15 October 2015 Last updated at 16:28 BST
The Conservative MP was speaking to the BBC's Sunday Politics Scotland programme.
When asked by presenter Gordon Brewer whether reversal by the Scottish government was possible, Mr Mundell said: "Yes it will. It will be able to top up tax credits and indeed child benefit if is chooses to do so.
"Of course it will have to find the money and it will have to find the money either from Scottish tax payers, by telling them it is going to increase tax, or it will have to find it from cuts being made elsewhere."
Secretary of State for Scotland, David Mundell, said under the new Scotland Bill powers heading to Holyrood, the SNP government would be able to offset benefit cuts being planned by Westminster