Unexplained expenditure and double disallowance: documented payments and prior CSR disallowance defeated the additions.

Expenditure recorded in audited books and paid through banking channels, supported by agreements, invoices, Form 15CA/15CB and TDS, cannot be treated as unexplained expenditure under section 69C merely because the Revenue doubts commercial expediency or actual service rendition; the addition was deleted. CSR expenditure already suo motu disallowed in the computation of income under section 37 could not be added again, as that would create impermissible double disallowance; the further addition was also deleted. The ratio is that section 69C applies only where the source of expenditure is unexplained, and a sum already disallowed by the assessee cannot be disallowed twice.

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Issues: (i) Whether expenditure recorded in the books and paid through banking channels could be treated as unexplained expenditure under section 69C of the Income-tax Act, 1961 merely because the Assessing Officer doubted its commercial expediency or actual rendition of services. (ii) Whether the CSR expenditure already added back by the assessee in the computation of income could be subjected to a further addition, resulting in double disallowance.

Issue (i): Whether expenditure recorded in the books and paid through banking channels could be treated as unexplained expenditure under section 69C of the Income-tax Act, 1961 merely because the Assessing Officer doubted its commercial expediency or actual rendition of services.

Analysis: The impugned foreign remittances were reflected in audited books and financial statements, supported by agreements, invoices, Form 15CA/15CB and tax deduction at source. No material was brought to show that the payments were bogus or that the source of expenditure was unexplained. Section 69C applies to unexplained expenditure and not to a mere dispute on business expediency. The principle of consistency also supported acceptance of similar payments in earlier years.

Conclusion: The addition made under section 69C was unsustainable and was deleted, in favour of the assessee.

Issue (ii): Whether the CSR expenditure already added back by the assessee in the computation of income could be subjected to a further addition, resulting in double disallowance.

Analysis: The computation of income showed that the CSR amount had already been suo motu disallowed under section 37 of the Income-tax Act, 1961, and the assessment record also noted this fact. A further addition of the same amount would therefore amount to impermissible double disallowance. On verification from the return and computation, the Assessing Officer was required to delete the addition.

Conclusion: The further addition for CSR expenditure was deleted, in favour of the assessee.

Final Conclusion: The additions in dispute did not survive, and the assessee obtained complete relief on the substantive issues decided.

Ratio Decidendi: Expenditure duly recorded in the books and supported by banking and documentary evidence cannot be assessed as unexplained expenditure under section 69C merely because the Revenue questions its business necessity, and a sum already disallowed by the assessee cannot be disallowed again.

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