2019 (10) TMI 1468 - AT - Income Tax

Unexplained household expenses - Addition based on entries found recorded in the seized diary - entries found recorded in the seized diary - HELD THAT - For assessment order for assessment year 2005-06, in the case of the assessee that credit appearing in some bank account was also unexplained - AO has not given benefit of said unexplained credit against unexplained house-hold withdrawal and addition has been made for the sum, which is maximum out of the two - benefit of only explained income or income on which tax has been paid (including exempt income) can be given against unexplained house-hold income, which the AO has partly given. If the unexplained credits in bank accounts, which are not utilized towards house-hold expenditure and used somewhere else, then a separate addition was required for those unexplained credits. The facts and circumstances are identical in other two assessment years. CIT(A) has not appreciated all the evidences furnished by the assessee and therefore, we feel it appropriate to set aside the order of the CIT(A) and restore the issue in dispute involved in all the three assessment years to the file of the AO with the direction to the assessee to file necessary evidence in support of source of household expenditure declared in the books of accounts including household withdrawals declared in the capital account of the family members, who contributed household expenditure of the assessee - Grounds raised in all the three appeals are allowed for statistical purposes.

Summary

Issues:
Appeals against addition of unexplained household expenses for assessment years 2005-06, 2008-09, and 2010-11.

Analysis:

1. Common Issue of Unexplained Household Expenses:
- Three appeals were filed against separate orders by the Ld. CIT(A) for the assessment years in question. The common issue across all appeals was the addition of unexplained household expenses based on incriminating documents seized during a search operation.

2. Assessing Officer's Findings and Additions:
- The Assessing Officer made additions for unexplained household expenditure after finding entries in a seized diary detailing household expenses for each assessment year. The additions were made for the amounts not accounted for by the assessee in their books of accounts.

3. First Round of Appeals and Dismissal:
- The assessee initially filed appeals before the Ld. CIT(A), but due to non-prosecution, the appeals were dismissed against the additions made by the Assessing Officer.

4. Second Round of Proceedings and Ld. CIT(A)'s Decision:
- After the matter was remanded back by the Tribunal, the assessee submitted necessary documents before the Ld. CIT(A). The Ld. CIT(A) upheld the additions after considering the remand report and the assessee's rejoinder.

5. Tribunal's Decision and Directions:
- The Tribunal observed that the Ld. CIT(A) did not adequately appreciate the evidence furnished by the assessee regarding the source of household expenditure. As a result, the Tribunal set aside the Ld. CIT(A)'s order and directed the issue to be restored to the Assessing Officer for fresh adjudication.

6. Legal Considerations and Ruling:
- The Tribunal emphasized that the Assessing Officer should allow adequate opportunity for the assessee to explain the source of household expenditure declared in their books of accounts. It was noted that unexplained credits in bank accounts should be separately addressed if not utilized for household expenditure.

7. Final Decision and Outcome:
- All three appeals were allowed for statistical purposes, and the issue of unexplained household expenses for the respective assessment years was directed to be reconsidered by the Assessing Officer in accordance with the law.

This detailed analysis highlights the key legal issues, procedural history, findings, and the Tribunal's decision regarding the addition of unexplained household expenses in the mentioned appeals.