2013 (10) TMI 757 - AT - Income Tax

Disallowance of Rs. 100000 out of Rs. 200000 of cash balance as opening balance Held that - Taxpayer has purchased land admeasuring 83 cents for Rs.5 lakhs and constructed a building by investing Rs.3,61,915 - The taxpayer is in the business of purchase and sale of scrap. Therefore, maintaining proper bills and vouchers for purchase and sale of scrap may be a little difficult - The taxpayer is doing business from the year 1992 and has shown an opening cash balance of Rs.2 lakhs for the year 2000 He invested Rs. 5 lakhs for purchase of land and investment of Rs.3,61,915 in construction of house property. These facts show that the taxpayer is earning sizeable income in the course of his business activity No reason to disallow any part of the amount shown as opening cash balance in the cash flow statement filed before the assessing officer Decided in favor of Assessee. Addition of 50000 as household expenses Held that - The very fact that the taxpayer has not incurred any expenditure separately shows that he was under the care and custody of someone else. When the taxpayer claims that he was under the care and custody of parents and brothers, it is natural that in a joint family system the elder brother or parents would incur the expenditure. Therefore, this Tribunal is of the considered opinion that addition of Rs.50,000 towards household expenses may not be warranted in the facts and circumstances of the case Decided in favor of Assessee. Addition of loan amount taken from the private persons Taxpayer has filed confirmation letters from the creditors Held that - Relying upon the judgment in the case of P Mohanakala 2007 (5) TMI 192 - SUPREME Court , it has been held that before dismissing the confirmation letters from the creditors, proper investigation needs to be done regarding the creditors s.a. the paying capacity of the creditors regarding loan amounts etc. Decided in favor of Assessee.

2007 (5) TMI 192 - SC

Issues Involved:
1. Disallowance of Rs.1 lakh for the assessment year 2001-02.
2. Addition of Rs.50,000 towards household expenses for the assessment year 2001-02.
3. Disallowance of Rs.1,14,991 for the assessment year 2002-03.
4. Addition of Rs.14,800 towards investment in A One Bottles for the assessment year 2002-03.
5. Addition of Rs.83,209 towards household expenses for the assessment year 2002-03.
6. Addition of Rs.6,10,440 for the assessment year 2004-05.
7. Addition of Rs.4 lakhs for the assessment year 2004-05.
8. Drawing of Rs.1,33,544 and loan of Rs.5,30,000 for the assessment year 2005-06.
9. Disallowance of agricultural income of Rs.1,43,873 for the assessment year 2005-06.
10. Loan of Rs.8 lakhs for the assessment year 2006-07.
11. Disallowance of agricultural income for the assessment year 2006-07.

Detailed Analysis:

1. Disallowance of Rs.1 lakh for the assessment year 2001-02:
The taxpayer, engaged in the business of purchase and sale of scrap, showed an opening cash balance of Rs.2 lakhs as on 01-04-2000. The assessing officer disallowed Rs.1 lakh due to lack of evidence. The Tribunal considered the taxpayer's long business history since 1992, significant investments in land and building, and deemed the opening cash balance of Rs.2 lakhs reasonable. The Tribunal directed the assessing officer to delete the disallowance of Rs.1 lakh.

2. Addition of Rs.50,000 towards household expenses for the assessment year 2001-02:
The assessing officer added Rs.50,000 for household expenses, doubting the taxpayer's claim of living in a joint family. The Tribunal found it unreasonable to expect documentary proof of living in a joint family and noted that the taxpayer's lack of separate expenditure indicated he was under someone else's care. The Tribunal directed the deletion of the Rs.50,000 addition.

3. Disallowance of Rs.1,14,991 for the assessment year 2002-03:
The assessing officer found unexplained investment of Rs.1,14,991. The Tribunal noted the taxpayer had sufficient cash balance, including Rs.1 lakh deleted from the previous year's disallowance, making the total cash available Rs.1,98,009 against an investment of Rs.2,13,000. The Tribunal found no unexplained investment and directed the deletion of Rs.1,14,991.

4. Addition of Rs.14,800 towards investment in A One Bottles for the assessment year 2002-03:
The lower authorities added Rs.14,800 due to cash deficiency after property investments. The Tribunal, considering the available cash balance of Rs.1,98,009, found the taxpayer could invest Rs.14,800 in A One Bottles and directed deletion of the addition.

5. Addition of Rs.83,209 towards household expenses for the assessment year 2002-03:
The Tribunal accepted the taxpayer's claim of living in a joint family, where family expenses were covered by elder brothers and parents, and found no need for further addition. The Tribunal directed the deletion of Rs.83,209 addition.

6. Addition of Rs.6,10,440 for the assessment year 2004-05:
The assessing officer disallowed Rs.6,10,440 due to lack of supporting documents. The taxpayer later produced balance sheets and other documents. The Tribunal remitted the issue back to the assessing officer for verification of the new evidence and to decide accordingly.

7. Addition of Rs.4 lakhs for the assessment year 2004-05:
The taxpayer received Rs.4 lakhs by cheque, claimed as a loan from Shaju. The Tribunal noted the need to verify the creditor's creditworthiness, which the lower authorities failed to do. The Tribunal remitted the issue back to the assessing officer for re-examination.

8. Drawing of Rs.1,33,544 and loan of Rs.5,30,000 for the assessment year 2005-06:
The assessing officer added Rs.1,33,544 and Rs.5,30,000 due to lack of evidence. The taxpayer later filed balance sheets and other documents. The Tribunal remitted the issues back to the assessing officer for verification of the new evidence and to decide accordingly.

9. Disallowance of agricultural income of Rs.1,43,873 for the assessment year 2005-06:
The assessing officer restricted agricultural income to Rs.60,000, adding Rs.1,43,783 as unexplained income. The Tribunal noted the need to verify land holdings and crop cultivation, which was not examined by the lower authorities. The Tribunal remitted the issue back for reconsideration.

10. Loan of Rs.8 lakhs for the assessment year 2006-07:
The taxpayer claimed Rs.8 lakhs received from two individuals, supported by confirmation letters. The Tribunal found the assessing officer failed to verify the details in the confirmation letters and remitted the issue back for thorough examination.

11. Disallowance of agricultural income for the assessment year 2006-07:
Similar to the previous year, the Tribunal remitted the issue back to the assessing officer to re-examine the agricultural income claim in light of the directions issued for the assessment year 2005-06.

Conclusion:
The Tribunal allowed the appeals for the assessment years 2001-02 and 2002-03, and remitted the issues for the assessment years 2004-05, 2005-06, and 2006-07 back to the assessing officer for reconsideration and verification of new evidence.

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