Section 69C requires proof of actual expenditure; customs valuation difference alone cannot justify an unexplained expenditure addition.

Section 69C cannot be invoked merely because the customs assessable value of imported goods exceeds the invoice value. The Revenue must first establish that the assessee actually incurred the alleged expenditure and then show that the source was not satisfactorily explained. Where the assessee capitalised the imported cable harness and modules in its books and no material showed unrecorded expenditure or purchases outside the books, the differential customs valuation alone was insufficient. The addition was therefore unsupported and stood deleted.

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Issues: Whether the addition made under section 69C on the basis of the difference between the customs assessable value of imported goods and their invoice value was sustainable.

Analysis: The assessee had capitalised the imported cable harness and modules in its books, and the Revenue relied only on the difference between the customs assessable value and the purchase invoices to treat the differential amount as unexplained expenditure. The governing principle applied was that section 69C can be invoked only where the Revenue first establishes that the assessee actually incurred the expenditure and then fails to satisfactorily explain its source. Mere variation between customs valuation for duty purposes and invoice value does not by itself prove unrecorded expenditure or purchases outside the books. The record disclosed no material showing that the differential amount was in fact incurred by the assessee, and the addition was therefore unsupported.

Conclusion: The addition under section 69C was rightly deleted, and the Revenue's challenge failed.

Ratio Decidendi: Section 69C cannot be applied merely because the customs assessable value exceeds the invoice value of imported goods unless the Revenue first proves that the assessee actually incurred the alleged expenditure.

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