2025 (12) TMI 496 - AT - Income Tax

Furniture expenses justified from spouse's capital; unexplained expenditure addition under Section 69C deleted, assessee fully relieved

The ITAT Raipur allowed the assessee's appeal, deleting the addition made as unexplained expenditure u/s 69C. The Revenue had treated furniture expenses ... Unexplained expenditure u/s. 69C - expenses allegedly incurred towards furniture work by assessee's wife - HELD THAT:- As evident from the capital account and the balance sheet as on 31.03.2017, the said Smt. Alka Jain had sufficient means to incur expenditure for furniture of Rs. 17,50,000/- and in absence of any contrary evidence there is no reason to disagree with the amount as reflected in the balance sheet. DR also could not bring on record any evidence contrary to the facts on record. Considering all addition made u/s. 69C of the Act as unexplained expenditure is therefore, misplaced, arbitrary and bad in law. Appeal of assessee allowed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the cash expenditure of Rs. 17,50,000/- incurred for furniture work in the residential house, paid in cash by the assessee's wife, could be treated in the hands of the assessee as unexplained expenditure under section 69C of the Income Tax Act, 1961. 2. ISSUE-WISE DETAILED ANALYSIS 2.1 Unexplained expenditure under section 69C in respect of cash payment for furniture by assessee's wife (a) Legal framework (as discussed) 2.1.1 The addition was made under section 69C of the Income Tax Act, 1961 treating the furniture expenditure as 'unexplained expenditure' in the hands of the assessee. (b) Interpretation and reasoning 2.1.2 The assessee explained that a residential property at Maruti Lifestyle, Raipur was purchased and that furniture for the said house was purchased by the assessee's wife from a concern at Raipur, for which the bill was originally Rs. 18,98,135/- and finally settled at Rs. 17,50,000/-, paid in cash by the assessee's wife. 2.1.3 Before the first appellate authority, the assessee produced documentary evidence including income tax returns from assessment years 2013-14 to 2020-21, computations of total income, and balance sheet of the wife, to establish the source of cash payments and her financial capacity. 2.1.4 The appellate authority recorded a clear finding that, based on the income tax returns and balance sheet, the assessee's wife had sufficient financial capacity to purchase the goods in cash and noted her total declared income for assessment years 2013-14 to 2017-18 as Rs. 22,18,330/-. 2.1.5 However, the appellate authority allowed relief only to the extent of Rs. 4,24,240/- by treating it as 'cash in hand' available as per the balance sheet, and held the balance amount of Rs. 14,73,895/- as unexplained expenditure. 2.1.6 The Tribunal examined the balance sheet as on 31.03.2017, wherein the capital account of the assessee's wife stood at Rs. 59,84,811/-, the specific head 'Furniture at Raipur' reflected an amount of Rs. 17,50,000/-, and 'cash in hand' was shown separately at Rs. 4,24,240/-. 2.1.7 The Tribunal held that the appellate authority had misread and misinterpreted the balance sheet by treating 'cash in hand' of Rs. 4,24,240/- as the only amount available with the wife, ignoring that the capital account and the asset entry 'Furniture at Raipur' itself reflected the impugned expenditure. 2.1.8 The Tribunal noted that the balance sheet and financial statements had been filed before the Department, remained undisputed, and that the appellate authority had in principle accepted the sufficient fund position and creditworthiness of the assessee's wife to incur the expenditure. 2.1.9 The Revenue could not produce any contrary evidence to dispute the correctness of the balance sheet or the financial capacity of the assessee's wife. (c) Conclusions 2.1.10 It was held that, in view of the capital position and balance sheet of the assessee's wife as on 31.03.2017 showing sufficient means and the specific entry of furniture at Rs. 17,50,000/-, the expenditure on furniture stood explained and could not be treated as unexplained expenditure under section 69C in the hands of the assessee. 2.1.11 The addition of Rs. 14,73,895/- made under section 69C was found to be misplaced, arbitrary and bad in law, the appellate order on this point was set aside, and the Assessing Officer was directed to delete the entire addition from the hands of the assessee.