2013 (4) TMI 543 - AT - Income Tax

Initiation of proceedings u/s. 153A - whether CIT(A) erred in not adjudicating the appellant s contention that initiation of proceedings u/s. 153A are bad-in-law even though no assessment or re-assessment proceedings in relation to this year were pending as on the date of the search u/s. 132 - Held that - The issue stands covered against the assessee by the decision of the ITAT Mumbai Special Bench in the case of All Cargo Global Logistics Ltd. vs. DCIT 2012 (7) TMI 222 - ITAT MUMBAI(SB) . Thus view taken by the CIT(A) confirmed and dismiss ground No. 1 of the assessee. 30% of addition made on account of alleged low household expenses - Held that - There is nothing on record to prove that the assessee was enjoying a lavish life style. At the relevant point of time, around Rs. 30,000/- per month was sufficient to maintain a comfortable life and hence, without bringing any specific material on record, the AO as well as the CIT(A) erred in making an estimate towards household expenditure, which is not in accordance with law. In particular he has submitted that the learned CIT(A) assumed that for the subsequent year the expenditure declared was only Rs. 3,43,870/- and added to that Rs. 45,000/- (30% of the addition made by the AO) and hence the total household expenditure estimated by the CIT(A) works out to Rs. 3,88,870/- whereas the fact remains that the assessee had withdrawn a sum of Rs. 4,40,206/- towards household expenses. Thus the addition made by the AO as well as the CIT(A) was purely on estimate basis which has no legs to stand - in favour of assessee.

Summary

Issues involved:
1. Validity of initiation of proceedings under section 153A of the Income Tax Act.
2. Addition made on account of alleged low household expenses.
3. Charge of interest under sections 234B and 234C of the Act.

Detailed Analysis:
1. The first issue revolved around the validity of initiating proceedings under section 153A of the Income Tax Act. The assessee contended that since no incriminating documents were found during a search, the initiation of proceedings was bad in law. However, the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) (CIT(A)) upheld the initiation, citing precedents. The ITAT Mumbai upheld the view taken by the CIT(A) based on precedents and dismissed the appeal.

2. The second issue pertained to an addition made on account of alleged low household expenses. The AO made an adhoc addition in each assessment year, which the assessee challenged before the CIT(A). The CIT(A) confirmed a portion of the addition, considering the family size and expenses. The ITAT Mumbai, after considering the submissions, held that the additions made by the AO and partly sustained by the CIT(A) were purely on estimate basis without any basis. Consequently, the ITAT directed the AO to delete the said additions, allowing the assessee's appeal on this ground.

3. The third issue concerned the charge of interest under sections 234B and 234C of the Act. The ITAT deemed this issue as consequential in nature and directed the AO accordingly, without providing further details on the outcome of this issue.

In conclusion, the ITAT Mumbai partially allowed the appeals filed by the assessee, ruling in favor of the assessee on the issue of low household expenses addition while dismissing the appeal on the validity of initiation of proceedings under section 153A of the Income Tax Act.