2013 (10) TMI 883 - AT - Income Tax

Burden of Proof - Unexplained cash credit Held that - The assessee, apart from furnishing the permanent account number of the creditor, has also furnished their balance sheet, copy of income tax return, confirmation, bank account etc. -The amount advanced to the assessee is duly disclosed in the balance sheet of all the creditors - Even the assessee has also explained the source of cash deposited in the bank account of the creditors - the initial onus which lay upon the assessee was duly discharged - If the Assessing Officer wanted to examine the issue further, he could have very well issued notice under Section 131 to the creditors which has not been done by the Revenue Following Commissioner of Income-Tax, Orissa V/s Orissa Corporation Pvt. Limited 1986 (3) TMI 3 - SUPREME Court - the assessee has duly discharged the onus of proving the cash credit in the name of all the three creditors - the addition sustained by the learned CIT(A) for unexplained was deleted cash credit - Decided in favour of Assessee. Disallowance of Several Expenses - The assessee is an individual and the personal use of vehicle by the assessee and his family members cannot be ruled out - the Assessing Officer has disallowed 1/5th out of diwali expenses, telephone expenses, sales promotion expenses and miscellaneous expenses - these expenses are supported by self-made vouchers only which are not verifiable - 1/5th disallowance out of car and conveyance expenses as well as diwali, telephone, sales promotion and miscellaneous expenses is fair and reasonable Decided against Assessee. Addition of Low Household Expenses Held that - The Assessing Officer has found that the total withdrawal for household by the assessee and his wife was only Rs. 1,11,578 - the household expenses at Rs. 12,000/- per month - the estimate of Rs. 12,000/- per month for household expenses is quite fair and reasonable Decided against Assessee.

Summary

Issues:
1. Challenge against total disallowance/addition sustained by CIT(A).
2. Addition of Rs. 7,00,000/- for unexplained cash credit.
3. Adhoc disallowances of car & conveyance expenses, Diwali & miscellaneous expenses.
4. Addition of Rs. 32,422/- for low household expenses.

Issue 1 - Challenge against total disallowance/addition sustained by CIT(A):
The appeal challenged the total disallowance/addition sustained by CIT(A). The appellant raised separate grounds for each addition/disallowance. The Tribunal deemed no separate adjudication of the general nature ground necessary, as it would be consequential to the disposal of other grounds.

Issue 2 - Addition of Rs. 7,00,000/- for unexplained cash credit:
The Assessing Officer made an addition of Rs. 8 lakhs as unexplained credit due to the inability of the assessee to establish creditworthiness and genuineness of transactions. CIT(A) accepted creditworthiness of Rs. 1 lakh, sustaining the addition under Section 68 of the Income-tax Act to the extent of Rs. 7 lakhs. The appellant provided detailed submissions and evidence regarding each creditor, proving identity, capacity, and genuineness of transactions. The Tribunal, relying on precedents, concluded that the initial burden was discharged by the appellant, deleting the addition of Rs. 7,00,000/- for unexplained cash credit.

Issue 3 - Adhoc disallowances of car & conveyance expenses, Diwali & miscellaneous expenses:
The Tribunal upheld the adhoc disallowances of 1/5th of car & conveyance expenses, Diwali, telephone, sales promotion, and miscellaneous expenses. The Assessing Officer disallowed these expenses due to lack of verifiable vouchers, and the Tribunal found the disallowance fair and reasonable, sustaining it.

Issue 4 - Addition of Rs. 32,422/- for low household expenses:
The Assessing Officer estimated household expenses at Rs. 12,000/- per month, leading to an addition of Rs. 32,422/- for low household expenses. The Tribunal considered the total withdrawal for household expenses, including a school-going child, and found the estimate of Rs. 12,000/- per month fair and reasonable, upholding the addition.

In conclusion, the Tribunal partly allowed the appeal, deleting the addition for unexplained cash credit while sustaining adhoc disallowances of certain expenses and the addition for low household expenses.