Genuine business expenditure supported by books and vouchers cannot be treated as unexplained under section 69C.

Expenditure supported by ledgers, vouchers and other evidence was treated as genuine business and not unexplained expenditure under section 69C. The assessee's Sierra Project loss expenses were found to have a business nexus, and the material on record showed that the balance amount formed part of the loss claimed in the relevant years. On that basis, the disallowance was held unsustainable and the deletion of the addition was upheld in favour of the assessee.

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Issues: Whether the disallowance made under section 69C of the Income-tax Act, 1961 in respect of Sierra Project loss expenses was sustainable and whether the deletion of the addition by the first appellate authority called for interference.

Analysis: The record showed that the assessee had produced ledgers, vouchers and supporting material before the first appellate authority. The summary of direct Sierra Project expenses also supported the claim that the expenditure had a business nexus and that the balance amount represented expenses incurred in the relevant years together forming the full loss claimed. On that material, the finding that the expenditure was proved and not to be treated as unexplained expenditure was held to be justified.

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

Ratio Decidendi: Where supporting books and evidence establish the genuineness and business nexus of an expenditure, it cannot be treated as unexplained expenditure under section 69C.

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