This is identified as a bug in Sitecore 8.1 update 3. See the response from Sitecore below:
Sitecore contains setting Media.UploadAsVersionableByDefault which defines the way how the media should be uploaded. By default the value of this setting is false. In this case, the dialog has to upload media as unversioned. However, the dialog does not consider this setting and uploads a versioned media.
This behavior has been as a bug in our bug tracking system. Thank you for reporting the problem.
To track the future status of this bug report, please use the reference number 162905. More information about public reference numbers can be found here:
If you are on same vesion number please request a patch from sitecore support.
This has been fixed in n sitecore 8.1 update 5