2013 (11) TMI 829 - AT - Income Tax

Addition u/s 69 of the Income tax act - Relevancy of third party evidence to explain the investment made and addition made u/s 69 of the Income tax act Held that - In reply to remand report, the Ld AR submitted that all queries made by the Assessing Officer and replies given by the assessee were already on the file of the Assessing Officer as these replies were given by the appellant during assessment proceedings itself and therefore it was submitted that the Assessing Officer s finding that it was difficult to verify the capacity and genuineness of transaction should not be accepted as the Assessing Officer was not able to find anything wrong or missing from third party evidence. The Assessing Officer without going through the third party evidences filed by the assessee continued to direct assessee to file proofs of income tax returns of earlier years in support of his acquiring assets ion earlier years and made additions because of non compliance which is not justified specially in view of the fact that he did not find any defect in the documents filed by the assessee - In view of the above, set aside the case to the file of Assessing Officer for re-adjudication who on the basis of any enquiries from third parties in respect of their confirmations may arrive at the conclusion of addition if any u/s 69 of the Act. Addition u/s 69A on the ground of household expenses Held that - There is no other yard stick to measure household expenses of a person other than on the basis of facts and circumstances of that person with respect to size of the family, school going children, assets owned by that person and other surrounding circumstances Assessee relied upon the case of Shri G.S. Bhatia 1997 (5) TMI 402 - ITAT MUMBAI , wherein it was held that unless and until it is established with evidence that it was only the assessee who had incurred all the household expenses, revenue was not justified in invoking the deeming provision of section 69A - In the present case, Ld AR did not bring to our notice any drawings made by wife of assessee for contribution to household expenses. Therefore the case laws relied upon by Ld AR do not hold force as the facts and circumstances of the present cases are distinguishable Addition upheld Decided against the Assessee.

Summary

Issues Involved:
1. Validity of assessment orders under section 153A/143(3) of the Income Tax Act, 1961.
2. Additions on account of unexplained investments.
3. Additions on account of low household expenses.
4. Additions on account of estimated business income.
5. Benefit of telescoping for assessment years 2008-09 and 2009-10.

Detailed Analysis:

1. Validity of Assessment Orders under Section 153A/143(3):
The assessee challenged the validity of assessment orders under section 153A/143(3) arguing that none of the provisions of section 132(1)(a)(b) and (c) were applicable. However, this ground was not pressed by the assessee during the proceedings. Consequently, the Tribunal dismissed these grounds as not pressed.

2. Additions on Account of Unexplained Investments:
In assessment year 2003-04, the Assessing Officer (AO) made an addition of Rs. 23,38,396/- under section 69 of the Income Tax Act, 1961, treating the entire amount as unexplained investment. The CIT(A) upheld this addition due to the assessee's failure to prove the sources of these investments. The Tribunal observed that the assessee had provided various documents and third-party confirmations to substantiate the claim that these investments were made in earlier years. However, the AO did not consider these documents adequately. The Tribunal set aside the case to the AO for re-adjudication, directing the AO to verify the third-party confirmations and other evidence provided by the assessee.

3. Additions on Account of Low Household Expenses:
For assessment years 2005-06 to 2009-10, the AO made additions on account of low household expenses, estimating household withdrawals at Rs. 1,80,000/- to Rs. 2,16,000/- per annum. The Tribunal upheld these additions, stating that the AO's estimates were reasonable given the assessee's family size, status, and investments. The Tribunal noted that the case laws cited by the assessee were not applicable to the present facts, as the assessee had not filed returns under section 139 for the relevant years, and no evidence was provided to show that household expenses were met by other family members.

4. Additions on Account of Estimated Business Income:
For assessment years 2008-09 and 2009-10, the AO estimated the business income based on a diary found during the search. The CIT(A) upheld these additions. The Tribunal noted that the assessee had not contested the estimation of business income before the CIT(A) or taken any ground before the Tribunal. However, the Tribunal allowed the benefit of telescoping, directing the AO to verify if the estimated business income was used for household expenses or invested in new assets.

5. Benefit of Telescoping for Assessment Years 2008-09 and 2009-10:
The Tribunal allowed the benefit of telescoping for assessment years 2008-09 and 2009-10, directing the AO to re-adjudicate the issue. The AO was instructed to verify the statement of assets as on 31.3.2007, 31.3.2008, and 31.3.2009 to determine if the estimated business income was used for household expenses or invested in new assets.

Conclusion:
- The appeal for assessment year 2003-04 was partly allowed for statistical purposes, directing the AO to re-adjudicate the addition on account of unexplained investments.
- The appeals for assessment years 2004-05, 2005-06, 2006-07, and 2007-08 were dismissed.
- The appeals for assessment years 2008-09 and 2009-10 were partly allowed for statistical purposes, directing the AO to re-adjudicate the benefit of telescoping.