2012 (8) TMI 9 - AT - Income Tax

Addition u/s 69 C - low household expenses - Held that - No evidence was brought on record by the Revenue which may prove that the assessee has incurred expenses on the household drawing much more than what has been shown by her family members. The household drawing has merely been estimated by the AO without pointing out any specific expenditure being incurred by the assessee - for applicability of section 69C there must be evidence on record which may prove that the assessee had incurred expenses much more than what has been shown by the family members - against revenue. Addition on account of property income - the assessee owned two properties out of which one was used for residential purpose and the other remained vacant - ALV of the property other than that occupied by the assessee was determined u/s 23(1)(a) r.w.s. 23(4)(B) - Held that - Assessee was owner of only one property which was vacant during the year under appeal as the same was not let out during the year and other property belongs to her husband as born out by the written submissions filed by the assessee with municipal tax receipts in the name of her husband and the computation of income filed along with return of income by her husband to show that the other property was self acquired property of her husband - the A.O. has not brought any material on record to show that the property owned by assessee was ever let out - against revenue.

Summary

Issues Involved:
1. Addition of Rs. 2,70,000/- on account of low household expenses under Section 69C of the Income Tax Act.
2. Addition of Rs. 5,17,120/- on account of property income under Section 23(1)(a) read with Section 23(4)(B) of the Income Tax Act.

Detailed Analysis:

1. Addition of Rs. 2,70,000/- on Account of Low Household Expenses:

The Assessing Officer (A.O.) made an addition of Rs. 2,70,000/- under Section 69C of the Income Tax Act, citing that the household expenses declared by the assessee were implausibly low. The A.O. noted that the withdrawals for household expenses were only Rs. 2,70,000/- for a family of nine, which included three school-going children. The A.O. found it impossible to believe that such a low amount could cover all household expenses, including personal travel, entertainment, and other miscellaneous expenses. The A.O. estimated that a reasonable withdrawal for household expenses should be Rs. 5,000/- per month per family member, totaling Rs. 5,40,000/- annually, leading to an addition of Rs. 2,70,000/- to the income.

The Commissioner of Income Tax (Appeals) [CIT(A)] deleted this addition, following the decision of the ITAT in the assessee's own case for the assessment year 2006-07, where a similar addition was made and subsequently deleted. The ITAT had observed that the A.O. had not provided any evidence to prove that the assessee incurred more expenses than declared. The ITAT emphasized that the onus was on the Revenue to prove that the actual expenses were higher than what was shown by the assessee.

In the current appeal, the ITAT upheld the CIT(A)'s decision, stating that the Revenue failed to bring any new evidence to support the addition. The ITAT reiterated that without concrete evidence, mere estimation by the A.O. could not justify the addition under Section 69C.

2. Addition of Rs. 5,17,120/- on Account of Property Income:

The A.O. added Rs. 5,17,120/- to the income on account of property income, determining that the assessee owned a bungalow in Beverly Hill Co. Society Ltd. The A.O. noted that the assessee had not declared any income from this property, either as let out or self-occupied. The A.O. calculated the annual value (ALV) of the property based on a 9% yield on the investment of Rs. 82,08,277/-, resulting in an ALV of Rs. 7,38,744/-. After allowing a deduction under Section 24, the taxable ALV was determined to be Rs. 5,17,120/-.

The CIT(A) deleted this addition, accepting the assessee's claim that the property was self-occupied and not let out. The CIT(A) noted that the property was occasionally used by the assessee's son and was not intended to be let out. The CIT(A) relied on the Supreme Court decision in Smt. Sheela Kaushis Vs. CIT, which supports the view that if a property is maintained for self-use and not intended to be let out, its ALV can be considered NIL under Section 23(2).

The ITAT upheld the CIT(A)'s decision, agreeing that the property was self-occupied and the assessee did not own any other property during the year. The ITAT found that the A.O. had not provided any evidence to contradict the assessee's claim that the property was not let out. The ITAT concluded that the CIT(A) correctly applied Section 23(2) and deleted the addition.

Conclusion:

The ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s deletion of both the additions. The ITAT found that the A.O.'s estimations and assumptions were not supported by concrete evidence, and the CIT(A)'s decisions were consistent with the legal provisions and judicial precedents. Consequently, the Cross Objection filed by the assessee in support of the CIT(A)'s order was also dismissed as infructuous.