2017 (8) TMI 858

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.... Act, 1961 (hereinafter referred to as the Act) was passed on 16.12.2008 by the Assessing Authority. The Assessing Authority after notice added a sum of Rs. 60,15,296/- as the unexplained expenditure under Section 69C of the Act in the income of the assessee which he had incurred in making purchases during the period 01.04.2004 to 31.03.2005 from one M/s Chirag Deep Video, Varanasi. On appeal being preferred, the Commissioner of Income Tax (Appeals) confined the aforesaid addition to only 5% of the amount spent on purchases by holding that the profits on the said expenditure/purchases would not have been more than that as per the past record of profits of the assessee. The aforesaid order of the C.I.T. (Appeals) has been affirmed by the ....

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....xpenditure or if the explanation offered is not satisfactory, the amount covered by such explanation or part thereof as may be necessary, may be deemed to be the income of the assessee for the said financial year. The language of Section 69C of the Act stipulates two conditions necessary for deeming the expenditure incurred by the assessee to be his income for the said year (i) where no explanation is offered; and (ii) where the explanation offered is not found to be satisfactory. At the same time, the use of the word "may" in the aforesaid provision makes the deeming provision discretionary and not mandatory. In other words, even if not explanation is offered or it is found to be unsatisfactory, it is not mandatory to treat such unexplai....

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....ng Authority added the unexplained expenditure as the deemed income of the assessee in the said assessment year. In the facts and circumstances of the present case, the assessee could not submit the explanation within the time allowed due to his death and the heirs were unable to explain the same as they had no knowledge of the business of their deceased father. The assessee and his heirs were prevented for sufficient good cause from submitting the explanation to justify the expenditure or its source. One cannot loose sight of the fact that in situations where the proprietor of the business dies and his heirs are not in business or are not connected with the business of the deceased they may not be in a position to furnish any explanation....