Section 69C of ITA, 1961 : Section 69C: Unexplained Expenditure, Etc

Explanation using Example

Imagine Mr. Sharma, a businessman, has purchased luxury furniture worth ₹10 lakhs during the financial year. During the income tax assessment, the Assessing Officer notices this high expenditure and asks Mr. Sharma to explain the source of funds used for this purchase. Mr. Sharma fails to provide any satisfactory explanation or proof about the source of the ₹10 lakhs spent on the furniture. In this case, according to Section 69C of the Income-tax Act, 1961, the Assessing Officer has the authority to consider the unexplained expenditure of ₹10 lakhs as income earned by Mr. Sharma in that financial year. Consequently, this amount will be added to his taxable income and Mr. Sharma will be required to pay tax on it. Moreover, this amount cannot be claimed as a deduction under any other head of income.