Recorded expenditure and third-party confirmations can defeat unexplained expenditure additions absent concrete evidence of bogus routing back.

Recorded expenditure supported by agreements, invoices, bank payments, books of account and third-party confirmations was found insufficiently discredited by mere doubts about service providers or lack of item-wise bifurcation. Section 69C was treated as inapplicable where the expenditure was duly recorded and the Revenue did not produce concrete evidence that the services were not rendered or that funds were routed back. A consequential addition based only on the deleted unexplained-expenditure adjustment also failed, because its foundation disappeared once the primary disallowance was unsustainable.

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Issues: (i) Whether the addition of Rs. 7.50 crore as unexplained expenditure under section 69C of the Income-tax Act, 1961 was justified; (ii) Whether the addition of Rs. 20,67,364 made on account of difference between surrendered income and returned income was sustainable.

Issue (i): Whether the addition of Rs. 7.50 crore as unexplained expenditure under section 69C of the Income-tax Act, 1961 was justified.

Analysis: The expenditure was supported by agreements, invoices, bank payments, entries in the books of account, and confirmations received in response to notices under section 133(6). The Assessing Officer did not bring credible evidence to show that the services were not rendered or that the payments were routed back to the assessee. The mere absence of item-wise bifurcation and the Assessing Officer's doubts about the service providers' set-up were held insufficient to sustain the disallowance. Section 69C was found inapplicable where the expenditure was recorded in the books and the source was not in dispute in the manner contemplated by that provision.

Conclusion: The addition of Rs. 7.50 crore under section 69C was not sustainable and stood deleted in favour of the assessee.

Issue (ii): Whether the addition of Rs. 20,67,364 made on account of difference between surrendered income and returned income was sustainable.

Analysis: The addition was only a consequential adjustment based on the first addition and the comparison drawn by the Assessing Officer. Once the earlier addition had no legal basis and was deleted, the foundation for this further addition also failed.

Conclusion: The addition of Rs. 20,67,364 was not sustainable and stood deleted in favour of the assessee.

Final Conclusion: The Revenue's challenge to both additions failed, and the relief granted by the first appellate authority was affirmed in full.

Ratio Decidendi: An addition under section 69C cannot be sustained when the impugned expenditure is recorded in the books and is supported by documentary evidence, banking trail, and third-party confirmations, unless the Revenue brings concrete evidence showing that the expenditure is bogus or the money has been routed back.

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