2015 (4) TMI 721 - AT - Income Tax

Addition to Household expenses - Held that - Some of the expenses seems to have been estimated on a very higher side. There was no material before the Assessing Officer to assume that the assessee was maintaining a car still expenses on account of petrol and driving have been estimated. Therefore, considering the overall circumstances of the case, we estimate the household expenses at ₹ 10,000 per month which means the assessee would get further benefit of ₹ 24,000. Thus, this ground is partly allowed. - Decided partly in favour of assessee. Unaccounted loans - Held that - Nowhere it is stated that cash was deposited immediately before giving the loan. Shri Rakesh Kumar was stated to be a small person engaged in collecting pigmy deposits from public for bank schemes. If Shri Rakesh Kumar was having sufficient income then why he would have kept the cash at home and why he would deposit the same only one day before the giving of loan. No doubt Shri Rakesh Kumar has filed return but perusal of the copy of the return filed before us shows that he has gross total income of ₹ 1,95,095 out of which deductions have been claimed at ₹ 74,639 which means this amount has gone towards some savings and the same is not available in liquid cash. Shri Rakesh Kumar himself have been left with only ₹ 1,20,456 which is just sufficient to met household withdrawals. These facts clearly shows creditworthiness of Shri Rakesh Kumar has not been proved. In this case the test of human probability laid down in the case of Sumati Dayal v. CIT 1995 (3) TMI 3 - SUPREME Court was held to be applicable in the case of cash credits. Therefore, in the case before us clearly the explanation is not satisfactory. It simply seems to be a case where cash was deposited in the account of Shri Rakesh Kumar and loan was shown in his name, therefore, we find nothing wrong with the order of the learned Commissioner of Income-tax in confirming the addition - Decided against assessee. Interest on advances - As submitted by assessee that in fact no loans were given to Shri Karan Bansal and Richa Bansal and the amount was actually a gift and by mistake it was shown as loan and advance - Held that - Gift deed was filed before the Assessing Officer then the Assessing Officer should have examined whether really gifts have been made then probably no interest was required to be charged. However, there are no findings in the order of the Assessing Officer, therefore, in the interest of justice we set aside the order of the learned Commissioner of Income-tax (Appeals) in this respect and remand the matter back to the file of the Assessing Officer for verification of this issue because copy of the gift deed is not available before us. - Decided in favour of assessee for statistical purposes.

Issues Involved:
1. Addition of Rs. 59,873 to household expenses.
2. Evidence for household expenditure.
3. Addition of Rs. 1,50,000 as unsecured loan from Shri Rakesh Kumar.
4. Disallowance of proportionate interest on a gift of Rs. 3,50,000.

Detailed Analysis:

Issue 1: Addition of Rs. 59,873 to Household Expenses

The assessee contested the addition of Rs. 59,873 to household expenses. The Assessing Officer (AO) estimated the total household expenses at Rs. 4,16,100, while the assessee declared Rs. 84,127, leading to an addition of Rs. 3,31,973. The Commissioner of Income-tax (Appeals) (CIT(A)) reduced this estimate to Rs. 1,44,000, resulting in an addition of Rs. 59,873. The Tribunal found that some expenses were overestimated, particularly those related to car maintenance, which the assessee did not have. Thus, the Tribunal further reduced the household expenses estimate to Rs. 10,000 per month, providing the assessee with an additional relief of Rs. 24,000.

Issue 2: Evidence for Household Expenditure

The assessee argued that the AO's estimates were based on presumptions without material evidence. The CIT(A) acknowledged that the addition was made on presumption but noted the assessee's failure to provide specific details when questioned. The Tribunal concurred that some expense estimates were excessive and adjusted the household expenses accordingly.

Issue 3: Addition of Rs. 1,50,000 as Unsecured Loan from Shri Rakesh Kumar

During assessment, the AO added Rs. 1,50,000 to the income, questioning the creditworthiness of Shri Rakesh Kumar, who admitted to giving the loan from his savings. Despite providing a confirmation letter, PAN copy, and income tax return, the bank statement was missing. The CIT(A) upheld the addition due to the absence of the bank statement. The Tribunal noted that the bank statement showed cash deposited just before the loan, raising doubts about the genuineness and creditworthiness. The Tribunal upheld the addition, citing the Supreme Court's stance in CIT v. P. Mohanakala and Sumati Dayal v. CIT, emphasizing the need for satisfactory explanations for cash credits.

Issue 4: Disallowance of Proportionate Interest on a Gift of Rs. 3,50,000

The AO disallowed Rs. 27,643 as interest on advances given by the assessee, treating them as non-business purposes. The assessee claimed these were gifts, not loans, and provided gift deeds. The CIT(A) confirmed the addition, but the Tribunal found that if the gifts were genuine, no interest should be charged. The Tribunal remanded the issue back to the AO for verification of the gift deeds.

Conclusion:

The appeal was partly allowed for statistical purposes, with the Tribunal providing relief on household expenses and remanding the interest disallowance issue for further verification. The Tribunal upheld the addition of the unsecured loan due to inadequate proof of creditworthiness. The order was pronounced in the open court on September 29, 2014.

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