P.J.GORADIA, A.M. : First ground in this appeal is regarding confirming partly G.P. addition of Rs. 8,000 made on lumpsum basis to book results. While completing assessment for asst. Yr 2034, ITO brought on r e c o r d following facts and decision taken by him after considering submission made by assessee. relevant portion is fount in para-2 of his order as under: assessee derives income from proprietary business of manufacture of bodies of chassises in name and style of M/s Wadia Body Builders and partnership share from M/s P.H. Wadia and Sons and M/s Sam Wadia & Co., Rajkot. assessee disclosed gross profit at Rs. 7,31,781, i.e. 33 per cent on total sales at Rs. 21,65,510 as against G.P. at Rs. 6,28,397 at 46 per cent on total sales at Rs.13,63,789 last year. purchase and sale account is not supported by quantitative details No. day to day register is maintained for material consumed, in manufacturing process. G.P. disclosed by assessee is found low as compared to last year. Considering fact that no day-to-day register is maintained for materials consumed and low G.P. during year I reject book results disclosed by assessee and make lumpsum addition of Rs. 15,000 in purchase and sale amount in view of proviso to s. 145(1) of Income-tax Act, 1961. On appeal, addition was confirmed to extent of Rs. 8,000 mainly on basis that there was no denial about defects pointed put by ITO. At time of hearing, learned counsel for assessee brought to our notice percentage of gross profit obtained in immediately two preceding years and details regarding sales, etc, learned departmental representative submitted that no material was brought on record in support of contention that there was rise in prices of raw materials, fibre, etc, and in absence of evidence regarding increase in cost of raw materials, etc, without there being increase in sale price there was no room for further reduction. Besides, addition retained by CIT (A) was only to extent of 0.3 per cent i.e raising G.P. to 34 per cent. In our opinion, there is no reason to interfere with order passed by CIT (A). second ground is against addition of amount of Rs. 27,100 by invoking provisions contained in s. 69C of IT Act, 1961. It would be necessary to narrate in detail factual aspects relating issue involved and findings made by ITO and therefore, para-7 of assessment order is reproduced below: assessee made payments to Contractors Shri Mangaldas Lalsingh Vaghela and Shri Vasantlal Devilal Sharma. On scrutiny books of account seized during course of search under s. 132 of IT Act. It came to light that payments made to above mentioned contractors had not been recorded in books of assessee at relevant time. Shri Wadia explained that Contractors might have received those amount from some other parties. In this connection, it is found during course of assessment proceedings that two contractors worked only for assessee and there was no narration in their books to justify contention of assessee. scrutiny of books or account reveals that on 4th Nov., 78, 28th Nov., 78, 27th Dec., 78, 22nd Dec., 78, 11th Jan., 79, 12th Feb., 79, 24th Feb., 79, 12th March, 79, and 28th March, 69, entries for payment to above mentioned Contractors had been made in Cash book after cash balance was struck. entries were made in different handwriting and also difference in ink. assessee was therefore requested to produce books of account of Contractors and tally with entries made in his books of account. detailed scrutiny of books assessee revealed that payments made to Shri Mangaldas on 29th Nov., 78, 29th Dec., 78, and 12th Jan., 79 were entered in cash book on 26th Jan., 79 and all amounts were lumped together in one entry made for Rs 7,500 on 26th Jan., 79. On 28th Feb., 79 Shri Mangaldas has shown payments received for Rs 2,300. assessee was asked to explain on which date above payment was debited in cash book maintained. assessee explained that Hetaji had lost this voucher and hence he had not written in books. Shri Mangaldas has shown amount of Rs 4,000 being payment received from assessee on 12th March, 79, assessee debited only Rs. 3,000 on 12th March, 79 and amount of Rs. 1,000 was debited on 8th May, 79. In case of Shri Vasantlal D. Sharma payments received by him from assessee on 15th Dec., 78 has been debited by assessee in his books of account on 26th Jan., 79. Shri Vasantlal D. Sharma received amount of Rs. 3,000 on 21st March, 79. assessee has not accounted for this expenditure in his cash book on ground that voucher was misplaced and hence not shown. assessee contended that he is maintaining books of account on Samvat year basis and hence entries should not be considered on financial basis. contention of assessee is duly considered. But same is not entertained because question of maintenance of books of account crop up when any sum is found credited in books of assessee maintained for any previous year and assessee offered no explanation about nature and source thereof or explanation offered by him is not satisfactory in opinion of ITO, sum so credited may be charged to Income-tax as income of assessee of that previous year, in view of provisions of s. 68 of IT Act. Here question is that of expenditure and not income or any sum credited in