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2013 (9) TMI 436 - AT - Income TaxAdditions on the account of cash flow statement furnished by the assessee Addition of the amount of Rs. 10, 40, 000/- Held that - During the course of search no incriminating documents were found relating to the fact that assessee was not having cash balances - ld. CIT(A) confirmed the addition merely on the basis that the assessee never filed capital account showing for each of the cash balances - Assessee has furnished sufficient material including income of the various years of assessee as well as assessee s mother which sufficiently proves that the assessee must have opening balances - The assessee furnished cash flow statement for earlier year also i.e. A.Ys.2004-05 to 2010-11 - The cash flow of the earlier years clearly show that the assessee was having such an opening balances. The assessee discharged the burden regarding cash balances shown in the cash flow statement by furnishing total income and earning in earlier years and furnishing cash flow statements from A.Y.2004-05 onwards - A.O. himself accepted inflow and outflow of the cash in the chart submitted and he did not doubt about that. He doubted about only opening balances. When the assessee has furnished the position of income from earlier/different years and the total income of the assessee and his mother comes to Rs.2, 32, 83, 547/- it can not disbelieve that the assessee was not having cash balance to the extent of Rs.10, 85, 231/- as opening balance in A.Y.2009-10 - Assessee has furnished sufficient material and discharged the burden supporting the fact that the assessee was having cash balance of Rs.10, 48, 000/- in the beginning of the year particularly under the facts and circumstances when no incriminating documents or other material was found during the course of search Decided in favor of Assessee. Addition on estimation basis estimation of larger sum of household expenses - A.O. noticed from the cash flow chart that the assessee has shown lower house hold withdrawals - Considering the size of family and social status of the assessee the A.O. has estimated household expenses of Rs.22, 000/- per month as against the total household withdrawal of Rs.1, 80, 424/- per annum shown by the assessee Held that - It is a search case and during the year no incriminating material or documents were found A.O. made addition merely on the basis of general presumption whereas the assessee has furnished a reasonable explanation that the assessee is residing in remote area at 20 km. away from city having substantial agricultural income and produce. The assessee is widow mother who is a separate income tax payer since long also resides with the assessee and she has also been withdrawing for household expenses - In the absence of material particularly under the circumstances where the assessee has satisfactorily explained the household expenses shown by the assessee in the light of these facts the CIT(A) is not correct in sustaining the addition of Rs.97, 900/- - Therefore deleted the said addition of Rs.97, 900/- sustained by the ld. CIT(A). Undisclosed investment in property u/s 69 of the Income Tax Act - Addition of Rs.38, 77, 589/- made by the A.O. by alleging undisclosed investment on the basis of DVO s report - Assessee is one of the co-owners of the building - The DVO has furnished two reports of valuation. The DVO while submitting the second report estimated cost of Rs.1, 30, 30, 085/- and clearly stated that the value determined by interpolation of cost index which is not in accordance with provisions of Section 142A of the Act Held that - Construction period was from 2000-2001 to 2010-2011 i.e. for about 10 years bifurcation of yearly investment has been given by the assessee considering objection of the assessee in respect of DVO s report particularly not allowing 10% self-supervising charges 3% of architect fee etc. the difference is only 13% in comparison to cost declared by the assessee and estimated by the DVO and the effect of the entire difference given in a particular year is not justified. Therefore the investment declared by the assessee is reasonable and the same is acceptable because in totality the investment shown by the assessee is correct. The first DVO s report supports to this fact - Therefore no addition is warranted - Deleted the addition of Rs.38, 77, 589/- made by the A.O. on account of investment in property under Section 69 of the Act and sustained by ld. CIT(A) Decided in favor of Assessee. Adhoc additions without enquiry - The A.O. made addition of Rs.1, 55, 000/- on the ground that the DVO has shown the construction cost which does not include cost of land furniture and furnishing A.C. electrical equipment old structures and old boundary wall. The A.O. treated 20% of the cost of construction shown by the assessee at Rs.15, 50, 000/- and calculated amount of addition of Rs.1, 55, 000/- by treating it as expenditure incurred for furniture and furnishing over and above cost of construction Held that - The A.O. has failed to point out by making enquiry that how many A.C and other electrical equipments were there with the assessee - Adhoc addition is not warranted In the lack of enquiry and making addition without considering complete facts merely on the basis of conjecture or surmises addition cannot be made particularly in case of search No justification of making addition of Rs.1, 55, 000/- therefore it has been ordered to delete the addition of Rs.1, 55, 000/- - Decided in favor of Assessee.
Issues Involved:
1. Validity of notice under Section 153A(b) of the Income Tax Act. 2. Addition of Rs.10,48,000/- on account of cash flow statement. 3. Addition of Rs.97,900/- under the head household expenses. 4. Addition of Rs.38,77,589/- based on DVO's report alleging undisclosed investment. 5. Addition of Rs.1,55,000/- alleging investment in furniture and furnishings. Issue-wise Detailed Analysis: 1. Validity of Notice under Section 153A(b): The grounds challenging the notice under Section 153A(b) were general in nature and not argued by the assessee's representative. Consequently, these grounds were dismissed. 2. Addition of Rs.10,48,000/- on Account of Cash Flow Statement: The assessee furnished a cash flow chart showing an opening balance of Rs.1,98,651/- as on 01.04.2003, which was not accepted by the Assessing Officer (A.O.). The A.O. made an addition of Rs.10,48,000/- due to insufficient cash balance to meet the expenses. The CIT(A) confirmed this addition, stating that the opening balance was not supported by documentary evidence. However, the Tribunal found that the assessee had provided sufficient material, including income details from previous years and cash flow statements from A.Y. 2004-05 onwards, proving the existence of the opening balance. Therefore, the Tribunal set aside the orders of the Revenue Authorities and deleted the addition of Rs.10,48,000/-. 3. Addition of Rs.97,900/- under the Head Household Expenses: The A.O. estimated household expenses at Rs.22,000/- per month, leading to an addition of Rs.1,81,900/-. The CIT(A) reduced this addition to Rs.97,900/-, considering the assessee's explanation regarding agricultural produce and shared household expenses. The Tribunal noted that the A.O. made the addition based on general presumption without detailed inquiry. Given the reasonable explanation provided by the assessee and the absence of incriminating material, the Tribunal deleted the entire addition of Rs.1,81,900/-. 4. Addition of Rs.38,77,589/- Based on DVO's Report Alleging Undisclosed Investment: The A.O. made an addition of Rs.38,77,589/- based on the DVO's second report, which estimated the cost of construction at Rs.1,30,30,085/-. The CIT(A) upheld this addition, dismissing the assessee's objections regarding higher rates applied by the DVO and the absence of incriminating material. The Tribunal found that the DVO's second report was not in accordance with Section 142A of the Act and that the first report, which showed a difference of only 13%, was more accurate. The Tribunal also noted that the construction was carried out over several years by multiple co-owners. Therefore, the Tribunal deleted the addition of Rs.38,77,589/-. 5. Addition of Rs.1,55,000/- Alleging Investment in Furniture and Furnishings: The A.O. made an addition of Rs.1,55,000/- on the assumption that 20% of the construction cost was spent on furniture and furnishings. The CIT(A) confirmed this addition. The Tribunal found that this addition was based on estimation without any corresponding evidence. Given the lack of incriminating material and detailed inquiry, the Tribunal deleted the addition of Rs.1,55,000/-. Conclusion: The Tribunal allowed the appeal of the assessee, deleting the additions made by the A.O. and confirmed by the CIT(A) on account of cash flow statement, household expenses, undisclosed investment based on DVO's report, and alleged investment in furniture and furnishings.
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