Unexplained expenditure addition fails where alleged cash-loan interest is unsupported by direct evidence and rests on conjecture.

An addition for unexplained expenditure on alleged interest paid on cash loans was deleted because it rested only on suspicion and conjecture, with no direct evidence of cash transactions between the assessee and the alleged lender. The Tribunal also noted that an identical issue on the same facts had already been decided in the assessee's favour in a succeeding year, and the earlier coordinate Bench had found the assessment unsustainable for want of evidence. The substantive addition therefore did not survive, and relief was granted to the assessee to that extent.

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Issues: Whether the addition made as unexplained expenditure on account of interest paid on alleged cash loans could be sustained.

Analysis: The addition was founded on the allegation that the assessee had paid interest on cash loans and the issue had already been decided in the assessee's own case for a succeeding assessment year on identical facts. The record disclosed no direct evidence of cash transactions between the assessee and the alleged lender, and the earlier coordinate Bench had deleted the similar addition after finding that the assessment was based on surmises and conjectures.

Conclusion: The addition under section 69C was directed to be deleted, in favour of the assessee.

Final Conclusion: The substantive addition relating to alleged interest on cash loans did not survive, and the appeals were disposed of by granting relief to the assessee to that extent.

Ratio Decidendi: An addition for unexplained expenditure cannot be sustained where it rests only on suspicion and conjecture and is unsupported by direct evidence, particularly when identical facts have already been decided in favour of the assessee.

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