books of account. In view of provisions of s. 69C of IT Act, 1961, assessee's explanation for source of expenditure is not supported by books of account maintained in normal course of business and hence amount covered by such expenditure or part thereof as case may be, deemed to be income of assessee for such financial year. expenditure incurred from 29th Nov., 1978 of 31st March, 79 amounts to Rs. 27,100 and same is treated as income of assessee under s. 69C of IT Act." CIT(A) confirmed decision taken by ITO mainly on ground that because of search and seizure operations, it was found that payments stated to have been recorded in books of accounts of Contractors did not find place in books of accounts of assessee. Besides, assessee had made many errors and overwritings on account of these transactions. learned counsel for assessee brought to our notice copies of accounts of contractors and repeated submission made before authorities below. Bringing to our notice relevant details as per petty cash authorities below. Bringing to our notice relevant details as per petty cash book, it was submitted that payments were recorded in assessee's books though on different dates. Besides, these payments pertained to business expenditure and therefore, there was no question of not recording same in books of accounts. learned departmental representative relied upon order passed by authorities below and further stated that it is not clear whether petty cash book was at all produced before ITO and cash balance should have been proved by assessee? In reply, learned counsel for assessee submitted that ITO had seen cash book and addition was made because of non-appreciation of facts and non-convincing of transactions. In our opinion, addition made is required to be deleted. reasons are as follows: Sec. 69C of IT Act envisages fiction of unexplained expenditure, etc., not satisfactorily proved. On perusing accounts of contractors, we find that payments are made to contractors and therefore, debited to personal account. Whether these payment are themselves expenditure or not is required to be first considered. It appears that assessee makes payments from time to time on account to these contractors who submit their bills regarding labour charges, etc. Subsequently, however account is adjusted from time to time on raising necessary bills or signing necessary vouchers, etc. on b s is of which appropriate amounts are credited in accounts of respective contractors. In light of these evidences and in absence of specific finding regarding amount sought to be added under s. 69C being expenditure only, no addition can be made. Since case was not processed along this line, assuming for while that amount can be considered expenditure, same are found to be in respect of expenditure allowable or deductible while computing income under head business. It is admitted position that amounts paid to persons under consideration are in respect of jobs carried out by those persons or materials supplied to assessee. Therefore, even if addition sought to be made on unexplained expenditure on basis that same is not recorded in books of accounts, then whole amount in respect of business expenditure not recorded in books is required to be deducted while computing profits under head business. In result, figure required to be added will be Nil. stand of Revenue is mainly based on evidence in respect of t h e entries found in books of accounts of other persons. payments received and shown to have been received on dates mentioned by recipients are treated to have been paid by assessee exactly on same date and hence addition. But one important aspect is forgotten in process that assessee in his books has also recorded payments to those recipients though on different dates. What has happened to these payments shown to have been made by assessee? Does it mean that payments shown by assessee were also shown by recipients on exactly same date mentioned in books of accounts of assessee? This particular aspect is totally ignored. When we are on provisions contained in s. 69C of Act, we would like to mention that section was inserted vide TLA Act, 1975 w.e.f. 1st April, 1976 on basis of recommendation made by Selected Committee. As found in report submitted in 1973. section is introduced with intention to cover whole expenses which are not deductible while computing income and are required to be added as income from undisclosed sources. Such expenditure w o u ld cover expenditure at time of marriage, furnishing of house, household expenditure and gifts. If s. 69C is sought to be invoked for expenditure deductible while computing income under any head probably action would cut at root of intention as no addition would be made. phraseology in section goes to show that before invoking section it must be conclusively established by evidence or material to prove that t h e amount spent is expenditure and expenditure is incurred by assessee only and same is not deductible while computing income under any head under IT Act. Thus primary onus is on Revenue. To extent as above, order or CIT(A) is modified and ITO shall pass appropriate order in accordance with law. In result, appeal is allowed, in part. *** S.F. WADIA v. INCOME TAX OFFICER