 69C applies only where expenditure is incurred in the relevant year and the source of such expenditure is not satisfactorily explained.

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

Issue (ii): Whether the addition under section 69C could be sustained in respect of payments made to labour contractors for mining expenses.

Analysis: The assessee supported the claim with bills, work details, ledger accounts, tax deduction records and income-tax returns of the contractors. The record did not show any defect in the documents, and the additions rested mainly on survey statements without corroborative evidence. The expenditure was found to be genuine business expenditure incurred for mining operations and the invocation of section 69C was held to be unjustified on the facts.

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

Final Conclusion: The Revenue's challenge to the deletions failed, and the assessment additions were not restored.

Ratio Decidendi: Section 69C cannot be invoked unless the impugned expenditure is shown to have been incurred in the relevant year and remains unexplained on the record; opening balances brought forward from earlier years and supported business expenditure cannot be taxed under that provision merely on suspicion.

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